Cryptocurrency update: BTC rally pushes crypto market above $2 trillion

Key tokens start the day with greens across the board, with Bitcoin and Ethereum leading the charge.

Cryptocurrency update

Global cryptocurrency market hits $2 trillion

With BTC and ETH reaching highs not seen for months, the total value of the global crypto market has exceeded $2 trillion for the first time since May.

Bitcoin crept above $48,000 on Monday morning, although it fell back towards $47,175 as the day progressed. Ether, which has strengthened on a successful network upgrade, is on a seven-day high after gaining 11% throughout the week. Cardano is up 53% across the last seven days.

It’s a good sign of market confidence in digital tokens. Bitcoin in particular had been experiencing a torrid couple of months recently. A strong sell-off in July, precipitated by falling token prices influenced heavily by China’s crypto crackdown, caused prices to dip below $30,000. Now, they’re rallying strongly and eyeing up the next resistance level.

During the BTC sell-off with prices at their lowest in July, the overall crypto market cap was around $1.12 trillion. Its peak, recorded in May when Bitcoin was trading at all-time highs, totalled $2.5 trillion.

There is still ground to recover. Volatility, however, is never far away from the world’s cryptocurrency markets.

While the bulls are feeling pretty good, there is still time for prices to go south again. Analysts predict the current BTC surge could top out at around $55,000. After that, the token may begin to fall away below $30,000 again.

The impact of the upcoming US Infrastructure Bill’s crypto tax provisions has yet to be truly felt.

That said, some are still optimistic. Others are predicting BTC hold its place above $40,000 and possibly over $50,000, going forward.

Singaporeans prefer Ether

A joint survey by digital token exchange Gemini, crypto market data analysts CoinMarketCap, and finance platform Seedly has revealed Singapore’s favourite coin: Ether.

78% of those surveyed by the group stated they hold onto Ether, compared to 69% that hold Bitcoin. Cardano was the third most popular token with 40% of respondents saying they had invested in it.

4,000 adults were surveyed as part of this study. 67% of respondents said they included digital tokens in their portfolios, and two-thirds of that group said they had increased their crypto holdings during the pandemic.

A fifth of those surveyed said that half or more of their investments are in cryptocurrencies.

Ether has been tipped to overtake Bitcoin as the world’s most popular digital token in the future. Many decentralised finance (DeFi) apps run off the Ethereum blockchain network, for instance, and users wishing to use said blockchain must pay a small fee in ETH to do so.

The network’s recent London Fork upgrade has introduced more user-friendly features, which may explain why ETH is rallying right now.

Still, with Bitcoin accounting for up to 68% of the total worldwide crypto market, Ether has some way to go before it can challenge for the top spot. It does appear, however, to be moving in the right direction – particularly if one nation’s traders and investors are seeing high potential in Ether.

The top five crypto-investing banks revealed

Institutional support for cryptocurrencies has been steadily building throughout the year, even with Bitcoin’s erratic price behaviour. Banks have stepped up their digital finance services and offers and been keen to grab their slice of the $2 trillion market.

A report from Blockdata has put together the 13 banks investing the most capital into blockchain networks and cryptocurrency wallets. Together, they represented over $3bn in investments. This includes token purchases and acquisition, as well as investment into tech companies and others in the digital finance ecosystem.

Blockdata said it reviewed banks in terms of size of funding rounds as a proxy of investment into the crypto space, saying it used that measure as banks participated in funding rounds with multiple or many other investors.

The top five crypto-investing banks as identified by Blockdata are:

  • Standard & Chartered – $380m in 6 investments
  • BNY Mellon – $321m in 5 investments
  • Citibank – $279m in 14 investments
  • UBS – $266m in 5 investments
  • BNP Paribas – $236m in 9 investments

While the above banks represent those betting the most on the crypto sector, it’s starting to pick up steam amongst other financial institutions.

55% of the world’s 100 biggest banks by assets under management are investing directly or indirectly in companies and projects related to digital currencies and blockchain, according to Blockdata research.

 

Attention shifts to bond yields as stocks rally, ARKX ETF launch, Deliveroo IPO priced at the bottom

Morning Note

Despite some volatility in individual names associated with the Archegos Capital fallout, chiefly the big banks that had acted as prime brokers to the hedge fund, there was no broad selloff in blue chips. The Dow Jones industrial average wiped out a 160pt loss at one point to finish 98 points higher for a fresh record close, while the S&P 500 and Nasdaq were flat. The DAX notched a record high, whilst the Euro Stoxx 50 hit its highest since the pandemic. European stock markets are broadly higher this morning, with the FTSE 100 eyeing 6,800 again with all sectors but healthcare in the ascendancy. The DAX made a fresh all-time high again. Banking shares in Europe are higher – shrugging off the Archegos episode as yields are on the move higher. Even CS is 1% higher this morning.

Market participants will be glad to see this has so far been contained – though there may be some more trades related to Archegos that need unwinding. Banks left holding the bag – which look to be Nomura and Credit Suisse more than others – will suffer significant losses. Goldman Sachs, surprise, surprise, seems to have escaped cleanly by acting swiftly and decisively to get out first. So far though there has not been a big unwind across assets.

Attention quickly turned to the bonds as the US 10-year yield jumped to 1.76% this morning, towards the top of the recent range. This helped lift the dollar to its highest since November, with the dollar index hitting 93. Gold fell to the bottom of the recent range to test $1,700 again – key trend and Fib support coalesces around $1,690 should the round number go. Bitcoin climbed to $58,000 say Visa offered more ‘corporate support’ by saying it would allow the use of the stablecoin USD Coin to settle transactions on its payment network. WTI (May) eased back from $62, the highest in a week, ahead of the OPEC+ meeting this week at which producers seem all but certain to maintain supply curbs through May.

Deliveroo is pricing its IPO at the bottom of the range, with shares off at £3.90 and valuing the company at £7.6bn. Still it’s the biggest London listing in a decade so it should get plenty of interest once the stock opens for unconditional trading next week. The IPO has not has been as warmly received in the City as found Will Shu might have expected. Numerous funds including giants Aviva, Aberdeen Standard and Legal & General are not taking part amid various concerns about governance (dual class shares), working practices (riders getting £2 an hour) and regulatory concerns. It’s also true to say that the path to profitability remains questionable.

Cathie Wood’s Space ETF – ARKX – is due to start trading today. The first new ETF in two years from the Wood stable is eighth in total. There are several eye-catching elements to the ETF’s holdings.

First, the holdings, which are not aligned very closely to existing space-focussed funds like the Procure Space UFO ETF. Somewhat amazingly, the second biggest holding in the ETF, at more than 6% weighting, is – get this – another ARK ETF, the 3D Printing ETF (PRNT). Loading up ETFs with other ETFs – which you are promoting – seems kind of wrong. You could rightly ask: is it a pyramid? It smacks of the 1920s American experience of the Goldman Sachs Trading Corporation, which in turn set up the Shenandoah Corporation, also an investment trust, which in turn set up Blue Ridge Corporation. Yes, another investment trust. What you had was a lot of trusts with the same people and same investments – cross-investing in one grand pyramid scheme. We all know how that ended up.

Second, it contains a number of names that are not associated with ‘space’. For instance, JD.com is a 5% holding, whilst Virgin Galactic is less 2%. Netflix is a 1.27% holding. True, the prospectus makes it clear that ‘space’ investments would only ever be no less than 80% of holdings, but it is nonetheless noteworthy to package up a load of investments in this way.

And, ARK has changed the language in its ETF prospectuses to remove the limits on single-company exposure. It also added a reference to blank-check companies (SPACs) to the risk section. This will only add to concerns about the concentration in large cap momentum stocks and exposure to high risk SPACs comes with its own set of worries for investors.

Constiuents of the ARKX space exploration ETF

A light calendar for data today – just the US CB consumer confidence report on tap as well as preliminary German inflation numbers. Fed speakers Williams and Quarles are up, too.

Fed governor Christopher Waller offered a robust defence of the central bank’s policy making, refuting suggestions it is keeping rates low to finance government debt. That is one in the eye for MMT supporters. US total government has risen $4.5 trillion, about 20%, since March 2020. In many ways the pandemic brought MMT from the theoretical shadows to the de facto limelight without any debate. However, the Fed is seeking to assert its independence and rejected the idea that the central bank is working in concert with the government to directly finance debt.

“My goal today is to definitively put that narrative to rest. It is simply wrong,” Waller said in prepared remarks to the Peterson Institute for International Economics. “Monetary policy has not and will not be conducted for these purposes.” We shall see.

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