1. Market Wrap: Bitcoin Rises Again as Altcoins Outperform
Bitcoin is back above $62K and investors are pumping more money into crypto funds.
Bitcoin is recovering from a weekend dip as traders anticipate the third U.S. futures-focused bitcoin exchange-traded fund (ETF) listing. The VanEck Bitcoin Futures ETF is expected to launch on Tuesday and will trade under the ticker symbol XBTF. Analysts continue to expect further upside in bitcoin’s price given strong investor sentiment on ETF approvals.
Last week, crypto investment funds saw a record $1.47 billion in inflows as investors positioned themselves ahead of the first U.S. bitcoin-linked ETF launch, by ProShares. Alternative cryptocurrency-focused funds also saw inflows, which coincided with a near 30% rise in Solana’s SOL token over the past week.
Analysts are also monitoring the recent rotation to alternative coins (altcoins), which are starting to outperform bitcoin. “The crypto market is turning from being dominated by short-term traders who want to ride the speculative trends to longer-term investors who value the technical capabilities of the different blockchains, challenging bitcoin’s market dominance,” Anders Nysteen, quantitative analyst at Saxo Bank, wrote in a research report.
Latest prices
Bitcoin (BTC): $62,813.67, +3.3%
Ether (ETH): $4,191.45, +3.53%
S&P 500: $4,566.48, +0.47%
Gold: $1,806.85, +0.69%
10-year Treasury yield closed at 1.64%
Record $1.5 billion crypto fund inflows
Investors pumped a record $1.47 billion in new money into digital asset investment products last week, fueled by a rally in cryptocurrencies and the launch of the ProShares bitcoin futures exchange-traded fund, according to a CoinShares report Monday.
Bitcoin-focused funds dominated last week’s inflows, at 99%. During the prior week, inflows into bitcoin-focused funds were at $70 million.
2. Crypto Fund Inflows Hit Record $1.5B as Bitcoin Futures ETFs Go Live
Bitcoin dominated this week’s inflows, with a 99% share. Last week, bitcoin’s weekly inflows were at $70 million.
Investors pumped a record $1.47 billion of new money into digital asset investment products last week, fueled by a rally in cryptocurrencies and the launch of the first bitcoin futures exchange-traded fund, a report Monday by CoinShares showed.
The increase in flows came as bitcoin (BTC), the world’s largest cryptocurrency by market capitalization, surged to an all-time high of $66,974 last week.
The previous weekly record came in February, when inflows totaled $640 million. The past week’s inflows into crypto funds pushed the year-to-date total to $8 billion.
Bitcoin-focused funds dominated last week’s inflows, with a 99% share of all inflows into cryptocurrency funds. During the prior week, inflows into bitcoin-focused funds were at $70 million.
“This is a direct result of the U.S. Securities and Exchange Commission (SEC) allowing a bitcoin ETF investing in futures and the consequent listing of two bitcoin investment products,” said a report by CoinShares.
On Oct 15, the SEC approved the first bitcoin futures ETF, the ProShares Bitcoin Strategy ETF, and the announcement drove bitcoin’s price above $60,000 for the first time in six months.
On Oct. 19, the ProShares ETF began trading on the New York Stock Exchange under the ticker symbol BITO.
Ether (ETH), the native cryptocurrency of the Ethereum blockchain, the world’s second-largest, also reached an all-time high last week at $4,361 on Oct. 21.
Although the ETH price climbed, funds focused on the cryptocurrency saw outflows for a third consecutive week. Outflows from ether-focused funds totaled $1.4 million last week, according to CoinShares.
3. US Treasury Report to Give SEC Oversight on Stablecoins
The recommendations may lead to greater powers for the SEC to pursue enforcement actions against certain cryptocurrencies.
The U.S. Securities and Exchange Commission (SEC) may have moved one step closer to achieving significant oversight on stablecoins.
According to a Bloomberg article on Monday, which cited people familiar with the matter, a report expected this week by the U.S. Treasury Department and other agencies will indicate that the SEC has significant authority to regulate cryptos pegged 1:1 to fiat currency.
The report will also ask Congress to detail how stablecoins should be regulated in the same way bank deposits are.
Gary Gensler reportedly pushed for changes behind closed doors.
Gensler is seeking to make clear the government will take a more active role in stablecoin regulation in the short-term while awaiting legislative changes in the long term, according to the report.
4. Taproot, Bitcoin’s Next Big Upgrade, Might Already Be Priced In
Set to take place Nov. 16, the upgrade has highlighted some investors’ skepticism of the Bitcoin network’s ability to adapt and scale — worried that its first-mover advantage might be eroding.
The last time the Bitcoin network locked in a major upgrade, in July 2017, the cryptocurrency’s price jumped almost 50% through Aug. 23, when the changes went live.
Now, as the original blockchain network prepares for its next big upgrade in November, known as Taproot, few investors are expecting a price reaction remotely on that scale. The bitcoin price has already doubled this year and hit a new all-time high near $67,000 last week. While further gains are possible, Taproot alone probably wouldn’t be the catalyst.
“The Taproot upgrade will have minimal impact on bitcoin’s price,” said Edward Moya, senior market analyst for the online foreign-exchange broker Oanda.
Set to go into effect on Nov. 16, the Taproot upgrade is designed to increase privacy protections on some transactions over the network through an innovation known as “Schnorr signatures.” The upgrade also will allow for more lightweight “smart contracts” — essentially programs stored on a blockchain that run when certain conditions are met. Smart contracts have been a key feature of the rival Ethereum network, powering fast growth in decentralized finance (DeFi) applications that aim to automate many functions of banks and trading firms.
“This is a revolutionary moment for Bitcoin,” said Don Guo, CEO of Broctagon Fintech Group.
Yet the episode is serving to highlight a key difference in Bitcoin’s approach to network improvements versus competing blockchains where upgrades and tweaks are far more common. Ethereum, the №2 blockchain, just off the heels of its “London hard fork” in August and now pushing forward with its “Ethereum 2.0” overhaul expected next year, has seen the price of ether, its native cryptocurrency, quintuple this year.
5. Citi Initiates Coverage of Coinbase With $415 Price Target, Says ‘Buy Crypto’s General Store’
The bank’s Coinbase target is 27% higher than Monday’s closing price.
Coinbase (NASDAQ: COIN) “offers investors direct exposure to increased retail and institutional adoption” of digital assets, Citi said in a note initiating coverage of the crypto exchange with a buy rating and a $415 price target.
“For its position within the crypto value chain, a ‘networking-based’ business model and strategy, the undeniably very large opportunity set … yes, we believe COIN is investable,” analyst Peter Christiansen wrote in a report dated Oct. 26. Investors should “buy crypto’s general store.”
Citi sees additional potential upside for the stock as the company grows its business beyond facilitating transactions.
The U.S. bank also sees the exchange’s “lean forward approach to regulatory compliance” as a prospective competitive advantage in the longer term and says that not all regulation should be seen as harmful.” To a degree, we think rising regulations could be a positive for Coinbase’s competitive positioning, particularly versus business models that predominantly rely on markets being unregulated,” the bank said.
The stock and the company’s financial performance will both “likely incur a high degree of volatility” as Coinbase’s business model is directly correlated to the price of major crypto assets, Citi cautioned. That volatility makes forecasting and budgeting the business more difficult.
Citi is positive on the long-term outlook for blockchain technology and crypto markets and says that “the form of the so-called crypto economy will likely remain in debate for some time, though its proliferation, driven by an exceptionally large opportunity, is here to stay, in our view.”
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October 26, 2021
