Bitcoin shed a couple thousand dollars in overnight trading, while larger wallet addresses appear to be consolidating their holdings. Meanwhile, Treasury Secretary nominee Janet Yellen said crypto is a “particular concern” and Web 3.0 advanced with Brave’s IPFS integration.

At around Bitcoin block height 666920, President-elect Joe Biden will take office. During his last night at the White House, President Donald Trump issued a list of pardons including Ken Kurson, a former Ripple board member and crypto media man. Notably absent was Ross Ulbricht, the founder of the Silk Road darknet marketplace and antihero figure among Bitcoiners.

Yellen’s concerns
Cryptocurrencies are “mainly for illicit financing” and terrorist financing, Treasury Secretary nominee Janet Yellen said Tuesday at a Senate hearing. The staid remarks are par for the course among regulators, though indicate revamping crypto regulation could be on the docket during her tenure. My colleague Nikhilesh De wrote about what to look for during the Biden administration.

Web & internet redesign
Brave, the privacy-focused web browser used by 24 million, has integrated with the InterPlanetary File System (IPFS), which is essentially a redesigned internet protocol with censorship resistant properties. Brave users can now more easily access IPFS sites and even run a node on the distributed system.

A series of disappointments
Block.one, the tech startup that raised $4 billion through an initial coin offering to develop the EOS blockchain network and its underlying EOSIO software, took a hit when a key executive stepped down 10 days ago. CoinDesk’s Brady Dale dives into the disappointments and power struggles at the company, including one over what to do with its 140,000 BTC stash. It’s worth a read in full.

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COINBASE BOUGHT: Staking service Bison Trails. (CoinDesk)

RETAIL INTEREST: India’s largest crypto exchange launched an app to make small crypto purchases easy. (CoinDesk)

CBDC PITFALLS: The European Commission has joined the European Central Bank to study a digital euro before development starts. (CoinDesk)

DOCUMENT DUMP: Bitfinex will finish overturning documents related to an $850 million Tether loan to New York state prosecutors in the coming weeks. (CoinDesk)

51% ATTACK: Privacy coin Firo saw 300 blocks rolled back. (Decrypt)

PORN PAY: Pornhub added XRP, BNB, USDC and DOGE as payment options. (The Block)

JOON IAN WONG: Explores the future of media and social tokens. (The Block - op-ed)

GREEN MINING: How to make bitcoin mining eco-friendly. (CoinDesk opinion)

Toil and trouble?
The question on everyone’s mind is whether this rally is sustainable. After a parabolic ascent that brought bitcoin above $40,000, a level more than double a previous all-time high set in 2017, the cryptocurrency has seemingly settled in a new normal around $35,000.

Daily trading has seen a level of volatility typical for digital assets, with 5% market moves common on the intraday charts. But it’s still an open question whether bitcoin will continue to set new highs above $40,000 in the near term.

JPMorgan analysts have cited a long-term bitcoin price target of over $146,000, based on a comparison to gold. While bears still think the decade-old crypto could collapse to $0. That’s quite a range of opinions!

In a recent survey of “market professionals,” Deutsche Bank found a whopping 87% think investments across asset classes are overheating. More than half think it's more likely for bitcoin to halve than double within the year. Though even more think the same of Tesla, 2020’s best performing bet.

It’s no secret that traditional and digital assets are on the ascent due to an unprecedented amount of U.S. dollars that have flowed into the financial system, as part of a coronavirus recovery plan. Money is cheaper than ever. Interest rates are nothing and approximately 23% of U.S. dollars in circulation were printed last year.

It’s for this reason that some keen observers think it’s not just bitcoin that’s in a bubble, but the entire financial system. Jeremy Grantham, co-founder of GMO, a major investment firm, said “this event will be recorded as one of the great bubbles of financial history,” in a letter to investors. He cited, “extreme overvaluation, explosive price increases, frenzied issuance and hysterically speculative investor behaviour.”

Still, many crypto analysts think there’s something different about bitcoin. Driven by increasing institutional investments – from the likes of hedge funds and publicly-traded companies – the recent market cycle sets itself apart from the retail exuberance seen three years ago.

As CoinDesk’s Director of Research Noelle Acheson noted in a recent newsletter, “It could also be argued that bitcoin is the anti-bubble, that its price is going up because of bubbles elsewhere in the economy. Many investors are buying bitcoin in response to what they see as a massive sovereign bond bubble, which they believe the government will try to deflate by printing money.”

Acheson argues that the label “bubble” implies there’s a discrepancy between an asset’s price and underlying value. The question with bitcoin is determining its intrinsic value. That’s a tough proposition, considering bitcoin’s users are still working out what the cryptocurrency's use case is, she writes.

Over the past year, the belief in bitcoin as a hedge against inflation has steadily grown in popularity. Even if this idea is true, it wouldn’t undercut bitcoin’s usability as a payment tool to buck financial gatekeepers, or as a way for anyone to speculate on macro trends.

Bitcoin’s open system is non-discriminatory. It can be whatever you want it to be. As Bloomberg journalist Tracy Alloway put it, “[T]here will always be a fresh bull case for Bitcoin waiting in the wings. In that sense, it's really the perfect post-modern financial asset for a post-modern financialized economy.”

So is bitcoin in a bubble? Well, it depends on what you mean by bubbles and what you mean by bitcoin.