1. Market Wrap: Possible Trend Reversal as Bitcoin Spikes Past $40K
The strong bounce in bitcoin over the weekend occurred as shorts covered positions.
Bitcoin is in rally mode, posting its largest daily gain in six weeks as shorts covered positions over the weekend. The cryptocurrency was trading around $38,874 at press time and is up 14.5% over the past 24 hours. Sentiment has shifted from extreme bearishness after a sharp correction in May and two months of consolidation between $30,000 and $40,000.
Some analysts expect further upside and view the recent bounce as a trend reversal.
“We turned bullish last Wednesday but weren’t expecting the short squeeze to happen quite so soon,” wrote QCP Capital in a Telegram chat. “We’ve been pleasantly surprised by how supported the market was after Wednesday and sentiment flipped decisively bullish into the weekend.”
Latest prices
Cryptocurrencies:
Bitcoin (BTC) $38,874, +14.5%
Ether (ETH) $2,324.7, +9.08%
Traditional markets:
S&P 500: 4422.3, +0.24%
Gold: $1976.8, -0.31%
10-year Treasury yield closed at 1.293%, compared with 1.281% on Friday.
“This move higher feels more like a bounce back into a neutral state after being overstretched to the downside below $30K,” QCP wrote. “The real pain could be lurking from short gamma positions above the $40K level.”
2. Tether’s Collapse Would Be Chaotic, Not Cataclysmic
Possible criminal charges against Tether executives will put even more pressure on a product that the market is already cooling on.
According to a new report from Bloomberg, an investigation by the U.S. Justice Department is weighing whether criminal charges should be filed against executives of stablecoin issuer Tether. The charges reportedly stem from Tether lying about the nature of its business when it was opening bank accounts around the world.
Tether has issued a statement saying the Bloomberg report “follows a pattern of repackaging stale claims as ‘news,’” but did not deny awareness of pending charges. Such charges would be credible based on known information, including public admissions by Phil Potter, CEO of Tether’s conjoined-twin company Bitfinex, of using “cat and mouse tricks” to maintain banking access. Tether was also linked to Crypto Capital Corp., a now-shuttered shadow bank that allegedly engaged in similar bank fraud on behalf of crypto clients.
The report adds a sharp edge to long-simmering concerns about Tether’s financial stability. Tether claims its dollar-denominated tokens are backed by an equal value of assets held by the company. But the company has never presented a full formal audit of its balance sheet, despite repeatedly promising to do so. In February, the company paid an $18.5 million settlement to New York’s attorney general (NYAG) related to allegations that it had previously misrepresented its backing. Tether tokens (USDT (-0.01%)) are now purportedly backed by a mix of assets, but critics remain worried by the opaque nature and quality of that backing.
Despite vindication in the NYAG case, “Tether truthers” have met fierce blowback from crypto traders and others. That’s at least in part because USDT has been a key tool for traders to move money safely and quickly, and for roughly half a decade, there were no truly superior alternatives. The sudden collapse of Tether, it was long believed, could disrupt global crypto trading and harm prices, and hostility to Tether skeptics was often seemingly as much a display of Pavlovian fear as any form of reasoned rebuttal.
But things have changed, and the market would no longer necessarily be deeply disrupted by an unwinding of Tether. More tightly regulated stablecoins have grown immensely in recent years, particularly Circle’s USDC (+0.05%), which has ballooned to a $27 billion market cap, nearly half of Tether’s issued volume. A wind down of Tether at this point would be chaotic, in other words, but not crippling.
3. Elon Musk’s Tesla Holds Its $1.3B Bitcoin Position in Q2
Tesla isn’t selling.
Despite its recent concerns about bitcoin’s environmental impact, Tesla hasn’t sold any more bitcoin (BTC, -2.45%).
Elon Musk’s electric vehicle company reported no new sales or purchases of digital assets, according to its Q2 earnings presentation Monday. The company holds $1.3 billion in bitcoin.
Tesla announced in February it had purchased $1.5 billion worth of bitcoin. Later in Q1, the company trimmed its bitcoin position by 10%, a sale that boosted that quarter’s earnings by $272 million. Recently, Musk also revealed that one of his privately-owned companies, SpaceX, holds bitcoin.
4. The Tether Put: Crypto Equivalent of Credit Default Swap?
Cryptocurrency market makers say they’re fielding inquiries about how to bet on a falling price for the dollar-pegged stablecoin USDT.
Tether, the largest dollar-backed stablecoin, penetrating nearly every nook of the crypto market, is in the news again and for inauspicious reasons.
Perma-bears who are worried that the lingering tether (USDT) scare would eventually culminate in a breaking of the buck might now be searching for the crypto market equivalent of a credit default swap — a derivatives instrument that allows buyers to bet on another trading counterparty’s creditworthiness.
The answer to that might be a put option on tether, essentially a bet that the stablecoin’s price will fall below its ostensible redemption value of $1. Some traders have been actively scouting around for such a trade, according to some players in digital-asset markets.
“We do continually have inquiries on tether puts,” said Rich Rosenblum, co-founder, and president at institutional market maker GSR Markets.
5. Shopify to Allow Merchants to Sell NFTs Directly Through Their Stores
One of the first Shopify merchants to offer NFTs will be the NBA’s Chicago Bulls.
Shopify President Harley Finkelstein said Monday his company is now allowing merchants on its platform to sell non-fungible tokens (NFT) directly to customers.
In his tweets making the announcement, Finkelstein noted that before Shopify’s move, its merchants would have to sell NFTs through a third-party marketplace, forcing them to relinquish control of the sale and the customer relationship.
“Once again we are putting the power back into the hands of merchants and meeting customers how and where they want to buy,” Finkelstein said.
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July 27, 2021
