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Price point
Bitcoin was slightly lower at the start of Friday, leaving the cryptocurrency on track for its first weekly price drop since mid-July.
The largest cryptocurrency topped $ 12,000 earlier in the week and failed to hold on to gains, though John Willock, CEO of crypto asset manager Tritum, told CoinDesk Thursday that “maybe we have $ 13,500 in the next phase in the next days”.
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European stocks rallied and the euro fell early Friday as investors continued to bet on tech stocks and a vaccine breakthrough, shaking off new signs that the economic recovery is faltering. The dollar was headed for its first weekly gain since mid-June.
“It almost seems like the entire cryptocurrency market is taking its cue from the US dollar,” Mati Greenspan, founder of foreign exchange and cryptocurrency analysis firm Quantum Economics, told subscribers in an email.
The market moves
Even after growing 100-fold over the past five years, the entire cryptocurrency asset class, which has a total market valuation of $ 372 billion, is only a fraction of the US stock market’s $ 35 trillion.
What is surprising is that still fledgling digital asset markets may be more rational and functional these days than Wall Street: the various ups and downs in token prices are sending bona fide market signals pointing to projects and opportunities in capital is guaranteed, and investors are responding.
Mainstream investment analysts and Wall Street Journal columnists are now practically stating that the stock market is simply being supported by this year’s $ 3 trillion worth of printing money from the Federal Reserve.
Sure, bitcoin has benefited from the perception that the largest cryptocurrency could benefit from inflation, as many investors see it as a hedge against the currency’s devaluation, similar to gold.
Much more fascinating are the flows of capital to semi-autonomous lending and trading systems being built on Ethereum and other blockchains under the rubric of “decentralized finance” or DeFi.
A real market?
The surge in token prices for projects like Aave, Chainlink, Compound, and Curve, not to mention the good luck outliers they explain to your friends like Yam and Spaghetti, have actually attracted capital, at least in traits. According to DeFi pulse, the total value grossed in platforms has jumped 10 times this year to $ 7 billion.
It may just be a speculative hype, but it may actually be preferable to global foreign exchange markets which are heavily impacted if not controlled by central bank officials.
In the digital asset ecosystem, investors have figured out how to quickly allocate and reallocate capital whenever new opportunities arise.
CoinDesk’s Daniel Cawrey reported Thursday that juicy returns in the DeFi market are driving some investors away, at least temporarily, from investing their money in bitcoin option contracts.
“Every derivative trader who was looking for incremental returns and leveraged returns has been fascinated by the breadth of movement in DeFi,” said Cawrey Viashl Shah, founder of the Alpha5 derivatives exchange. “So, of course, the cost of capital requires at least some attention in this way.”
Traders are even putting their bitcoins on DeFi platforms to take advantage of the higher returns in the fast-growing arena.
Since the beginning of the year, the number of bitcoins blocked in DeFi has grown 34 times to around 49,000.
It might be a bubble, but at least it’s not a game to try and anticipate the Fed’s next move. In fact, there’s also room for investors to bet on which projects could become dominant players in the future, without struggling so hard to understand what exactly is going on, as often seems to be the case these days in so many traditional markets.
“Long-term DeFi will revolutionize finance, but this short-term bubble is bound to burst eventually, in my opinion,” Michael Gord, co-founder of trading firm Global Digital Assets, told Cawrey. At that point, blocked bitcoins could flow back from DeFi and more money could flow back into bitcoin options.
Almost like a real market.
Bitcoin clock
Bitcoin retreated more than 5% from the 13-month high above $ 12,400 reached on Monday.
- Unless the buy action happens quickly, the downward momentum could push prices as high as $ 11,000, cryptocurrency trading firm QCP noted earlier this week.
- Open interest in bitcoin options has returned to near-record highs seen in July.
- However, this is not necessarily a bullish development, as investors have recently been selling call options. This is evident from the recent recovery of the one-month put-call skew from -10% to -3%.
- Investors typically sell call options when they expect prices to consolidate or fall.
Read More: Bitcoin Options Open Interest Nears All-Time High, But Rising Puts Could Preserve Decline
Coin operated clock
Dai (DAI): Stablecoin enters Binance’s new DeFi staking platform. Dai, the dollar-linked stablecoin for the MakerDAO crypto lending platform, has become the first digital asset available in Binance’s DeFi staking program. The Binance initiative aims to leverage this year’s burgeoning DeFi market by offering users the ability to earn “staking rewards”, similar to interest on a bank deposit. Dai will be used to participate in Compound staking, according to Binance. Compound, another DeFi money market protocol, has more than $ 993 million in offering from right now, according to its website. As previously reported by CoinDesk, Compound users were rushing to deposit their data on the platform to maximize returns.
Tether (USDT): 1 billion dollar-linked stablecoins are moved to the Ethereum blockchain by Tron.
Kyber (KNC): The DeFi token looks cheap based on a discounted cash flow analysis and comparison with Synthetix (SNX) and Balancer (BAL), according to a new report from TradeBlock.
Ethereum Classic (ETC): Frequently attacked blockchain may be online for updates to protect against more attacks by 51%.
OMG (OMG): The price of the token doubles last week as record Etherum fees fueled interest in Tier 2 solutions.
Analogues – On traditional economics and finance
European economic activity slowed unexpectedly in August (Bloomberg)
The US cut of $ 500 billion in emergency aid could reduce the economy $ 940 billion. (Peterson Institute)
Costa Rica, Greece, Morocco, Portugal, Thailand hit by a “precipitous decline” in tourism. (IMF)
JPMorgan is reportedly pushing to provide banking services in US post offices. (The Capitol Forum)
The Federal Reserve has placed a limit on the Treasury market for 84 years. (New York Fed)
Asian banks face a “challenging” revenue environment due to near-zero interest rates (Fitch)
US jobless claims back above 1 million as labor market recovery halts (Department of Labor)
TWEET OF THE DAY
What’s new
Chinese Citizens Could Use Spirit Capital Link Outside China (Bloomberg)
The grayscale trusts “sold in the secondary market to the public at great prizes” (Arcane Research)
Mining industry increasingly “financialized” and “capitalized” hashrate (TokenInsight)
Crypto-Friendly US Congressman Turns To Crypto-Friendly Fundraising Via BitPay (CoinDesk)
FTX Hires Former Crypto Executive Robinhood as COO of US Crypto Exchange (The Block)
Latest generation Bitmain, MicroBT rigs portend a “competition between neck and neck” (BitMEX Search)
