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Bitcoin price flies solo? Institutional crypto push may be overrated

Republished by Plato

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In the history of financial markets, there are only a few tradable assets that have conquered this frontier. Currently, Bitcoin has the eighth-highest market cap among all tradable assets in the world, including equities and commodities. Among the top 10 exchange-tradable assets, it sits right above Tencent, which Bitcoin flipped on its eventual surge past the $1 trillion mark, below which stands Facebook, which was flipped earlier this month.

Bitcoin is only one step away from surpassing Google and two steps away from silver. Considering the history of commodities like silver and gold, which have been traded for centuries now, Bitcoin’s history is extremely short, starting only in January 2009 as no more than an experiment. Even stocks like Google and Tencent have histories over two decades, while Apple and Microsoft have over four decades.

Was Bitcoin’s final surge organic?

In analyzing the timing of Bitcoin finally smashing this landmark, it’s evident that there were no big institutional announcements leading up to the surge in market cap. The Bitcoin Coinbase Premium Index by on-chain data provider CryptoQuant — when the premium is high, it indicates strong spot buying on Coinbase — suggests that at the time when this breakthrough occurred, the Coinbase premium was negative.

Ki Young Ju, CEO of CryptoQuant, explained to Cointelegraph what this suggests: “The buying power seems mostly to come from stablecoin whales and retail investors, not institutional investors or high-net individuals in the U.S.”

At long last, Bitcoin (BTC) broke the $1 trillion market capitalization frontier on Feb. 19, with its market cap tripling in just three months. This important landmark came almost a year after it tanked to less than $100 billion on March 12, 2020, more commonly known as “Black Thursday” in the cryptocurrency community.

It is also important to consider the proportion of BTC actually in circulating supply before assuming the price implications of Bitcoin volumes. According to research from Glassnode, 78% of Bitcoin’s supply is illiquid, thus implying the supply-demand economics of the asset is only a small aspect of how its price is influenced. 

Fortunately, or unfortunately, for the market, Bitcoin’s price is still mostly dependent on sentiment. This is evident in the fact that Robinhood has already acquired more than 6 million retail crypto investors this year alone.

While acknowledging the presence and overall influence of institutional investors, Jay Hao, CEO of cryptocurrency exchange OKEx, told Cointelegraph that a Twitter trend could be responsible for the push to $1 trillion: “This frenzy that included Elon Musk, Michael Saylor, and Senator Cynthia Lummis, could have helped BTC break the $1 trillion market cap without any final push from institutional investors who generally don’t buy when the markets are looking overstretched.” He added further:

“At this point, many technical indicators suggest that BTC was beginning to look overbought as retail traders jumped in fueled by the ‘laser-eye’ trend that stormed Twitter with participants shooting for $100K BTC, including many leading CEOs and politicians.”

Institutional involvement in Bitcoin could be overrated

Crypto venture capitalist Brock Pierce outlined to Cointelegraph that in his view, institutional involvement could indeed be “overrated” but that it is still present as evidenced by their long positions:

“There has been a mix of retail and institutions and other factors driving the markets higher. In terms of the on-chain metrics, we are seeing large amounts of bitcoin leave the exchanges and also miners that are reluctant to sell — both of which serve to reduce the supply and reduce any selling pressure on the market.”

He further opined that corporations are adopting “programmatic buying” as they attempt to reach a certain allocation. Moreover, as indicated by both Pierce and Hao, it is often the sentiment in the market that causes retail investors to get involved, thus causing major price movements in the BTC market.

Ju recently pointed out on Twitter that prominent miners often have private wallets separate from their mining wallets; hence, their power could be greater than what on-chain analysis may suggest. He further clarified the implications this may have on the price of Bitcoin:

“Affiliated miners (whales) seem to sell Bitcoins in exchanges, not via OTC deals. They have personal wallets other than mining wallets, so it’s important to see the trend, not an absolute number. The significant outflow happened when the price was 58k, and it has been cooled down lately.”

Institutions continue to buy the dip?

After Bitcoin breached the $1 trillion mark, it quickly went on to reach its all-time high of $58,352 on Feb. 21. But the very next day, BTC price dropped 20% alongside several other cryptocurrency assets in a correction now more commonly referred to as “Bloody Monday” in the cryptocurrency community. Its price continues to trade between around $45,000 and the previous $50,000 support level.

During this drop in price, it seems that institutional investors have taken it as a green light to buy the dip in large quantities. Jack Dorsey’s Square bought another round of Bitcoin, approximately 3,318 BTC for $170 million. Square first purchased Bitcoin in October 2020, buying 4,709 Bitcoin for about $50 million at an average price of $10,618 per BTC. Square’s motivation to buy the dip in a second round of investment could be driven by the fact that its gains on the first round of investment are around 400%.

In addition to Square, Michael Saylor’s MicroStrategy purchased another $1 billion worth of Bitcoin, an additional 19,452 coins at an average price of $52,765. This investment into Bitcoin comes just six months after its initial investment of $250 million in August 2020.

Now, MicroStrategy owns over 90,000 BTC, which accounts for 63% of its total market cap. Saylor has announced that MicroStrategy “remains focused on our two corporate strategies of growing our enterprise analytics software business and acquiring and holding bitcoin.” Hao further commented on the purchase:

“The MicroStrategy debt offering and subsequent purchase of additional $1 billion of BTC was a massive announcement, although we already know what a huge Bitcoin bull and evangelist Michael Saylor is! […] Institutional investors do not chase trends, rather they wait for corrections to come in and buy at an acceptable price. I expect we will be hearing about more and more institutional activity shortly.“

David Donovan, executive vice president of Publicis Sapient — a digital transformation firm — expressed to Cointelegraph his reservations regarding the lack of regulation, especially because investing in BTC comes with risk and volatility: “Individuals should not invest their money in bitcoin if they are not in solid financial standing as there is no FCID protection for stored bitcoin at this time.”

JPMorgan Chase became the most recent financial giant to cautiously endorse Bitcoin when it advocated in a note to clients that “investors can likely add up to 1% of their allocation to cryptocurrencies in order to achieve any efficiency gain in the overall risk-adjusted returns of the portfolio.” Most would see this as a bullish announcement; however, as the price of Bitcoin continues to struggle below $48,000, it adds to the narrative that the influence of institutional investors on the market could be overrated in the minds of the average crypto consumer.

Source: https://cointelegraph.com/news/bitcoin-price-flies-solo-institutional-crypto-push-may-be-overrated

Blockchain

Bitcoin Bull Mike Novogratz Predicts Existential Crisis Unless the US Creates a Digital Dollar

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Mike Novogratz, a veteran investor, and a huge Bitcoin supporter noted the U.S. is currently in a good economic position. Still, the nation can face a major competitive disadvantage unless it engineers a digital dollar soon.

The Importance Of An E-Dollar

Novogratz, chief executive of digital merchant bank Galaxy Digital GLXY, underlined the value that a digital dollar could bring to the US. In a Friday interview with MarketWatch, he stated:

”To me it is an existential crisis, we need a digital dollar.”

Furthermore, the investor expressed his view over the current COVID pandemic and the negative impact on the U.S. market and the world, in general. He referred to the trillions of dollars of monetary and fiscal spending done to help eliminate the worst of the economic aftershocks the disease caused:

”If our fiscal and monetary policy starts looking like it’s from a Banana Republic…you are going to run into some Minsky moment where confidence breaks down.”

With his statement, Mike Novogratz referenced Hyman Minsky, who exposed a view in the recent past that a period of distortions in the financial system eventually ends very badly.


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The existence of a digital dollar sounds even more important after some stock-market investors have been warning about a surge in US inflation in the past weeks.

The Competition With China

During the interview, Novgorotz claimed that while in the U.S., the development of an e-dollar is still under question and researches, China has fired the first salvo on the digital currency front.

The biggest economy in Asia conveys great support to its digital yuan. According to some experts in the field, its new currency is a weapon that the country can use to compete with the U.S. and other developed economies.

As CryptoPotato recently reported, PayPal CEO Peter Thiel said that Bitcoin could be used as a Chinese financial weapon against the U.S.

In the meantime, Novogratz said that there is ”zero evidence of the Chinese government buying Bitcoin” much less weaponizing it, referring to the comments made by Peter Thiel:

”Sometimes he likes to say things that are provocative.”

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Coinsmart. Beste Bitcoin-Börse in Europa
Source: https://cryptopotato.com/bitcoin-bull-mike-novogratz-predicts-existential-crisis-unless-the-us-creates-a-digital-dollar/

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Blockchain

Ripple becomes tidal wave, leads weekend pump and notches legal victories

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Amid a weekend pump carrying multiple cryptocurrencies higher, Ripple’s XRP looks to be leading the way with a push as high as 30% on the daily — carried on the back of a string of legal victories and rumors of relisting at some exchanges. 

Where Bitcoin and Ethereum are up merely 2.7% and 3.4% respectively on the day, XRP climbed to $1.36 before retreating to $1.32, where it sits at the time of publication. The digital currency is now up 111% on a 7 day basis, and a staggering 544% on the year. The recent push has also buoyed XRP back into the top 10 cryptocurrencies by marketcap, behind only BTC, ETH, and BNB at #4.

The rally flies in the face of a lawsuit from the Securities and Exchange Commission, which charges that XRP’s $1.3 billion ICO was an “unregistered securities offering.” The news led multiple exchanges to delist the currency, and XRP lost its place as the 3rd largest currency by marketcap, at time looking as if it would even fall out of the top ten. 

The bad news for XRP didn’t stop with the SEC, either. In March Ripple CEO Brad Garlinghouse announced that the company would be “winding down” its relationship with Moneygram — a once highly-touted partnership that investors often pointed to as proof of the digital currency being on a path towards becoming “the standard” for payments and settlement.

Despite the deluge of negative headlines, it appears all buyers needed was a small ray of hope to jump back in — and they’ve gotten exactly that. Ripple lawyers have notched two victories in their legal battle against the SEC, including winning access to internal SEC discussion history regarding cryptocurrencies, and a court denied the SEC the ability to disclose the financial records of two Ripple execs, including Garlinghouse.

Ripple executives themselves seem heartened by the news, with CTO David Schwartz saying the US isn’t “prepared” to regulate cryptocurrencies (a possible dig at the ongoing legal proceedings).

All in all, it’s just another week for one of the most controversial cryptocurrencies in the space.

Coinsmart. Beste Bitcoin-Börse in Europa
Source: https://cointelegraph.com/news/ripple-becomes-tidal-wave-leads-weekend-pump-and-notches-legal-victories

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Blockchain

Why this OlympusDAO’s product could be amongst DeFi most lucrative

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Taking the market by storm, OlympusDAO’s native OHM is up 95.8% this week alone and 31.1% in the past two weeks. At the time of writing, OHM is trading at $812,76 with 7.3% profits in the 24-hour chart.

With a market cap of just $68 million, OlympusDAO might have gone unnoticed by many investors. However, it has a mechanism called Bonds which promises to be one most important and lucrative in the DeFi sector.

According to research firm Messari, this protocol is attempting to create a stable currency backing every OHM with DAI and OHM-DAI. The objective is to maintain a “fundamental check on inflation” and a currency with an undiluted purchasing power.

Unlike Tether and other stablecoins, OHM is not pegged to any other asset. Its stability is achieved via the DAO (Decentralized Autonomous Organization) when it alters variables to obtain more profitability for stakers.

This is done via the sales contract connected to the protocol’s treasury and a liquidity pool (OMH-DAI) on decentralized exchange Sushiswap, as shown below. Messari explains:

When OHM trades above 1 DAI, the protocol mints and sells new OHM. When OHM trades below 1 DAI, the protocol buys back and burns OHM. In each case the protocol makes a profit. Olympus DAO distributes these profits 90% to OHM stakers pro rata and 10% to a DAO.

OlympusDAO OHM
Source: Messari

How OlympusDAO’s bonds operate

The Bonds are a treasury component to get liquidity with it users can trade Stake Liquidity Provider tokens to get OHM directly with the protocol, as an OlympusDAO developer explained.

Once the trade is completed there is a vesting schedule of 5 days. During this time, the user can redeem the tokens but has incentives to get them at a discount. The latter is determined by the number of bonds in the protocol, more bonds are equal to a lower discount.

Via this mechanism, as the developer said, OlympusDAO restrains its own growth, to have become “steadier”.

The liquidity from a bond is locked in the treasury and used to back new $OHM. That liquidity now belongs to the market and, by extension, the token holders. The more liquidity the protocol builds up, the more confident holders can feel.

The users are basically contributing to OlympusDAO by adding liquidity. In retribution, the user gets a reward in OHM at a much cheaper price during a specific period. That way, both the user and the protocol can benefit.

OlympusDAO offers LP a variety of strategies around OHM which they can leverage to obtain a bigger profit than on the spot market. The developer claims:

All of this serves to create a long-term, sustainable bootstrapping mechanism for the protocol, with participants as the main beneficiaries. A good system shouldn’t offer one opportunity to “make it”; it should offer them in perpetuity with diminishing returns. This is how you produce wealth; slowly, through compounding gains.

Ethereum is trading at $2096,58 with a 1.2% profit in the 24-hour chart, after dropping from its ATH at $2,198.

OlympusDAO OHM Ethereum ETHUSD
ETH with small profits in the 24-hour chart. Source: ETHUSD Tradingview

Coinsmart. Beste Bitcoin-Börse in Europa
Source: https://www.newsbtc.com/news/why-this-olympusdaos-product-could-be-amongst-defi-most-lucrative/

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