The digital asset market was mixed this week, with falls in Bitcoin offset by increases in the cryptocurrencies lower down the rankings—so-called altcoins. Several of these altcoins saw new all-time highs for the first time since the speculation-driven heights of early 2018, buoyed by a return of retail investors
Bitcoin experienced a dip this week, falling from a high of $34,700 on Monday to a low of $29,900 on Wednesday, before recovering back above the $30,000 mark. Just before publishing, Bitcoin surged over $3,000 within an hour, to $35,700 (a 15% weekly increase)
Ethereum reached another all-time-high within a week of setting a new record, achieving a price of $1,450, before Wednesday’s Bitcoin dip halted the momentum and took Ether down to a low of $1,220, before a recovery to a current value of $1,363; representing a 20% weekly increase
The overall cryptocurrency market cap recovered last week’s losses, spurred by growth in the Ethereum ecosystem. At the time of writing, the market has a current value of $999bn, up from a weekly low of $843bn last Friday
Total Value Locked in DeFi grew this week, driven by strong performance in the Ethereum ecosystem. On Friday, the overall value grew to a new record of $31.4bn, up from last week’s total of $29.7bn
Ethereum reached another new all-time high this week alongside several other prominent altcoins, whilst digital assets as a whole remained firmly on both the institutional and legislative agenda. Central banks spoke out in favour of digital assets, major American universities were found to have invested, record volumes continued to register, and cryptocurrencies pushed past some potential cultural barriers to open investment opportunities to new markets.
What happened: Ray Dalio, Founder of Bridgewater Associates, published a major macro research piece reviewing Bitcoin’s role as a long term investment asset: Ray Dalio — What I Think of Bitcoin
How is this significant?
Ray Dalio, founder of Bridgewater Associates, is a leading global hedge fund manager and one of the most influential commentators on financial markets
Dalio makes the case not from a technical perspective, nor as a Bitcoin maximalist, but as a global macro investor interested in Bitcoin’s utility as a portfolio component and monetary hedge, and in the option value were Bitcoin to become fully established as a long term store of wealth
The piece is tempered with caution, acknowledging the existing regulatory risks and custodial challenges, and how these may be resolved in the near to medium term
The degree of institutional involvement can be approximated by the rise of so-called “whale” addresses (those holding 10,000 Ether or more), which reached a 13 month high on Saturday
Additionally, large amounts of Ether have been withdrawn from centralised exchanges to non-custodial wallets, indicating an intent to hold the assets for the long term
According to data from crypto analytics firm Glassnode, the number of coins held on exchange addresses fell to around 15.5 million over the weekend, representing a decline of more than 1 million coins on exchanges over the course of just four days
This removal from exchanges may also have helped with Ether’s price run over the weekend, reducing supply in the face of steady demand
Previous remarks by Yellen regarding concerns over the use of cryptocurrency in illegal transactions were widely credited with causing a brief dip below $30,000 for Bitcoin last week
Written testimony of her Senate hearing ahead of confirmation indicates that she recognises the potential economic benefits of digital assets as well as their risks
In her testimony, Yellen stated that “I think it important we consider the benefits of cryptocurrencies and other digital assets, and the potential they have to improve the efficiency of the financial system”
Rather than trying to freeze digital assets out of the financial system, her intent seems to be integrating cryptocurrency into a robust regulatory framework, saying “I intend ...to implement an effective regulatory framework for these and other fintech innovations”
Harvard, Yale, and Brown have all been buying cryptocurrency as an investment for their endowments over the last year, with some accounts dating back as far as 18 months
By buying from Coinbase, these institutions are directly holding crypto as an investment, rather than holding cryptocurrency-linked derivatives
University endowments in America can be sizeable—Harvard holds over $40bn in assets, whilst Yale holds over $30bn
Directly purchasing cryptocurrency represents an evolution of sorts in the digital asset investment approach of universities, with several (including Yale, Harvard, and Stanford) having previously invested in crypto funds and blockchain venture capital companies
One source close to the subject confirmed to CoinTelegraph that digital assets are viewed as an increasingly viable investment class by a range of universities, saying “A lot of endowments are allocating a little bit to crypto at the moment.”
What happened: Raoul Pal, of the Global Macro Investor, published his long-term outlook on the sector, entitled The Inconvenient Truth About Crypto
How is this significant?
Raoul Pal, former co-manager of GLG and founder of the Global Macro Investor, is one of the key supporters of Bitcoin’s investment case, with an extensive following in the investor community
The piece explores the different investor communities in the sector (“tribes”) and maps the likely future path as the adoption increases
Cryptocurrency is presented as an ecosystem, where different coins and tokens fulfil different purposes, and no one coin will “win” it all; meaning more potential growth in the altcoin sector
What happened: More major investments in cryptocurrency mining
How is this significant?
Investment into cryptocurrency mining represents a very long-term belief in the value proposition of cryptocurrencies, due to the high initial infrastructure costs and overheads in electricity
This year’s World Economic Forum features two sessions dedicated to cryptocurrencies, reflecting their rise in the consciousness of economic policy-makers
The first session on Monday was titled “Resetting Digital Currencies” and featured speakers, including Bank of England Governor Andrew Bailey and Wester Union CEO Hikmet Ersek
The Thursday session is focused on the potential of CBDCs, featuring government representatives such as Tharman Shanmugaratnam of Singapore, and Zhu Min, chairman of the Beijing-based National Institute of Financial Research
This follows up on an increase in digital asset activity at the WEF, including the formation of a cryptocurrency working group aimed at exploring the utility of crypto and blockchain across a variety of use cases, declaring it “a key driver of sustainable finance”
What happened: Central Banks globally display activity on cryptocurrency
However, there was also some more cautious commentary, courtesy of the Bank of England, where governor Andrew Bailey commented during a session at Davos that due to the value and volatility of cryptocurrency, he doesn’t believe it can be a viable medium of exchange, believing that digital payments are here to stay but crypto is not
By offering Shariah-compliant services, cryptocurrency exchanges can potentially open the doors to investors across the MENA region who’ve previously been reticent to invest for cultural reasons
The Central Bank of Bahrain has approved CoinMENA exchange, and they have been certified by the Shariyah Review Bureau, allowing investors in the region to gain exposure to cryptocurrency without any ethical concerns
CoinMENA also plan to offer an OTC desk for large transactions, allowing institutional investors across Bahrain, the United Arab Emirates, Kuwait, Oman, and Saudi Arabia to invest in cryptocurrency without suffering from major price slippage
Bill Miller (and his son, Bill Miller IV) recently added a significant position in Bitcoin to the Miller Value Partners fund, as part of Microstrategy’s recent raise of $650m in convertible senior notes
They also expressed a bullish long-term view on the potential of Bitcoin, as well as praising its past performance; “Not owning any bitcoin has been a massive mistake, and we expect that will continue to be true”
As the largest American cryptocurrency exchange, and first to announce plans to go public, Coinbase represents a barometer for public and institutional trust and enthusiasm for digital assets
In Coinbase’s 2020 Year in Review report, they announced that they currently hold over $90bn in assets, driven by widescale institutional inflows into cryptocurrency
Institutional exposure is growing, with the report noting that Coinbase has transacted massive institutional volume in the form of “single trades exceeding $1 billion for some of the largest institutions in the world”