In markets

March has historically been a terrible month for Bitcoin, but not this year with the price increasing by almost a third. Bitcoin is up 2.9% on a week ago to trade just under A$77,000. However, Bitcoin dominance has fallen from 72% at the turn of the year to 55.7% today. The reason is that altcoins have gone nuts: in the past two months, the number of crypto unicorns has doubled. There are now 100 projects with a market cap above US$1 billion. Ethereum has broken into new highs and is currently up 17.8% to trade around A$2,760. Everything else saw double-figure percentage increases with Polkadot up 33.6%, XRP/Ripple (61.5%), Litecoin (14.8%), LINK (16.2%), Stellar (30.7%), Bitcoin Cash (26.7%), EOS (58.5%), AAVE (11.2%) and Synthetix (19.8%).

Cryptocurrency Market Update 2021-04-06

In headlines


ETH peaked at a new all-time high price around A$2,797 on the weekend, smashing the previous record of around A$2,560 set way back in the dark days of late February. It’s on track to hit new heights by the time you read this. Sadly gas prices have increased by three quarters this week, rendering the blockchain less useful. ETH has flipped BTC on transactions, node count and fee revenue, but is just 23% of the market cap and gets 18% of the Google search interest. The Flippening Index is at 65.6%.

Bitcoin price doubled in the first quarter of 2021

Bitcoin has just recorded six-monthly green candles in a row for the first time since 2013. This could be highly bullish as back then it surged 700% afterwards, and, after five monthly candles in 2017, the price quadrupled. While various pundits like Bloomberg intelligence’s Mike McGlone and veteran trader Peter Brandt think history may well be about to repeat itself, five green candles in 2016 also saw a 20% dip and five others in 2019 was followed by a 60% crash.

Blood Bitcoin

The debate over Bitcoin’s energy consumption continued this week with Shark Tank investor Kevin O’Leary telling CNBC he will only buy Bitcoin that’s mined sustainably. He said two classes of Bitcoin were emerging: “Blood coin from China, (and) clean coin mined sustainably in countries that use hydroelectricity, not coal.” Institutions are increasingly wary, he said: “Institutions will not buy coin mined in China, coin mined using coal to burn for electricity, coin mined in countries with sanctions on them,” he said. Coin Metrics’ Nic Carter wrote an interesting piece on the topic showing that most Bitcoin mining in China uses surplus energy. “There’s enough nonviral energy out there to run Bitcoin many times over. It’s just a matter of deploying hashrate in the right locations, which miners are doing — aggressively.”

Ups and downs

JPMorgan has set a US$130K (A$170K) price target for Bitcoin, however, it believes the risk-adjusted Bitcoin theoretical fair value is actually between US$24,000 and $30,000 (A$31.3K to $39.2K) based on current volatility ratios. On-chain analyst Willy Woo noted this week that US$54,000 (A$70.5K) was the strongest area of BTC price discovery he’d seen by long term investors, since US$11K (A$14.4K). “Typically, BTC forms a strong base of price discovery 2-3x above the (prior cycle) all-time-high before launching into bull market highs,” he wrote.

DeFi and Lightning doubled too

DeFi more than doubled in size in the first quarter. Data from CoinGecko suggest the Total Value Locked in DeFi now stands at a record US$74B (A$96.6B) – up from just US$1B (A$1.3B) a little over a year ago in February 2020. High gas fees mean that it’s no longer just an ETH party, with Binance Smart Chain Projects like ThorChain up 61% in TVL in a week along with Alpha Finance (47%) and PancakeSwap and Venus (30%). The total market cap of all DeFi coins has hit US$98.4 billion (A$128.5B). Meanwhile, the number of public nodes on Bitcoin’s Lightning Network has nearly doubled in the space of a year. Back in April 2020, it had 5,335 nodes, which has grown to 10,348 today. There are 45,000 payment channels and 1,185 BTC locked in the network worth US$70M (A$91.5M).

ETH merge this year

Eth2 researcher Justin Drake has shared a poll of Ethereum devs showing that 86% are in favour of launching a “minimum viable merge” before the end of the year. The merge will see Ethereum docked with the Eth2 beacon chain and mark the move to Proof of Stake. The update has been planned for six years, but recent pushback from miners unhappy with EIP-1599 “catalyzed efforts” Drake said. While Proof of Stake will make Eth more environmentally friendly, the scaling won’t happen until sharding is implemented.

Kimchi Premium returns

The so-called Kimchi Premium has returned with a vengeance, with Bitcoin currently trading 11% higher on South Korean exchanges. This can occur due to high demand in the country which has a banking system difficult for outsiders to access. FTX founder Sam Bankman-Fried made $25M a day (A$32.6M) back in early 2018 by working out how to exploit the arbitrage opportunity.

Institutional roundup

US crypto exchange Coinbase has received approval from the US SEC to launch its direct listing on April 14. Class A common stock will list on the NASDAQ under the ticker COIN, with recent private market share sales valuing the company around $100B. Grayscale has announced it will convert GBTC into an exchange-traded fund as soon as regulators allow it. PayPal has made good on its promise to enable payments at US merchants with Bitcoin, Litecoin, Ether and Bitcoin Cash (it’s converted into USD for retailers). Goldman Sachs will offer cryptocurrency investments in the second quarter through its private wealth management division focused on those with more than $25M to invest. Morgan Stanley is also starting to place clients into Bitcoin funds this month.

Until next week happy trading!