Welcome back to another crypto market update.
Bitcoin has blasted through the US$61K / AU$83K mark thanks to the arrival of Bitcoin futures ETFs. It’s just seen the highest ever weekly close and is not far off the all-time high price seen on April 14 when Bitcoin hit AU$84.7K. At the time of writing Bitcoin was trading just under AU$83.7K (US$62k, SG$83.7k), up 8% for the week and 28.2% for the month. The big question is whether the Bitcoin futures ETF will be a “sell the news” event? Ethereum gained 6.4% to trade just over AU$5,000, though it’s only up 9.2% for the month. Cardano was down 2% and XRP lost 5% however Polkadot gained 20%, Dogecoin (6%), Uniswap (7%), Litecoin (4%) and Chainlink lost 2.6%. The Crypto Fear and Greed Index is at 78, or Extreme Greed.
The future is now
In a big win for the legitimacy of the crypto industry, the Securities and Exchange Commission is allowing Bitcoin Futures ETFs to trade this week. Eight years after the Winklevoss Twins submitted the first ETF application in 2013, the ProShares Bitcoin Strategy ETF will begin trading on the New York Stock Exchange later today under the ticker BITO. It means investors with ordinary brokerage accounts can now get exposure to Bitcoin. Bitcoin Futures ETFs from Van Eck and Valkyrie are imminent as well, with the latter cheekily changing its ticker today to BTFD, which is code for Buy The F—ing Dip. Surprisingly however the Invesco Bitcoin Strategy ETF has pulled out at the last minute. With regards to market effect, crypto trading firm QCP Capital isn’t convinced the arrival of ETFs will be as seismic as some hope, writing: “We are not sure if these futures-based ETFs will be able to draw enough new money to trigger an exponential move higher like the one we saw in Q4 2020”.
Grayscale and Ethereum ETFs
Grayscale has confirmed it will apply to the SEC to convert its Bitcoin Trust to a spot Bitcoin ETF. CEO Michael Sonnenshein also told CNBC that he believes the approval of futures ETFs was likely to bring more capital and investors into the system and said the approval meant the SEC would likely allow a similar Ethereum ETF to be brought to market.
Date announced for Ethereum to end PoW
Ethereum’s dev team has released an update on the move to Eth2 stating: “Aim for code to switch off PoW forever to be ready by Feb 2022.” PoW refers to Proof of Work mining, which is the same method Bitcoin uses. Ethereum is switching to Proof of Stake which is 99% more energy-efficient and requires stakers and validators rather than miners.
CEO Jack Dorsey says Square is looking at developing a Bitcoin mining system based on custom silicon and open source technology. The aim is to improve decentralisation of the network: “Bitcoin mining should be as easy as plugging a rig into a power source,” he tweeted. “There isn’t enough incentive today for individuals to overcome the complexity of running a miner for themselves.”
Tether’s big fine
Tether has agreed to pay a US$41 million (AU$53.3M) fine to settle the Commodity Futures Trading Commission’s claim it misrepresented just how backed by dollars Tether was. The CFTC claimed Tether had made misleading statements between 2016 and 2019 stating each USDT was backed by $1. In fact, the CFTC says they were fully backed only about 27.6% of days during that period. As part of the settlement, however, Tether admits no wrongdoing.
CBDC guidelines from G7 nations
The financial leaders of the G7 nations got together this week to nut out 13 guidelines for CBDCs. The principles are nothing too unusual, they state CBDCs should be energy efficient, “do no harm” to financial stability and meet rigorous standards around privacy, transparency and protection of user data. “Any central bank digital currency (CBDC) should be grounded in long-standing public commitments to transparency, rule of law and sound economic governance,” the G7 finance leaders said in a statement.
Melbourne’s Apollo Capital DeFi fund was the best performing fund in Australia last year with a 393% return. Now it’s backing a new startup called PrePO which will allow traders to speculate the price on upcoming IPOs before they list on the ASX. “We think the next big wave in DeFi will be in something we call on-chain derivatives and synthetic assets, and this is the category that prePO falls within,” Apollo Capital CIO Henrik Andersson told the Fin Review. In other local news Blockchain Australia has lined up representatives from the ASX, ANZ, Westpac, Stripe, Computershare and Mastercard for a free online event on the future of fintech and digital assets.
Charting a course for success
The stars are aligning for Bitcoin according to various analysts. Willy Woo released a chart called “Bitcoin Long Term Holder Supply Shock” showing a peak in accumulation and commenting that the chart should be named: “2022 is gonna be a good year”. Charles Edwards, the founder of Capriole Investments, also released a chart of the MVRV-Z score noting: “Historically every time MVRV z-score reclaimed 3.0, #Bitcoin went on a parabolic price run for the next 1-2 months. Bitcoin just reclaimed 3.0.”
The technical name for this chart is “2022 is gonna be a good year”. pic.twitter.com/SoHoPhUpvR
— Willy Woo (@woonomic) October 16, 2021
DeFi total value locked surpasses US$200 billion
Recent tracking data from DefiLlama showed that the total value locked (TVL) in DeFi platforms crossing multiple blockchains has exceeded US$200 billion. This metric measures the token value (in dollars) that is stored on smart contracts in these platforms. This amount has more than doubled since late June with the majority of value being held on Ethereum-based projects, roughly equating to US$140 Billion. Despite Ethereum’s market dominance in DeFi, this year has also seen the emergence of various protocols across other chains like Solana and Avalanche, taking market share and adding deep value to the space.
(Source: DeFI Llama)
Morgan Stanley CEO: crypto not going away
Although not a large part of the firms’ business, Morgan Stanley CEO James Gorman stated to analysts, “I don’t think crypto’s a fad, I don’t think it’s going away.” Admitting he doesn’t know what the value of Bitcoin should or shouldn’t be, he didn’t deny that “the blockchain technology supporting it is obviously very real and powerful”. Stating that the firm is willing to evolve with client interest, Morgan Stanley’s US$150 billion investment unit Counterpoint Global, exposed itself to more than 28,000 shares of Grayscales Bitcoin Trust in June of this year.
Until next week, happy trading.