Price Point

Bitcoin was falling on Monday, retreating after surpassing a price of $50,000 last week for the first time and soon afterward topping a market capitalization of $1 trillion. Over the weekend, bitcoin surged to a new all-time-high price  over $58,000. 

As of press time, the largest cryptocurrency was changing hands around $54,000. Price charts appeared to show support levels around $50,700, or $41,800 in a deeper pullback, according to Matt Blom, head of sales and trading for the digital-asset exchange firm EQUOS.

“The current price trajectory may be weakening,” said Simon Peters, an analyst with the trading platform eToro. 

In traditional markets, investors were gripped by rising U.S. government-bond yields. For 30-year bonds, the “real yield,” which subtracts out the inflation rate, turned positive for the first time since June 2020. A continued rise in yields could make the country’s bonds more attractive to foreign investors, pushing the U.S. dollar higher and putting selling pressure on risky assets like stocks and bitcoin.   

“Market reflationistas are winning the day as bond yields spike from Australia to the U.S.,” according to Bloomberg News. 

European shares slid and U.S. stock futures pointed to a lower open. Oil and copper prices were higher, and gold strengthened 0.7% to $1,797 an ounce. 

Bitcoin Watch

Bitcoin market corrects even as news flow looks bullish

Bitcoin might have further room to fall, according to David Lifchitz, CIO for Paris-based quantitative trading firm ExoAlpha.

“A 15% correction could happen, taking some steam out of the hot market, before reaching new highs,” Lifchitz told CoinDesk. “The more upward parabolic and fast a move, the more fragile it is, so a pullback would be more than welcome.”

A healthy cooling off of the market looks overdue, CoinDesk’s Omkar Godbole wrote Monday. Several indicators from price charts are signaling overstretched conditions, including an above-70 reading on the widely tracked relative strength index (RSI).

BITCOIN NEWS ROUNDUP:

• Miami Mayor Suarez plans to personally buy bitcoin, ether, or dogecoin.
• Barclays wealth investment chief says bitcoin is increasingly "cultist" and supported by "magical thinking."
• Even skeptics may need to consider crypto exposure, according to the Wall Street Journal's Heard on the Street column. 
• Citadel CEO Ken Griffin tells CNBC he doesn’t see the ‘economic underpinning’ of cryptocurrencies. 
• New York Post highlights "11 glorious homes you can now buy with bitcoin."
• Bitcoin is now more expensive than a kilogram of gold, Decrypt reports. 
• Bitcoin reaches 10% of gold's market capitalization, according to The Block. 
• A quarter of U.S. investors own cryptocurrencies, survey finds. 
• Americans are increasingly bullish on cryptocurrency as bitcoin soars to new records. 
• Some 10% of private aviation company PrivateFly's annual revenue is now coming from travelers paying with bitcoin. 
• Canada’s first bitcoin ETF hits $421.8 million in assets under management in two days.
• CI global files to issue North America’s third bitcoin ETF.
• Bitcoin's price rally might be the most powerful of any major asset over the past half-century, according to Bank of America:

Token Watch

ETHER PASSES $2K: Prices for ether (ETH), the native cryptocurrency of the Ethereum blockchain, have pushed past $2,000 for the first time in an extension of this year’s powerful bull run. At least three growing areas of demand are fueling the increase in ether’s price, according to CoinDesk’s Will Foxley: decentralized finance, known as DeFi, most of which has been built to run on the Ethereum blockchain; the buildup to Ethereum’s upcoming “2.0” upgrade and the move toward a deposit-like “staking” system; and Chicago-based CME’s new ether derivatives market. By Monday, though, ether prices were tumbling apparently caught in the downdraft of a crypto market sell-off.  

MEOW! A digital token representing a decade-old pixelated feline image known as Nyan Cat fetched a price of 300 ETH ($590,000) in an online auction last week. According to CoinDesk’s Daniel Kuhn, “It wasn’t the .gif file that was sold, which is still reproducible and found everywhere online, but a cryptographic hash of the psychedelic image on the Ethereum blockchain.” It’s a purr-fect example of the sudden fascination with these “non-fungible tokens,” which typically represent ownership in a unique asset such as digital art, collectibles or video-game skins.

BCH, BSV BECOME COLLATERAL DAMAGE OF BITCOIN’S POPULARITY: The cryptocurrency exchange OKCoin has delisted the cryptocurrencies bitcoin cash (BSV) and bitcoin SV (BSV) to avoid ‘misleading’ new clients, many of whom are looking to buy bitcoin. The exchange’s higher-ups wanted to avoid any confusion that new clients might have between the largest cryptocurrency and the similarly named also-ran tokens, CoinDesk’s Colin Harper reported. 

Market Moves

U.S. banking giant JPMorgan acknowledges existential threat from digital finance

Crypto journalists who raced last week to digest JPMorgan’s 86-page opus on bitcoin and digital finance invariably homed in on the juiciest part: the potential market shock that could come from any “issues” involving the $35 billion stablecoin tether (USDT).

Less salacious but perhaps more significant was what JPMorgan, the largest U.S. bank, said about the threat facing its own industry: The risk that big established players from traditional finance are falling behind in the rapid shift toward cryptocurrencies and digital finance. 

“Banks have been sleepy,” according to the report, prepared by no fewer than 35 co-authors, including Global Market Analyst Nikolaos Panigirtzoglou. “The time is now to fight back.”

The digital-finance startups probably benefit from a “much lower regulatory burden,” but the banks are expected to fall back on their own advantages, including trillion-dollar balance sheets, regulatory clout and the backing of the Federal Reserve.  

“Traditional banks could emerge as endgame winners in the digital age of banking due to their advantage from deposit franchise, risk management and regulation,” according to the report. 

How will they catch up? Banks might have to open their wallets to acquire digital-forward competitors, or otherwise ramp up in-house spending on technology. 

“We would not underestimate banks forming tech partnerships to combat share loss, even if relegated to a wholesale model, which could be a boon to the winning bank tech partners of choice,” the analysts wrote. 

The analysis takes it for granted that the banks will be the ones acquiring, not the other way around. And that’s not a given, given the rapidly rising value of some advanced crypto players.

The digital exchange Coinbase is reportedly now trading at a valuation of $77 billion or upwards of $100 billion in private share markets, and rival Binance’s in-house BNB tokens are worth more than $40 billion after a sevenfold price increase so far this year. The big banks’ market value, by comparison, has stagnated or fallen recently. JPMorgan is still far ahead with a $451 billion market value, and Bank of America stands at $297 billion. But Wells Fargo’s $157 billion and Citigroup’s $137 billion don’t look too far out of sight, based on the torrid pace of growth in the crypto industry.

Either way it looks like banks are going to have to pump a lot of money into digital finance to avoid obsolescence, which is probably bullish for the crypto industry in general and especially so for the early entrants.  

“Although the market has fixated on the rally in bitcoin, the real economic and exciting action is in the new battle for digital supremacy between the banks and fintech,” the analysts wrote. 

Opinions and Observations

ARTHUR HAYES RETURNS TO WRITING: “It’s risky for sure, but if your goal is to speculate your way out of Covid-lockdown-induced boredom, or to augment your declining real wages, crypto can and does generate such outcomes. It also, similar to traditional markets, could morph into a pit where your money and resources are set ablaze,” BitMEX co-founder Arthur Hayes wrote in his blog, the first such post since August. He made no mention of the federal charges pending against him. 

LASER EYES: The new thing that bitcoin bulls are doing these days is modifying their Twitter profiles so it appears that lasers are coming out of their eyes. Supposedly it is part of a campaign by some investors to stay “laser-focused” on a bitcoin price of $100,000. Those who have added the laser eyes to their profiles or been reported to have done so include Tesla CEO Elon Musk, SkyBridge founder Anthony Scaramucci, CoinShares Chief Strategy Officer Meltem Demirors, MicroStrategy CEO Michael Saylor, U.S. Senator Cynthia Lummis of Wyoming and U.S. Representative Warren Davidson of Ohio, . The whole thing feels a lot like a game, played with an asset now worth more than $1 trillion.