In traditional markets, Asian and European shares rose and U.S. stock futures pointed to a higher open, as investors bet that a dismal jobs report expected early Friday from the Labor Department on the December employment situation would strengthen the case for additional economic stimulus. Gold weakened 1.1% to $1,893 an ounce.
Yields on 10-year U.S. Treasury notes jumped Thursday to 1.07%, the highest since March, as traders focused on the potential for faster inflation under a U.S. government controlled by President-elect Joe Biden’s Democratic party, according to the Wall Street Journal.
Bitcoin has climbed more than 40% in the first eight days of 2021 – after a quadrupling in 2020 and doubling in 2019 – and some analysts are turning wary.
“We are very much in speculative bubble territory now, and while I don’t think it’s done, it’s becoming increasingly likely that it’s going to get messy,” Craig Erlam, senior market analyst for the London-based foreign-exchange broker Oanda, wrote in an email. “I previously said I wouldn’t be surprised to see $50,000 before the end of the month and I’m now thinking that was too conservative. The last $10,000 move only took four days. It’s getting silly now.”
First Mover reached out to investors, analysts, executives and one finance professor for their views on whether a correction might be in the future. TL;DR: Yes. Here’s what they said:
- Joe DiPasquale, CEO, BitBull Capital, a cryptocurrency-focused hedge fund. He says bitcoin “has been and remains extremely volatile.” As recently as Monday, he noted, after prices had climbed to a new all-time high, they tumbled almost $7,000. “What causes this is that people can use lots of leverage, so they can easily get washed out.” He sees a correction as possible, though there appear to be plenty of interested buyers around $28,000, so that might level might function like a price support barring any major news that might send prices crashing. What might that be? A forceful move by regulators to impose stiff anti-money-laundering rules on merchants, raising the threat of prosecution or forfeiture if bitcoin can be traced back to illicit proceeds. That might scare off new buyers.
- Gavin Smith, CEO of the digital-asset firm Panxora. According to Smith, there hasn’t been a single year since 2013 when prices have not fallen at least 25% from a high point reached earlier in that year. “Before that it would move so much up and down that you can’t really draw any analysis.” He said he wouldn’t be surprised to see bitcoin prices rise to $70,000 or $80,000, nor if a setback of 40% were to materialize. Medium term, he’s bullish: “Over a three-year period, this is a great asset.” Over the long term, there’s a risk that technological developments could overtake bitcoin. “Even with quantum computing, there’s nothing on the horizon that indicates that could happen,” he says, “but it’s always dangerous to completely ignore the risk.”
- Mike Venuto, co-portfolio manager of the Amplify Transformational Data Sharing exchange-traded fund, which invests in blockchain-related stocks. Will bitcoin crash? “People are going to ask this, because the last time we had a rally like this, it did crash.” He sees bitcoin prices rallying two to three times from their current level before falling back to about where they are now. That would imply a two-thirds retracement from that hypothetically new all-time high. “What’ll cause a crash more likely is overexuberance on the upside. I don’t think we’re there yet.” He says he estimates bitcoin’s fundamental value, based on the current size of the network, to be “somewhere between $40,000 and $50,000,” though that could increase over time.
- Denis Vinokourov, head of research for the cryptocurrency prime broker Bequant. “There will be swings, and yes, the swings will be wild,” he says. “You have a lot of retail flow that tends to panic.” He sees prices going up, in the long term, at least partly based on the bullish expectations of big Wall Street firms. “Can it go to $4,000? Yes.” One potential trigger for a rapid sell-off could be any actions brought by authorities against tether (USDT), a privately issued, dollar-linked digital token known as a “stablecoin” that has become a key source of liquidity in digital-asset markets. New York State prosecutors are currently battling Tether in court due to its finances.
- James Angel, Georgetown University finance professor. “The history of financial markets is the history of bubbles, where investors get carried away with enthusiasm and they bid the prices of certain assets to levels far above their fundamental values,” Angel says. He notes that authorities could move to crimp the bitcoin rally if they start to get worried that it’s becoming a threat. “Almost everybody who tries to start their own money does so in competition with a national currency, and it usually gets shoved aside by regulators.”
- Sui Chung, CEO of CF Benchmarks, a cryptocurrency provider. “Bitcoin passing the $40,000 milestone shows the market still sees upside in the cryptocurrency market. While we’re currently seeing an unequivocal expression in the market’s bullish sentiment, a correction could well be on the horizon. But this is a natural part of market mechanics. While it may dampen near-term enthusiasm, it will ensure future price rises remain grounded.”
- Guy Hirsch, managing director for the U.S. at the trading platform eToro. “There is likely to be profit taking along the way, causing temporary dips (which are of course magnified with bitcoin, relative to traditional assets) but, given the extraordinary amounts of adoption by institutions, it would be a surprise if bitcoin dropped below $20,000 any time soon – though I would caveat this to say that we are monitoring proposed regulatory measures and the posture of the new Administration towards crypto to assess if they would have an adverse impact on institutional adoption of crypto assets.”
– Bradley Keoun and Muyao Shen
U.S. President-elect Joe Biden’s Democratic party narrowly triumphed in the state of Georgia’s special Senate elections earlier this week, wresting control of the upper legislative chamber from outgoing President Donald Trump’s Republicans. With the lower chamber also under Democratic control, Biden and party leaders could have more room to implement policies.
Analysts at UBS Bank say the unified government houses could smooth the path to more fiscal stimulus. According to an Axios report, Biden is considering a two-pronged stimulus effort in the form of $2,000 checks for Americans and a tax and infrastructure spending package worth $3 trillion. The new fiscal stimulus is expected to boost inflation, weaken the U.S. dollar and bring more buyers for scare assets such as bitcoin and gold.
Alex Melikhov, CEO and founder of Equilibrium and the EOSDT stablecoin, told CoinDesk that Biden’s stimulus would inject more liquidity into markets and likely fuel further bitcoin price rises.
The leading cryptocurrency is already in a strong bull market, courtesy of the inflation-boosting measures adopted by the Federal Reserve and the U.S. government over the past 10 months to counter the coronavirus-induced slowdown. These measures have pushed institutions to seek investments that offer a hedge against inflation.
Bitcoin prices have risen from $10,000 to record highs above $41,000 in the past four months, with public-listed companies such as Microstrategy buying bitcoin to preserve the value of their treasury reserves. That trend could gather pace, as predicted by JPMorgan, with Biden’s additional fiscal stimulus and the Federal Reserve’s continued easing.
“The Biden stimulus may add an extra jolt to bitcoin’s price, but nothing more than pushing along a barreling freight train,” Jehan Chu, managing partner at Hong Kong-based crypto investment firm Kenetic Capital, told CoinDesk.
– Omkar Godbole
65K comments and counting: Crypto industry fights ‘arbitrary’ Treasury rule (CoinDesk)
Bitcoin “rich list” rebounds to all-time high (CoinDesk)
BitMEX exchange says all users are now verified, months after U.S. prosecutors, regulators bring charges against principals over unregistered trading (CoinDesk)
The latest on the economy and traditional finance
December jobs report from U.S. Labor Department is projected to show that the unemployment rate increased for the first time in eight months; economists see nonfarm payrolls growing by 50,000; report from Labor Department is due at 8:30 NY time (13:30 UTC) (Bloomberg).
Blackstone’s Byron Wien predicts yields on 10-year U.S. Treasury notes will climb to 2%, from just over 1% now, as Federal Reserve maintains accommodative monetary policies (Bloomberg)
U.S. Treasury Department launches $25B emergency rental-assistance program (Treasury Department)
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Aave and Chainlink hit new highs as Bitcoin price fights to hold $32K
Bitcoin (BTC) price opened the weekend trapped within the $33,500 to $32,000 range but at the time of writing the digital asset is struggling to hold above $32,000.
A few analysts have warned that the recent price loss of momentum may be a sign of ‘institutional exhaustion’ as selling pressure from Asia has increased since Jan. 19.
Despite Bitcoin’s current downtrend, some institutional investors are sticking to their prediction that BTC price will reach $100,000 before the end of 2021. This suggests that institutions are buoyed by rising investor sentiment and the new proposals for a Bitcoin ETF.
While Bitcoin still faces resistance around the $33,000 level, on-chain analyst Willy Woo sees one potentially positive development for BTC. Woo said that the Bitcoin Spent Output Profit Ratio (SOPR), a metric that shows the profit ratio of BTC by dividing the price sold by the price paid, had “a touchdown”.
According to Woo there was a:
“Full on-chain SOPR reset. Coins moving between investors per hour (24h MA) no longer carry profit on average. To push SOPR lower, investors would have to be willing to sell at a loss.”
Woo also suggested that investors are less likely to sell at a loss, an early signal that Bitcoin could be close to finding a bottom.
Altcoins and DeFi tokens soar
DeFi tokens and altcoins continued to forge their own path as Bitcoin searched for support. Polkadot (DOT), AAVE, Curve DAO Token (CRV) and Sushiswap (SUSHI) all rallied roughly 5% to 7%.
The surge in the price of many DeFi-related tokens has in large part been the result of an increase in DEX activity. Data from Dune Analytics shows monthly DEX volumes have increased since July 2020 and currently the total value locked in DeFi is at $23.89 billion.
Chainlink (LINK) continued its strong rally, setting a new all-time high at $25.50 and surpassing Litecoin (LTC) in terms of total market cap to become the seventh-largest project listed on CoinMarketCap. Aave price also broke to a new all-time high at $229.39 and the total value locked in the platform is $3.44 billion.
The overall cryptocurrency market cap now stands at $936.8 billion and Bitcoin’s dominance rate is 63.5%.
Ultra-rare alien CryptoPunk NFT sells for 605 ETH, or $750,000
Amid a wild market-wide bullrun for non-fungible tokens (NFTs), an ultra-rare “alien” CryptoPunk has sold today for 605 Ether, worth over $750,000 at today’s prices.
CryptoPunks are widely considered to be the original NFT project, released even before Cryptokitties, the blockchain-based collectibles project that propelled NFTs to mainstream consciousness. CryptoPunks developers Larva Labs report that Punks have accounted for $26 million in lifetime sales on their native marketplace, and the average sale price for Punks over the past year has been $6,199.
Each Punk has unique attributes, such as background color, accessories, and even some ultra-rare features, such as an “alien” or “zombie” appearance. The Punk that sold today, #2890, is one of nine alien Punks in existence.
— CryptoPunks Bot (@cryptopunksbot) January 23, 2021
The bidding for the Punk was competitive throughout the last week, with DeFi megawallet-turn-Twitter personality 0x_b1 putting in a 500 ETH bid. The Punk was last sold in July of 2017 for 8 ETH, meaning the owner made a 75x return on their investment.
The new owners are a group of investors that include FlamingoDAO, a “NFT collective that supports and collects premium NFTS,” according to a Flamingo spokesperson. The official FlamingoDAO Twitter handle confirmed the purchase with a meme:
— FLAMINGO (@FLAMINGODAO) January 23, 2021
“It’s simple: Cryptopunks is a groundbreaking project; it pre-dated the ERC 721 standard and crypto kitties,” said the spokesperson on the investment thesis. “Aliens are the rarest form of Cryptopunk and we believe that the acquired Alien will be prized by collectors over time and mature into an iconic digital art piece.”
Crypto art collector @gmoneyNFT, who himself dropped 140 ETH on a Punk earlier in the month, thinks that the alien is a fine investment despite the sky-high valuation.
“I think it was a great purchase. As the world moves more digital, the digital “flex” will be more and more important. It’s how humans operate in the physical world. It won’t change in the digital realm,” he said.
Long-derided as a secondary usecase for blockchain, sales like today’s demonstrate that NFTs are just beginning to have their day in the sun. NBA Topshot, a collectible highlight project from Dapper Labs, has proven to be tremendously popular, and Axie Infinity’s native critters have been selling for remarkable prices as of late as well.
Some critics have called into the question the sky-high prices rare NFTs have been fetching, however, arguing that simple digital scarcity is a shaky foundation on which to justify a $750,000 sale. @gmoneyNFT dismisses these criticisms, saying that there are plenty of real-world analogues that make just as much — or as little — sense.
“Why would someone pay millions of dollars for an original Andy Warhol screen print when you can buy the same one online for $20? Why would someone buy a pair of yeezy’s for $300 when you can buy a fake from the same factory, made with the same materials for much less? Humans like to feel special. The provenance has value.”
Voyager Token (VGX) gains 926% as mergers and acquisitions bring new users
Voyager Token (VGX), also known as BQX at some exchanges, is the native token of Voyager cryptocurrency exchange.
The exchange separates itself from its competitors by claiming to be a commission-free crypto broker platform and its smart order router also allows clients to trade at multiple exchanges.
Since the turn of the year, VGX has gained 620% and on Jan. 15 the token reached a new all-time high at $1.48.
In addition to having a fiat gateway, the platform also offers market data, interactive charts,crypto research and up to 9% interest on stablecoins, along with staking returns for Bitcoin and other cryptocurrencies if users leave them in their exchange wallets.
Token activity sees exponential growth
On-chain data shows that activity started to pick up just a few weeks ago, with the number of daily active addresses surpassing 1,500 while transfers quickly reached $60 million.
The Invest Voyager app allows traders to earn interest with no lock-ups and users staking a certain quantity of VGX token unlocks higher yields. Furthermore, the platform is owned by a listed company in Canada, Voyager Digital Ltd. (CSE:VYGR), a $600 million market capitalization fully-regulated entity.
The Canada TSX exchange listing deal also hides an interesting story. By acquiring a defunct shell company, Voyager was able to manage a reverse merger in Feb. 2019. More interestingly, not a single USD has been paid for the deal, which involved shares of the new company.
In Oct. 2019, Voyager announced a partnership with Celsius Network to manage a portion of its clients’ assets. Thus, the broker was able to diversify its staking offering.
Another notable milestone was Circle Invest acquisition completed in Feb. 2020, converting more than 40,000 accounts. Circle Invest was previously involved with the USD Coin (USD) stablecoin, besides Poloniex exchange, although both projects had already been divested. It is worth noting that the deal did not involve cash, being settled in Voyager Digital shares.
These developments explain the current uptick in user accounts and token activity and similar to Coinbase, Voyager’s fiat on-ramp and regulated status could make the exchange a top choice for future crypto investors located in the United States.
VGX price growth follows new acquisitions and European expansion
Currently, Voyager exchanges is available to every U.S. state except New York, as the company waits for its BitLicense approval. In October 2020, Voyager Digital acquired France-based LGO, a fully licensed European digital asset exchange focused on institutional investors.
LGO CEO Hugo Renaudin explained that the French company would discontinue its dedicated institutional exchange, while LGO would operate under the Voyager brand, although focusing mostly on retail.
The overall traded volume on Voyager’s platform reached $120 million in Nov. 2020, while its asset under management surpassed $485 million on Jan. 15. To date, more than 200,000 users have downloaded the iOS and Android applications and further expansion into Europe should increase the platform’s user base.
Data from TheTIE, an alternative social analytics platform, shows that the recent price spike was preceded by increased social network activity. Apart from a few users complaining of KYC-related withdrawal issues, the general sentiment around Voyager and VGX are positive.
Offering up to 9.5% annualized interest returns on stablecoins and being a fully-licensed broker offering altcoin trading and staking to U.S. citizens seem to be the primary drivers behind the platform’s momentum.
As for the economics behind the VGX token, the possibility of a debit card with cashback rewards, withdrawal fee discount, and interest booster on staking might be needed to drive its valuation further.
The views and opinions expressed here are solely those of the author and do not necessarily reflect the views of Cointelegraph. Every investment and trading move involves risk. You should conduct your own research when making a decision.
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