Bitcoin fell to the lowest last seen on January 11. Some analysts say that the worrying “concern” of Janet Yellen, Treasury security candidate, about crypto is the reason for the sale.
The recent pullback has prompted some once bullish analysts like Guggenheim to speculate that the cryptocurrency may retrace its 2021 gains in the near term.
Elsewhere, a Bitcoin copyright debate is pushing people to host their own versions of Satoshi’s whitepaper, while BlackRock, the world’s largest asset manager, has given the green light to two of its funds to trade futures contracts on BTC.
Top shelf
Related: First player: As Bitcoin tips lower, neither Biden nor BlackRock light up the mood
Crypto state
President Joe Biden froze all agency rules, including former Treasury Secretary Steven Mnuchin’s controversial proposal on “unhosted wallets,” according to a prominent cryptocurrency lawyer. While not out of the woods yet, the hiatus on the proposal – which would force exchanges to add strict surveillance to private wallets – is being celebrated as a minor victory. Elsewhere in the Biden administration, former Treasury official and former member of Ripple’s council of advisers Michael Barr would replace Brian Brooks as Comptroller of the Currency. Moreover, Nebraska is presented as the next Wyoming.
White paper woes
Bitcoin.org refused to comply with Craig Wright’s request to remove a copy of the Bitcoin white paper. Wright, who claims to be the pseudonymous Bitcoin creator Satoshi Nakamoto, also claims that he owns the copyright to the source document. Bitcoin.org said the white paper was released under the permissive and free MIT license, rendering Wright’s claims unfounded, although Wright took steps to patent Bitcoin’s technology among 100 to 200 other blockchain-related patents. . In what is considered a betrayal by some, Bitcoin Core removed the paper, references to it and merged the edits on GitHub, according to Bitcoin.org.
No breakdown
BlackRock, the world’s largest asset manager with $ 7.81 trillion under management, appears to have granted at least two of its funds the opportunity to invest in bitcoin futures. “Certain Funds may engage in bitcoin-based futures,” the prospectus read, including BlackRock Global Allocation Fund Inc. and BlackRock Funds V. It is not known if and when an allocation is forthcoming. , but the door is open. Meanwhile, eToro, a popular brokerage firm, surveyed 25 institutional players and found that pension funds and endowments were heating up towards crypto.
Quick bites
BASIC OPTIONS: Explanation of Deribit on options trading. (Deribit)
Related: Blockchain Bites: Bitcoin Bubble, Toil and Trouble
BITCOIN IN AFRICA: Crypto trading is a way to increase income, for some. (CoinDesk)
THREE WEEKS: Tron USDT volume continues to beat tie totals on Ethereum. (CoinDesk)
NOT BITCOIN: Yearn, once considered the parent of Bitcoin’s fair launch, could see the issue of $ 200 million in tokens. (CoinDesk)
ASSET MANAGEMENT: Crypto finance firm Amber Group crosses $ 530 million in assets under management. (Modern consensus)
ASIAN BEARS: Market insiders find it difficult to explain the typically bearish crypto trading sessions in Asia. (The Block – paywalled)
Market information
Tilt down
Bitcoin options traders are starting bearish bets as the spread between short-term put options and call prices has peaked at 14% in five weeks. “More than 380 $ 30,000 call contracts expiring Jan. 29 were purchased today,” Swiss data analytics platform Levitas told CoinDesk. These contracts represent 50% of the total volume traded on major exchanges, according to Skew.
Stake
Penny hoarders?
While some crypto traders look at fundamentals such as bitcoin’s deflationary attributes when placing bets, it is possible that many are investing solely on the price of a token.
That was the conclusion that Wall Street Journal columnist James Mackintosh drew in a Tuesday report on how traditional stock markets have moved in 2020. “Stock performance this year has been driven by gross share prices, cheaper stocks doing better and more expensive worse, ”he writes.
With people taking refuge there has been a well-documented increase in the number of retail investors signing up for free trading apps. eToro, for its part, a competitor to Robinhood that was quick to add crypto services, registered more than half a million new registrations in the first 17 days of 2021, Bloomberg reported.
The influx of inexperienced investors seeking to ride the green wave of asset prices is, as Mackintosh argues, a market failure. Instead of looking at the basics of what makes a healthy business like its “future cash flow, valuation, brand power, management skills, or even political sensitivity”, many only look at ticker price – those under $ 5 seem like good deals.
And it paid off! As Bloomberg said in June, “Dumb money looks a lot smarter in a never-ending stock rally.” Yet the idea of “bumping” an asset solely on the basis of its current price is an affront to some analysts. Mackintosh called it a blatant misallocation of capital.
Stock prices basically don’t make sense. Companies can, and do, do things like stock splits (create more stocks to lower their price) and reverse stock splits (consolidate outstanding stocks to support the price) without affecting the company’s proposition. underlying business value. It’s just arithmetic!
Of course, crypto tokens are not the same as small certificates of ownership on a publicly traded company called stock. Tokens and cryptocurrencies are generally programmable assets that are issued based on the programming of a blockchain.
Many tokens have a function, like dai, which is an algorithmic US dollar stablecoin. Bitcoin was the first fully decentralized peer-to-peer currency system. Social tokens, like $ ALEX, are bets on the future market value of a particular community or individual. None of these claims relate to an underlying company, as there is no such company. (This sets aside some of the securities concerns that weigh on some crypto companies.)
As CoinDesk previously reported, in times of market exuberance, many new entrants to the crypto arena see the price of a token as the primary reason for investing. “Some entry-level investors who see bitcoin’s high trading price – unaware that it can be bought in fractional minutes – opt for altcoins because their relatively low price makes them seem affordable,” wrote the reporter from CoinDesk Muyao Shen.
It is for this reason that the UK’s financial watchdog has issued a warning stating that “if consumers invest in these types of products, they must be prepared to lose all their money”. The Financial Conduct Authority said lack of consumer protection and high volatility were of particular concerns.
That said, many analysts say crypto markets are moving away from the FOMO-driven speculation that made markets in 2017. In a new report, CoinShares, a digital asset management company, said that the rise in corporate and institutional interest in bitcoin is sustainable.
“What used to be a desire to invest speculatively has now evolved into a fear of extremely loose monetary policy and negative interest rates as clients seek an anchor for their investments,” wrote James Butterfill, CoinShare investment strategist.
This does not rule out the idea that retail crypto traders follow the penny stock investing manual. However, this complicates the complaint that crypto is pure speculation.
With the rise of fractional stock programs, which allow small buyers to buy a percentage of a stock, the question arises: what really is the line between the old and the new market? “Dumb” and “smart” money? As my colleague Noelle Acheson often says, does anyone know what’s going on?
