First Mover: Who ISN’T Dabbling as Bitcoin Passes $52K, Ether Tops $1,900

Price Point

Bitcoin was lower after surging on Wednesday to a new all-time high price above $52,000, while ether topped $1,900 for the first time, pushing toward the psychologically crucial $2,000 mark. 

“My sense is the technology has evolved and the regulations have evolved to the point where a number of people  find it should be part of the portfolio, so that’s what’s driving the price up,” Rick Rieder, head of global allocation for the $8.7 trillion money manager BlackRock, told CNBC. “We’ve started to dabble a bit.”

In traditional markets, European shares slid and U.S. stock futures pointed to a lower open, amid concern that rising bond yields might sap this year’s momentum in equity markets. That’s despite a U.S. government report Wednesday showing that consumers rushed to spend stimulus checks in January, bolstering retail sales, while minutes from the Federal Reserve’s meeting last month showed officials expected their $120 billion-a-month of asset purchases would continue for “some time.” 

A growing number of investors say that bitcoin might serve as a hedge against inflationary policies as governments and central banks pump trillions of stimulus money into the coronavirus-racked economy.   

The News

COINBASE VALUATION: Coinbase, the cryptocurrency exchange readying a public listing, is valued at $77 billion based on trading in privately held shares on the Nasdaq Private Market, ConDesk’s Ian Allison reported. The amount is greater than the market capitalization of Intercontinental Exchange Inc., owner of the New York Stock Exchange. (For what it’s worth, Tesla used Coinbase for its $1.5 billion bitcoin purchase, according to The Block.) 

ROBINHOOD REBOUND: Beleaguered online brokerage app Robinhood says it plans to enable withdrawals and deposits of cryptocurrencies including dogecoin (DOGE). In a tweet Wednesday, the app provider said it “fully intends” to provide the extra functionality, without giving a date. Currently, traders can only buy and sell crypto assets within the app, according to its support page. The tweet came an hour before Bloomberg published an article asserting that Robinhood was the owner of the world’s largest dogecoin wallet. (EDITOR’S NOTE: Go here for a livestream of the U.S. House of Representatives hearing starting at noon Washington time (17:00 UTC) on the GameStop stock-trading saga, featuring Robinhood CEO Vlad Tenev (prepared remarks here), Reddit CEO Steve Huffman and Citadel CEO Kenneth Griffin.)

MASTERCARD PAYS IN SAND DOLLARS: People in the Bahamas now have the option of loading the country’s central bank digital currency, known as the Bahamas Sand Dollar, onto a prepaid Mastercard to enable use anywhere in the world, the payments giant has announced.

BITWISE DEFI: Bitwise Asset Management has launched a decentralized finance index fund, CoinDesk’s Danny Nelson reports. The money manager aims to capitalize on growing investor demand for digital tokens associated with the fast-growing “DeFi” arena, a segment of the cryptocurrency industry where entrepreneurs are building software-automated versions of banks and trading platforms atop blockchain networks.    

Bitcoin Watch

Decline in “whale” entities worth watching, CoinDesk’s Omkar Godbole writes  

The number of bitcoin addresses with at least 1,000 bitcoin (roughly $50 million worth) has trailed off recently after rising over the past year.

Source: Glassnode

The number of large bitcoin investors or “whales” has declined recently after rising over the past year, blockchain data show, potentially a bearish signal if it means there’s less buying pressure from large accounts. 

Wallet addresses or clusters of related addresses holding at least at least 1,000 bitcoins (roughly $50 million worth) have dropped by a little over 1% to 2,200 in the past nine days, according to Glassnode, a blockchain data provider.

The cryptocurrency, however, has risen from $40,000 to $52,000 during the same timeframe.

So spot-market inflows might need to pick up soon to keep the bullish momentum going, as derivative markets are looking overheated.

Token Watch

Ether (ETH): Ethereum cryptocurrency looks overleveraged after rising to new all-time-high price over $1,900. Signals from derivatives market suggest that traders are heavily skewed toward leveraged bet on further upside, potentially a harbinger of fresh volatility.  

Cosmos (ATOM): Upstart “ecosystem of blockchains” plans to go live Thursday with “Stargate” upgrade. “Stargate represents an important milestone for the Cosmos project on the way to launching its inter-blockchain communication (IBC) protocol that will allow the 200+ Tendermint-based blockchains to interoperate easily,” CoinDesk’s Brady Dale writes. 

PoolTogether (POOL): “Lossless lottery” set up in 2019 will airdrop new token to all users who have joined it for the ride so far. “No-loss prize savings is one of the most, if not the most used consumer financial primitive in the whole world,” PoolTogether founder Leighton Cusack said.

Opinions and Observations

BITCOIN ON THE BALANCE SHEET? The U.S. will eventually adopt bitcoin as a reserve asset, argues Zabo co-founder Alex Treece in an op-ed for CoinDesk Opinion. 

DOGECOIN DREAMS: Rise of the Shiba Inu-themed “meme token” dogecoin (DOGE) reflects the power of collective belief and a longing for a more ideal form of crypto, CoinDesk’s Emily Parker writes in op-ed: “It may be tempting to write this off as a speculative frenzy or just a fluke, but that would be missing the larger picture.”  

BUY THE TOP: People who bought bitcoin at the previous price peak in 2017 have outperformed the Standard & Poor’s 500 Index 3.5-fold, the crypto trader Alex Kruger tweeted.  

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First Mover: What’s Next After Bitcoin Hits $50K? Another $1K Gain

Bitcoin’s momentum carried through overnight, pushing upward to a new all-time high above $51,000 just a day after passing $50,000 for the first time. 

“It’s not exactly soaring, as it has with other major technical breakouts, but another 3% gain isn’t to be sniffed at,” Craig Erlam, senior market analyst for the foreign exchange broker OANDA, wrote in an email. 

In traditional markets, investors were focused on the recent rise in the U.S. Treasury yields to a 12-month high around 1.3% – taken as a sign that bond traders are growing more concerned about future inflation as the economy makes a fuller recovery. Bond yields sometimes rise when there’s a greater chance of inflation, since investors want the extra income as compensation for the extra risk. 

It’s also a key focus for cryptocurrency traders, since bitcoin has become a popular way for many big investors to bet on faster inflation and a reduction in the U.S. dollar’s purchasing power. 

A fresh concern this week is that the winter storm hitting the (usually warm) state of Texas might drive up gasoline prices, contributing to inflation. Crude oil held at over $60 a barrel, near highs not seen in more than a year.

Some investors also see the potential for a growing supply of Treasury bonds, given President Joe Biden’s push for a $1.9 trillion stimulus plan, which would likely have to be financed through extra borrowing. Theoretically, an increase in the supply of bonds causes yields to rise, since more investors have to be enticed to buy the securities. 

All things being equal, rising yields, while potentially a sign of heightened inflation fears, could make bitcoin incrementally less attractive on a relative basis compared with bonds: ”Momentum funds who bought bitcoin as a hedge against inflation might sell if real yields rise,” Avi Felman, head of trading at BlockTower Capital, told CoinDesk. 

On the other hand, a rise in yields might prompt the Federal Reserve to expand its monetary stimulus. The U.S. central bank has been buying $120 billion of bonds a month for most of the past year to help keep interest rates low. 

The News

BITCOIN AS A STOCK: As asset managers continue to push for a U.S. exchange-traded fund tied to bitcoin, while prices keep rising, the pressure is growing on the Securities and Exchange Commission to clarify its regulatory stance. 

  • NYDIG, a big digital-asset manager, has filed a new application for a bitcoin ETF, CoinDesk reported Tuesday. (VanEck and Valkyrie also have recently applied.) 
  • So far, the SEC has rejected all applications for bitcoin-based ETFs. In August 2018, it rejected nine such proposals on the same day.
  • The main question is whether the market has matured enough to meet the requirements listed under the Securities Exchange Act, the federal law that oversees securities trading within the U.S., CoinDesk’s Nikhilesh De wrote Tuesday in his “State of Crypto” newsletter on policy and regulation. 
  • Another question is what stance Gary Gensler, nominated as SEC chair, will take on the matter – if he even has time to make it a priority. Competing priorities include “likely having to form a response to the market volatility seen last month with the GameStop stock pump,” De wrote. 
  • Canadian regulators on Tuesday approved the country’s second bitcoin exchange-traded fund. Evolve’s bitcoin ETF was conditionally approved to trade on the Toronto Stock Exchange, following approval of Purpose Investment’s offering last week. “It’s a promising sign if there are no issues with launching a bitcoin ETF in Canada,” said James Seyffart, ETF research analyst at Bloomberg Intelligence.
  • “So much work has been done in the backend of this, the plumbing, to effectively allow something like this,” Purpose Investments CEO Som Seif said Tuesday on CoinDesk TV’s “First Mover” show.
  • Osprey Funds said its bitcoin trust is now available to retail investors via over-the-counter markets, joining a crop of new bitcoin funds aimed squarely at the market-leading Grayscale Bitcoin Trust (GBTC) before a bitcoin ETF is approved by the SEC.

TEXAS WINTER STORM HITS CRYPTO: Bitcoin mining farms in Texas go offline as an unusually harsh winter storm and cold spell in the southern U.S. strains the electricity grid. 

Market Moves

What comes next now that bitcoin has passed $50K?

Chart of daily price moves for bitcoin.

Source: TradingView/CoinDesk

The next key milestone for bitcoin would come when the cryptocurrency’s market capitalization tops $1 trillion, a threshold that would signal a new level of maturity for the asset. Based on the outstanding number of bitcoins, currently about 18.63 million, that would happen when bitcoin’s price clears $53,677

In the meantime, here’s a sampling of commentary from analysts and other observers on what’s next for the bitcoin market:

  • QCP Capital: Options market “is pricing a 10% chance of $400,000 by year’s end, 15% chance of $300,000, 30% chance of $160,000 and close to a 50/50 chance of higher than $100,000.”
  • Alessandro Andreotti, bitcoin over-the-counter broker: “In my opinion we are going to keep reaching fresh new highs soon.”
  • Matt Blom, head of sales and trading, EQUOS: “If the market remains strong and holds above $50,000, then we see momentum building and the race to a $1T market cap is well and truly on. $54,000 is still the target, and looking ahead, with very little to stop this trend, thoughts of $60,000 will not be far from traders’ minds.”
  • Edward Moya, senior market analyst, OANDA: “Every day, it seems there are fresh catalysts for Bitcoin.”
  • Denis Vinokourov, head of research at digital assets prime broker Bequant: “Yesterday’s news that MicroStrategy is to buy another round of Bitcoin using the proceeds from their announced $600 million note offering should be a net-positive for the price action. But there is a risk that, similar to QE announcements, that market participants will be demanding larger and larger ticket sizes or push prices lower.” (EDITOR’S NOTE: MicroStrategy has increased the size of the note offering to $900 million.) 
  • Mati Greenspan, founder, Quantum Economics: “At this point, people have to be asking just how much longer the party might last? The sheer interest in the space and new money that is reportedly being pumped into bitcoin as a hedge against copious amounts of brrrrrrr from J-POW and the Biden administration could well send bitcoin right past the $50,000 mark and into the stratosphere.”
  • JPMorgan: Bitcoin’s charge to a record north of $50,000 isn’t sustainable unless the cryptocurrency’s price swings cool down quickly, according to a research note published Tuesday. 
  • Wedbush Securities: “We believe the trend of transactions, bitcoin investments, and blockchain-driven initiatives could surge over the coming years as this bitcoin mania is not a fad in our opinion, but rather the start of a new age on the digital currency front.” 
  • Joel Kruger, cryptocurrency strategist, LMAX Digital: “Now that we’ve finally pushed through this next great barrier, we recommend exercising extreme caution over the short-term. The market has gone parabolic since breaking through $20,000, and technical studies are warning of the need for a healthy pullback in the days and weeks ahead to allow for severely stretched readings to unwind and normalize.”
  • James Bullard, president of the Federal Reserve Bank of St. Louis: “I just think for Fed policy, it’s going to be a dollar economy as far as the eye can see – a dollar global economy really as far as the eye can see – and whether the gold price goes up or down, or the bitcoin price goes up or down, doesn’t really affect that.”
  • Eric Demuth, CEO, Bitpanda: “In my opinion, it is just a matter of time until bitcoin becomes the new gold and will be added to the balance sheet of central banks.”

Bitcoin Watch

Weak spot-market volume might be cause for concern

Bitcoin’s daily chart shows bearish volume divergence on Coinbase Pro.

Source: TradingView/CoinDesk

Another day, another record high for bitcoin. The top cryptocurrency rose above $51,000 early Wednesday, taking the month-to-date gain to 54% amid a wave of institutional adoption.

  • The options market is biased bullish, with both short-term and long-term call options drawing higher prices than puts or bearish bets, CoinDesk’s Omkar Godbole writes.
  • The only cause for concern is the weak spot market volume on institution-focused exchanges such as Coinbase Pro. As seen in the chart above, the 10-day average of daily trading volume is trending south, putting a question mark on the sustainability of the breakout above $50,000.
  • As such, a sudden pullback, possibly to the 10-day average of bitcoin’s price, currently at $47,700, cannot be ruled out.

  • Pricing in futures market looks bullish, with the March contract on Chicago-based CME trading at 2.57% above the spot bitcoin price, representing an annualized premium of 24%, well above the average around 15%, the Norwegian cryptocurrency-analysis firm Arcane Research noted Tuesday in a weekly report. “The market is heavily tilted towards the upside, which can trigger brutal liquidations as we advance,” the analysts wrote. 
  • Most financial executives, including CFOs, are not planning to invest in bitcoin as a corporate asset this year, according to a new survey by consultant Gartner. Eighty-four percent of polled executives (representing 77 firms) told Gartner in February they were spooked by “financial risk due to volatility of Bitcoin” when considering whether to invest in the crypto.

Token Watch

Ether (ETH): Customers of the Coinbase cryptocurrency exchange can now sign up to stake ether into the Beacon Chain smart contract, which was set up to help facilitate the Ethereum blockchain’s planned “2.0” transition to a “proof-of-stake” system from the current “proof-of-work” system, which is what the Bitcoin blockchain uses. 

Dogecoin (DOGE):

  • The Shiba Inu-themed token started off as a joke cryptocurrency but now has a market capitalization of $7 billion and a huge global following. How did it all happen? CoinDesk’s Ollie Leach explains. 
  • “DOGE is indeed relatively concentrated,” the blockchain analytics firm Coin Metrics wrote Tuesday in a report. “The top 100 largest DOGE addresses hold 68.1% of total supply. Comparatively, the top 100 largest BTC addresses only hold 13.7% of total supply.”

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First Mover: Bitcoin Tops $50K and Crypto’s Nouveau Riche Move In

Price Point

Bitcoin (BTC) shot past $50,000 for the first time Tuesday to a new all-time high price.

The gain took the year-to-date return to about 70%, and traders immediately began to discuss what comes next. 

  • “We’re still in the midst of a violent bull run that will soon be more violent,” Ari Paul, chief investment officer of BlockTower Capital, tweeted Sunday. 
  • “We’re concerned about the pace of these market moves and would therefore recommend proceeding with caution over the short term,” Joel Kruger, cryptocurrency strategist at LMAX Digital, said in an email. NOTE: A price correction on Monday led to more than $520 million of futures-positions liquidations.
  • Bank of America, in a monthly investor survey of the “most crowded trades,” said that “long bitcoin” – bets on further price gains – slipped to second place behind “long tech.” Bets against the U.S. dollar (“short dollar”) ranked third.   

In traditional markets, U.S. stock futures pointed toward a higher open. “The reflation trade is powering assets tied to economic growth and price pressure, including commodities and cyclical stocks,” Bloomberg News reported. “At the same time, investors are riding a wave of speculative euphoria from penny stocks to bitcoin amid abundant policy support.”

The News

CRYPTO CRUSH: Signs continued to mount of greater mainstream acceptance of bitcoin and other cryptocurrencies.

  • Michael Saylor’s MicroStrategy plans a new sale of $600 million of convertible notes and will use the net proceeds to buy more bitcoin. 
  • Deutsche Bank, Germany’s biggest lender, is exploring cryptocurrency custody, with aspirations to offer high-touch services to hedge funds that invest in the asset class, CoinDesk’s Ian Allison reported Friday. 
  • Morgan Stanley’s $150 billion Counterpoint Global investment unit is considering placing a bet on bitcoin, according to a report by Bloomberg, which cited people familiar with the matter.
  • The city of Miami, following the lead of Mayor Francis Suarez, voted late last week to study the use of cryptocurrencies to pay for services or worker salaries while launching educational campaigns in English, Spanish and Creole.

VERGE SNAFU: Verge, a small cryptocurrency serving as a payments option on Pornhub, suffered a massive 560,000-block reorganization Monday, according to researchers at Coin Metrics.

  • The past 200 days of Verge transaction history “just vanished,” wrote Coin Metrics network data analyst Lucas Nuzzi. He described the event as “likely the deepest reorg that has ever taken place in a ‘top 100’ cryptocurrency.” 
  • Verge’s official Twitter account said the “dev team has released a fix,” and everything should be “business as usual” in “13 hours,” CoinDesk’s Zack Voell reported. 
  • The cryptocurrency previously known as DogecoinDark is no stranger to network attacks. It suffered similar but less severe exploits in April 2018 and May 2018.

Market Moves

Nouveau riche emerge as crypto market cap tops $1.5 trillion

This ranking of the top 10 cryptocurrencies by market value shows how the leaders from prior years, like XRP and litecoin, have been elbowed out recently by fast-growing blockchain projects like Cardano and Polkadot.

Source: Messari

The market value of all cryptocurrencies has topped $1.5 trillion for the first time, and it’s interesting to note just how much of that growth has been fueled by speculation over which projects might be the most promising – rather than just the pumping of also-ran tokens that dominated the industry’s top ranks in recent years. 

Sure, the industry leaders bitcoin and Etherum’s ether still dominate the charts, representing roughly $1.1 trillion of the total. But the top 10 tokens now include cardano (ADA), polkadot (DOT), Binance coin (BNB) and chainlink (LINK) – all associated with projects perceived as having at least some claim on helping to create the future of finance.

They’re crypto’s nouveau riche, climbing in the industry hierarchy at the expense of XRP (XRP), litecoin (LTC) and bitcoin cash (BCH), which held sway until recently but apparently have failed to inspire traders to the same degree. 

Some companies in the growing arena of decentralized finance, a subsector of the crypto industry where entrepreneurs are using blockchain technology to design automated versions of lenders and trading platforms, are raising money through token sales the way a Silicon Valley startup might sell an equity interest to a venture-capital fund.

In fact, Synthetix, a decentralized trading project, has just raised $12 million from investors Coinbase Ventures, Paradigm and IOSG – apparently through a sale of the project’s associated SNX tokens. “The raise looks to be a rare occurrence of VCs investing through the purchase of a platform’s native token directly from its treasury rather than wiring funds to its founders,” CoinDesk’s Daniel Kuhn wrote Sunday. The SNX tokens have tripled in price this year to a market value of about $2.9 billion. 

“Individually, none of these may make sense, and no one can really predict who actually will win,” John Wu, president of Ava Labs, said in an interview. His company backs the Avalanche blockchain, whose native AVAX cryptocurrency is up roughly 10-fold this year to a market value of $3 billion. And that’s after the revelation of a programming bug last week triggered a quick price correction.

“This is very similar to tech investing where people are paying for the future,” Wu said. 

Token Watch

Ether (ETH):

  • Staked ether in “2.0” deposit contract tops $5.5 billion.
  • Price hit new all-time high of $1,872.52 on Feb. 12.
  • Simon Peters, cryptoasset analyst for the trading platform eToro, wrote in an email: “Supply is constrained by investors depositing coins off the network, and buying from institutional investors continues to climb.” 
  • Denis Vinokourov, head of research for crypto prime broker Bequant: “The amount of bitcoin locked on Ethereum remains on a relentless trend higher (174k as of this morning), underpinning the ‘hunt for yield’ trade, which, combined with the surge higher by BTC resulted in the total value locked on DeFi platforms surging to over $40 billion. However, the well documented double-edged sword of a ‘hyperactive’ Ethereum network with erratic gas fees continues to wreak havoc and cause hour-long delays in transaction validations, yet again squeezing out the smaller market participants. The time for platforms to put more focus on layer-2 solutions is here, and doing so will prove beneficial for the broader ecosystem because it will likely drive many users towards decentralized exchanges.”

Dogecoin (DOGE): 

  • Price has fallen in five of the past eight days to about 5.8 cents. 
  • Slide accelerated after Tesla CEO Elon Musk tweeted on Sunday: “If major dogecoin holders sell most of their coins, it will get my full support. Too much concentration is the only real issue imo.”
  • One dogecoin address holds 27% of meme token’s supply, according to Decrypt.

Avalanche (AVAX):

  • An unusually high volume of transactions highlighted a code bug that severely crippled the Avalanche blockchain last week, but funds were never at risk,  an engineer Ava Labs, the development company behind the network, wrote in a Medium post on Sunday.
  • The episode represented an embarrassment for the because the “Ethereum killer” blockchain has touted its ability to handle high throughput.
  • AVAX tokens have tumbled in price since the incident, though they’re still up 11-fold so far in 2021.

Opinions and Observations

STIMULUS BITCOIN WINNINGS: Americans who bought bitcoin with first $1,200 U.S. government stimulus check are up 639%.

BLOCKCHAIN POWER USAGE BETWEEN ROMANIA’S AND POLAND’S: Bitcoin and six other proof-of-work blockchains use between 55.1 terawatt-hours of electricity per year (roughly the energy footprint of Romania) and 180.1 terawatt-hours (Poland or Thailand), argues Tim Swanson, founder of Post Oak Labs and head of market intelligence at Clearmatics, in paper published Sunday. 

MOHAMED EL-ERIAN SEES GROWING “OFFICIAL” RISK: “The private sector is embracing more and more bitcoins as both a form of payment and as away to invest,” the Allianz chief economist told CNN’s Julia Chatterley in an interview. “The official sector is warning more about bitcoin. The real accident here is that the official sector says, enough is enough.”

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First Mover: A Bullish ($1 Million) Bitcoin Forecast as Year of Ox Begins

Editor’s Note: Happy Chinese Lunar New Year! First Mover will not publish on Monday, February 15, which is Presidents’ Day in the U.S. Cryptocurrency markets will be open, as they always are.

Price Point

Bitcoin (BTC) was lower, after pushing early Friday to a new all-time high price of $48,925, based on CoinDesk pricing. 

Market activity was quiet due to the Lunar New Year celebrations across Asia and the upcoming Presidents’ Day holiday in the U.S. on Monday, according to Craig Erlam, senior market analyst for the foreign-exchange brokerage Oanda. (It’s the Year of the Ox, by the way, which is seen by some traders as bullish, in case you missed the story last week by CoinDesk’s Muyao Shen.)   

In traditional markets, U.S. stock futures were lower, with one investor telling Bloomberg News that “investor exuberance has somewhat waned.” Gold weakened 0.5% to $1,817 an ounce. 

The News

JPMORGAN FEELS BITCOIN BURN: JPMorgan employees hounded senior trading-division management during an internal “town hall” meeting over when the largest U.S. bank might get into bitcoin, CNBC reported.    

RESERVE CURRENCY STATUS? ECB President Christine Lagarde said it’s “very unlikely” that central banks will hold bitcoin in the near future. “I would say it’s out of the question,” Lagarde said during a conference call hosted by The Economist. 

GIVE THE PEOPLE WHAT THEY WANT: U.S. Securities and Exchange Commissioner Hester Peirce, sometimes known as “Crypto Mom” due to her sanguine views on the digital-asset industry, said the country’s capital markets are ready for a bitcoin exchange-traded product. The SEC has refused to approve a bitcoin exchange-traded fund despite multiple applications. People are already eager to trade a bitcoin ETP, “so if we don’t give them the natural way, which I think would be an ETP, they are going to look for other (less optimal) ways to do it,” Peirce said Thursday on CoinDesk TV. 

CANADA ISN’T WAITING: The first North American bitcoin ETF was approved Thursday by the Ontario Securities Commission. “Perhaps they’re normal and SEC too conservative,” tweeted Eric Balchunas, senior ETF analyst at Bloomberg. “Either way U.S. usually follows shortly after.”

FINANCE EXECS DEMUR ON BITCOIN: Top financial executives at Verizon, Cisco Systems and Mozilla see risks and accounting challenges in putting corporate money into bitcoin, the Wall Street Journal reported. Such anecdotes challenge the investment narrative that the cryptocurrency is set to benefit from a wave of new demand from companies.  

BAIR’S A BEAR: Bitcoin prices are at “nosebleed levels,” said Sheila Bair, former chair of the U.S. Federal Deposit Insurance Corp. and now chair at the government-owned mortgage-finance company Fannie Mae. “Stay away from it,” she said late Wednesday in a Bloomberg Radio interview. “It’s volatile. It’s at nosebleed levels now. We don’t know how sustainable that is.” 

INDIA GRACE PERIOD: Policymakers in India will provide a transition period if a proposed ban on cryptocurrency usage is passed as expected, Bloomberg reported. After that, cryptocurrency usage in all aspects will be banned via a new law set to be introduced in the current parliamentary session via the Cryptocurrency and Regulation of Official Digital Currency Bill, 2021.

Market Moves

How bitcoin gets to $1 million in 11 years, in one analyst’s scenario

First Mover ran some back-of-the-envelope math earlier this week to illustrate just how scarce the supply of bitcoin might be for the bevy of new institutional investors and corporate treasurers now ostensibly considering an allocation to the cryptocurrency, following Tesla’s announcement earlier this week of a $1.5 billion purchase. 

Now comes Charlie Morris, chief investment officer of ByteTree Asset Management, who has run his own calculations along similar lines, making First Mover’s amateur efforts look like the doodlings of a toddler. 

Some 363,500 bitcoins will be awarded this year to cryptocurrency miners for helping to secure the blockchain network, Morris estimates. He assumes the miners “will presumably sell most because that is their business.”

Further extrapolation leads to a figure of $18.17 billion: This is the amount of new bitcoin demand that would be needed this year to “sustain a $50,000 BTC price,” according to Morris. 

For context, Morris writes that gold exchange-traded funds attracted $41 billion last year. “Given the offsetting flows into bitcoin at the time, the evidence points towards gold investors switching into bitcoin,” Morris writes: “If bitcoin can attract $41 billion in 2021, as gold did last year, expect to see an average bitcoin price of $100K.”

It’s pretty bullish, in other words, but not crazily farfetched. As First Mover reported earlier this week, some $2.02 billion has already flowed into bitcoin-focused investment products this year, based on a report Tuesday from the digital-asset manager CoinShares. And the CoinShares report doesn’t even cover demand from investors or corporate treasurers who may be buying bitcoin directly through their own accounts, or purchases from retail traders who are looking for a piece of the action. 

Factor in the Bitcoin blockchain’s quadrennial halvings, where miner rewards are cut in half, and the investment hurdle gets lower every four years. “It keeps on falling thereafter, meaning that high prices are easier to sustain in the future than today,” Morris writes. 

So what does that mean for bitcoin prices? Morris figures a $1 million price for bitcoin is reasonable by 2044 at a rate of $41 billion of new inflows per year. If consumer price inflation averages 2.5%, the $1 million mark is achieved by 2036, or by 2032 if inflation averages 5%. That’s just 11 years from now, representing a 20-fold gain from current price levels. 

Mastercard/BNY Mellon Reax

Gavin Smith, CEO, Panxora Group: “BNY Mellon’s and Mastercard’s entry into the cryptocurrency space moves bitcoin two huge steps closer to mainstream acceptance.”

David Mercer, CEO, LMAX Group: “Financial institutions are now preparing to follow their clients.”

Don Guo, CEO, Broctagon Fintech Group: “We hope that the increasing adoption will urge the industry to prioritize liquidity provision through improving crypto infrastructure. This will ensure both existing and new participants consistently have access to the best prices and that the industry reaches the next level of maturity.”

Edward Moya, senior market analyst, Oanda: “Improved mainstream acceptance for cryptocurrencies are completely easing most regulatory concerns for now.”

Anthony Pompliano, Morgan Creek Digital, in a tweet: “Eventually, every company will join the revolution.” 

Bitcoin Watch

Number of large bitcoin addresses swells, CoinDesk’s Omkar Godbole writes

Bitcoin’s supply distribution shows increase in addresses with large balances.
(Coin Metrics)

Bitcoin’s blockchain data supports the popular narrative that price rally has been fueled by increased institutional demand.

  • According to data source CoinMetrics, the number of bitcoins locked in the addresses holding between 1,000 to 10,000 BTC has increased significantly since late 2020. The group now holds over $5 million coins or 30% of bitcoins’ total supply. That’s a sign of increased participation by high net worth individuals and institutions.
  • Retailers too have participated in the rally, with addresses holding between 0 and 10 BTC gaining share since mid-2020.

Token Watch

Ether (ETH): Joel Kruger, cryptocurrency strategist at exchange LMAX Digital, offered CoinDesk’s Muyao Shen some price points to watch: “A break above [$1,840] will open the door for a test of massive resistance at $2,000, which represents a critical psychological barrier and measured move upside extension,” Kruger said. “We see the first level of support at $1,680, with a break below to take the immediate pressure off the topside and open the door for a correction back down towards the $1,500 area.”

Avalanche (AVAX): Network comes to near halt after “bug in the cross-chain functionality” fails under high loads, according to Avalanche developer team on Reddit. The AVAX token’s price has jumped 15-fold already this year. 

Tether (USDT): Dollar-linked stablecoin’s market cap surpasses $30B.

Economy in Transition

REMOTE WORKING STICKS: Another year of remote working looms as companies delay office-reopening plans to September or beyond, in many cases refusing to commit to specific dates, the Wall Street Journal reports. As First Mover wrote in November: “A secular transition to commuting-by-Internet might be taking place, perhaps one of the biggest labor-force transformations since the industrial revolution, which lured people to cities…. Governments and central banks are probably going to have to provide a lot of aid and stimulus to assure the transition goes smoothly, that society holds together, that people can manage.”

U.S. DEBT > 100% OF GDP: The government’s debt load is on track to exceed the size of the entire U.S. economy this year, largely due to the $4 trillion in emergency spending approved since March to fight the pandemic and stimulate output. The debt is forecast to reach 107% of gross domestic product in a decade. 

U.S. Congressional Budget Office’s latest projections for the federal debt show the nation’s liability load increasing by more than $1 trillion a year over the next decade, from an already elevated level.

Source: Congressional Budget Office

Opinions and Observations

PAY NOW OR PAY LATER: Mohamed El-Erian, chief economic advisor for the German financial behemoth Allianz, writes in column for Bloomberg Opinion: “What is favorable for policy and markets now increases future risks, starting with financial instability. The more Wall Street surges ahead in the short term, the harder it is for eventually improving economic conditions to validate the ever more elevated asset prices in an orderly manner.”

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First Mover: Bitcoin at Center Stage (and Record High) as Mastercard, BNY Go Crypto

Price Point

Bitcoin jumped more than 6% Thursday to a new record high of $48,297 after Mastercard confirmed CoinDesk’s exclusive Wednesday that the payments-processing giant plans to let merchants receive payments in cryptocurrency starting later this year.

And BNY Mellon, the world’s largest custodian bank with some $41 trillion of assets in safekeeping, said Thursday it’s moving into crypto.   

“Bitcoin and its peers are, quite simply, going to be part of the mainstream financial universe sooner rather than later,” Simon Peters, cryptoasset analyst for the trading platform eToro, wrote Thursday. “I expect demand to surge and see bitcoin prices hitting at least $70,000 by the end of this year.”

In traditional markets, trading in Asia was muted ahead of Lunar New Year public holidays, with China breaking for a week. (The year of the Ox is seen as bullish for bitcoin, of course.) U.S. stock futures pointed to a higher open as investors focused on the prospect of higher inflationas the economy accelerates and governments and central banks maintain aggressive stimulus policies. Gold weakened 0.1% to $1,842 an ounce. 

The News

BNY Mellon gets in: Bank beats rivals JPMorgan, Citigroup to the punch with plan for new digital custody offering later this year. “It will be driven by client interest and demand,” Mike Demissie, head of advanced solutions at BNY Mellon, told CoinDesk’s Ian Allison in an interview. 

Mastercard too: Card network plans to let merchants receive payments in cryptocurrencies later this year. The news was reported Wednesday by CoinDesk’s Danny Nelson and later confirmed by the company in a web post. “Whatever your opinions on cryptocurrencies – from a dyed-in-wool fanatic to utter skeptic – the fact remains that these digital assets are becoming a more important part of the payments world,” according to the Purchase, New York-based company.

Yellen’s yellow light: U.S. Treasury Secretary Janet Yellen said the use of cryptocurrencies for illicit purposes are a “growing problem,” while adding that she sees “the promise of these new technologies.” The remarks, made Wednesday at a roundtable on financial-industry innovation and published in a Treasury Department press release, could fuel some traders’ concerns that the U.S. government might mount a crackdown as cryptocurrencies gain wider acceptance.

Amazon in Mexico: E-commerce giant preparing to launch a digital-currency project in Mexico, job postings show. It’s not clear how much the planned foray relates to “Amazon Coins,” an 8-year old virtual currency initiative that allows holders to transact across web games.

Market Moves

Bitcoin at center of conversations at center of global markets

Federal Reserve Chair Jerome Powell delivers a webcast speech Wednesday to the Economic Club of New York. (C-SPAN) 

Inflation has all of a sudden become the biggest issue in global markets. and as with all things involving humans, there’s a lot of disagreement to go around. 

The debate ranges from whether the Federal Reserve has the willpower or inclination to snuff out inflation if prices really starts to tick up to whether bitcoin is really the solution for big investors or corporations looking to protect themselves from the potential debasement of the U.S. dollar. 

One thing’s for certain: The three most important U.S. officials driving the economic strategy are President Joe Biden, Treasury Secretary Janet Yellen and Fed Chair Jerome Powell. And all three are broadly in alignment that the country’s focus at this point should be on a stimulus-fueled recovery that will create lots of jobs. Inflation isn’t really a concern right now. Worry about that later, the thinking goes. 

“The Fed will continue to support the devastated labor market with plenty of brrrrrrrrrrrrrr,” Mati Greenspan, founder of the foreign-exchange and cryptocurrency analysis firm Quantum Economics, wrote Wednesday. That two-consonant word, for those who missed the popular meme last year, is the elongated version of an onomatopoeic rendition of the sound a money printer ostensibly makes. 

A big data point on inflation arrived Wednesday from the U.S. Labor Department, which reported that the “core” consumer price index, which excludes food and energy items, was unchanged in January from December levels. Over the past 12 months, it’s up 1.4%. No big deal, right? That’s well below the Fed’s target of 2% annually. 

The real bogeyman, though, isn’t what’s happening with inflation now as the lingering pandemic continues to take a toll on economic activity, suppressing consumer demand, but what happens when activity resumes in full and people get out and about and start spending all the money they’ve saved up.

So big investors are fixated on bond-market signals showing fast-rising expectations for inflation in the future. The average level implied over the next five years recently ticked above 2%, and the chart shows a steep slope upward to the right:

Source: Federal Reserve Bank of St. Louis

The U.S. government’s budget deficit has totaled $736 billion over the first four months of the year, a record for the period and 89% higher than a year earlier, according to a statement released Wednesday. The figures don’t even account for the $1.9 trillion stimulus package that Biden is pushing Congress to pass despite reluctance from the opposition Republican Party as well as influential members of his own Democratic Party.

It goes without saying that any fresh stimulus would follow a lot that’s already been done, both on the fiscal and monetary sides: The Federal Reserve has created about $3.3 trillion of new money since the start of 2020, pushing the size of its balance sheet to nearly $7.5 trillion for the first time.

“With no hints of scaling back the Fed’s massive asset purchases, Powell is a super dove,” Oanda Senior Market Analyst Edward Moya wrote Wednesday after reviewing a speech Wednesday by the Fed chair. 

Bitcoin over the past year has become one of the most popular ways for big investors to play the “reflation trade,”and there’s no shortage or diversity of opinions on the cryptocurrency. It’s a digital version of gold or it’s a scam benefiting from a tulip-like mania, with a lot of space in between. Here’s a quick rundown of comments that emerged Wednesday.

  • Bank of Canada Deputy Governor Timothy Lane: “The recent spike in their prices looks less like a trend and more like a speculative mania.” 
  • David Rosenberg, former chief economist for Bank of America, now at his own firm: “You’re buying bitcoin on the assumption that some bigger fool is going to buy it at a higher price.”
  • Three Morgan Stanley analysts, in a slide presentation. “Central bank policies could be setting up for accelerating inflation. Investing in bitcoin provides a hedge against that risk, especially if supply chain payments can be migrated from fiat to bitcoin.”
  • Twitter Chief Financial Officer Ned Segal: “We’ve done a lot of the upfront thinking to consider how we might pay employees should they ask to be paid in bitcoin, how we might pay a vendor, if they actually pay in bitcoin, and whether we need to have bitcoin on our balance sheet should that happen.”
  • Morgan Stanley Chief Global Strategist Ruchir Sharma: “Even if bitcoin’s price pops, as it has before, the rush of 2020 can’t be dismissed as an irrational mania. Cryptocurrencies are still young, they still face growing pains. But they also promise speed, transparency, and low fees that traditional payment channels cannot match. They satisfy a growing demand for a digital alternative to gold, an asset likely to protect investors from massive money printing and the threat of inflation. To younger investors, `crypto’ already evokes digital, stable and good, not shadowy and sinister. The rest would be well advised to recognize that the currency world is changing, or risk being left behind.”
  • Bank of America’s research investment committee: “As a long-term store of value, cryptocurrencies might be attractive, but only for investors who can tolerate substantial volatility.”
  • Nouriel Roubini, economics professor at New York University, appearing on Wednesday’s “First Mover” show on CoinDesk TV: “In the case of bitcoin, it doesn’t have any income, it doesn’t have any use, it doesn’t have any utility. So what’s the value of it, based on what? Based on no intrinsic value, and purely a speculative bubble.”
  • Mark Haefele, chief investment officer for global wealth management at Swiss banking giant UBS: “The basic function of a modern currency is to store value. By contrast, the diminishing incremental supply of bitcoin has made ‘bubbling’ one of its basic functions.”

To sum up: The prospect of future inflation has become a central topic for investor conversations about global markets and the economy, and bitcoin is at the center of those. 

With prices for the cryptocurrency up 55% already in 2021, outperforming almost everything in traditional markets for the third straight year, Wall Street analysts and mainstream corporate executives are no longer shrinking from the discussion

Bitcoin Watch

“Rich list” grows; options market sees low odds of $100K in 2021 

Chart of bitcoin options probabilities shows low odds of $100,000 price in 2021.

Source: Skew.

Bitcoin’s “rich list,” consisting of blockchain addresses with at least 1,000 coins, continues to grow, a sign of sustained accumulation by large holders also known as whales, CoinDesk’s Omkar Godbole writes.

  • Tally hits fresh record high of about 6.1 million on Wednesday, surpassing the previous peak around 5.75 million reached Jan. 8, according to data provider Glassnode.
  • The data, coupled with the persistent positive Coinbase premium, a sign of institutional demand, suggests the path of least resistance for the cryptocurrency is to the higher side. NOTE: Coinbase premium is the gap between Coinbase’s BTC/USD pair and Binance’s BTC/USDT pair involving the tether stablecoin, according to the South Korea-based on-chain data site CryptoQuant.
  • Options market, however, is pricing low odds of a rally into six figures this year.

Token Watch

Binance coin (BNB), FTX token (FTT), Huobi token (HT):  Utility tokens for centralized exchanges hit all-time highs.

Dogecoin (DOGE):

  • Doggie-faced meme token’s surging price (1,472% year-to-date) brings new focus to programmers’ historically scattered efforts to develop blockchain.
  • Castle Island’s Nic Carter tells CNBC that “a lot of retail punters are going to lose money on dogecoin in the long term because there’s really not much there in terms of interesting technology.”
  • Tesla CEO Elon Musk tweets that he “bought some dogecoin” for his son, “so he can be a toddler hodler.” (Tesla shares fell 5.3% Wednesday, the biggest decline in a month.)
  • Wallet holding almost $3B of dogecoin reportedly placed 20 transactions for 28.061971 DOGE, which corresponds to Elon Musk’s birth date.

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First Mover: As Wall Street Fixates on Inflation Hedges, Good Luck Finding Bitcoin

Price Point

Bitcoin (BTC) was lower, after an intraday price spike on Tuesday took the largest cryptocurrency to a new all-time high of $48,226.25, based CoinDesk 20 data.   

$50K in sight: “Bitcoin needs a couple more big endorsements, and that could be the key to take prices above the $50,000 level,” Edward Moya, senior market analyst for the foreign-exchange broker Oanda, wrote Tuesday. 

Inflation watch: European shares and U.S. stock futures were higher as Bloomberg News reported that “inflation has quickly become the biggest issue in markets on speculation the Federal Reserve will let the economy run hot out of the pandemic.” The U.S. Labor Department’s Bureau of Labor Statistics reported Wednesday in its monthly CPI report that the consumer price index rose 0.3% in January, for a 1.4% increase over the past 12 months. The headline reading was in line with economists’ expectations.  

The News

Argo Blockchain plans new bitcoin mine in western Texas: The publicly-listed company has agreed to buy 320 acres of land to build the 200-megawatt data center, at a cost of $17.5 million to be funded via the issuance of ordinary shares. Argo will use a $100 million credit facility to fund the construction of the site, which ostensibly would be one of the world’s largest bitcoin mines.  

Bitcoin ‘can’t be stopped’: Nigerians look to peer-to-peer exchanges after crypto ban. Some Nigerians plan to continue using bitcoin and other cryptocurrencies despite a directive issued by the Central Bank of Nigeria last week ordering banks to close down accounts associated with cryptocurrencies. going remote: The company is the largest private employer in San Francisco and occupant of the city’s tallest building, known as the Salesforce Tower, and yet it’s planning for most employees to work remotely part- or full-time after the pandemic, the Wall Street Journal reports. First Mover has written previously about how a permanent shift toward remote working could represent one of the biggest labor-market trends in generations, and yet the Federal Reserve and other economic authorities have barely begun to address the transition. 

Market Moves

Everybody wants bitcoin, but where will it come from? 

The number of bitcoins held on cryptocurrency exchanges, ostensibly ready for a quick sale if the price is right, has declined over the past year to levels not seen since mid-2018.

A collision course is setting up in the bitcoin market: a wave of new buyers appearing just as easily-obtained supplies of the cryptocurrency fall to their lowest levels in more than three years. 

Electric-vehicle maker Tesla’s announcement this week that it had bought $1.5 billion of bitcoin triggered a new round of wagering that more corporate treasurers might soon follow CEO Elon Musk’s lead. 

At least one Wall Street analyst argued that iPhone maker Apple, the world’s largest company, should push into the game. There’s also speculation that software giant Oracle might be next, partly fueled by CEO Larry Ellison’s service on Tesla’s board of directors. Facebook, Amazon, Netflix, Google and Microsoft could all be candidates, suggests Mati Greenspan, founder of the foreign-exchange and cryptocurrency analysis firm Quantum Economics.  

Even the obstreperous CNBC personality Jim Cramer weighed in on Tuesday: “Every treasurer should be going to boards of directors and saying, ‘Should we put a small portion of our cash in Bitcoin?’” Cramer said on the financial-news network. (A JPMorgan analyst, for what it’s worth, argues that corporate treasurers are likely to be turned off by bitcoin’s notorious price volatility.)  

Yet if companies start buying bitcoin en masse, finding fresh supplies of the cryptocurrency is likely to come at a cost, according to professional analysts in digital-asset markets. 

The number of bitcoins sitting on cryptocurrency exchanges – ostensibly ready for a quick sale if the price is right – has fallen to about 2.3 million, the lowest since July 2018, based on data from Glassnode, a blockchain analysis firm. It’s down from about 3 million as recently as early 2020.

The decline may reflect the activity of big investors who bought bitcoin over the past year and then swiftly transferred their holdings to custody providers or offline “cold storage” solutions, awaiting long-term gains, according to Arcane Research, a Norwegian cryptocurrency-analysis firm.  

“A proper supply crisis is taking place in front of our eyes,” the Arcane analysts wrote. 

Bitcoin’s year-to-date returns versus the Standard & Poor’s 500 Index and gold.

Source: TradingView/CoinDesk

Prices for bitcoin are already up 62% year-to-date, versus 4.1% for the Standard & Poor’s 500 Index of large U.S. stocks. That track record alone might be enough to tempt more companies, investment firms, endowments, pension plans, governments, endowments, pension plans and regular people – especially at a time when bitcoin is increasingly viewed as a hedge against currency debasement, during an era of easy-money policies from central banks around the world.  

“If you think Bitcoin is lively now, wait till there’s a liquidity crunch,” says Matt Blom, head of sales and trading for the cryptocurrency exchange firm EQUOS.

Some 900 new bitcoins are minted each day by the underlying blockchain network, worth roughly $42 million at current prices

Compare that with the $2.02 billion that has flowed into bitcoin-focused investment products so far this year, based on a report Tuesday from the digital-asset manager CoinShares. That works out to an average $51.9 million per day.

And the CoinShares report doesn’t even cover demand from investors or corporate treasurers who may be buying bitcoin directly through their own accounts, or from retail traders who are looking for a piece of the action. 

The math is pretty simple: There’s not a lot of bitcoin for sale at current price levels.

“Holders are not selling their bitcoin in response to price increases,” says Philip Gradwell, chief economist for the blockchain-forensics firm Chainalysis. “If this behavior continues, then price should continue to rise if demand continues.”

Bitcoin Watch

“Doji candle” signals indecision, CoinDesk’s Omkar Godbole writes

Bitcoin price chart showing “Doji” candle.

Source: TradingView/CoinDesk

Bitcoin’s daily price chart shows signs of indecision in the form a Doji candle. The range play is typical of price consolidation seen after a notable rally.

  • If buyers fail to defend Tuesday’s low of $45,060, bitcoin may revisit the former record high of $41,962, now perceived as a new level of support. 

Token Watch

Ether (ETH): Second-largest cryptocurrency by market capitalization hit fresh all-time high Tuesday of $1,824, according to CoinDesk 20 data. “We expect some exhaustion on ether coming from the price itself, above $2,200, but also from the fees to use the network itself while solutions are being built to tackle this issue,” Jean-Baptiste Pavageau, partner at quantitative trading firm ExoAlpha, told CoinDesk’s Daniel Cawrey. 

Litecoin (LTC): Alternative cryptocurrency hits 3-year highas network activity picks up, with the number of new addresses climbing to the highest since 2019.  

DeFi Soars: Collateral locked in decentralized-finance protocols closes in on $40 billion, up from about $1 billion a year ago, according to DeFi Pulse:

Collateral locked in decentralized finance has soared to about $40 billion.

Source: DeFi Pulse

First Person

Opinions and observations

Has Ethereum already passed threat from Ethereum killers? Sure, other “smart-contract” blockchains might eventually do what Ethereum does, and do it faster and cheaper. But “Ethereum’s immense intangible assets are the real moat behind its dominance,” including a cryptocurrency brand second only to Bitcoin’s and a “fanatically loyal community,” Zabo co-founder Alex Treece writes for CoinDesk Opinion. 

End of “Petrodollar” era could loosen U.S. dollar’s domination as global reserve currency, according to Reuters column by Mike Dolan. 

“Investors who have grown accustomed to central banks always coming to the rescue could find themselves in serious pain” if inflation ticks up and the Federal Reserve steps in to tighten monetary policy, columnist James Mackintosh writes for WSJ.  

Bitcoin to Keep Dominating? David Russell, an analyst for TradeStation, emails First Mover to say: “Lots of people expected a rally in altcoins this year, and there are legitimate reasons to like smaller coins associated with the growth of DeFi. But investors shouldn’t overlook the much bigger trend of institutional adoption, which could channel hundreds of billions of dollars into the market much faster than anyone thought. It’s a completely different catalyst that could disproportionately favor bitcoin at the expense of altcoins. DeFi and Altcoins offer a steady trickle of innovation and excitement. But institutional adoption could represent a tsunami of cash. Risk-averse corporations and institutions are doing the buying. If they’re just now getting the courage to enter a market that was previously viewed as risky, they will favor the safest asset in that market. This is similar to global investors in a new emerging market. They often target the biggest and most mainstream companies like banks and telecoms rather than smaller industrials.”

Opportunism is alive and well in crypto: After just two days, it appears that a website called The Doge Store is already selling a T-shirt for $19.99 with the words “Elon’s Candle” and an image of bitcoin’s price chart (candle view) leading up to the moment earlier this week when Tesla announced its $1.5 billion purchase of the cryptocurrency. By the way, the 19.5% price jump over the course of Feb. 8 was the largest daily move in percentage terms since Dec. 7, 2017, and  also represented the largest-ever daily price increase in absolute dollar terms, at more than $7,500, according to Arcane Research. (EDITOR’S DISCLAIMER: We know absolutely nothing about this retailer.) 

“Elon’s Candle” T-shirt from The Doge Store.

Source: The Doge Store

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First Mover: Elon Musk’s #bitcoin Bet Pays Off With $270M Gain on First Day

Price Point

In a run reminiscent of bitcoin’s stunning ascent in early January, bitcoin’s price blew past $45,000, $46,000 and $47,000 in less than an hour late Monday, eventually topping $48,000. By early Tuesday, the largest cryptocurrency had settled down to about $45,200. 

The powerful rally came after Elon Musk’s electric-vehicle company, Tesla, announced that it had bought $1.5 billion of the cryptocurrency. Bitcoin now has a market capitalization of nearly $890 billion, which would rank it ahead of all but six of the world’s largest publicly trading companies, including No. 7 Tesla at $829 billion. 

For those keeping track of Tesla’s bet, it appears to be paying off so far. Based on the 18% gain in the cryptocurrency’s price over the past 24 hours, the investment has already generated a paper gain of about $270 million.   

Ether (ETH), the native cryptocurrency of the Ethereum blockchain, climbed early Tuesday to a new all-time high of $1,825, based on CoinDesk 20 data. The increase pushed the second-largest cryptocurrency’s market value past $200 billion for the first time. Traders cited expectations that the CME’s new ether futures might prompt more institutional investors to bet on the cryptocurrency’s price. At the same time, data showed the balance of ether on exchanges falling to a 16-month low – taken as a sign that few investors are queuing up to take profits, even at these unprecedented price levels.      

In traditional markets, investors in bond markets were focused on the “great reflation trade,” amid signs that President Joe Biden is pushing forward with his $1.9 trillion stimulus proposal despite opposition from lawmakers in the minority Republican Party as well as from fellow Democrats. Stocks were lower, while gold strengthened 0.6% to $1,842 an ounce. 

Market Moves

Corporate treasurers might follow Tesla into bitcoin

Bitcoin analysts say Elon Musk, reportedly the world’s richest man, might inspire other executives to sock corporate cash into the cryptocurrency.
(C-Span, modified by CoinDesk)

Tesla’s purchase of $1.5 billion of bitcoin has opened a spigot of speculation – on how many corporate executives might soon follow CEO Elon Musk’s lead and steer their firms into cryptocurrencies.

“It will now become increasingly common for company treasuries to have an allocation to bitcoin,” says Joe DiPasquale, CEO of the cryptocurrency hedge fund BitBull Capital. He predicts the trend could help send bitcoin prices to $80,000 by year’s end. 

Musk commands an audience partly because he’s reportedly one of the world’s richest men – just as investors once hung on Berkshire Hathaway CEO Warren Buffett’s every word when he was the world’s richest man; he had the hot hand. 

“If any lesser mortals had made the decision to put part of their balance sheet in bitcoin, I don’t think it would have been taken seriously,” Thomas Hayes, managing member at Great Hill Capital LLC in New York, told Reuters. 

And yet it is being taken seriously. Not only are big investors with almost-unassailable reputations like Bill Miller going into bitcoin, at least partly because of its perceived use as a hedge against central-bank money printing, but retail traders are flocking to the fold. In January, some $3.5 billion poured into exchange-traded funds that track inflation-protected bonds, the strongest monthly inflow on record, Bloomberg News reported last week.  

Michael Saylor, the MicroStrategy CEO who has become the biggest proselytizer for corporations putting treasury money into bitcoin, congratulated Musk on Monday in a tweet. “The entire world will benefit from this leadership,” Saylor wrote. 

Mitch Steves, an analyst with the brokerage firm RBC Capital Markets, wrote Monday in a report that he thinks Apple, the iPhone maker that is also the world’s largest company, should start its own cryptocurrency exchange. According to CoinDesk’s Nathan DiCamillo, Steves wrote that “the potential revenue opportunity would be in excess of $40 billion a year.” That’s enough to move the needle, even for Apple. 

“There’s no doubt in my mind that in the coming weeks and months, we’ll see many more Fortune 500 companies making similar announcements as they look to diversify their tremendous cash balances out of the flailing U.S. dollar,” said Mati Greenspan, founder of the foreign-exchange and cryptocurrency analysis firm Quantum Economics.

Craig Erlam, senior market analyst for the foreign-exchange brokerage Oanda, says the corporate herd may still move slowly. Indeed, few CEOs possess the well-documented moxie of Musk, who not only started his own private spaceflight company as a moonlighting gig but also once sent a single tweet that resulted in a $40 million fine from the U.S. Securities and Exchange Commission. “Some other companies may be tempted to follow but the vast majority will be far too cautious to expose themselves to the volatile world of cryptos,” Erlam wrote in an email. 

David Grider, an analyst for the independent investment-research firm FundStrat, estimated Monday in a report that some $215 billion of additional demand for cryptocurrencies could materialize if all the companies in the Standard & Poor’s 500 Index followed Tesla’s lead.  

“We don’t think this happens overnight, but we do think there’s much more room for corporate treasury penetration and expect the trend to continue,” Grider wrote.

As always with fast-moving market trends, fear of missing out, often known by the acronym FOMO, can be a powerful force. The more big corporate moves into bitcoin, and the higher bitcoin goes as a result of those moves, the more treasurers might feel pressure to join the crowd. Grider suggests that some companies might buy bitcoin as a hedge against the possibility that their companies might someday get disrupted against blockchain technology; if they lose out to the competition, the reasoning goes, at least they’ll have the bitcoin. 

Maya Zehavi, a blockchain consultant, put it this way to Reuters: “The downside of staying on the sidelines will only become costlier over time.”  

Bitcoin Watch

“It’s a call-buying frenzy”

The bias in the bitcoin market should remain bullish as long as the trendline rising from $10,000 is held intact, CoinDesk’s Omkar Godbole writes.

Source: TradingView/CoinDesk

Investor interest in call options (bullish bets) has increased, a sign that some investors are positioning for a continued price rally, CoinDesk’s Omkar Godbole writes.

  • “We are seeing high volume across the board in call options ranging from $56,000 to $72,000,” Matthew Dibb, co-founder and COO of Stack Funds, told CoinDesk. “If the options market is any indication of the enthusiasm across investors, we will be going a lot higher.”
  • Multiple 100-plus call option contracts have been bought at strikes of $44,000, $48,000, and $52,000, according to Swiss-based data analytics platform Laevitas. 
  • “It’s a call-buying frenzy,” Laevitas tweeted late Monday.
  • The one-, three- and six-month put-call skews, which measure the cost of bearish puts relative to calls, are firmly entrenched in the negative territory, per data provider Skew. That’s an indication that call options are drawing higher demand than puts.

According to Godbole, the broader bias in the bitcoin market should remain bullish as long as the trendline rising from $10,000 is held intact. (See chart above.) 

The “Elon rally” has established $42,500 as the new support, and prices could rise to $50,000 in coming weeks, according to Dibb.

Token Watch

Ether (ETH): On the first day of trading in the CME’s new ether futures, some 388 contracts changed hands, equivalent to about 19,400 ETH, or $33 million, Tim McCourt, global head of equity products for the Chicago-based exchange, told The Block. “The response to ether has been overwhelming,” McCourt said. For comparison, when the CME debuted bitcoin futures in late 2017, nearly 1,000 contracts changed hands on day one, according to McCourt. 

Cardano (ADA), Polkadot (DOT): Ether? Bah. A growing number of cryptocurrency traders are betting on “Ethereum killers,” or tokens associated with blockchains that could someday rival Ethereum’s domination of decentralized finance, known as DeFi, CoinDesk’s Muyao Shen writes. Cardano has vaulted into the top ranks of digital assets, with a market value of about $22 billion, while Polkadot is just behind, at about $20 billion. Both have now surpassed XRP’s $16 billion though still represent a fraction of ether’s $201 billion.  

Dogecoin (DOGE): Prices for the doggie-faced meme token, started in 2013 as little more than a joke, were higher for a fourth straight day, topping 8 cents. The token now has a market capitalization of more than $10.3 billion. That’s more than Dropbox, the cloud data-storage company; Pandora, the music-streaming service; Invesco, the mutual-fund company; and Fresnillo, the world’s largest silver-mining company, according to the website

Publicly traded companies with a market value just below dogecoin’s $10.3 billion.


First Person

Opinions, observations and other perspectives

Matt Blom, head of sales and trading at EQUOS, had a lot of fun imagining Tesla’s new price list, below, which appeared in his daily newsletter on Monday.

Even so, Antony Welfare, executive director for enterprise at NEM Software couldn’t help but dwell on the future price of a Tesla Roadster, currently priced at a $250,000, or a little over 5 BTC: “By the end of this bull market it will be more like 2 BTC,” he noted in a comment emailed to First Mover by a PR representative. 

Prices for Tesla models, expressed in BTC terms.

Source: EQUOS

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First Mover: Tesla Sends Bitcoin Mooning Past $44K as Snoop Wins #dogebowl

CoinDesk TV is here! Regular programming starts Monday as we roll out three daily and three weekly shows, including “First Mover,” hosted by Christine Lee, Lawrence Lewitinn and Emily Parker, airing every weekday at 9 a.m. U.S. Eastern time. Today’s debut episode features guests: Brian Brooks, former U.S. comptroller of the currency; Tim McCourt, global head of equity products at CME; and Yassine Elmandjra, an analyst for Cathie Wood’s ARK Investment Management.   

Bitcoin shoots to new all-time high price above $44K: Tesla’s disclosure early Monday that it bought $1.5 billion of bitcoin and will now accept it as a form of payment sent the cryptocurrency’s price mooning more than 11% early Monday.  

The announcement is “yet another confirmation that bitcoin is going mainstream,” Matt Blom, head of sales and trading for the cryptocurrency exchange firm EQUOS, wrote Monday in an email. 

Ethereum futures go live on CME: The Chicago-based exchange has opened trading in its much-anticipated futures contracts on ether, the main cryptocurrency of the Ethereum blockchain. Prices for ether, which is the second-biggest cryptocurrency after bitcoin, rose to an all-time high last week above $1,700, partly on expectations that the CME’s new offering might lure more big institutional investors into the market.

Dogecoin pump: Prices for the doggie-faced meme token soared 70% on Saturday and Sunday after it apparently won over rapper Snoop Dogg and rocker Gene Simmons as new celebrity endorser-pumpers. (See Token Watch, below.) On Monday, dogecoin’s price was down 3.9% to 7.5 cents. 

In traditional markets, stocks were higher after U.S. Treasury Secretary Janet Yellen hit Sunday talk shows to drum up support for a large stimulus package. The 30-year U.S. Treasury-bond yield rose above 2% for the first time in almost a year. Gold strengthened 0.4% to $1,821 an ounce. 

The News

Tesla’s #Bitcoin Moment: In an annual report filed with the U.S. Securities and Exchange Commission for the year ending Dec. 31, 2020, the electric vehicle maker said, “In January 2021, we updated our investment policy to provide us with more flexibility to further diversify and maximize returns on our cash that is not required to maintain adequate operating liquidity,” and that “thereafter, we invested an aggregate $1.50 billion in bitcoin under this policy and may acquire and hold digital assets from time to time or long-term.” Late last month, Twitter CEO Elon Musk caused a stir in the market when he added “#bitcoin” to his Twitter profile. 

Miller Time: Investing-legend-turned-bitcoin-bull Bill Miller’s $2.3 billion flagship fund has expanded its investment mandate to include purchases of Grayscale Bitcoin Trust (GBTC), up to 15% of assets under management. (EDITOR’S NOTE: Grayscale is a unit of Digital Currency Group, which also owns CoinDesk.) 

Bitfinex-Tether: Cryptocurrency exchange Bitfinex said Friday it repaid the remaining balance of a $550 million loan to its sister firm, Tether, the issuer of the tether (USDT) stablecoin. It’s the latest development in a saga dating back to 2018, and the loan has drawn scrutiny from prosecutors in New York state.

Binance’s Nigeria Suspension: The world’s biggest cryptocurrency exchange has temporarily suspended deposits in Nigeria’s domestic currency, the naira, after authorities in the country sent a letter on Friday instructing local banks to identify and close all accounts tied to cryptocurrency platforms or operations. Though after a wave of outrage on social media, the Nigerian central bank on Sunday issued a five-page statement clarifying that there was nothing new about the instructions.  

#IndiaWantsBitcoin: Indian cryptocurrency exchanges have started a joint initiative to convince the country’s parliament to regulate cryptocurrencies rather than impose an outright ban. But the Indian government still appears intent on fast-tracking a bill that would kick off development of a digital rupee while banning “private cryptocurrencies.”  

Chinese New Year

It’s the Year of the Ox. Why would anyone sell? 

The “Chinese New Year Dump” represents the belief among some cryptocurrency traders that bitcoin’s price typically drops around the Asian country’s holiday period, starting this year on Feb. 12.   

But it might not happen in 2021. Why? The theory is that the entry of big institutional investors in the U.S. and Europe into the market may mute the impact of retail traders in China, who in the past may have taken time off from the markets, reports CoinDesk’s Muyao Shen. The bull run of 2017 was heavily powered by retail investors in Asia.

“It is just like how people in the U.S. would take profit from stock holdings before Christmas,” says Alex Zuo, vice president of China-based crypto wallet Cobo. 

Fireworks: Chinese-language social media platforms are filled with discussions of whether the current bitcoin bull market might pause during the holiday season.

Plus, the year of the ox is coming in 2021, under the Chinese lunar calendar. As one might imagine, that’s bullish. While some traders might have sold their bitcoin for the holiday, a large number investors in China are betting on a long-lasting positive market trend, and appear prepared to hold on into the new year. 

Bitcoin Watch

Bullish case strengthens with rising inflation expectations

Even before the Tesla news hit early Monday, bitcoin’s bullish case was strengthening, with U.S. inflation expectations on the rise, CoinDesk’s Omkar Godbole writes. 

  • U.S. 10-year inflation expectations, as implied in the market for government bonds, have climbed on Monday to a six-year high of 2.2%. Over the past 10 months, bitcoin prices appear to have risen in tandem with the inflation expectations.
  • Friday’s disappointing report on the January employment situation in the U.S. appears to have crystalized support for President Joe Biden’s $1.9 trillion stimulus package. NOTE: Nonfarm payrolls rose by 49,000, well below the 250,000 increase projected by economists at Citigroup.
  • Support for a large package is high now among the American population because the crisis is still top of mind and people want it to be over,” Ed Mills, Washington policy analyst for the brokerage firm Raymond James, wrote Friday in a report.    
  • “I’m not cutting the size of the checks,” U.S. President Joe Biden said Friday.
  • The comments came despite nagging anxiety over the size of the package among members of the opposition Republican Party and evenj some Democrats.
  • “There is a chance that macroeconomic stimulus on a scale closer to World War II levels than normal recession levels will set off inflationary pressures of a kind we have not seen in a generation, with consequences for the value of the dollar and financial stability,” former U.S. Treasury Secretary Larry Summers wrote last week in an op-ed for the Washington Post.  
  • More corporate treasurers are being pushed to consider bitcoin, following MicroStrategy’s lead – and now Tesla’s lead, too. 

Token Watch

Circle of life, or ladder of DOGE? Elon Musk, reportedly the world’s richest man, tweeted this Lion King-inspired image over the weekend.

Source: Twitter/@elonmusk

Dogecoin (DOGE): The rapper Snoop Dogg tweeted an image on Saturday with the words “Snoop Doge” at Elon Musk, the electric-vehicle and private-spaceflight entrepreneur who has himself recently promoted dogecoin (as well as bitcoin). The price pump helped give dogecoin, which was launched in 2013 as little more than a joke, a market capitalization of more than $9 billion, up more than 11-fold just this year alone. The Shiba Inu-themed token also got a shout-out from Gene Simmons, bassist for the rock band Kiss, who tweeted a glowing image of himself under the words, “God Of Dogecoin.” The crypto news site Decrypt reported that one dogecoin address apparently held 27% of the entire coin’s entire supply, and the hashtags #dogecoinrise and #dogebowl were trending on Twitter at various moments. The entire thing was pretty DOGE-gone ridiculous.

Ether (ETH): The second-biggest cryptocurrency might be getting an uplift from traders rotating out of bitcoin into ether and other altcoins, CoinDesk’s Daniel Cawrey reported. Joel Edgerton, chief operating officer of cryptocurrency exchange BitFlyer USA, said he thinks of ether as an exchange-traded fund for decentralized finance, known as DeFi, which is a sector of the cryptocurrency industry where entrepreneurs are building software-based, automated versions of lenders and trading systems, mostly atop the Ethereum blockchain. “Should DeFi projects continue to grow at the rate they are, it would be hard for ETH to not also continue setting new records,” said Guy Hirsch, managing director of U.S. for the online trading platform eToro. Chad Steinglass, head of trading at CrossTower Capital, says crypto traders have been scooping up ETH ahead of the Chicago-based CME exchange’s launch of ether futures, scheduled for Monday. “The addition of CME futures will open the door to many potential investors who want to have exposure, but have yet to take any positions due to logistical hurdles.” 

0x (ZRX): 0x Labs, the firm behind the decentralized exchange protocol and ZRX token, has closed a $15 million Series A equity round led by Pantera Capital, CoinDesk’s Brady Dale reported. Additional funding participants included Jump Capital, Blockchain Ventures, Coinbase Ventures and others. The new round comes off the successful launching of 0x’s DEX router, Matcha, which came out in June and has processed $2.7 billion in orders. Prices for the ZRX tokens have nearly quadrupled this year, to a market capitalization of $1.4 billion. 

First Person – Opinions and observations

SUSHI’S PRICE-TO-SALES RATIO: Fundamental investing is alive and well in crypto, Arca’s Jeff Dorman writes. “The digital assets ecosystem has evolved into a complex asset class and has become perhaps the perfect asset class for fundamental analysis and low-risk, high-reward investing.” 

IT’S THE CLEARING, STUPID: Paxos CEO Charles Cascarilla writes that the Lehman Brothers, Gamestop and “next financial crisis” have in common an antiquated system for settling and clearing trades. 

“The central counterparty settlement monopoly is like a 19th century sewer system: it runs smoothly in good weather, but the streets flood when a storm hits.” 

ETHER IS A HIPPY: Zubin Koticha, CEO of Opyn, tweeted out the following “political compass of cryptocurrencies,” admittedly subjective: 

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First Mover: It’s ‘Dorsey’s Node’ as Bitcoin Marches Higher, DOGE Chokes

Bitcoin drifts higher, DeFi tokens moon, dogecoin pants

Bitcoin was higher early Friday, pushing toward $38,000, around the highest levels in about three weeks. 

The news overnight was mixed, with an Australian central bank official telling lawmakers in the country that bitcoin is “not a payment instrument and it’s not even really money,” while Twitter and Square CEO Jack Dorsey tweeted that he had set up his own bitcoin node.

Key price levels: “Should we go higher, we’ll be eyeing the $40,035 mark as the next resistance,” Matt Blom, head of sales and trading for the cryptocurrency exchange firm EQUOS, wrote early Friday in an emailed note. “Should we edge back down, the $34,855 mark will be the level to watch.”

DeFi to the moon: CoinDesk’s Omkar Godbole reported Friday that some investors “look to be temporarily shifting focus away from bitcoin and toward crypto tokens associated with decentralized finance,” such as Compound’s COMP token and Aave’s AAVE. (Read more about this in Bitcoin Watch and Token Watch, below.) 

And dogecoin (DOGE)? The price of the token, symbolized by the dog breed Shiba Inu, was down 16% on Friday, after a brief rally late Thursday. The post below was representative of the flavor of the chatter on Reddit:

Source: Reddit

Market Moves: Bank of England takes baby step toward negative interest rates 

The Bank of England has asked British banks to prepare for negative interest rates within six months, opening the possibility that the U.K. central bank could eventually join counterparts in Europe and Japan in pursuing ultra-loose monetary policy. 

Only an option, we swear: Officials were quick to note that the central bank wasn’t signaling an intention to actually push borrowing rates below zero – just that option might be needed at some point. The main bank rate is currently set at 0.1%.  

“The BOE wants to have its cake and eat it too: recognize that negative interest rates as a possible tool, which may help keep rates down without delivering what would appear to be a disruptive move,” Marc Chandler, a former head currency strategist for foreign-exchange giants Brown Brothers Harriman and HSBC, wrote Thursday on SeekingAlpha.   

Negative interest rates have always been a head-scratcher, given the prospect that borrowers in the country may at some point find themselves getting to take out loans, rather than forking over interest payments to their lenders. Or that savers might end up paying banks to hold their money, instead of receiving income on deposits.

Bitcoin’s validation? The announcement – made via a published letter that was sent to bankers, with a subsequent news conference held by Bank of England Governor Andrew Bailey – offers the latest validation of the economic scenario many bitcoin bulls are betting on: that despite the ongoing rollout of coronavirus vaccines, the world’s monetary authorities aren’t likely to stop stoking global financial markets with easy money anytime soon. 

More money printing: Economists are reading the tea leaves and coming to the conclusion that the Bank of England may also opt to increase its £895 billion target for asset purchases, a form of stimulus pioneered by the Federal Reserve in which central banks essentially pump new money into financial markets. Pantheon, the forecasting firm, predicted Thursday that the U.K. central bank will increase the target by £50 billion later this year.   

The Federal Reserve, for what it’s worth, is currently buying $120 billion of assets a month, and Chair Jerome Powell has said there’s no need to cut interest rates to negative levels; currently the key U.S. short-term rate is set at just above zero. But pressure might build on the Fed to experiment with more unconventional monetary policies if the world’s other major central banks keep moving in that direction.    

The Bank of England’s target for asset purchases under its “quantitative easing” program has increased over recent years, and some economist now see it going even higher.

Source: Bank of England

Bitcoin Watch

In a bullish sign, bitcoin appears to have broken out from a “descending channel” on the daily price chart.

Source: TradingView/CoinDesk

The path of least resistance for bitcoin appears to be to the upside, writes CoinDesk’s Omkar Godbole, as demand continues to outstrip supply.

  • The cryptocurrency has broken out of a descending channel on the daily chart, indicating scope for a re-test of record highs above $41,900, Godbole wrote Friday. The market focus may shift back to bitcoin if the cryptocurrency charts a quick move upwards. (See chart above.)
  • Stimulus plan moves forward: The U.S. Senate narrowly voted early Friday to adopt a budget blueprint for President Joe Biden’s $1.9 billion coronavirus relief package, a legislative track that’s being closely watched by bitcoin bulls betting that the cryptocurrency can serve as an inflation hedge during an era of outsize government and monetary stimulus.
  • Dollar strength: The U.S. dollar is on track for its strongest weekly gain since October, on investor optimism for a faster economic recovery. The greenback’s strength makes bitcoin’s 14% gain since Sunday look more impressive, since the cryptocurrency’s price is denominated in dollars.

Token Watch

DEFI TOKENS MOON: In the past 24 hours, DeFi-linked tokens such as COMP, AAVE, KNC and ZRX leapt to fresh all-time highs. Compound’s governance token COMP clocked a new record of $500, taking the month-to-date gain to above 40%. Oracle provider Chainlink’s LINK token is also benefitting from the broad-based rally across DeFi. AAVE, the token of the DeFi lending protocol Aave, rose 21% to a record. ZRX, from the Ethereum-based decentralized exchange 0x, is up 60% in the past 24 hours.

ETHER GAS PRICE FALLOUT: Japan cryptocurrency exchange Liquid temporarily halted ether (ETH) withdrawals as gas fees hit new highs.

COMPOUND VS. AAVE: Aave has a “fighting chance” to the take the crown from Compound as “DeFi’s most popular lending protocol,” according to The Defiant.  

Celebrity Watch

Who ISN’T investing in crypto these days? LL Cool J, the Queens-born rapper and entrepreneur, is among a glitzy roster of limited partners backing North Island Ventures’ newly revealed $72 million fund, CoinDesk’s Zack Seward reported Thursday. Paul Tudor Jones II, the legendary hedge fund manager who last year was among the first big institutional investors to espouse bitcoin as an inflation hedge, is also involved. North Island Ventures is chaired by Glenn Hutchins, a co-founder of the technology-investment firm Silver Lake and until recently a board member of the Federal Reserve Bank of New York. 

Jack Dorsey has set up his own bitcoin node. The Twitter and Square CEO, who has used his posts to promote the cryptocurrency, shared an image Friday “showing the node in the action of synchronizing with the bitcoin blockchain,” CoinDesk’s Tanzeel Akhtar reported. In the latest post he wrote simply, “Running #bitcoin.”

Source: Twitter

What Else

$90M hedge fund deceit: Cryptocurrency hedge fund founder Stefan Qin pleaded guilty Thursday to deceiving investors out of more than $90 million. According to a press release from the U.S. Department of Justice on Thursday, Qin, a 24-year-old Australian national and founder of Virgil Capital, had been charged with a single count of securities fraud in Manhattan’s federal court.

Arcane stock goes live: Shares in the Norwegian cryptocurrency analysis firm Arcane Crypto started trading Friday under the ticker ARCANE on Nasdaq First North Growth Market, after completion of reverse takeover. According to this, the stock has a market capitalization of about 1.7 billion Swedish krona ($200 million). 

Move over, GameStop: Brokerage firms report boom in online bond trading, including corporate debt and mortgage-backed securities. 

Was anything wrong with the GameStop saga, or just markets being markets?

U.S. Securities and Exchange Commission investigators are combing social-media and message-board posts for signs that fraud played a role in the recent GameStop stock-price pump, Bloomberg News reported. Regulators in Massachusetts are also looking into the case.  

Prosecutors reaching: The story shows how pressed the official overseers of traditional markets are to bring a solid case over the move, which appeared to be coordinated by retail stock traders on the Reddit forum r/WallStreetBets. The basic defense is that they were just sharing their opinions publicly, perhaps less suspicious than the type of private information sharing and insider access that’s prized on Wall Street. 

What’s the big deal? Cryptocurrency analysts have noted the similarities between the GameStop saga and the type of anything-goes trading that happens every day in 24-hours-a-day, seven-days-a-week, international digital-asset markets, where no single exchange or country dominates the action and regulations seem to be constantly catching up to the industry’s fast-evolving growth. Coordination on social media? Check. Triple-digit percentage moves? Check. A sometimes complete lack of news to explain price pumps or price dumps? Check.  

So it’s perhaps not surprising that some crypto-industry executives are using the opportunity to tee off on everything that’s wrong with the traditional financial system. Or maybe – what’s wrong with believing that there’s a right way to think about a trade, and a wrong way. 

William Quigley, co-founder of WorldWide Asset eXchange, a decentralized video-game and entertainment network, said in emailed comments Thursday that “at its core, investing all about convincing someone else of the merits of buying a stock or other asset – or the opposite.”

Even in traditional markets, there are all sorts of reasons for getting in and out of the market – including “programmatic trading that pays no heed at all to underlying fundamentals.”  

“The notion that WallStreetBets is somehow illegitimate because it is encouraging going long GME without solid fundamentals to back it up there is irrelevant,” Quigley said.

The “pure speculation” in dogecoin (DOGE) recently is no different, he added.

Dogecoin, for those who haven’t followed the thread, is a “meme token,” symbolized by the Japanese dog breed Shina Inu after being launched in 2013 as a joke. Elon Musk, the electric-vehicle and private-spaceflight entrepreneur who’s reportedly the world’s richest man, likes to tweet about it. People are talking about it on the Reddit forum r/SatoshiStreetBets. 

“It has no fundamental value drivers,” Quigley said. “People buy dogecoin for one reason: pure speculation. They hope other people will buy it and pay a higher price.”

Quigley is giving his opinion. Just like the commenters on Reddit and Warren Buffett on CNBC, when he talks about the virtues of his conglomerate Berkshire Hathaway’s investments in railroads and Coca-Cola.

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First Mover: Ethereum, DOGE on Own Journeys as Inflation Bets Fuel Bitcoin

Ethereum pauses at record high, bitcoin’s rally stalls, DOGE Moons

Ether (ETH) prices were lower after surging 10% on Wednesday to a new record, climbing past $1,600 for the first time. 

The recent gains appeared driven by signs of growth on the cryptocurrency’s underlying Ethereum blockchain network, as well as interest from institutional investors that are starting to venture beyond bitcoin, the oldest and largest cryptocurrency. 

“Ethereum is in such high demand because the asset is undergoing changes to make it even more decentralized, and even more secure,” said Simon Peters, an analyst for the trading platform eToro. “This is attracting buyers from both the institutional and retail world.” 

Bitcoin (BTC) appeared to lose momentum after its steady rise over the past week from $30,000 to about $38,000. 

The price level of $38,190 proved tough to pierce, according to Matt Blom, head of sales and trading for the cryptocurrency exchange firm EQUOS. 

“Once it hit that level, prices seem to struggle and actually just retraced lower, overtaken by massive sell orders on both spot and derivatives exchanges,” Blom wrote. “Stagnation in the $34K-$38K range probably can’t be avoided, and eager bulls might be cooled down by relentless sellers before BTC progresses higher again.”

And dogecoin (DOGE)? The digital token launched in 2013 as little more than a joke is up about 50% in just the past two days, for a market value of more than $6 billion. Elon Musk, the electric-vehicle and private-spaceflight entrepreneur who’s also reportedly the world’s richest man, tweeted about it early Thursday. There was also heavy chatter about the token on social media forums, and probably a lot of speculation about the chatter. 

In traditional markets, the Reddit-fueled whiplash in shares of “meme stocks” like GameStop (GME) appeared to subside, but the regulatory fallout might just be getting going: U.S. Congresswoman Maxine Waters, who heads the House of Representatives Financial Services Committee, said Wednesday she wants Reddit user Keith “DeepF—ingValue” Gill to testify at a Feb. 18 hearing along with executives from the retail trading platform Robinhood and the hedge funds Melvin Capital and Citadel.  

Stocks were pointing higher while gold weakened 1.1% to $1,814 an ounce. 

Visa’s plans push crypto industry closer to point of no return

With 3.3 billion payment cards in use, Visa (V) is a household name. It’s also one of the biggest players in the global financial infrastructure, processing some 188.1 billion transactions a year.

That’s why it was such big news for the cryptocurrency industry on Wednesday when Visa announced it was piloting a new program that will allow banks to offer bitcoin services. Previously, Visa had been focused on helping crypto companies issue bank cards and has partnered with 35 crypto firms to date, but this is the first time the company has offered crypto services to banks.

The market impact? Edward Moya, senior market analyst for the brokerage Oanda, wrote Wednesday that the news may have helped to push up bitcoin prices on Wednesday. “Bitcoin’s acceptance continues to improve,” Moya wrote. 

Another takeaway might be that Visa’s splashy move could make it harder for U.S. lawmakers or regulators to thwart bitcoin’s growth. Ray Dalio, of the giant hedge fund Bridgewater, and former Goldman Sachs CEO Lloyd Blankfein have suggested that authorities might look to crack down on the fast-emerging cryptocurrency if it really starts to take off. 

Think of the operational, technological and marketing expenses involved in Visa’s new project. The chances are low that a big heavily regulated financial company would push forward without some assurances that there’s no turning back from crypto. Or that Visa would make this move before heavy consultations with key corporate customers, including big credit-card lenders like JPMorgan Chase, Citigroup and Bank of America. 

The more investments that established companies make in the business, the less likely authorities are to force write-offs.  

Ether rally spreads beyond ether. Dogecoin has nothing to do with it.

The average fee for sending a transaction on the Ethereum blockchain has climbed above $20 for the first time, in a sign of just how popular the network is becoming.

Source: Blockchair

It’s not just ether (ETH) rallying to a new all-time high this week: Also rising were major digital tokens from the realm of decentralized finance, known as DeFi, where entrepreneurs are building software-automated versions of banks and trading platforms atop decentralized, Internet-based networks, mainly the Ethereum blockchain, CoinDesk’s Muyao Shen reported Wednesday.

DeFi tokens including price-feed-provider Chainlink’s LINK, the decentralized exchange SushiSwap’s SUSHI and the DeFi lender Aave’s AAVE have logged new historic highs.

Prices for SUSHI, whose launch last year met with immediate controversy, have quadrupled already in 2021 amid bullish speculation over the future of DeFi. Based on data from the analysis firm Messari, that’s the second-highest gain among digital assets with a market capitalization of at least $1 billion – after dogecoin (DOGE), which offers little more than meme-y yuks to its adoring fans. (Dogecoin has nearly sextupled this year, for those keeping track.) 

Also getting a lift were prices for cryptocurrencies associated with blockchains that are competing with Ethereum to become dominant platforms for decentralized computer applications. Sometimes referred to colloquially as “Ethereum killers,” they include Polkadot’s DOT token and Solana’s SOL. 

“Ether made a significant push, and that is causing projects linked to the DeFi space” to rise, said Hunain Naseer, senior content editor at crypto exchange OKEX’s research unit, OKEx Insights.

One downside from the flurry of activity on the Ethereum blockchain might be elevated fees for sending transactions over the network, since the rate paid rises with increasing congestion. As reported by CoinDesk’s Will Foxley, the average transaction fee early Thursday climbed above $20 for the first time, reflecting growing demand for tokens launched atop the Ethereum blockchain. Those include the dollar-linked digital tokens known as stablecoins as well as DeFi-related tokens.  

A catalyst for further price action might come from the Chicago-based CME’s launch of a new futures contract on ether next week. The listing should give more institutional investors a way to bet on the second-largest cryptocurrency after they took positions in bitcoin last year.

“The institutions are buying ether,” Ryan Sean Adams, founder of newsletter Bankless, wrote in a tweet. “And they’re just getting started.”

Bond traders are increasing their expectations for inflation

So-called breakeven inflation rates, or the pace of price increases implied by U.S. government bond markets, have reached an eight-year high and are climbing fast.

Source: Federal Reserve Bank of St. Louis

The Federal Reserve’s mantra over the past year as the coronavirus wreaked a devastating toll on the economy is that there’s no need to worry about inflation; in fact, as Chair Jerome Powell was quick to point out, recessions often lead to deflation, since flagging consumer demand can prompt businesses to cut prices, while elevated unemployment mutes upward pressures on wages. 

Despite the assurances, big investors and corporations have piled into bitcoin over the past year, betting that the cryptocurrency, whose supply is limited under the blockchain network’s underlying programming, could serve as a hedge against loose monetary policy, aka near-zero interest rates and trillions of dollars of money printing.  

But now there are signs that another key market segment might be getting more concerned about inflation: bond traders. 

The five-year “breakeven inflation rate,” which can be derived by examining the yields on various U.S. government bonds, is now signaling a 2.2% average rate over the next five years. That’s the highest in eight years, and it’s also above the Fed’s long-term target of 2%. What’s more, the figure appears to be rising fast: As recently as September, the breakeven inflation rate was below 1.5%. 

As noted this week by First Mover, economists are already starting to sketch out how fast the economy might heat up as more people get vaccines and consumers start to get their confidence back. Bank of America estimates there’s some $1.6 trillion of excess savings on consumer balance sheets, which could quickly translate to pent-up spending demand. And the economy has yet to feel the impact of the stimulus package now being debated in U.S. Congress, likely to total at least $1 trillion. 

The national employment situation will become clearer on Friday when the U.S. Labor Department’s Bureau of Labor Statistics releases its jobs report for the month of January. On Wednesday, Pantheon, a macroeconomic forecasting firm, revised its projection to an increase of 200,000; previously the firm was expecting a decline of 100,000 in the nonfarm payrolls. The average expectation of Wall Street economists is for an increase of 100,000, according to Bloomberg. (U.S. jobless claims were lower than expected last week, at 779,000, according to a report early Thursday.) 

“The reflationary trends we are seeing in markets are likely to continue throughout 2021,” according to a report Wednesday from the Wells Fargo Investment Institute.     

Bitcoin Watch: Increasing signs of demand from institutional investors

Although bitcoin has failed to sustainably push past the psychologically important $40,000 price level, signs continue to mount of growing interest in the cryptocurrency from big institutional buyers. 

  • NYDIG, a cryptocurrency asset manager, could see its bitcoin investments more than quadruple this year to about $25 billion, CEO Ross Stevens said this week.  
  • The Chicago-based futures exchange CME’s chief economist said Tuesday that “gold appears to have an emerging competitor in bitcoin” for use as an inflation hedge.
  • Dan Tapiero, an investor and entrepreneur, is launching a $200 million fund called 10T to invest in cryptocurrency startups. 
  • MicroStrategy (MSTR) CEO Michael Saylor, who has become one of bitcoin’s most prominent boosters, said at his own conference this week there’s a “macroeconomic wind blowing” that’s “gonna impact $400 trillion of capital.” and “this is where bitcoin comes in.” 

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Bitcoin (BTC) $ 44,186.84 2.36%
Ethereum (ETH) $ 2,377.42 0.87%
Litecoin (LTC) $ 78.90 6.65%
Bitcoin Cash (BCH) $ 255.81 3.98%