CoinDesk Crypto

Bitcoin continues to trade in the opposite direction to the Dollar Index in a reflection of the cryptocurrency’s maturation as a macro asset like gold.

The top cryptocurrency by market value slumped to $32,400 early on Monday, having set record highs above $41,800 on Friday.

The crash came alongside a bounce in the Dollar Index (DXY), which tracks the greenback’s value against major currencies. The DXY has jumped to two-week highs near 90.50, extending a two-day winning streak. The index reached a 33-month low of 89.21 on Jan. 6, according to TradingView.

Related: Market Wrap: Bitcoin Plunges to $30.3K as Options Traders Bet on Sub-$800 Ether

Since the major markets crash in March, bitcoin and the index have trended in opposite directions, with bitcoin witnessing consolidation or correction during DXY’s temporary recovery rallies.

“Bitcoin’s value increased as the money supply and inflation expectations grew. At the same time, the dollar depreciated to multi-year lows, resulting in an inverse correlation between the government-backed fiat and decentralized digital asset,” Kaiko Research noted in its December market report.

Bitcoin’s price fell from $12,000 to $10,000 in early September and remained sidelined for the rest of the month as the dollar index bounced from 91.75 to 94.75. Similar action was observed in June 2020.

The cryptocurrency’s rally resumed in October as the foreign exchange markets began selling the dollar on expectations of additional U.S. fiscal stimulus. A steep drop in the DXY accompanied the cryptocurrency’s meteoric rise from $15,000 to above $41,000 seen over the past two months or so.

Related: Institutions Use This Strategy to Hide Their Bitcoin Orders

The inverse correlation isn’t surprising, given that publicly listed companies such as MicroStrategy are buying bitcoin to preserve the inflation-adjusted value of their treasury assets, mainly cash (USD).

“What we’re trying to do is preserve our treasury; the purchasing power of the cash is debasing rapidly,” MicroStrategy’s CEO Michael Saylor told CoinDesk in November.

The dollar’s latest bounce looks to have been fueled by a rise in U.S. Treasury yields.

Bitcoin is not the only asset falling alongside the dollar’s recovery rally. Gold, the classic inflation hedge, declined to a one-month low of $1,817 early Monday. The yellow metal peaked at a multi-week high of $1,959 last week as the DXY found a temporary bottom.

It remains to be seen if a continued rally for the dollar, if any, will fuel a deeper drop in bitcoin.

At press time, bitcoin is trading near $33,520, representing a 15% drop on a 24-hour basis.

Also read: MicroStrategy CEO Explains Why Bitcoin Is ‘a Million Times Better’ Than ‘Antiquated’ Gold

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The Agricultural Bank of China is said to have enabled a number of ATMs around the city of Shenzhen to offer trial services for the digital yuan.

• AgBank, one of the “big four” Chinese banks, is allowing customers to deposit and withdraw digital yuan to or from their current or savings accounts, according to a report from Shenzhen Daily on Sunday.
• The news comes as Shenzhen is holding its second digital currency lottery – a public trial that is giving away 20 million digital yuan (worth around $3 million).
• According to the report, AgBank is establishing an office dedicated to innovation around the digital yuan in Shenzhen.
• Other major banks in the nation are also working on apps for the People’s Bank’s digital currency initiative.
• As these and other trials continue, China looks to be closing in on the launch of the digital alternative to traditional cash and would be the first major nation to do so.
• The Bahamas launched its sand dollar central bank digital currency last October.

Read more: Shenzhen to Double Digital Yuan Giveaway in China’s Latest Lottery Test

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Hermez Network, a decentralized project focused on scaling the Ethereum network, announced it is integrating the tether (USDT) token in a bid to make transactions more affordable.

• USDT – a U.S. dollar-based stablecoin – will be used to provide cheaper payments and token transfers in a move to counter high “gas” fees on the Ethereum network, the company announced Monday.
• Hermez is a “zero-knowledge rollup” – a solution that runs as an overlay on Ethereum and helps increase transaction throughput on the blockchain network by rolling multiple transfers into a single transaction.
• The gas fees required to make transactions on Ethereum have been prohibitively high in recent months, making it hard for many projects based on the network to make microtransactions.
• “Hermez is excited to welcome tether tokens as the first of many projects to join the layer two network ahead of our official launch this year,” said Jordi Baylina, tech lead at Hermez Network.
• The firm further hopes to create a “self-sustaining network” by reinvesting 40% of any value generated into community-driven layer one projects.

Read more: High Gas Fees Prevent Ethereum From Being Ethereum

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Propine, a Singapore-based digital asset custody provider, announced Monday it has been awarded a capital markets services license from the Monetary Authority of Singapore (MAS).

• The news comes as Propine graduates from the MAS FinTech Regulatory Sandbox, which allows financial institutions to experiment with new financial products under the close eye of the central bank.
• The company was admitted to the sandbox to provide digital asset custody services in November 2019.
• The firm also exits the sandbox with what it claims is the first ISO 27001 certification for a crypto custody provider.
• The ISO 27001 certification is an international standard providing a framework for preserving the confidentiality and integrity of vital data.
• “Compliant infrastructure is a bedrock on which the foundations of the security token ecosystem are created,” said Propine CEO Tuhina Singh, in reference to MAS’ regulatory framework for digital assets.
• As well as custody, Propine offers digital asset servicing, trade settlement facilitation and investor reporting with a focus on institutional clients.

Read more: MAS, JPMorgan Build Payments System With Inter-Blockchain Connectivity

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Bitcoin mining firm Bit Digital (BTBT) now has a market value above $1 billion, up from $6.2 million a year ago.

• Shares of the New York-based company have soared nearly 7,500% in the past year, currently trading just above $25.
• Along the way, Bit Digital has worked to aggressively expand its mining operations, including a $13.9 million deal to purchase nearly 18,000 Antminer and Whatsminer machines.
• Once received and deployed, the machines will more than double Bit Digital’s hashpower to over 2,253 petahash per second (PH/s).
• The company’s focus on increasing its mining capacity is not surprising given that mining revenues are ballooning.
• Three other public mining firms have recently joined Bit Digital as billion-dollar companies: Riot Blockchain, Marathon Patent Group and Hive Blockchain.

• Bitcoin Miners Saw 33% Revenue Increase in December
• Bitcoin Mining Difficulty Hits Record High Amid Miner Revenue Surge
• Square Crypto Funds Bitcoin Developer to Improve Mining Pool Software
• Cryptocurrency Miner Hive Blockchain Passes $1B Market Value

European users of eToro are claiming they were given the bum’s rush regarding leveraged crypto positions, which have been abruptly closed in the face of what the trading platform called “extreme market volatility.”

Retail investors in the U.K. and U.S. are barred from buying into crypto derivatives, including financial contracts that allow margin trading where investors need only put up a small amount of the contract’s notional payoff. 

Customers of eToro in European countries that allow such trading in contracts for differences (CFDs), were told via email on the evening of Friday, Jan. 8: “If you do not increase the margin to 100%, then the position will be closed at 21:00 GMT today.” 

Related: Deluge of Would-Be Bitcoin Traders Prompts eToro to Put Out the Unwelcome Mat

This came with an explainer, saying clients with available balance could keep the positions open by adding funds, while those that don’t have available balance had the option to close other positions in order to free up funds.

However, disgruntled traders have taken to Twitter stating that four hours later eToro closed all leveraged positions on cryptocurrencies, including those that users had attempted to keep open. 

“eToro violated the contracts it had agreed with its clients,” said Slavko Vesenjak, an attorney in Slovenia who represents several eToro clients from across Europe. “A four-hour notice before closing all leveraged crypto positions made people wake up in their different time zones seeing their positions closed.”

Amy Butler, global head of PR for eToro, said the vast majority of eToro’s customers were unaffected by the changes. 

Related: Traders Can Now Bet on ‘Bitcoin $300K’ as Options Keep Pace With Rising Price

“We understand that there are several dozen frustrated clients and we are working hard to resolve their frustrations,” Butler said.

Also last week, eToro, which is said to be planning a $5 billion public listing, raised its required deposit level from $200 to $1,000 in order to better manage overwhelming demand from hopeful crypto traders attracted by rocketing prices. 

The temporary decision to increase deposit minimums is because of the surge in demand, said Butler. As far as the removal of leveraged crypto in Europe, this decision was taken “from an internal risk management perspective,” said Butler, adding that it was not related to any potential IPO plans.

“The eToro clients will get their funds. If eToro does not refund them, the Cyprus state will,” said Jurij Toplak, a law professor at Alma Mater Europaea in Slovenia and an adjunct at New York’s Fordham Law.

Toplak said aggrieved eToro customers he’s representing will be approaching the Cyprus Securities and Exchange Commission in a bid to have eToro’s license revoked.

“I guess cryptocurrencies were just going up and eToro discovered they were not able to pay out that much money to the customers,” Toplak said in an interview. “And then they just canceled the contracts.”

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A New York bar owner is selling his business for bitcoin (BTC) and ether (ETH), which could make it the first cryptocurrency-only restaurant sale in the U.S.

• According to the New York Post, owner Patrick Hughes has put the Hellcat Annie’s and Scruffy Duffy’s up for sale and is accepting bitcoin and ether as a form of payment.
• Saying he’s hoping “to catch one of these crypto dudes who always wanted to own a bar,” Hughes says he’s willing to sell both businesses for around 25 BTC or 800 ETH, which are each valued at around $975,000 at the time of publication.
• “Crypto is on fire, it’s a hot currency,” Hughes told the Post.
• Though still uncommon, purchasing high-end property and real estate using cryptocurrencies is nothing new. In 2018, a beef salesman–turned–early bitcoin adopter from China’s Shanxi province, Guo Hongcai, funneled parts of his wealth out of the country by purchasing real estate abroad.
• Hongcai sold 500 BTC in the U.S. and then used that money to buy a 100,000-square-foot mansion in Los Gatos, a 90-minute drive from San Francisco, Calif.
• As for Hughes, while the bar owner says he’s only received a few casual offers, he’s convinced crypto is the future. “The next crisis, you won’t have to run out and buy toilet paper,” he told the Post. “You can just use your dollars.”

Read more: New York Moves to Lure Crypto Startups as BitLicense Turns Five

CORRECTION (Jan. 10, 18:47 UTC): Corrects headline to reflect it’s two bars being sold.

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Serial blockchain entrepreneur Dan Larimer has left Block.one, the company that raised $4 billion to build the software behind the EOS blockchain.

Larimer, who co-founded the company and had served as its chief technical officer since April 2017, announced the move on Block.one social network Voice.com on Sunday:

“I will continue on my mission to create free market, voluntary solutions for securing life, liberty, property, and justice for all. I do not know exactly what is next, but I am leaning toward building more censorship resistant technologies.”

Related: Apple Suspends Parler From App Store, Amazon Kicks It Off Web Hosting Service

Larimer said he left Block.one as of Dec. 31, 2020. The Virgnia-based technologist announced his boycott of Twitter yesterday, saying its “censorship has gotten out of control,” likely a reference to the company’s banning of U.S. President Donald Trump the previous day. He also hit out at Apple for its threatened, and since carried out, ban of conservative social media service Parler.

“Voice has a huge battle ahead and will need to adapt if it wants to escape the same kind of coerced censorship of its users,” he wrote. “We can no longer rely on these services. Voice is not immune from this censorship pressure. We are entering dark times.”

Block.one confirmed the departure, saying Larimer “left to pursue new personal projects.”

“I’m not alone in being grateful for the contributions Dan has made to date, and I look forward to seeing what he will do next,” Block.one CEO Brendan Blumer said in a statement.

Related: India’s Leading Bitcoin Exchange Raises $13.9M From Block.One, Coinbase Ventures

Larimer founded BitShares alongside Charles Hoskinson (a co-founder of Ethereum) in 2013. Larimer later founded the Steem blockchain in 2016.

In 2018, Block.one raised over $4 billion in the largest initial coin offering (ICO) in history. As a result, the firm is sitting on a massive reserve of bitcoin. CEO Brendan Blumer recently announced on Twitter, “we have accumulated well beyond our previously announced 140,000 #BTC position.”

The price of EOS fell on the news of Larimer’s departure, dropping to as low as $2.93, before recovering slightly to $3.03, down 15.1% over the last 24 hours.

UPDATE (Jan. 10, 15:33 UTC): Adds Block.one response, background, EOS activity.
UPDATE (Jan. 10, 17:43 UTC): Updates drop in the price of EOS.

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Apple has suspended Parler, a conservative social media service, from its App Store, saying the app’s owner hasn’t done enough to deal with threats of violence on the platform. Meanwhile, Amazon dealt the service a potential death blow by kicking it off its web hosting service, citing the same reason, BuzzFeed News reported.

• Amazon’s action means that if the service can’t find another host, Parler will go offline Sunday.
• “Recently, we’ve seen a steady increase in this violent content on your website, all of which violates our terms. It’s clear that Parler does not have an effective process to comply with the AWS terms of service,” Amazon said to Parler in an email obtained by BuzzFeed.
• Apple struck much the same tone in a statement Saturday: “Parler has not taken adequate measures to address the proliferation of these threats to people’s safety.”
• Yesterday, BuzzFeed News reported Apple had written to Parler saying there had been complaints that the platform had been used to plan and coordinate the attack on the U.S. Capitol on Wednesday.
• In response, Apple had given the service 24 hours to make sure its controls were in order, BuzzFeed News said. Parler reportedly submitted some changes but apparently Apple didn’t think they went far enough.
• Apple said the suspension of Parler will last “until they resolve these issues.”
• Google on Friday suspended Parler from its Google Play app store until it addresses a lack “robust moderation for egregious content.” Google said it took the action “in light of this ongoing and urgent public safety threat” referring to Wednesday’s attack. 

UPDATE (Jan. 10, 03:05 UTC): Adds Amazon action.

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Bitcoin miners generated an estimated $692 million in revenue in December, up 33% from November, according to on-chain data from Coin Metrics analyzed by CoinDesk.

Extending November’s own 48% increase, miner revenues continued to soar as bitcoin rallied over 300% last year, briefly trading above $29,000 for the first time ever on New Year’s Eve. 

Revenue estimates assume miners sell their BTC immediately.

Related: Bitcoin Mining Difficulty Hits Record High Amid Miner Revenue Surge

Measured by per terahash per second (TH/s), miner revenues nearly tripled in the past three months, reaching $0.284 Thursday, per data from Luxor Technologies, its highest level since August 2019, as CoinDesk previously reported. 

Network fees brought in $68.3 million in December, or nearly 10% of total revenue, a slight percentage decrease from the 10.5% of revenue represented by fees in November. 

Fees were quite volatile in December, bouncing between $4 to all the way to above $12 throughout the month, per Coin Metrics. 

Notably, fees as a percentage of total revenue continues a strong upward trend since April, prior to the network’s third-ever block subsidy halving in May. Increases in fee revenue are important to sustain the network’s security as the subsidy decreases every four years.

Related: Square Crypto Funds Bitcoin Developer to Improve Mining Pool Software

Taking advantage of the revenue increase, miners are bringing more machines online, pushing the network’s difficulty to record highs after Saturday’s adjustment. 

What’s more, miners have ordered so many new machines to capitalize on the period of increased profitability that leading manufacturer Bitmain, for example, has sold out until August even after nearly doubling the price of some models. 

As heavyweight investors offer six-digit price predictions for bitcoin amid its ongoing parabolic rally, miners eye continued revenue growth through early 2021 and beyond.

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Traders are swapping their tokenized bitcoins for the real thing more than ever.

• BitGo saw a record 11,613 wrapped bitcoin (WBTC) swapped for real bitcoin (BTC) in December, with only 2,731 BTC exchanged for the bitcoin-backed ERC-20 tokens last month.
• December marked the first time in the young project’s history that “burns,” the reversion of WBTC back to BTC, have outnumbered “mints.”
• The total value of the “burned” WBTC is approximately $235 million, based on bitcoin’s price at the time the tokens were swapped for BTC.
• Diminishing yields in decentralized finance (DeFi), a primary use case for WBTC, and increased trading activity on traditional cryptocurrency exchanges amid bitcoin’s recent eye-popping surge are likely reasons for the increase in burns and slowed rate of minting.
• Most of the burns came from trading firms Alameda Research and Three Arrows Capital.
• BitGo’s Wrapped Bitcoin project gained wide popularity through Q3 and early Q4 2020 amid a DeFi frenzy that saw over 124,000 BTC tokenized on Ethereum at its peak after starting the year with less than 600 BTC.
• In mid August, demand for WBTC was so high that bitcoins were being tokenized faster than they were being mined.
• To date, roughly 110,000 WBTC are still circulating in the DeFi ecosystem.

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While a bitcoin exchange-traded fund (ETF) would be a long-term positive, in the short term it could hurt the price of the leading cryptocurrency as it would draw institutional money from the Grayscale Bitcoin Trust (GBTC), currently the only way for some on Wall Street to gain exposure to bitcoin, JPMorgan analysts wrote in a report.

• Optimism over the U.S. Securities and Exchange Commission approving a bitcoin ETF this year has grown due to the likelihood of a new commissioner being appointed this year, the report notes.
• But that change would give competition to GBTC, which benefits from being the only game in town. (Grayscale is owned by Digital Currency Group, the parent company of CoinDesk.)
• Due to regulatory and other restrictions, some financial institutions and funds can’t directly own bitcoin or even buy shares directly from Grayscale. To get in on the bitcoin action, they have little choice but to buy GBTC shares on the secondary market at a premium. With an ETF, that premium would shrink, reducing the attractiveness of GBTC shares.
• A shrinking GBTC premium would also diminish the allure of a popular trade, the analysts wrote. Right now, some institutional investors buy GBTC at net asset value with the intent of selling after the mandatory six-month lockup period expires to capitalize on that premium. Should the premium drop due to the coming introduction of an ETF, it would diminish the popularity of buying GBTC at NAV for that purpose.
• The JPMorgan analysts estimate the GBTC premium monetization trade could account for around 15% of outstanding GBTC stock.
• The prospect of a bitcoin ETF and the resulting diminishing GBTC premium could also lead some institutional investors who bought in in the second half of last year to sell when their six-month lock-up expires, further putting downward pressure on GBTC premiums, the analysts wrote.

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Bitcoin’s mining difficulty just reached a record high above 20.6 trillion as more people are mining at a larger scale than ever before thanks to ballooning mining revenue and bitcoin’s parabolic price rally.

“A new difficulty all-time high is no surprise considering mining revenue has tripled in recent months,” said Edward Evenson, business development lead at Braiins, a mining software company that recently acquired full ownership of leading pool Slush Pool after being majority stakeholders since 2013. 

Saturday’s adjustment at block 665,280 marks an 11% increase from the last adjustment on Dec. 27.

Related: Bitcoin Miners Saw 33% Revenue Increase in December

Difficulty is a relative measure of the amount of resources required to mine bitcoin that climbs or falls depending on the amount of computing power consumed by the network, known as its hashrate. 

As bitcoin’s price continues to soar – almost touching $42,000 Friday – miner revenues keep pace, incentivizing even more participants to mine. Twelve months ago, bitcoin’s difficulty was below 15 trillion. 

“I see this trend continuing in the first half of 2021,” Evenson told CoinDesk. 

Signalling even more upward difficulty adjustments in the future, mining companies plan to capitalize on higher revenues at such a scale that their orders for new machines have left leading manufacturers like Bitmain sold out until August even after nearly doubling the price of some models. 

Related: Square Crypto Funds Bitcoin Developer to Improve Mining Pool Software

“ASIC manufacturers have had to turn away more than half a billion dollars in mining equipment orders in Q4 2020 alone,” Evenson said. “Hardware supply chains are currently overloaded by immense demand.”

Companies like Core Scientific are handily contributing to the overload with massive 59,000-machine orders from Bitmain, which are set to triple its mining capacity. 

Publicly traded mining firms like Riot Blockchain (RIOT) and Marathon Patent Group (MARA) placed similar pre-orders for 31,000 and 90,000 machines through 2020, respectively. 

Based on the ongoing mining frenzy, Bitcoin’s hashrate is “likely to at least double in 2021,” Evenson predicts. 

More than an inconvenience, the current ASIC shortage signals a deeper fundamental weakness in the mining sector amid soaring revenues and activity.

“Right now, the biggest risk to the mining business is the ASIC shortage,” said Steve Barbour, president of portable mining infrastructure manufacturer Upstream Data, in a direct message with CoinDesk. 

Barbour said he doesn’t see “any signs yet” that manufacturers are “ramping up fast enough” to meet the yet unabated surge in demand for machines. They aren’t even pursuing temporary solutions like offering mid-tier machines for “miners who aren’t interested in high-priced, high-efficiency gear.” 

With no signs of replenished supplies, miners have been scavenging secondary markets for any available and working machines, causing prices of some models to reach 12-month highs, per CoinDesk’s prior reporting.

The miner manufacturing business “definitely has room for more diversified competition,” Barbour said.

• Cryptocurrency Miner Hive Blockchain Passes $1B Market Value
• Bitcoin Miners See Revenue Per TH/s Nearly Triple in 3 Months

eToro said it’s so overwhelmed by demand by newcomers who want to trade cryptocurrencies on the exchange it has temporarily boosted the amount new users have to put on deposit to discourage them from joining.

• The platform, which mainly caters to “social” or beginner traders, raised its required deposit level to $1,000 from $200.
• The number of new registrations and the volume of deposits and trading on the platform hit all new highs in 2021, fueled by crypto, Amy Butler, global head of PR for eToro, said in an email to CoinDesk.
• “We have seen huge demand for crypto, especially bitcoin,” she said.
• While institutional funds were the main driver of the bull run last year, this report of “unprecedented demand” by eToro could be a sign that retail traders are finally starting to jump in with both feet.
• “In this first week of 2021 we have seen days with over 40,000 new registered users in a day and volumes of crypto trades at 10 times the average of last year,” Butler said.
• After notching more than a 300% gain in 2020, the price of bitcoin has already risen more than 35% this year.
• While last year’s performance largely stayed off the front page of non-crypto publications, this year’s string of all-time highs has been getting more and more attention from the mainstream media. This is undoubtedly creating increased interest and perhaps a “fear of missing out” (FOMO) on the part of retail investors, the likes of whom are now overwhelming eToro and potentially others.

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U.S. President Donald Trump has been permanently banned from Twitter, less than two weeks before he is set to leave office.

Twitter announced the move late Friday, saying it had conducted a “close review” of the President’s recent tweets and how they were being received, and concluding that two tweets on Friday might lead to violence on or around the inauguration of President-elect Joe Biden later this month.

Twitter had previously suspended Trump’s access for 12 hours on Wednesday, after a mob composed of the President’s supporters broke into the U.S. Capitol Building, ransacked congressional offices and interrupted the joint session intended to accept the electoral college votes confirming Biden’s victory in last year’s election. Five individuals died during the riot, including four supporters of the President and an officer with the Capitol Police.

Related: Dogecoin Jumps 20% After Musk’s Twitter Shout-Out; Bitcoin Joke Spurs Dialogue With Saylor

“In the context of horrific events this week, we made it clear on Wednesday that additional violations of the Twitter Rules would potentially result in this very course of action. Our public interest framework exists to enable the public to hear from elected officials and world leaders directly. It is built on a principle that the people have a right to hold power to account in the open,” Twitter’s statement Friday said.

The company cited the President’s tweets on Friday, one which said his supporters “will not be disrespected or treated unfairly in any way, shape or form” and the other which was an announcement that he would not be attending Biden’s inauguration on Jan. 20.

“These two Tweets must be read in the context of broader events in the country and the ways in which the President’s statements can be mobilized by different audiences, including to incite violence, as well as in the context of the pattern of behavior from this account in recent weeks,” Twitter said.

Twitter joins Facebook (and Instagram), Snapchat and Twitch as some of the platforms to remove Trump’s pages in recent days. Each of these companies initially began with indefinite or temporary suspensions on Wednesday. Twitch and Facebook have indicated that Trump may regain access after the inauguration.

Related: Bitcoin Chatter on Twitter Nears Highest Level in 3 Years Amid Price Surge

Read more: Decentralization and What Section 230 Really Means for Freedom of Speech

Shopify has likewise blocked the Trump campaign’s digital store, while YouTube announced changes that could ban accounts spreading election misinformation.

On Friday, Reddit banned its r/DonaldTrump community and a moderator of its r/conspiracy community. While a specific reason wasn’t given for the subreddit ban, the moderator was banned for “inciting communities” and violating the site’s content policy, according to the Daily Dot.

Apple has likewise threatened to ban the social media app Parler if it doesn’t enact some content moderation policies, while Google Play did Apple one better by suspending Parler until it addresses a lack “robust moderation for egregious content.” Google said it took the action “in light of this ongoing and urgent public safety threat.”

Meanwhile, Discord banned its “The Donald” server which is affiliated with pro-Trump communities (including the former Reddit page r/TheDonald, which was banned last year for “harassment, hate speech and content manipulation,” Gizmodo reported).

Read more: In Trump Versus Twitter, Decentralized Tech May Win

Earlier Friday, Twitter suspended a number of accounts that showed support for the QAnon internet conspiracy, including former National Security Advisor and retired General Michael Flynn and Trump attorney Sidney Powell.

Payment platform Stripe suspended the Proud Boys, a far-right group, on Friday.

The video streaming platform DLive likewise announced on Friday it was suspending several accounts in relation to Wednesday’s riot.

Twitter’s share price dropped in after-hours trading on the news, pricing in at $50.40 after closing Friday at $51.48.

UPDATE (Jan. 9, 2021, 00:20 UTC): Added additional context and information.
UPDATE (Jan. 9, 2021, 01:30 UTC): Added that Google Play has suspended Parler from its Play Store.

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Morgan Stanley now owns 792,627 shares of MicroStrategy, bringing its total ownership in the company best known for holding over $2 billion in bitcoin to 10.9%, according to a filing made with the U.S. Securities and Exchange Commission.

• The financial giant boosted its stake by almost 650,000 shares since the end of Q3.
• The shares of MicroStrategy, a relatively little known business intelligence firm prior to its massive investment in the leading cryptocurrency, have soared 330% since the company bought its first bitcoin on Aug. 11, 2020, rising from $123.80 to $539.57.
• As illustrated in the chart below, before buying its first bitcoin, MicroStrategy’s share performance left something to be desired, having fallen 13% from Jan. 2, 2020, through Aug. 10, 2020.
• Given MicroStrategy’s shares are largely tracking the price of bitcoin, which is up more than 40% this year following a 300% gain in 2020, it’s likely Morgan Stanley views its investment as a way to benefit from bitcoin’s historic run without actually being a HODLer.

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Traders can now bet on whether bitcoin will hit $300,000 by year’s end.

• Crypto derivatives exchange Deribit has added a $300,000 option to keep up with BTC‘s blistering price performance in recent weeks.
• The $200,000 option came into being late last week after bitcoin rose from $25,000 on Dec. 25 to $32,000 on Jan. 2.
• Six days later – with bitcoin currently north of $39,000 and having risen to as high as $41,962.36 earlier Friday – the maximum option followed suit.
• Even with the bullishness driving bitcoin’s rally, there’s only so high folks are willing to climb, as you can see from the following picture of open positions on Deribit’s website.
• Other than one optimistic soul wagering that $200,000 this year could be a real thing, there’s been no activity at any strike above $100,000.

• Generally, options indicate how some of the market’s more sophisticated traders are gauging current price trends.
• Hope may spring eternal but apparently, even hope has a ceiling.

• Market Wrap: Bitcoin Crosses $41.9K as Ether Futures Interest Grows 85% So Far in 2021
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• Square Crypto Funds Bitcoin Developer to Improve Mining Pool Software
• Bitcoin Is ‘Less Risky the Higher It Goes,’ Says Investor Bill Miller on CNBC

Bitcoin hit a fresh all-time high Friday as investors continued to scoop up some of its limited supply. The ether futures market also hit records as derivatives traders check out the second-largest cryptocurrency by market capitalization.

• Bitcoin (BTC) trading around $39,304 as of 21:00 UTC (4 p.m. ET). Gaining 0.64% over the previous 24 hours.
• Bitcoin’s 24-hour range: $36,579-$41,962 (CoinDesk 20)
• BTC below the 10-hour but above the 50-hour moving average on the hourly chart, a sideways signal for market technicians.

New all-time highs are again the topic of the day on Friday, the third straight day the price of bitcoin hit a record level. Around 15:00 UTC (10 a.m. ET), the price of bitcoin changed hands at $41,962, according to CoinDesk 20 data. Price has dropped since, at $39,304 as of press time.

Read More: Over $41,000: Bitcoin Continues to Forge New Highs

Related: Traders Can Now Bet on ‘Bitcoin $300K’ as Options Keep Pace With Rising Price

“BTC is currently in price discovery with a lot of demand and limited supply,” Joel Edgerton, chief operating officer of Bitflyer USA. “Everyone that holds bitcoin thinks it will go higher, so they hold.” 

According to data aggregator Glassnode, bitcoin’s current circulating supply is at 18,594,037 BTC – and investors seemingly can’t get enough of the world’s oldest cryptocurrency. 

“The continued relentless money flows into BTC from institutional and some retail buyers provides significant positive drift,” said Chad Steinglass, head of trading for derivatives firm CrossTower. “As more and more coins are locked away in long-term investments and are essentially removed from circulation, squeezing available inventory tighter and tighter.“

“Everyone without BTC is afraid of missing out and wants to buy,” Bitflyer’s Edgerton added. “Borrowing [U.S. dollar] stablecoins to buy BTC is the crypto carry trade.” 

Related: BRRR: Biden Readies a New $3T Stimulus Package

The top three stablecoins – tether (USDT), U.S. dollar coin (USDC) and dai (DAI) – collectively have a market capitalization of $28 billion, much of which consists of tether – $22,916,992,958, according to CoinGecko.

“The doors are fully open and the buying pressure has been building up massively this whole year based on macro cycles, COVID-19, the U.S. election and a feeling of general anxiety,” said Henrik Kugelberg, an over-the-counter bitcoin trader. “In the short term I expect a setback of perhaps 15%, but it will just be a bump in the massive bull run – $100,000 this year is totally possible!” 

Read More: Why Joe Biden’s $3T Stimulus Package Could Add Fuel to Bitcoin’s Rally

Action in the bitcoin derivatives market was heavy as well. Jason Lau, chief operating officer for San Francisco-based exchange OKCoin, noted almost $1 billion in liquidations occurred there Thursday. “The majority of these liquidations were longs and it was the third-highest amount since November.” 

At BitMEX alone, over $100 million in liquidations have occurred on the venue’s bitcoin market over the past three days, with $65 million buy liquidations signaling short-oriented traders got squeezed versus $42 million in the crypto equivalent of a margin call for long positions. 

In the options market, Denis Vinokourov, head of research at brokerage Bequant, noted that traders are liking the $36,000 strike price for bitcoin.

“Given the outsized focus on bitcoin’s $36,000 options strike for the end of January options expiry, which comes with a raft of optionality plays and risks, this disconnects bitcoin from fundamentals, so to speak,” Vinokourov told CoinDesk. “It will be interesting to see whether the market will be able to compartmentalize this bitcoin risk away from the rest of the market.”

Ether (ETH) was down Friday, trading around $1,159 and slipping 6.5% in 24 hours as of 21:00 UTC (4:00 p.m. ET).

Read More: Ethereum 2.0 Explained in 4 Easy Metrics

On Jan. 1, ether futures open interest, or OI, on major derivatives venues was at $2 billion. On Thursday, OI had ballooned 85% to a record $3.7 billion according to aggregator Skew. Binance was leading the way with $820 million in OI, over 20% of the total ether futures market.

“ETH still hasn’t touched its previous all-time high of over $1,400,” noted Brian Mosoff, chief executive officer of investment firm Ether Capital. “To date, there has been less access to invest in ether versus bitcoin. As we await the pending launch of the CME [ether] futures, community members who are more crypto-native and have less restrictions about how to hold ETH are likely looking to front-run the launch.”

Digital assets on the CoinDesk 20 are in the red Friday. Notable losers as of 21:00 UTC (4:00 p.m. ET):

• stellar (XLM) – 11.7%
• omg network (OMG) – 9.2%
• cosmos (ATOM) – 8.6%

Equities:

• The Nikkei 225 in Asia closed up 2.36%, led by outsized gains in Oki Electric Industry Co., which jumped 9.6% Friday.
• Europe’s FTSE 100 ended the day in the green 0.24% as traders continue to anticipate U.S. government stimulus from Democrats will boost the global economy.
• In the United States, the S&P 500 gained 0.55% as traders contended with a choppy market amid the possibility of new government stimulus and worse-than-expected jobs data.

Commodities:

• Oil was up 3%. Price per barrel of West Texas Intermediate crude: $52.48.
• Gold was in the red 3.4% and at $1,848 as of press time.

Treasurys:

• The 10-year U.S. Treasury bond yield climbed Friday jumping to 1.110 and in the green 2.5%.

• Square Crypto Funds Bitcoin Developer to Improve Mining Pool Software
• Bitcoin Is ‘Less Risky the Higher It Goes,’ Says Investor Bill Miller on CNBC

Decentralized finance (DeFi), the sector of crypto that drove all the excitement this summer, isn’t quite back to its old energy, but the lull is over.

“Raw DeFi numbers are at all-time highs, and they’re not fake,” Alameda Research founder Sam Bankman-Fried told CoinDesk in an email. “But in relative terms to the rest of crypto, they’re down from their peak but up from their nadir.”

From a casual glance, it can look like DeFi is stronger than it’s ever been. Judged by the sector’s favorite metric, total value locked (TVL), the sector has been adding about a billion dollars worth of additional value per day since the new year started – from $15.67 billion to $22.35 billion as of this writing. However, a lot of that growth has been driven by the simple fact of asset prices going up across the board.

Related: Bitcoin Goes Institutional, Ethereum Spreads Its Wings: CoinDesk Q4 2020 Review

“TVL isn’t the best indicator when ETH and all other crypto is green for weeks,” Jesse Walden, founder of the venture firm Variant, told CoinDesk in an email.

ETH, the asset that powers DeFi, traded at $737 on Jan. 1, rising to $1,182, as of this writing. 

In other words, ETH is up a bit over 60% and DeFi is up a bit over 40%.

DeFi will be booming again when a lot more assets get locked in there. It seems clear that most of the uptick in value can be attributed to asset price increases, but that’s not the whole story. 

Related: Market Wrap: Bitcoin Reaches $40.3K While DeFi Value Locked Inflates to Over $22B

“Uniswap alone is settling around $1 billion daily, so I think the ecosystem is growing, no doubt,” Walden noted.

A good way to baseline DeFi upticks is by checking action specifically in stablecoins because they don’t tend to get skewed wildly by price volatility.

DeFi money market Compound kicked off the DeFi craze and yield farming on that application is still going strong. Its website makes it easy to check deposits over time.

Looking at the big three stablecoins – USDT, USDC and DAI – only USDT has really been inching up on Compound, but it also has by far the smallest deposits. 

Tether’s stablecoin has risen from a mere $91.5 million on Jan. 1 to $146 million today. Meanwhile, DAI has basically hovered a bit above $1 billion and USDC has in the area of $800 million that whole time. Nothing very exciting happening there, which probably stands as something of a bellwether for the real action in the space.

Blockchain consultant Maya Zehavi agreed with the comments above. “My opinion is that DeFi just increased leverage in the system a bit, say 5%,” she wrote via text message. “The rest is just price appreciation.”

If it’s not obvious for those who believe the rally is going to keep going, borrowing more of the rising asset can be a good way to lock in more gains. “In general, during [a] bull market, more users are collateralizing to borrow to leverage their positions on ETH,” Stani Kulechov of the money market Aave (a protocol that turned one year old today) told CoinDesk over Telegram.

Kulechov shared data with CoinDesk that showed over $1.5 billion worth of new deposits on Aave versions 1 and 2 combined. By far the biggest intake has been in ETH itself, with more than $450 million in new ETH deposited into Aave in 2021 alone.

After all, once people have reached a position they believe they can afford, they might as well deposit it somewhere that it can earn just a little more while they wait for prices to moon. 

Pantera Capital partner Paul Veradittakit told CoinDesk via email that the investment firm is closing a lot of new deals in DeFi. 

“We believe that DeFi will drive the ecosystem forward and that’s our thesis,” he said. “Decentralized trading has eclipsed centralized trading periodically and will continue to grow proportionately while use cases around synthetic assets, algorithmic stablecoins and lending/borrow are very promising.”

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XRP’s double-digit gains could be the result of a bold bet by retail investors, especially those in Asia, that the cryptocurrency’s price could follow the broader crypto bull run. The latest rally surprised many because it is happening not long after XRP crashed on the news the U.S. Securities and Exchange Commission (SEC) filed a lawsuit against Ripple Inc., claiming the company sold the token as a security.

That said, it seems as if some market participants are undeterred by the regulator’s action. 

“Traders often trade products on a relative value basis,” Chris Thomas, head of digital assets at Swissquote Bank, told CoinDesk on Jan.7. “XRP felt cheap a few days ago. Today it feels normal again, in my opinion.”

Related: Ripple ‘Tried’ to Settle With SEC Ahead of XRP Suit, CEO Says

Read More: XRP Climbs Back up Crypto Rankings With Near 50% Rise

Simons Chen, a crypto trader based in Hong Kong, told CoinDesk he bought XRP when the price went to nearly its bottom point at the end of December with the belief that it would rebound soon, following bitcoin’s trend.

Chen said that when bitcoin and other alternative cryptocurrencies (altcoins) were going up, XRPs price went the opposite way because of the SEC news. That movement, to him, meant a great opportunity to “buy the dip.”

Read More: An SEC Victory in Ripple Case Would Render XRP ‘Untradeable,’ Market Pros Say

Related: Market Wrap: Bitcoin Reaches $40.3K While DeFi Value Locked Inflates to Over $22B

Trading volumes from major exchanges globally, particularly in Asia, also show significant traffic in the XRP/USDT (tether) and XRP/KRW (Korean won) pairings, according to data from Nomics.

CoinDesk Research collected XRP trading volume data since Dec. 1, 2020, from six exchanges that saw noticeable activity and broke down the data by quote currency. Significant volumes came from the XRP/USDT and XRP/KRW ) pairings, yet volumes on XRP/bitcoin and XRP/ether pairings were relatively small.

Tether, a dollar-pegged stablecoin, is frequently used by traders and investors in Asia, especially in China, to buy cryptocurrencies. Due to regulations in South Korea, people there often buy cryptocurrencies directly from fiat on Korea-based exchanges. The data indicates the markets in Asia have been the main driver of the price rally.

Even though multiple exchanges, especially those that have a presence in the U.S., have announced suspension or delisting of XRP on their platforms, XRP pairings are still available on many other exchanges, including the so-called “Big Three” – Binance, Huobi, and OKEx – all of which first started in China.

“Unlike Coinbase or other ‘regulated’ exchanges, Korean and [other] Asian exchanges do not need to care that much of what the SEC does, and investors in Asia are less sensitive about the news,” said Sinhae Lee, partner at Shanghai-based blockchain consulting firm Block72. “With the current major altcoins’ price appreciation, investors bought XRP as its price went down a lot.”

The lack of institutional investors, particularly those based in the U.S., is evidence that non-U.S. retail investors are most likely the reason for XRP’s rebound, according to Lingxiao Yang, chief operating officer at crypto quant firm Trade Terminal. Yang said large digital asset managersincluding Grayscale have dropped XRP from their funds, “a death penalty” for XRP’s market in the U.S. [Grayscale is owned by DCG, CoinDesk’s parent company.]

Read More: Grayscale Drops XRP From Large Cap Crypto Fund Following Ripple SEC Suit

If retail investors’ increasing appetite is the only driver of XRP’s price, it is hard to tell whether the price will remain healthy in the long term. A key factor will be what happens between Ripple and the SEC. Just Wednesday, the company’s CEO, Brad Garlinghouse, said his company “tried” to settle charges of conducting unregistered securities transactions with the SEC. 

Read More: Ripple ‘Tried’ to Settle With SEC Ahead of XRP Suit, CEO Says

“If the SEC rejected [Ripple’s] proposal [to settle] and there seems nothing more than a court case, then the token is now over-valued, in my opinion.” Swissquote’s Thomas said. “As an 18-month court case it will weigh heavily on the asset.”

At the press time, XRP traded at $0.31, down 8.95% in the past 24 hours but up 14.2% from the December low of around $0.17.

• XRP Climbs Back up Crypto Rankings With Near 50% Rise
• Expected Rise in Ether-Bitcoin Volatility Points to Altcoin Season Ahead: Analyst