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| February 3, 2021 Everything you need to make sense of the crypto markets and beyond Sponsored By: By the CoinDesk Markets Team Edited by Bradley Keoun If you were forwarded this newsletter and would like to receive it, sign up here. Bitcoin (BTC) +3.2% $36,674 Ether (ETH) +3.5% $1,566 (Price data as of Feb. 3 @11:29 UTC) TODAY: Price Point: Bitcoin was higher, along with ether and dogecoin. Ether hits all-time high, ahead of next week's CME futures debut. GameStop comedown shows appeal of social-media-fueled trading. Bitwise, Grayscale, 21Shares hawk crypto funds to stock traders. DeFi's time to scale is here, but kinks are everywhere.Bitcoin Watch: Hoarders "sucking up market supply."
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PRICE POINT Bitcoin climbs past $36K as Minerd now preaches $600K Bitcoin (BTC) was higher for a third day, pushing on the upper end of its range over the past couple weeks, between $30,000 and $36,000.
“Cryptocurrency has come into the realm of respectability," Scott Minerd, chief investment officer of the $310 billion money manager Guggenheim Partners, told CNN in an interview. Minerd, who in December said bitcoin should be worth $400,000, said last month that the price could drop to $20,000 in the short term. Now he says a price as high as $600,000 is conceivable.
Ether (ETH), the second-biggest cryptocurrency, was carrying through on Wednesday after hitting a new all-time high price. (Read more about that below.)
Dogecoin (DOGE) appeared to stabilize around 3.3 cents, which is still more than four times where it changed hands a week ago. The doggie-faced meme token, which is attracting social-media chatter, has been the object of price pumps at least five times since mid-2017.
ETHER RECORD Ether rises to new all-time high price over $1,500, ahead of CME futures debut Ether breaks $1,500: All eyes are on ether (ETH), the second-biggest cryptocurrency, after its price shot above $1,500 for the first time on signs of growing activity on the Ethereum blockchain. Prices, which quintupled in 2020, have more than doubled already this year, overshadowing the better-known bitcoin's 21% year-to-date return.
CME, the Chicago-based commodities exchange, is set to debut its new futures contracts on ether next week. That might generate additional buzz for ether, since the CME's bitcoin futures, listed in late 2017, have grown to become one of the most popular ways for big institutions to bet on the largest cryptocurrency.
Some analysts connected the move to the turmoil in stock markets: Online brokerages including Robinhood restricted transactions to rein in volatility fueled by Reddit-based retail traders’ coordinated buying in GameStop and other out-of-favor stocks.
"The case for cryptocurrencies only grows stronger,” Nicholas Pelecanos, head of trading at NEM Group, told CoinDesk's Omkar Godbole.
More ether is locked: Simon Peters, an analyst for the trading platform eToro, noted that more ether are getting locked up in specific uses, including staking them in Ethereum 2.0, a planned upgrade for the blockchain. The tokens are also getting socked away in decentralized finance protocols, known as DeFi.
Institutional buyers might be pushing prices higher: "Either way, it's clear from the price that this diminishing supply is feeding through quickly to prices," Peters said in emailed comments. "With institutions expected to add further to their positions, we expect the price of ethereum to push higher from here."
STONKS AND DOGECOIN GameStop comedown shows appeal of social-media-fueled trading GameStop continued its slide: The stock tumbled 60% on Tuesday in what appears to be a comedown from last week's Reddit-fueled price pump. Other "meme stocks" AMC Entertainment and BlackBerry also fell.
Virtual-asset traders have kept a close eye on the saga. That's partly because the entire episode recalled the anything-goes culture prevalent in cryptocurrencies, but also because some of those fired-up retail traders might ultimately decide to give digital assets a try.
"Looking at the charts today, it does seem like it's game over for GameStop," Mati Greenspan, founder of the foreign-exchange and cryptocurrency analysis firm Quantum Economics, told his subscribers Tuesday. "One lesson that the world seems to have learned is that social media can be a leading indicator, and even a driving force, for future price movements."
Of course, the use of social media in trading is as relevant an issue to cryptocurrency traders as it is to the investors in traditional whose faith in stock markets might now be somewhat shaken: If the trading moves were coordinated among a huge number of individuals on a public forum, is it akin to a traditional pump-and-dump scheme?
U.S. securities regulators may find it difficult to bring a case. (Though the matter is under review by the White House and U.S. Treasury Secretary Janet Yellen, with both the U.S. Senate and House of Representatives planning to hold hearings, as reported by CoinDesk's Nikhilesh De. Chinese regulators are also watching closely, CoinDesk's David Pan reported.)
Mark Cuban, the "Shark Tank" investor and basketball-team owner, doesn't expect the new trading phenomenon to disappear anytime soon, he told CNBC Tuesday: “I think now that they’ve recognized their power and now that they’ve learned some lessons, we’re going to get more of it, not less of it.”
Some analysts are starting to connect the dots to cryptocurrency trading. Edward Moya, a senior analyst for the London-based foreign-exchange broker Oanda, wrote Tuesday in a market update that "Panic selling across GameStop, AMC and silver is triggering a nice bid on cryptocurrencies."
Few crypto Twitterati would deny the role social media play in newfangled digital markets.
Indeed, the Reddit forum r/SatoshiStreetBets was filled early Wednesday with posts calling to pump dogecoin (DOGE) – a digital token created as a joke, with the adorable miniature dog breed Shina Inu as its ubiquitous icon – "to the moon" later this week. There's even a song.
HONEY POT Bitwise, Grayscale, 21Shares look to cash in on demand for cryptocurrencies With bitcoin up 21% so far in 2021 and ether hitting a new all-time high, digital-asset managers are rolling out announcements to take advantage of what they see as still-growing demand among investors for cryptocurrencies. Bitwise Asset Management said Tuesday it's seeking U.S. regulatory approval to publicly trade shares of its bitcoin fund on the over-the-counter marketplace OTCQX. “There is significant growth in interest from professional investors in accessing bitcoin as a tool to hedge their portfolios against rising inflationary risk,” says Matt Hougan Bitwise’s chief investment officer. Grayscale Investments reopened its Ethereum Trust earlier this week to accredited investors. (NOTE: Grayscale is a unit of Digital Currency Group, which also owns CoinDesk.) Switzerland's 21Shares (formerly known as Amun) is launching the world's first exchange-traded product for the cryptocurrency polkadot (DOT), to be traded on the Swiss SIX Exchange under the ticker symbol PDOT. Prices for DOT have doubled this year, for a market capitalization of about $15 billion. The investment firm Accelerate Financial Technologies is seeking approval from Canadian securities regulators to list a bitcoin exchange-traded fund on the Toronto Stock Exchange, CoinDesk's Tanzeel Akhtar reported Wednesday.The offerings come amid other signs of institutional demand for cryptocurrency-related investments, including the disclosure of a new $10 million bitcoin purchase by Michael Saylor's MicroStrategy. The $441 billion California Public Employees' Retirement System, which is the largest U.S. public pension fund, disclosed Tuesday in a filing that it held about 113,000 shares of the bitcoin miner Riot Blockchain (RIOT) at the end of 2020, worth some $1.9 million.
And CoinDesk's Muyao Shen reported Tuesday that balances of the stablecoins dai (DAI) and USD Coin (USDC) on cryptocurrency exchanges had reached new all-time highs in the past week. Citing the blockchain data tracker Glassnode, Shen reported that the increase might be a bullish indicator if it reflects buyers’ plans to use the two stablecoins to buy cryptocurrencies. The balance of USD Coin on all cryptocurrency exchanges has climbed recently, suggesting investors might be queuing up to buy. (Glassnode)
ROBO FINANCE It's DeFi's time to scale, but kinks are everywhere The furor over the trading platform Robinhood's stock suspensions in the wake of the GameStop saga is generating fresh interest in decentralized finance, or DeFi, where entrepreneurs are building automated exchanges and lending protocols atop blockchain networks. The idea is that the computer-run systems might be fairer and less prone to ad hoc human interventions in market operations.
Yet the fast-growing industry is still working out its kinks. Stakeholders in Yearn Finance, which acts like a robo-advisor steering users toward opportunities for earning high yields in DeFi protocols, voted this week to sell more tokens to raise money to compensate people who are working on the project as de facto staffers. The decision marked a clear shift for the team, which accrued a unique amount of buzz for eschewing the convention of setting aside governance tokens for insiders, CoinDesk's Brady Dale reported. "Yearn's launch was exceptional at creating a decentralized and engaged community, but it did not provide adequate incentives to retain existing and future contributors on an ongoing basis, nor did it provide the protocol with a war chest to fund future activities," the proposal's authors wrote.Ren, whose RenBTC has become the second-leading "tokenized bitcoin" in DeFi with a market cap of more than $500 million, is reportedly "joining" cryptocurrency entrepreneur Sam Bankman-Fried's Alameda Reseearch, according to a blog post. But as reported by CoinDesk's Will Foxley Smith, the exact nature of the arrangement wasn't entirely clear. Bankman-Fried drew attention last year when he briefly stepped in to take control of the decentralized exchange SushiSwap. Ren said it plans to prioritize support for the blockchain Solana, which Bankman-Fried has supported. The blockhain's SOL tokens have nearly tripled in price this year, for a market capitalization of about $1.4 billion. Manta Network, another DeFi project, says that while volumes are increasing on decentralized exchanges, they're also a "hotbed for front-running opportunities," as reported by CoinDesk's Benjamin Powers. Manta CEO Shumo Chu said in an email that a recent survey showed that nearly three-quarters of the 404 respondents (73.2%) “have either hesitated or completely avoided making a transaction in the past because they were worried about the privacy implications of that transaction.”
BITCOIN WATCH "Sucking up market supply" Balances of bitcoin held in "accumulation addresses" have increased, signaling growth in the number of investors with a longer-term mindset. (Glassnode) Long-term investors continue to hoard bitcoin, sucking up market supply and helping the cryptocurrency maintain its broader upward trajectory, CoinDesk's Omkar Godbole reports.
Data provided by Glassnode shows the total balance of bitcoin held in “accumulation addresses” rose to a 3.5-year high of 2,851,608 BTC on Tuesday. That amounts to 15.32% of the total circulating supply of 18,618,081 BTC. The number stood slightly below 14% three months ago.
Accumulation addresses are those that have at least two incoming non-dust transfers (tiny amounts of bitcoin) and have never spent funds. The metric excludes addresses active more than seven years ago to adjust for lost coins and those belonging to miners and exchanges.
Valid Points: What's Next for Ethereum 2.0
The price of ether has reached an all-time high less than two months since the Ethereum protocol's historic upgrade. Research analyst Christine Kim and tech reporter Will Foxley break down Ethereum 2.0 and its sweeping impacts on crypto markets, weekly.
Valid Points features original insights on what lies ahead for industry stakeholders and investors. Subscribe to the Valid Points newsletter.
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