First Mover: Bitcoin Tops $50K and Crypto’s Nouveau Riche Move In

Price Point

Bitcoin (BTC) shot past $50,000 for the first time Tuesday to a new all-time high price.

The gain took the year-to-date return to about 70%, and traders immediately began to discuss what comes next. 

• “We’re still in the midst of a violent bull run that will soon be more violent,” Ari Paul, chief investment officer of BlockTower Capital, tweeted Sunday. 
• “We’re concerned about the pace of these market moves and would therefore recommend proceeding with caution over the short term,” Joel Kruger, cryptocurrency strategist at LMAX Digital, said in an email. NOTE: A price correction on Monday led to more than $520 million of futures-positions liquidations.
• Bank of America, in a monthly investor survey of the “most crowded trades,” said that “long bitcoin” – bets on further price gains – slipped to second place behind “long tech.” Bets against the U.S. dollar (“short dollar”) ranked third.   

In traditional markets, U.S. stock futures pointed toward a higher open. “The reflation trade is powering assets tied to economic growth and price pressure, including commodities and cyclical stocks,” Bloomberg News reported. “At the same time, investors are riding a wave of speculative euphoria from penny stocks to bitcoin amid abundant policy support.”

The News

CRYPTO CRUSH: Signs continued to mount of greater mainstream acceptance of bitcoin and other cryptocurrencies.

• Michael Saylor’s MicroStrategy plans a new sale of $600 million of convertible notes and will use the net proceeds to buy more bitcoin. 
• Deutsche Bank, Germany’s biggest lender, is exploring cryptocurrency custody, with aspirations to offer high-touch services to hedge funds that invest in the asset class, CoinDesk’s Ian Allison reported Friday. 
• Morgan Stanley’s $150 billion Counterpoint Global investment unit is considering placing a bet on bitcoin, according to a report by Bloomberg, which cited people familiar with the matter.
• The city of Miami, following the lead of Mayor Francis Suarez, voted late last week to study the use of cryptocurrencies to pay for services or worker salaries while launching educational campaigns in English, Spanish and Creole.

VERGE SNAFU: Verge, a small cryptocurrency serving as a payments option on Pornhub, suffered a massive 560,000-block reorganization Monday, according to researchers at Coin Metrics.

• The past 200 days of Verge transaction history “just vanished,” wrote Coin Metrics network data analyst Lucas Nuzzi. He described the event as “likely the deepest reorg that has ever taken place in a ‘top 100’ cryptocurrency.” 
• Verge’s official Twitter account said the “dev team has released a fix,” and everything should be “business as usual” in “13 hours,” CoinDesk’s Zack Voell reported. 
• The cryptocurrency previously known as DogecoinDark is no stranger to network attacks. It suffered similar but less severe exploits in April 2018 and May 2018.

Market Moves

Nouveau riche emerge as crypto market cap tops $1.5 trillion

The market value of all cryptocurrencies has topped $1.5 trillion for the first time, and it’s interesting to note just how much of that growth has been fueled by speculation over which projects might be the most promising – rather than just the pumping of also-ran tokens that dominated the industry’s top ranks in recent years. 

Sure, the industry leaders bitcoin and Etherum’s ether still dominate the charts, representing roughly $1.1 trillion of the total. But the top 10 tokens now include cardano (ADA), polkadot (DOT), Binance coin (BNB) and chainlink (LINK) – all associated with projects perceived as having at least some claim on helping to create the future of finance.

They’re crypto’s nouveau riche, climbing in the industry hierarchy at the expense of XRP (XRP), litecoin (LTC) and bitcoin cash (BCH), which held sway until recently but apparently have failed to inspire traders to the same degree. 

Some companies in the growing arena of decentralized finance, a subsector of the crypto industry where entrepreneurs are using blockchain technology to design automated versions of lenders and trading platforms, are raising money through token sales the way a Silicon Valley startup might sell an equity interest to a venture-capital fund.

In fact, Synthetix, a decentralized trading project, has just raised $12 million from investors Coinbase Ventures, Paradigm and IOSG – apparently through a sale of the project’s associated SNX tokens. “The raise looks to be a rare occurrence of VCs investing through the purchase of a platform’s native token directly from its treasury rather than wiring funds to its founders,” CoinDesk’s Daniel Kuhn wrote Sunday. The SNX tokens have tripled in price this year to a market value of about $2.9 billion. 

“Individually, none of these may make sense, and no one can really predict who actually will win,” John Wu, president of Ava Labs, said in an interview. His company backs the Avalanche blockchain, whose native AVAX cryptocurrency is up roughly 10-fold this year to a market value of $3 billion. And that’s after the revelation of a programming bug last week triggered a quick price correction.

“This is very similar to tech investing where people are paying for the future,” Wu said. 

Token Watch

Ether (ETH):

• Staked ether in “2.0” deposit contract tops $5.5 billion.
• Price hit new all-time high of $1,872.52 on Feb. 12.
• Simon Peters, cryptoasset analyst for the trading platform eToro, wrote in an email: “Supply is constrained by investors depositing coins off the network, and buying from institutional investors continues to climb.” 
• Denis Vinokourov, head of research for crypto prime broker Bequant: “The amount of bitcoin locked on Ethereum remains on a relentless trend higher (174k as of this morning), underpinning the ‘hunt for yield’ trade, which, combined with the surge higher by BTC resulted in the total value locked on DeFi platforms surging to over $40 billion. However, the well documented double-edged sword of a ‘hyperactive’ Ethereum network with erratic gas fees continues to wreak havoc and cause hour-long delays in transaction validations, yet again squeezing out the smaller market participants. The time for platforms to put more focus on layer-2 solutions is here, and doing so will prove beneficial for the broader ecosystem because it will likely drive many users towards decentralized exchanges.”

Dogecoin (DOGE): 

• Price has fallen in five of the past eight days to about 5.8 cents. 
• Slide accelerated after Tesla CEO Elon Musk tweeted on Sunday: “If major dogecoin holders sell most of their coins, it will get my full support. Too much concentration is the only real issue imo.”
• One dogecoin address holds 27% of meme token’s supply, according to Decrypt.

Avalanche (AVAX):

• An unusually high volume of transactions highlighted a code bug that severely crippled the Avalanche blockchain last week, but funds were never at risk,  an engineer Ava Labs, the development company behind the network, wrote in a Medium post on Sunday.
• The episode represented an embarrassment for the because the “Ethereum killer” blockchain has touted its ability to handle high throughput.
• AVAX tokens have tumbled in price since the incident, though they’re still up 11-fold so far in 2021.

Opinions and Observations

STIMULUS BITCOIN WINNINGS: Americans who bought bitcoin with first $1,200 U.S. government stimulus check are up 639%.

BLOCKCHAIN POWER USAGE BETWEEN ROMANIA’S AND POLAND’S: Bitcoin and six other proof-of-work blockchains use between 55.1 terawatt-hours of electricity per year (roughly the energy footprint of Romania) and 180.1 terawatt-hours (Poland or Thailand), argues Tim Swanson, founder of Post Oak Labs and head of market intelligence at Clearmatics, in paper published Sunday. 

MOHAMED EL-ERIAN SEES GROWING “OFFICIAL” RISK: “The private sector is embracing more and more bitcoins as both a form of payment and as away to invest,” the Allianz chief economist told CNN’s Julia Chatterley in an interview. “The official sector is warning more about bitcoin. The real accident here is that the official sector says, enough is enough.”