First Mover: Ether Steals Limelight With New All-Time High Price as Bitcoiners HODL

January 19, 2020

Everything you need to make sense of the crypto markets and beyond

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By the CoinDesk Markets Team

Edited by Bradley Keoun

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Bitcoin (BTC)

+2.0% $37,820

Ether (ETH)

+13% $1,417

(Price data as of Jan. 19 @12:23 UTC)

TODAY:

Price Point: Ether hits new all-time high above $1,400 as bitcoin trades sideways.

Market Moves: Bitcoin prices have stalled after the powerful rally over the past couple months, but blockchain data show that few investors are rushing to take profits, and new buyers will have to compete for limited supplies of the cryptocurrency.

Bitcoin Watch: Analysts see potential price breakout from “contracting triangle” pattern on hourly chart, CoinDesk’s Omkar Godbole writes.

What's Hot: Goldman Sachs reportedly eyes custody play, Kraken halts XRP trading, Huobi connects to European banks via BCB fiat network, JPMorgan analysts see $40K bitcoin as key level, U.S. Treasury nominee Yellen to urge "big" spending.

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Price Point

Bitcoin (BTC) was higher for a second day, staying in the past two week's range between roughly $34,000 and $40,000.

"This period of consolidation is building a solid base, giving those who wish to sell bitcoin plenty of time," according to the cryptocurrency exchange firm Diginex.

Ether (ETH), the second-biggest cryptocurrency, rose Tuesday to a new all-time high of $1,499.33, reaching price levels not seen since early 2018. The LINK token from Chainlink, which provides price feeds to decentralized trading and lending systems built atop blockchain networks, also set a record price.

Read More: Ethereum's Ether Cryptocurrency Sets New Price Record on Major Exchanges

With the bitcoin market trading sideways, some investors might be rotating into so-called alternative cryptocurrencies for faster returns, Edward Moya, a senior market analyst for the foreign-exchange broker Oanda, said in emailed comments.

"The cryptoverse is growing again, and right now many cryptocurrency traders are diversifying into other coins," Moya said.

In traditional markets, Asian and European shares rose and U.S. stock futures pointed to a higher open ahead of Treasury Secretary nominee Janet Yellen's confirmation hearing. The former Federal Reserve chair is expected to call for the government to "act big" on stimulus borrowing and spending, to aid the economic recovery.

Gold strengthened 0.2% to $1,845 an ounce.

Market Moves

With bitcoin prices up 26% so far in January after quadrupling in 2020 and doubling the year before that, a trader might be forgiven for looking to take some profits.

But based on data extracted from the underlying blockchain network, investors appear content to sit tight, apparently betting a new rally could quickly take the cryptocurrency to fresh all-time highs.

Delphi Digital, a cryptocurrency analysis firm, noted last week in a report that bitcoin balances on cryptocurrency exchanges had decreased to about 2.3 million from 2.4 million over the past month as prices rose. Often, when prices rise, the balances increase, as more investors transfer bitcoins to the exchange to be liquidated.

"The net outflow this time around is potentially indicative of the long-term focused nature of recent investors," according to the Delphi analysts, Yan Liberman and Kevin Kelly.

Bitcoin balances on exchanges have declined even as prices for the cryptocurrency rose, indicating holders are in no hurry to take profits. (Delphi Digital)

The exchange outflows dovetail with other blockchain data showing more bitcoin being hoarded by investors for the long term, known in crypto-industry jargon as HODLing.

Analysts for Glassnode, a blockchain-data firm, noted Monday that the number of bitcoins held in "accumulation addresses" has climbed by 17% over the past year to more than 2.7 million. These are addresses that have only ever received bitcoin and never spent them.

"This increase highlights the massive supply restriction that is occurring in the BTC market, with almost 15% of the total supply held in these addresses," according to the firm.

Some 14.6 million out of the 18.6 million bitcoins mined over the blockchain network's 12-year history are "either lost or being HODLed long term," Glassnode says. That means new buyers coming in, such as big investors or companies looking to use the cryptocurrency as a hedge against potential inflation, would have to compete for the remaining 4 million or so bitcoins still circulating.

"When combined with the general decrease in bitcoin's liquid supply and the number of lost coins, this leads to an even more limited supply, which is helping BTC maintain the highest prices it has ever seen," the analysts wrote.

- Bradley Keoun

Past episodes of a decreasing "liquid supply" of bitcoin have preceded price rallies. (Glassnode)

Bitcoin Watch

Bitcoin's hourly chart, with bull-bear tug of war represented by "contracting triangle" price pattern. (TradingView/CoinDesk)

Bitcoin remains locked in a narrowing price range despite resurgent institutional demand.

The top cryptocurrency has charted a symmetrical triangle over the past few days, as seen on the hourly chart. It's a sign both buyers and sellers are unwilling to lead the price action.

Grayscale Bitcoin Trust (GBTC), the biggest publicly traded crypto investment trust, purchased a total of 16,244 BTC ($607 million) on Monday, taking out 18 times more supply from the market than what miners added. This was after the trust reopened last week following a month-long pause and quickly accumulated another 4,700 BTC. (Grayscale is owned by Digital Currency Group, the parent company of CoinDesk.)

Even so, the cryptocurrency is struggling to gather upside traction. The bulls look to be taking a hiatus, having engineered a rally of more than 200% over the past three months.

Digital-asset traders appear to have shifted toward alternative cryptocurrencies such as ether, the second-largest cryptocurrency, which rose to a new record high early Tuesday.

The focus could move back to bitcoin if the largest cryptocurrency breaks out of its hourly chart triangle pattern. That would imply a resumption of the broader trend and put $50,000 on the map, as noted by Vinny Lingham, investor and founder of crypto wallet and identity verification firm Civic.

- Omkar Godbole

Read More: Bitcoin Becomes Most-Crowded Trade in Bank of America Survey After Passing ‘Long Tech’

If Q1 2020 was the quarter of market turmoil, Q2 the bitcoin halving and Q3 the explosion of stablecoins and decentralized finance applications, Q4 was the quarter of institutional FOMO for bitcoin and of Ethereum launching the first phase of its ambitious migration to a proof-of-stake (PoS) blockchain.

The latest CoinDesk Quarterly Review looks at the performance of bitcoin and ether compared to macro assets and other crypto assets, and at their progress, milestones and value drivers over the past three months. Download the free report.

Token Watch

What's Hot

MetLife's investment arm predicts "true central bank digital-currency launch among Western countries seems unlikely to occur anytime soon" (CoinDesk)

Wall Street chief financial officers (CFO) are more wary of putting company funds into bitcoin after last week’s 30% price plunge (CoinDesk)

Bitcoin is "two bets in one: a sound, unimpeachable monetary protocol and the reserve asset for a rapidly expanding crypto-financial network," Castle Island Ventures' Nic Carter writes (New York Magazine)

Dunamu's new index is pushing toward the red zone, indicating "extreme greed." (Dunamu)

Analogs

The latest on the economy and traditional finance

Jamie Dimon says JPMorgan Chase should absolutely be "scared s---less" about threat from fintech rivals, names PayPal, Square, Stripe, Ant Financial, Amazon, Apple, Google (CNBC)

China's GDP grew 2.3% in 2020, lowest lowest in 44 years (Nikkei Asia Review)

Taiwanese chip maker startup Kneron eyes global expansion, aims for 8x growth in 2021 as U.S. blacklists hit Chinese rivals (Nikkei Asia Review)

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Disclaimer: The information presented in this message is intended as a news item that provides a brief summary of various events and developments that affect, or that might in the future affect, the value of one or more of the cryptocurrencies described above. The information contained in this message, and any information liked through the items contained herein, is not intended to provide sufficient information to form the basis for an investment decision. The information presented herein is accurate only as of its date, and it was not prepared by a research analyst or other investment professional. You should seek additional information regarding the merits and risks of investing in any cryptocurrency before deciding to purchase or sell any such instruments.

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