Blockchain Bites: Crypto Market Cap Drops Below $1T as Dollar Gains

Bitcoin saved a clean 20% in trading early Monday after failing to establish itself above $ 40,000. The index of all crypto assets fell with it, with analysts calling the decline a healthy correction for an overheated market.

“A strong spot selling against an over-leveraged market led to a drop in prices,” trader and analyst Alex Kruger told CoinDesk’s Omkar Godbole. It is unclear whether it was mine sales or macro traders liquidating positions.

Top shelf

JPMorgan says …
An exchange-traded Bitcoin fund (ETF) could push Bitcoin price down in the short term, if approved, by putting pressure on Grayscale’s Bitcoin Trust (GBTC), which is currently the most popular way for Wall Street companies to get into Bitcoin to hire a heavy premium. In the long term, a Bitcoin ETF would be positive for the ecosystem – but the SEC has to deregister first. (Grayscale belongs to the CoinDesk parent DCG.)

Don’t block?
Dan Larimer has left, the company behind the EOS blockchain, which raised $ 4 billion in an initial coin offering in 2017. Former technical director and co-founder Larimer said he will be pursuing personal projects, including building censorship-resistant technology, notably adding the EOS-attached “Voice is not immune to censorship pressures” social platform over the past few weeks.

Mining reset
Bitcoin’s mining difficulty was reset to a record high last week. According to the tea leaves, it’s now 11% harder to mine Bitcoin than it was on the previous difficulty level. Programmatic billing helped secure the Bitcoin network. “A new all-time high is no surprise when you consider that mining revenues have tripled in recent months,” said Edward Evenson, director of business development for Braiins, a mining software company.

Fast bites

  • BAKKT SPAC: Bitcoin Exchange Bakkt will go public as part of a SPAC merger, valued at an estimated $ 2.1 billion. (CoinDesk)
  • ROAD BLOCK? Why CoinDesk’s Bailey Reutzel had to spend hours trying to buy $ 100 in BTC. (CoinDesk op-ed)
  • SHENZHEN TEST: According to reports, the Agricultural Bank of China is testing the functionality of digital yuan at ATMs. (CoinDesk)
  • CONTEXT: Hermez Network Scaling Solution Adds Cables to Manage High Gas Charges. (CoinDesk)
  • BITCOINER RESTORATOR: Two bars in NYC are for sale if you have the BTC or ETH. (CoinDesk)
  • SELL STOCK, BUY BTC MINERS: The listed Chinese sports lottery company plans to buy mining machines worth $ 14.4 million, as well as issue and sell shares. (CoinDesk)
  • UNUSED? European eToro traders call for foul over entering into leveraged crypto contracts. (CoinDesk)
  • TETHER MINTS: Record two billion USDT in one week. (CoinDesk)
  • BURNS OUTPACE: Wrapped Bitcoin (WBTC) mints for the first time in December. (CoinDesk)
  • DEFI GOVERNANCE: The proposal aims to revise Aave’s $ 375 million security module. (Cointelegraph)

Market information

Reverse relationship
Bitcoin fell below $ 33,000 early Monday, just as the US dollar appeared to be making gains. The dollar index, which tracks the value of the greenback against major currencies, is at a two-week high near 90.50 (up from a 33-month low of 89.21 on Jan. 6), according to CoinDesk’s Omkar Godbole . Some see the inverse relationship between BTC and USD as a sign of Bitcoin’s maturation as a macro-asset.

On the game

According to Messari data, market capitalization for crypto products has dropped roughly double-digit percentages of around $ 156.8 billion in the past 24 hours, and is around $ 867 billion at press time. It does so just five days after the crypto market table topped the $ 1 trillion level for the first time.

There is still no clear consensus reason for a nosedive in assets like Bitcoin, Ether, XPP, and other large-cap cryptos. Analysts point to over-leveraged market conditions, increased sales by Bitcoin miners, and growing bearish sentiment in traditional markets during a period of political instability in the final weeks of President Trump’s tenure.

There are some visible clues on the Bitcoin blockchain that help piece together the story as it unfolds. Crypto trader @lightcrypto pointed to a Coinbase sell order for 180 BTC (a multi-million dollar sale) that preceded a $ 1,200 decline, CoinDesk’s Omkar Godbole wrote.

Crypto isn’t the only market where individual sellers and buyers can have such a powerful impact on price. The history of the stock market is punctuated by stories of short sellers, companies cornering the markets and manipulating prices, as well as panic selling and bad decisions.

There’s the story of two commodity traders who cornered the onion market in the 1950s. This market manipulation led to crater prices and led to the Onion Futures Act, which prohibits futures speculation about onions and “box office receipts”.

More recently, in March 2020, in the early days of the coronavirus pandemic, a writer on Forbes wrote about how CNBC’s emotional interview of bearish billionaire Bill Ackman led to one of the biggest sell-offs in economic history.

“Hell is coming,” Ackman reportedly said on a live broadcast. “Turn it off now,” he said of the economy. “A tsunami is coming.” The Dow Jones Industrial Average fueled over 1,000 points in the air and tripped a circuit breaker. Forbes reported that Ackman closed Doomsday Hedges to sell the market short in January.

During this coronavirus-triggered market move, media outlets and analysts pointed to Warren Buffett’s advice, which was stated in a 2017 shareholder letter that downturns are inevitable. As a long-term investor, Buffett said the best step is the easiest: buy and hold. He quotes Rudyard Kipling’s “If”:

If you can keep your head when everything around you loses hers …

If you can wait and you are not tired by waiting …

If you can think – and not make thought your goal …

When you can trust yourself, when all men doubt you …

Yours is the earth and everything that is in it.

Still, crypto volatility can be painful. That market downturn, seemingly out of the air (not crypto), is the biggest intraday loss since March, as CoinDesk’s first mover notes.

For this reason, government agencies such as the UK’s Financial Conduct Authority (FCA) are taking measures to protect private and smaller investors. A long-smoldering ban on leveraged derivatives went into effect last week, while the watchdog today issued a statement highlighting the risks of investing in crypto.

“Investing in crypto assets or related investments and loans generally involves very high risk with investors’ money,” the agency said. Investors could lose “all their money”.

In the run-up, many Bitcoin bulls pointed to changed conditions that indicate the sustainability of a rally and peaked at around $ 42,000. Institutional investors and companies burdened the inflation hedge and thus contributed to Bitcoin increasingly functioning as “digital gold”.

Many have not lost their faith. However, Scott Minerd, Guggenheim Investments chief investment officer, said in a nutshell: It may be time to take some money off the table.

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