Related: Switzerland’s Crypto Broker AG Wins Securities House License From FINMA
“It’s a genuine blockchain-based digital twin of a traditional security. Switzerland’s strategy is to provide a bridge into this new digital economy and the transition from traditional fiat ways of banking and security assurance.”
Related StoriesXRP has crashed hard from a two-month high reached early Monday, with a planned community buying effort failing to yield desired results.
The cryptocurrency is trading near $0.42 at time of writing – down 40% from the high of $0.75 reached at around 11:10 UTC, according to CoinDesk 20 data.
A coordinated buying effort by some 200,000 members of the two-day-old Telegram group called “Buy & Hold XRP” at 08:30 a.m. ET was supposed to push the cryptocurrency to higher resistance levels. Instead, XRP pulled back from $0.75 to $0.60 ahead of the crowd buying and extended losses to $0.40 after 08:30 a.m. ET.
Related: Market Wrap: Bitcoin Trading Tepidly at $33.7K While SushiSwap Eats Raw Market Share
The cryptocurrency almost doubled in value over the weekend and clocked a two-month high earlier today. The price action suggests some traders bought XRP in anticipation of a price pump, inadvertently pushing it higher. Some of them may now be trapped on the wrong side of the market.
At press time, the exact reason for the price dump is not known. It’s quite possible that a whale (large investor) took advantage of the price rise and dumped his holdings. Pump and dump strategies are not new to crypto markets, particularly for XRP.
A Reddit post, which talked about a crowd-buying attack at 08:30 and how it could be successful, has now been removed by Ripple moderators. The Telegram group, however, is still active, where members are blaming exchange downtimes for the price drop.
Related StoriesBitcoin (BTC) quickly settled back into the past couple weeks’ range of between roughly $30,000 and $36,000 after a short-lived price spike Friday when Elon Musk, the electric-vehicle and private-spaceflight entrepreneur who’s also reportedly the world’s richest person, added “#bitcoin” to his Twitter profile.
“The longer we stay at the current level, the stronger the base to bounce back up,” Matt Blom, head of sales and trading for the exchange firm EQUOS, wrote early Monday. Bitcoin prices finished January up 14% on the year.
Last week’s Reddit-fueled trading in GameStop (GME) bore uncanny similarities to the fevered, anything-goes trading culture that has long defined cryptocurrencies. The five-fold jump in prices for dogecoin (DOGE) – a blockchain-based token representing little more than a doggie-faced meme – showed some of that retail-trader-driven mania spilling over into digital markets.
Related: Market Wrap: Bitcoin Trading Tepidly at $33.7K While SushiSwap Eats Raw Market Share
During an audio chat late Sunday on the app Clubhouse, Musk said he was a “supporter” of bitcoin and that it’s “on the verge of getting broad acceptance by conventional finance people.” He added that the “most entertaining and ironic outcome” would be if DOGE became the “currency of earth in the future.”
Where will markets go next? The news of India’s proposed crypto ban has made some bitcoin investors nervous, CoinDesk’s Tanzeel Akhtar reported Saturday. Meanwhile, Chinese traders late last week were already speculating on which cryptocurrencies might be the next to get a major price pump, CoinDesk’s Muyao Shen reported.
Prices for the digital token XRP (XRP) have nearly tripled in the past five days. They had fallen 67% in December, when U.S. securities regulators brought charges against Ripple Labs, which uses XRP in its payments network.
In traditional markets on Monday, stocks were higher in Europe and Asia, but the real action was in silver, where prices have climbed 16% over the past three days to about $30 an ounce amid a Reddit-fueled buying frenzy. Gold strengthened 0.9% to $1,860 an ounce.
Market Moves The “Grayscale premium” is shrinking, and analysts are speculating why.Related: Blockchain Bites: The ‘Silver Lining’ for Bitcoin
A growing number of cryptocurrency analysts are watching a steep contraction recently in a closely tracked ratio in the bitcoin market known as the “Grayscale premium.”
This premium represents the difference in market prices for bitcoin and the price implied by the Grayscale Bitcoin Trust (GBTC), one of the most popular vehicles for investing in the cryptocurrency via the stock market. (EDITOR’S NOTE: Grayscale Investments, which sponsors GBTC, is a unit of Digital Currency Group, which also owns CoinDesk.)
What’s getting attention now is that the Grayscale premium last week fell to as low as 3.5%, from upwards of 40% late last year, according to Ycharts.
Many observers say one explanation for the premium might be the lack of alternatives, especially when the U.S. Securities and Exchange Commission has yet to approve a bitcoin-focused exchange-traded fund in the U.S. When the premium is elevated, it’s seen as a sign of just how eager retail stock traders are to bet on bitcoin’s price.
So the recent decline might be explained by signs that greater competition is on the way: BlockFi, a major hub for crypto lending, has filed to start a new bitcoin trust, CoinDesk’s Danny Nelson reported. According to The Block, Osprey Bitcoin Trust will list on over-the-counter markets in coming days. In Canada, the investment firm Ninepoint Partners completed an initial public offering of a cryptocurrency fund worth a reported C$230 million (US$180 million).
Yet, there may be another factor: Flagging demand for bitcoin with prices over $30,000, double their level just a couple months ago. Some institutional investors who were betting on the price to keep mooning may have lost their nerve, and the premium collapsed as they rushed to exit positions.
“The dissipation of this premium is further evidence of the internal stresses of the markets on bitcoin,” Greg Cipolaro, global head of research for NYDIG, a digital-asset investment firm, wrote Friday in a weekly report.
He noted that the gap has also compressed between spot prices for bitcoin and futures contracts traded on the Chicago-based CME – possibly another indication that traders are taking less market risk in the face of heightened volatility.
Bitcoin Watch “A BTC bull and believer”The rally triggered by Tesla CEO Elon Musk adding “#bitcoin” to his Twitter profile quickly fizzled, but Su Zhu, CEO of the cryptocurrency investment firm Three Arrows Capital, says that “long term, it’s very bullish.”
“Elon news is a watershed moment for crypto as the wealthiest man in the world and operator of the world’s most successful companies is now a BTC bull and believer,” Zhu told CoinDesk in a Telegram chat.
Denis Vinokourov, head of research at the London-based prime brokerage Bequant, expects range-bound trading to continue for a while. He points to healthy market signs, including growth in blockchain-based trading and lending systems of decentralized finance (DeFi). Flow into exchange-traded products remains strong, he said.
“Everyone is looking for catalysts but I don’t think any new catalysts per se are required,” Vinokourov told CoinDesk.
– Omkar Godbole
Token Watch CoinDesk 20 Returns in JanuaryStellar (XLM), the payments token, surged 143% in the first month of the year to dominate the CoinDesk 20 set of digital assets. Ether (ETH), the native cryptocurrency of the Ethereum blockchain, gained 77% on the month. Bitcoin rose 14%.
What’s Hot Crypto industry booms but doesn’t quite “Zoom,” while Elon Musk gets immortalized on the Bitcoin blockchain.One of the biggest questions facing the crypto industry over the past year has been whether the companies and their new-tech platforms could “Zoom” – where suddenly everyone starts using the product. Last week showed there’s plenty of progress still to be made on that front. The industry groaned under the newfound attention from ready customers, some of them ostensibly fleeing the trading platform Robinhood following a series of anger-inducing trading suspensions. Outages were reported at crypto trading venues including Coinbase, Kraken, Binance and Voyager. New York Department of Financial Services Superintendent Linda Lacewell tweeted that, as the state’s virtual-currency regulator, she was “actively monitoring market volatility.”
Elon Musk’s Twitter account got a hat tip in the form of a message encoded into the Bitcoin blockchain. The phrase, “In retrospect, it was inevitable,” was written by a clever bitcoin miner into the record for data block 668197, shortly after the world’s richest man updated his profile to include the hashtag #bitcoin.
Analogs The latest on the economy and traditional financeThe hedge fund Greylock is known for making bets on the government debt of troubled nations like Argentina, Lebanon and Venezuela. Now, according to Bloomberg, Greylock, led by CEO Hans Humes, has filed for bankruptcy protection, apparently seeking the court’s help to wriggle out of its own liabilities. The proceedings reportedly will allow Greylock to terminate its $100,000-a-month office lease in Manhattan. (Bloomberg)
Reddit user “DeepF—Value” who helped direct WallStreetBets’ campaign is a 34-year-old former insurance marketing executive who has just made $20M from gains on GameStop shares and options. (WSJ)
“Fundamentals have never mattered less” as GameStop saga “makes a mockery of the idea that markets provide an efficient form of capital allocation in the economy,” James Mackintosh writes in column. (WSJ)
For public companies, there are benefits to having no supply caps: Data show a rise in “shelf” registrations for potential securities sales, as CEO prepare to take advantage of buoyant market conditions. (WSJ)
Related StoriesMark Cuban, the billionaire owner of the National Basketball Association’s Dallas Mavericks, informed old-school investors that Reddit WallStreetBets (WSB) traders, in his mind “the store of value generation,” are “kicking your ass.”
In a blog post published Sunday, Cuban said after watching the situation with the WSB traders unfold he believes they are applying the principles of the crypto world to the stock market.
Last week, the financial world and beyond looked on as an army of ordinary online investors, the WSB group, took on the power of big institutions by pumping the price of U.S. video game retailer GameStop’s (GME) stock to counter Wall Street hedge funds that were “shorting” or betting against it.
Related: Exchange Tokens Hit New All-time Highs as Stock Traders Rush to Crypto
In his post, Cuban praised the new generation of investors that have grown up in a digital world, stressing that everything that has been of greatest value to them has been digital.
“It’s pretty obvious that the WSB traders are applying the same principles of the digital/CryptoAsset world to the stock market and they are loving the fact that the old schoolers are hating it,” Cuban wrote.
Cuban argues that for many old-school traders the idea that a crypto asset could be a store of value is crazy because it has no intrinsic value.
Related: Robinhood Can’t Democratize Finance Using Old Tools
“To them, it is a digital representation of nothing, that crazy people are paying good money for. That is not the case,” writes Cuban.
He adds that Wall Street and the agency that regulates it, the U.S. Securities and Exchange Commission (SEC), “have become fat and happy” and this makes the old school slow and resistant to change.
“Very resistant. And obviously very unaware of the change that is happening around them,” adds Cuban.
Related StoriesSygnum, a digital-asset finance firm with a Swiss banking license, has tokenized its first set of assets under the nation’s new law addressing the use of distributed ledger technology (DLT).
According to a press release on Monday, Sygnum Bank teamed up with Fine Wine Capital AG to tokenize a range of “investible fine wines,” issuing tokens representing the alcoholic assets on Sygnum’s Desygnate platform.
The move was enabled by the first phase of the new law, effective as of Feb. 1, with Sygnum and Free Wine Capital now free to register and transfer their tokenized assets without concern for any legal ramifications, according to the release.
Related: Switzerland’s Tokenized Securities Law Ushers In New Chapter for Digital Assets
The legislation is expected to open luxury goods such as diamonds and fine wine to a larger pool of investors by increasing accessibility and liquidity of such assets using blockchain technology.
“Tokenization of wine assets enables us to expand our private collector investor base to new private and institutional investors,” said Fine Wine co-founder Alexandre Challand. “This provides them the opportunity to hold, trade or request a physical settlement of this unique asset in an efficient manner.”
Tokenized assets issued on Desygnate have their ownership records recorded on the blockchain ledger that is legally binding. The ownership rights are transferable to others solely over the DLT system under Switzerland’s new law.
See also: Switzerland’s Crypto Broker AG Wins Securities House License From FINMA
Related: Switzerland’s Crypto Broker AG Wins Securities House License From FINMA
“The legal provisions which come into effect today ensure that asset tokenization is now a viable alternative to traditional securitization,” said Sygnum’s head of regtech, Gino Wirthensohn.
First proposed by the Swiss Federal Council in 2019, the measure went through a rigorous legislative process before finally passing both the lower and upper chambers last summer. A second phase comes into effect at the start of August that will address infrastructure upgrades in the financial markets.
Related StoriesCryptocurrency lender Nexo has launched an exchange service for a range of digital assets within its mobile app.
According to an announcement Monday, the new service provides more than 75 cryptocurrency and fiat currency pairs, with 17 cryptocurrencies supported. There are no limits on the number of exchanges a user can make in the app (available on iOS and Android) and any trade can be up to $50,000 in value, a Nexo representative told CoinDesk.
Users will be able to transfer digital assets to their Nexo Wallets from any other wallet or exchange and make fiat currency deposits directly through transfers from their bank accounts.
Related: Grayscale Reopens Its Ethereum Trust to Investors
Nexo will not hold all the assets being traded. Instead, a “Smart Routing System” connects to multiple exchanges and splits orders depending on the price per volume, fixing a valuation at the moment an order is submitted, the representative said.
While the person wouldn’t name the exchanges used for liquidity, the representative said the Smart Routing System connects to five of “most trusted and well-capitalized exchanges simultaneously,” aiming to offer the “most competitive” prices.
“Fast, transparent and inexpensive transactions are the backbone of fintech, but making them easily accessible and secure in a seamless, intuitive environment is the single most important step towards mass crypto adoption,” said Nexo co-founder and managing partner Antoni Trenchev in the announcement.
In the first half of 2021, the firm plans to launch a crypto credit card in its bid to offer a full suite of retail banking services for digital assets. Nexo holds multiple licenses in order to comply with laws and regulations in the 200-plus jurisdictions in which it operates.
Related: Singapore’s SDAX Gets In-Principle Approval to Launch Digital Asset Exchange
Correction (Feb. 1, 13:15 UTC): Corrected headline that erroneously described Nexo as a crypto insurer.
Related StoriesLong in the making, Zurich’s Crypto Broker AG announced Monday it has been granted a securities house license by the Swiss Financial Market Supervisory Authority (FINMA).
Crypto Broker AG is part of a digital assets conglomerate that includes asset management and custody services. The license means broadening the scope of its business and adding a rubber-stamp when it comes to compliance, risk monitoring, liquidity reporting and so on, said Crypto Broker CEO Rupertus Rothenhaeuser.
“Some of our client banks have strict orders only to trade with regulated partners,” Rothenhaeuser said in an interview. “Now it’s just a case of calling them up to tick a box and they can start trading.”
Swiss momentumRelated: Signature Bank Crosses $10B in Deposits From Crypto Customers
Switzerland is probably the only place on the planet where regulations are actually keeping up with crypto infrastructure. That said, only a handful of crypto firms have been given FINMA’s blessing.
The securities license invites Crypto Broker AG to join other regulated Swiss crypto players like SEBA and Sygnum, and dive into the world of regulated security tokens (an area that just received further clarity in Switzerland thanks to the so-called “super DLT law”).
In terms of immediate practicalities, being a licensed broker allows the firm to hold funds in fiat currency for clients, which removes headaches around payments and processing, said Rothenhaeuser.
“On the one side, we are very much a modern, fast, DLT-based business. But on the other side, the payment cycle for cryptocurrency transactions reminds me sometimes of being back in the 1980s,” Rothenhaeuser said. “Being a securities license holder enables us to keep funds in the account rather than always keep the balance zero, so we can do much better straight through processing and also maximize our margins.”
Related: Signature Bank Adds $2.5B in Non-Interest Bearing Deposits in Q4
Asked which big players are waiting in line to start trading with Crypto Broker AG, Rothenhaeuser politely declined to name names, but said some big players will appear in the news cycle shortly.
“We’ve been waiting four and a half years for this license. I expect to be on the phone solidly for the next five days,” he said.
Related StoriesXRP rallied hard on Saturday in a move similar to a crowd pump recently observed in out-of-favor stocks such as GameStop.
The cryptocurrency jumped 56% to $0.50944 to hit the highest level since Dec. 22, according to CoinDesk 20 data. That was the biggest single-day percentage gain since Dec. 21, 2017.
The double-digit price rise was likely fueled by members of a Telegram-based group called Buy & Hold XRP (t.me/pumpxrp), which came into existence on Saturday. The group’s membership hit Telegram’s 200,000 ceiling within the first 24 hours, forcing a migration to a new official channel with a similar title but a different link (t.me/pumpxrpofficial).
Related: Market Wrap: Bitcoin Bumps to $38.6K While DeFi Exchanges Hit $50B
“Traditional Crypto-Pump groups are being copied and legitimized by WallStreetBets-style crowd-pumps, and are now turning their burning gaze from dogecoin to XRP,” Jehan Chu, co-founder and managing partner at Hong Kong-based Kenetic Capital, told CoinDesk.
Classic pump and dump tactics are not new to crypto, particularly for XRP, which has a strong army of followers. However, their morale may have been boosted by a group of amateur day traders based on a Reddit forum called WallStreetBets, who recently launched a coordinated buying attack on the video game retailer Gamestop, triggering a short squeeze and inflicting heavy losses for hedge funds.
Short-squeeze target GameStop (GME) surged nearly 400% last week, extending the preceding week’s 83% rise and attracting unwanted attention from regulators. Meanwhile, the meme-based cryptocurrency dogecoin surged 800% a day before XRP’s price pump. The data suggests the crowd buying tactics are returning to their home turf, having democratized the legacy markets.
It remains to be seen if the Buy & Hold XRP group members remain faithful to the group’s title by holding the cryptocurrency.
Related: After GME, Dogecoin and Bitcoin, Chinese Traders Are Betting What Will Pump Next
At press time, XRP is changing hands near $0.45. The price rise has erased a significant chunk of the plunge from $0.55 to $0.20 observed following the U.S. Securities and Exchange Commission’s filing a lawsuit against Ripple Labs in late December.
Related StoriesEven Elon Musk’s power has its limits, apparently, as bitcoin gave back all its gains from a nearly 20% pump that coincided with commotion over the tech mogul’s Twitter account.
Virgil Griffith’s motion to dismiss the charges against him claiming that he violated U.S. sanctions law in North Korea was denied Wednesday by a judge in the Southern District of New York (SDNY).
U.S. Judge Kevin Castel denied the motion, leaving it up to a jury to decide whether Griffith is guilty of helping North Koreans circumvent U.S. economic sanctions using cryptocurrency. SDNY prosecutors allege that Griffith violated the International Emergency Economic Powers Act by giving a speech in April at the Pyongyang Blockchain and Cryptocurrency Conference on how to use cryptocurrency to get around U.S. sanctions.
Griffith’s team has argued that first amendment rights protected him and that he did not render North Korea “services” since he received no compensation for the speech.
Related: Ethereum Developer Virgil Griffith Will Likely Face Trial Next September
“The failure to allege that Griffith was paid a fee by the DPRK does not render the indictment defective,” Castel wrote. “The indictment alleges an object of the conspiracy was ‘to provide services to the DPRK.’ This is sufficient and encompasses the provision of useful labor or human effort whether or not compensation was contemplated.”
The U.S. State Department banned all U.S. citizens from traveling to North Korea without express permission in 2017. According to today’s ruling, Griffith’s request was initially rejected by the State Department, but later granted by the DRPK UN mission in Manhattan after he sent copies of his CV, passport, and explained his desire to attend the conference.
In today’s ruling, the judge also denied Griffith’s demand for a bill of particulars. In December 2020, Griffith’s attorneys filed documents arguing that he didn’t know what exactly he had been accused of saying or doing.
“Griffith contends that he is in the dark as to the services he is accused of providing to the DPRK,” Castel wrote. “But Griffith’s briefing to this Court makes it plain that through discovery he has learned much of the government’s evidence. He does not seek the bill of particulars simply as a means to learn facts, but to limit proof at trial. As already stated, a bill of particulars is not a discovery tool to limit the government’s evidence.”
Related: Virgil Griffith Still Doesn’t Know What Exact Crimes He Is Accused of, Attorneys Say
Related StoriesIndia’s cryptocurrency investors were caught off-guard and left confused after news broke Friday that the country’s Parliament will be considering a government-backed bill that would ban “private” cryptocurrencies. Given the ruling party controls both houses of Parliament, the bill’s chances of becoming law are good.
The Cryptocurrency and Regulation of Official Digital Currency Bill 2021 would prohibit cryptocurrencies in India and provide a framework for creating an official digital currency to be issued by the Reserve Bank of India (RBI). The RBI had previously prohibited crypto trading for almost two years before that ban was overturned by the Supreme Court in March 2020.
Industry watchers said the government’s definition of “private” could imply that any digital currency that is not sovereign could be seen as a “private” currency, including bitcoin. It’s unclear which cryptocurrencies would be affected as the bill it allows for certain unspecified exceptions to promote the underlying technology of cryptocurrency and its uses
Related: All Over the World, Small Investors Jump Into the GameStop Frenzy
“This is (the) time to be nervous,” an official at a large cryptocurrency exchange said to the Economic Times of India on the condition of anonymity.
The move is bound to make potential and current crypto investors outside the country nervous as well. When naming potential obstacles to the growth of bitcoin as a store of value, that governments will try to ban it should it become too successful almost always makes the list.
This past week, while appearing more warmly disposed toward bitcoin than he had in the past, Ray Dalio, the founder and co-chairman of Bridgewater Associates, the world’s largest hedge fund, listed government prohibition of bitcoin as one of his remaining concerns regarding the cryptocurrency. That one of the world’s biggest economies seems poised to do just that is only going to feed that narrative.
News of the likely ban may have been a contributing factor in the fallback in the price of bitcoin Friday after it had risen in response to Elon Musk’s Twitter-bio shoutout.
Nischal Shetty, CEO of Mumbai-based cryptocurrency exchange WazirX criticized the announcement via Twitter, explaining “there is no such thing as a private cryptocurrency” and the bill is aimed at helping the RBI create its own central bank digital currency (CBDC) by banning so-called private cryptocurrencies with some exceptions.
“A country as large as India should at least work on understanding the underlying terminologies before presenting technology-related bills in Parliament – seems like a hurried move,” said Shetty.
Related: India Would Ban Private Cryptocurrencies Under Proposed Legislation
Adding that just because a bill is presented does not mean it will be cleared and warned, “wrong or hasty regulations will set us [India] back by a decade. Right regulations will catapult India to the forefront of this technology.”
If the bill becomes law, India would become the only major Asian economy to ban private cryptocurrencies rather than regulating them like corporate stocks.
Related StoriesVisa CEO Al Kelly said the payments giant is in a position to make cryptocurrencies more “safe, useful and applicable” and may add them to the company’s payments network.
Speaking on the company’s fiscal first-quarter 2021 earnings call, Kelly described cryptocurrencies like bitcoin as “digital gold” which are “not used as a form of payment in a significant way at this point.”
“Our strategy here is to work with wallets and exchanges to enable users to purchase these currencies using their Visa credentials or to cash out onto our Visa credential to make a fiat purchase at any of the 70 million merchants where Visa is accepted globally,” Kelly said.
The payments executive also said stablecoins could be used for “global commerce” and that “digital currencies running on public blockchains as additional networks just like RTP or ACH networks.”
Related: US Federal Reserve Looking to Hire a Manager to Research Stablecoins and CBDCs
Kelly added:
“Today, 35 of the leading digital currency platforms and wallets have already chosen to issue Visa, including coin-based Crypto.com, BlockFi, Fold and BitPanda. These wallet relationships represent the potential for more than 50 million Visa credentials. The next leading network has a fraction of that. And it goes without saying, to the extent a specific digital currency becomes a recognized means of exchange, there’s no reason why we cannot add it to our network, which already supports over 160 currencies today.”
Related StoriesCanadian investment firm Ninepoint Partners completed the C$230 million (US$180 million) initial public offering of its cryptocurrency fund which is now fully invested.
Read more: Former Canadian Prime Minister Lists Bitcoin as Possible Future Reserve Currency
Related StoriesThe world is watching U.S. markets with great interest, and more than a little FOMO, as Reddit investors continue to test their might against Wall Street.
It all started when retail investors on the Reddit community wallstreetbets began pumping the price of U.S. video game retailer GameStop’s (GME) stock to counter Wall Street hedge funds that were “shorting” or betting against it. What the Reddit group did, and the reaction of the mainstream as the stock skyrocketed, reminded many of crypto trading.
Meanwhile, the world watches, with some seeing what happened with GameStop as a more global story of ordinary investors taking on the power of big institutions.
Related: The GameStop Stop Is Not a Technology Problem
“We are very much interested in what is happening in the U.S. for many reasons. For some of us, it is the feeling that we can now also play in the market and we are also seeing how the markets actually get manipulated to serve only the rich. This isn’t a movie. … We saw this happen,” Bernard Parah, founder and chief executive officer of Nigerian crypto trading startup Bitnob, told CoinDesk via an email.
According to Parah, Nigerian investors were buying GME using a number of apps including Bamboo and Trove, which allow U.S. equity trading.
In India, small retail investors were quick to jump in on the action, with GameStop becoming one of the top five traded stocks on Stockal, a platform used by Indian investors to trade U.S. equities, according to Bloomberg.
Retail investors in China also wanted in, with some users excitedly sharing their gains on social media. There are about 177 million retail investors in China.
Related: After GME, Dogecoin and Bitcoin, Chinese Traders Are Betting What Will Pump Next
Read More: After GME, Dogecoin and Bitcoin, Chinese Traders Are Betting What Will Pump Next
After the U.S. retail trading platform Robinhood limited users from buying certain trending stocks including GME, European investors who still had access continued to trade: wallstreetbets alleged that they helped keep the GME price up despite the trading restrictions.
“GME makes you feel the power of the people around the world. … After the Europeans, Asian people are joining the fight to support the movement. It makes your blood boil just by watching it,” one Chinese user wrote on popular social media app Weibo.
Meanwhile, the Reddit investors’ strategy to counter shorted stocks went global, according to Bloomberg journalist Tracy Alloway: Bloomberg reported earlier this week that heavily shorted stocks were rallying in Australia and Japan. Nikkei Asia reported the same trend was seen in Hong Kong and Malaysia.
Crypto SpilloverThe turmoil didn’t stop there. Soon, Reddit investors were pumping other shorted or meme stocks including dogecoin (DOGE), a cryptocurrency that was created as a joke. DOGE started rallying after a Twitter user calling himself the chairman of wallstreetbets (though who is not affiliated with the subreddit) asked followers about the cryptocurrency.
Responding to the hype, Nigerian social payments app Bundle Africa listed dogecoin on Friday. An hour later, it was the second-most bought asset on Bundle that day.
“We are definitely feeling the spillover in crypto as people move to buy DOGE as a reaction to what’s been happening in the U.S.,” Yele Bademosi, chief executive officer of Bundle, told CoinDesk via Twitter.
Read More: GameStop Investing Craze ‘Proof of Concept’ for Bitcoin Success, Says Scaramucci
Colombian investors were getting curious about dogecoin, Alejandro Beltrán, country manager of crypto exchange Buda.com told CoinDesk. Buda.com does not list Dogecoin, and it has no current plans to do so, Beltrán added.
Some users in Japan watched the dogecoin price run with skepticism, with one user comparing it to a local meme-based cryptocurrency called monacoin.
“It is a remarkable activity in the market this week, and one which is yet to be determined as healthy or otherwise,” Jon Squires, chief executive officer of crypto exchange Currency.com, told CoinDesk.
According to Squires, on Thursday, the platform had 10 times the typical number of new clients.
In Nigeria, Parah says there has been a lot of activity in the various investor communities.
“Even on Whatsapp statuses, you have people asking things like, “What is a short squeeze?” or “What does it mean to short?”… It’s been crazy watching this happen in real time,” Parah said.
Related StoriesStani Kulechov used to think angel investing would distract him from leading his company, Aave, one of the top money markets in decentralized finance (DeFi).
Attention on Aave proved to be well spent: This time last year, Aave only had a few million dollars worth of crypto in it; since then it has risen to become the second largest DeFi project on Ethereum, with over $3 billion in crypto committed to its smart contracts.
Nevertheless, over the last year, Kulechov also invested in something like three-dozen projects. Clearly, his stance on angel investing has changed.
Related: Market Wrap: Bitcoin Bumps to $38.6K While DeFi Exchanges Hit $50B
“I think everyone should do angel investing in the space, especially if you gained,” Kulechov told CoinDesk in an interview.
Kulechov justifies devoting part of his time to angel investing because he has come to see it as a defensive move for his company. It’s like the internet: Once enough people have started using and relying on a tech stack, it becomes very nearly impossible to yank it back out of their hands.
“When the ecosystem is big enough, I believe it is very difficult at that point to fight against the technology,” Kulechov said.
The best the banking system could hope to do, he believes, is decide to build its own version of DeFi, but, “that will not work when you have so many projects in the ecosystem and the ecosystem is growing all the time,” Kulechov said.
Dark forestRelated: Algorand Teams Up With Crypto Custodian Curv for ‘Trusted DeFi’
The term “ecosystem” gets thrown around a lot but Kulechov contends it is uniquely apt in DeFi.
In an ecosystem, things are living off each other but also supporting each other. Species evolve in a specific context and everything is relative. Kulechov sees the same thing happening on Ethereum.
“An ecosystem means you are sharing things together. You are sharing, you are consuming and you are supplying, and you are doing all of these three things together,” he said.
Take Yearn Finance for example. It takes advantage of composability by building other smart contracts into its smart contracts. In exchange, it also pumps a lot of additional liquidity into those protocols by way of its own various interfaces. It also consumes the yield that comes from the backers it supplies. It’s a virtuous cycle.
“We have smart contracts and we have composability,” Kulechov said, “but also we have an element of human composability.”
Kulechov backs a lot of teams but not everyone. The question he’s trying to answer when making picks is: How creative is this team? He said he likes to ask them what they are looking to build next and then maybe after that as well. He needs to see a fertile mind that’s always ready to innovate, because that’s the only way to keep adding value.
PicksCoinDesk sees Kulechov’s name on press releases about new startups all the time. For example, we’ve reported his backing of Lido, Maple, Slingshot, Swivel and PoolTogether.
Aave itself raised a fresh $25 million last October, ahead of releasing its new version in December.
But when asked to name some investments that are on his mind, he named three specific ones he’s made in small, new teams that haven’t gotten a ton of attention yet.
Pods Finance. A derivatives product that’s designed to work without oracles.
Kulechov said he liked Pods because it was a team of very young people from Brazil who were traveling around to hackathons to build out early versions of their product.
Certora. A smart-contract security consultancy that specializes in formal verification.
“It’s kind of a traditional business model,” Kulechov said. Certora stands out in the crypto space because it’s a bunch of security researchers who simply provide a service in exchange for payment, without a token or DAO in sight.
Shell Protocol. An upstart automated market maker (AMM) for stablecoins aiming to enable money for the internet.
“What for me was interesting was the whole story of how they moved to Hawaii,” Kulechov said. The team has a “Hawaii House” on the beach listed as a perk for new hires. New employees aren’t required to live there but encouraged to at least come and hang out a while.
Kulechov said he’s been pleased to see some decentralized exchange (DEX) aggregators routing orders through this relatively small protocol, which has a big mission to reinvent money. That said, “They don’t make any noise,” Kulechov said.
PrinciplesKulechov contends he doesn’t have strict investing principles, but obviously he likes to see people embrace DeFi values: transparency, open source and the like.
One point he does like to stress, though, is he prefers to make investments in the tokens generated by his own project, Aave. So rather than sending a team a bunch of USDC, he’d rather send them aUSDC, because then they already have some yield built in.
Treasury management is obviously important for any team, but: “If you take interest-bearing tokens it’s actually managed,” Kulechov said.
The point there is to keep projects sustainable on the micro level. Investing does the same for DeFi on the macro level.
“I spend my whole day in DeFi,” Kulechov said, noting that most of his hours are focused on Aave. The remainder, though, often goes to angel investing. “I think everyone should do this,” he said.
Related StoriesThe U.S. Federal Reserve is looking for a manager of digital innovations who will assess the pros and cons of stablecoins and central bank digital currencies.
Read more: Jerome Powell on CBDCs: ‘We Don’t Feel a Need to Be First’
Related StoriesAnalysts believe Elon Musk’s shout-out to crypto pushed bitcoin’s price upwards at a time when decentralized exchanges are experiencing record amounts of trading volume on the Ethereum network. Excessive fees could damp that, however.
Bitcoin’s price jumped massively Friday. In the span of an hour, starting at 9:00 UTC (4 a.m. ET), the world’s oldest cryptocurrency gained 11%, going from $33,377 to $37,113 according to CoinDesk 20 data. Over the next five hours, bitcoin hit a 24-hour high of $38,566 before increased sell orders started to take over the market, with the price per 1 BTC at $34,616 as of press time.
Read More: Kraken, Coinbase Suffer Outages Amid Market Volatility
Related: Aave’s Founder Angel Invests to Grow DeFi’s Head Start on the Banks
Analysts point to the legendary social media habits of serial entrepreneur Elon Musk as a catalyst for bitcoin’s Friday price pop. “Elon’s ‘bitcoin’ logo added to his Twitter feed kicked us off on the aggressive move higher,” said Chris Thomas, head of digital assets for Swissquote Bank. “His comments triggered huge buy stop losses on Binance and likely the other Asian exchanges as leveraged traders had to close their short positions.”
Read More: Musk-Prompted Bitcoin Price Surge Causes Liquidation of $387M in Shorts
Indeed, total liquidations across the entire crypto market over the past 24 hours was the highest in three months, at over $850 million on the short side, according to aggregator Bybt. Liquidations are the crypto equivalent of a margin call: When a leverage trader’s position moves against price, it is bought or sold automatically to begin to wipe out any potential liability.
“The red pullback is absolutely natural given how much we have moved,” Swissquote’s Thomas added. “We’ll likely find a new base – perhaps with $35,000 support – and trade sideways to slightly higher, assuming no more news.”
Related: Are You Running a Bitcoin Node?
Some good news for brokerages: Crypto spot volumes perked up Friday, to $8.7 billion as of press time, the second-highest level over the past month, according to the eight USD/BTC exchanges the CoinDesk 20 tracks.
Prior to the Musk motions, the crypto market had been in the doldrums. “Investors were focused on other big events like earnings and the [Federal Reserve],” noted David Russell, vice president of market intelligence for trading platform TradeStation. “They would have come back to crypto regardless because of the institutional adoption trend, but Musk lit a fire under their feet.”
Funding rates for long leverage are jumping to a level not seen since bitcoin’s record high Jan. 8, when the price hit $41,962, according to CoinDesk 20 data. It’s a sign traders are emboldened by the short liquidations to fuel up some long trades right now.
It will be interesting to see how bitcoin performs over the weekend because crypto never sleeps. Major equities indexes on Friday are awash in red. Could traders jump on cryptocurrency markets to find weekend opportunities?
“This has been a tremendous week for retail trading across multiple asset classes,” noted James Putra, head of product strategy at Tradestation. “Since most other asset classes are closed later today, we are excited to see if the 24/7 crypto markets benefit from the retail trading enthusiasm.”
DEX volumes hit $50 billion in January monthly volumeEther (ETH), the second-largest cryptocurrency by market capitalization, was up Friday trading around $1,348 and climbing 0.81% in 24 hours as of 21:00 UTC (4:00 p.m. ET).
Monthly decentralized exchange, or DEX, volumes for major projects in the Ethereum ecosystem have eclipsed $50 billion, according to data aggregator Dune Analytics.
In first place is long-standing bellwether Uniswap, with $23.3 billion for January so far, almost half of the total volume. Uniswap is followed by $10 billion by its smart contract fork rival SushipSwap and then $5.8 billion for stablecoin-focused exchange Curve. “I trade a lot on DEXs. They have deeper liquidity and less slippage than traditional exchanges,” noted Michael Gord, chief executive of trading firm Global Digital Assets.
However, Peter Chan, head trader at quantitative firm OneBit Quant, cautioned that centralized exchanges (CEX) still rule despite the record volumes on DEXs. “This is remarkable and I am happy for the development of DeFi,” Chan told CoinDesk, referring to decentralized finance. “But it’s still a long way to go compared to volumes on a CEX.”
According to CoinGecko, volume the past 24 hours on centralized exchange Binance was $34 billion as of press time.
Chan noted that DEX fees can also be staggering. “Gas price is still going to be a major problem for DEXs. Especially for small trades, gas fees could take up to 20%-30% of the trade.”
Other marketsDigital assets on the CoinDesk 20 are mixed Friday, mostly higher. Notable winners as of 21:00 UTC (4:00 p.m. ET):
In addition, meme-focused cryptocurrency dogecoin (DOGE), which is not currently part of the CoinDesk 20, has seen a price appreciation of over 120% over the past 24 hours, mostly because of high activity on social media.
Read More: Dogecoin Becomes Most Mentioned Crypto on Twitter Ever as Price Soars
Notable losers:
Commodities:
Treasurys:
“Are you running the numbers?”
This is what Bitcoin Core developer Andrew Chow is trying to find out in a new survey.
Sponsored by a grant from MIT’s Digital Currency Initiative, Chow crafted the survey “to get answers from people who are not current users” about why they don’t run a Bitcoin Core full node, the wallet software which simultaneously keeps a record of Bitcoin’s transaction history and connects users to other peers in the network.
Related: Market Wrap: Bitcoin Bumps to $38.6K While DeFi Exchanges Hit $50B
Bitcoin full nodes are like servers so, if you’re not running your own to broadcast transactions to the wider network, then you’re relying on someone else’s.
Moreover, a full node offers users complete control over what encoded rules they want to follow, as well as the ability to independently verify a variety of network data. The popular Bitcoin memes “One node, one vote” and “Run the numbers” demonstrate that these principles of self-verifiability and freedom of choice are core principles for Bitcoin’s most fervent followers.
In short, running a full node is the ultimate exercise in financial self-determination in the Bitcoin realm.
So that’s why Chow launched the survey, which runs until March 2, to give developers an “idea of the biggest barriers facing people who might want to run a node but currently do not.” The inspiration came from a conversation with fellow developers about the removal of a little-known wallet feature for Bitcoin Core.
Related: Beyond Coinbase: 8 Other Ways to Buy Bitcoin
“Several months ago, a few other Bitcoin Core developers and I were discussing the removal of a feature called zapwallettxes. The main question that we had was whether anyone actually used it. This basically led to the general sentiment of wishing to know how users actually use Bitcoin Core,” he told CoinDesk in a direct message.
Bitcoin Core usage surveyThe survey’s first questions establish the basics: where are you from, how’d you find the survey, do you run a Bitcoin Core full node?
If the respondent replies that they do run a node, the survey follows up by asking if they use the Bitcoin Core wallet and if they ever have in the past. If you do run a node, the survey will continue to grill you over the specifics of your use: how often you update, what other software/hardware you use, why you run a node, etc.
If you don’t run a node, the survey asks you what wallet you use if you own bitcoin and what barriers have kept you from running a node, be they technical complexity or otherwise.
How many Bitcoin nodes are there?Measuring the total number of active nodes on the Bitcoin network is tricky, because some nodes may choose to be open to connect to any other node (a “listening node”), while others may choose to keep their connections closed and private (a “non-listening node”)
Still, one of the more accurate metrics comes from prolific Bitcoin developer Luke Dash Jr., whose data estimates there are roughly 83,000 Bitcoin Core nodes currently active (and just over 1,100 or so of Bitcoin’s other few software versions).
This is long shy of the 200,000 Bitcoin nodes that were running back at the peak of 2017’s market cycle, according to the same data, but still more than the 40,000 or so that were operating in the aftermath of March 2020’s historic sell-off.
Better-than-expected responseSo far, the survey has 600 recorded responses, which is more than Chow and his peers projected for the early stages of the survey, which will run for roughly five more weeks.
Chow said he plans to publish the data he collects once it’s fully analyzed, adding that “there are no plans to act on the results.” Bitcoin’s development is distributed, after all, so coordinating around specific changes for the diversity of users in the survey isn’t practical.
“Instead [the answers] will help us when there is a question about how users behave. There could be direct changes as a result of the survey, but that depends on the results. The survey is being conducted as more of an overarching ‘what are our users doing?’ rather than trying to figure out some specific feature or detail that we should be doing.”
Related StoriesCrypto trading platform Voyager has gone off-line several times since Thursday due to “immense ongoing volume,” after its official Twitter account sent out multiple tweets encouraging users to buy and trade dogecoin (DOGE) on its app.
“We’re still working to stabilize our scalability, and performing system upgrades,” according to a tweet from Voyager. “We just wanted to keep you updated as we work to get the system back online. We apologize for the inconvenience.”
At press time, Voyager’s support team sent out at least four emails to its users addressing the service disruptions since the platform’s first tweet on Thursday about dogecoin. In that first tweet the trading platform asked users to tell their friends about Voyager with a link to guidance of how to buy and trade the skyrocketing cryptocurrency.
Related: Market Wrap: Bitcoin Bumps to $38.6K While DeFi Exchanges Hit $50B
Angry users appear to have taken their dissatisfaction to Twitter, too. As one user wrote: “Voyager is the reason I missed out on [DOGE] at 25% this morning. I was digging it until my deposit was continually denied. The thousands I’ve missed out on brings much shame.”
A spokesperson representing Voyager told CoinDesk that Voyager’s platform experienced “an unprecedented amount of volume and traffic” after retail traders from Reddit and Robinhood began migrating into cryptocurrencies. The “rapid” growth in trading activity on Voyager generated 150% more accounts in just 24 hours, the spokesperson added.
“While we had internally scaled our system ten times to handle the influx, what we saw after was of an order of magnitude higher, and ultimately required our system to go offline for further scaling,” according to the email response from Voyager’s spokesperson. The platform recognized significant spikes of trading volumes in dogecoin, its own voyager token, as well as bitcoin.
In a Thursday email from Voyager’s support team reviewed by CoinDesk, Voyager claimed the service disruption was due to “an unexpected event from a system upgrade.” Another email sent on Friday noted “immense ongoing volume” from both “new accounts and trading.”
Related: In Retrospect, It Was Inevitable: Elon Musk Pumps Bitcoin to Space
“All funds are safe,” according to Friday’s email. “While we experience these volume increases, the Voyager app may periodically undergo maintenance periods to ensure systems are able to operate efficiently during this surge in demand.”
UPDATE (Jan. 30, 2021, 02:11 UTC): the article was updated with responses from a spokesperson representing Voyager.
Related StoriesRallies in GameStock (NYSE: GME) shares as well as dogecoin (DOGE) and bitcoin (BTC) are piquing the betting interest of traders in China as much as they are in the United States.
On Weibo, the popular social media platform in China, the highly active crypto community is speculating on which cryptocurrency will be next to get a major pump after dogecoin and bitcoin jumped in recent days.
“Were it not that Ripple was struggling with its lawsuit, the next token being pumped by the retailers in the U.S. could have been XRP,” according to one Weibo account holder with nearly 40,000 followers. “Many newcomers to crypto only look at prices and names, and they do not care how many times this particular token has taken away people’s money or whether it is highly centralized.”
Related: All Over the World, Small Investors Jump Into the GameStop Frenzy
“It might be a good time to look into tokens that’re associated with XRP the most,” the post then continued, which was followed by several responses asking whether Stellar lumens (XLM) would be the next token to pump. Prices for XLM were trading at $0.304 at press time, up 13.96% in the past 24 hours and outperforming bitcoin, according to the CoinDesk 20.
Read More: Stellar’s XLM Token Rallies to 2-Year High on XRP Woes, OCC Ruling, Ukraine
It’s not just on Weibo. Chinese internet users have been surfing on English-based social media platforms including Telegram chat groups and Reddit, where the most recent bout of trading frenzy started originally. A tweet by Tron’s Justin Sun, which said he’d buy $1 million worth of GameStop stock to show his support to the Reddit community, was briefly pinned on the reddit group, r/wallstreetbets, the epicenter of the GME drama.
“Justin Sun (Asian billionaire) has our back and is joining in,” the group’s post says. After the post went out, prices for the tron (TRX) cryptocurrency rose as high as $0.0446, up 52.2% from its 24-hour low at $0.0293, according to Messari.
Related: Market Wrap: Bitcoin Bumps to $38.6K While DeFi Exchanges Hit $50B
The post also led to what appeared to be an accidental rally in shares of Tanzanian Gold Corporation, which has the ticker symbol TRX. That stock doubled in price in earlier Friday and is still up 26% on the day as of press time, according to Yahoo Finance.
“Every stock investor is thinking of how to buy cryptocurrencies,” Yang Liu, a Colorado-based Chinese crypto retail trader, told CoinDesk. “Every crypto investor is thinking of how to buy stocks.”
Yang saw the early movement on Reddit and bought shares of GME last week, right before GME’s prices skyrocketed. He told CoinDesk many friends and family in China have been asking him over the past two days which tokens they should buy.
“In China, the fear of missing out (FOMO) has surpassed the fear of losing money,” Yang said, adding that many Chinese have been trading American stocks since the start of the lockdown in 2020 using platforms such as FutuBull, and Forex.com.
Data from a December report by the China Securities Depository and Clearing Corporation shows there are more than 177 million individual stock investors in China. Unlike the market in the U.S., the stock market in China is dominated by retail investors. The Chinese stock market is also highly regulated, with short-selling very rare and stock exchanges forcing the suspension of trading for the day should the CSI 300 Index rise or fall by 7% or more from its previous close.
The battle between retail traders and financial elites is also nothing new to hundreds of millions of traders in China. They often half-jokingly describe themselves as “leeks,” a common vegetable in China, “being harvested” when they think their money has been “stolen” by the much bigger market players in the traditional stock market.
“Sending support to retailers in the U.S,” one Weibo user commented under a post by Chinese state media The Paper about trading platform Robinhood stopping buy orders on GameStop.
Read More: Retail Traders Sue Robinhood Over Meme Stock Restrictions
That said, it is hard to gauge whether China’s participation in the GME surge is much more than FOMO. Some say that while retail traders are jumping into certain stocks or cryptocurrencies, it may be more about taking advantage of an opportunity rather than a shift in ideology.
“It doesn’t matter whether it’s the GameStop drama or the dogecoin pump. From what we see, the retail investors in China are not deeply or actively engagement in the real ‘revolution’ behind [the trading frenzy],'” Flex Yang, founder and chief executive of Hong Kong-based crypto lender Babel Finance, told CoinDesk.
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