Bitcoin dips, but it may have already entered a bull market, based on these metrics
By Frances Yue
Welcome back to Distributed Ledger. This is Frances Yue, crypto reporter at MarketWatch.
Bitcoin may have already entered a bull market, despite the carnage of the crypto industry, according to Dan Morehead, founder and managing partner at Pantera Capital.
Meanwhile, crypto conglomerate Digital Currency Group reportedly has been selling shares in several crypto trusts run by its subsidiary Grayscale at a deep discount.
Coinbase's CEO suggested that he'd been hearing rumors that regulators would like to get rid of crypto staking, and decried such a possibility.
Find me on Twitter at @FrancesYue_ to share any thoughts on crypto, this newsletter, or your personal stories with digital assets.
Another bull market?
Bitcoin lost over 4% Thursday, falling below $22,000 to the lowest level in three weeks, down 68% from its all-time high, according to CoinDesk data. Still, its 37% rally so far this year may have marked the start of a new bull market cycle, according to Pantera's Morehead.
Morehead wrote in a Wednesday note that the most recent bear market for bitcoin started in November 2021 and ended in November 2022, lasting for 376 days, while the median length of bitcoin's previous bear cycles stands at 307 days.
Meanwhile, the median drawdown for bitcoin has been 73%, while during the most recent bear market, the crypto lost 77% of its value from the all-time high, according to Morehead.
The recent bear market has also been the only one that wiped out all the gain from the previous bull market, and resulted in even greater losses, noted Morehead.
To be sure, crypto traders are watching for more potential fallouts from the collapses of Genesis and FTX, while uncertainty remains in the macroeconomic environment, with a still high inflation and risks of a U.S. recession.
Bitcoin as an inflation hedge?
For the past few years, bitcoin has been often trading in tandem with stocks, especially growth stocks, crushing some of its supporters' hope that the crypto could be seen as a hedge against inflation.
However, John Haar, managing director at Swan bitcoin and a former Goldman Sachs veteran, said the narrative may still hold, but it may be too late to buy bitcoin for this reason given inflation has already peaked in the U.S.
Bitcoin, which has a limited supply of 21 million, is a hedge against expansionary monetary policy, which often leads to an increased inflation levels, Haar said.
"If someone waits until the day that CPI is going up to buy Bitcoin, they have likely waited too long because monetary expansion often causes consumer prices to go up on a lag basis," noted Haar.
Bitcoin climbed as the Federal Reserve started easing its monetary policy after the outbreak of the Covid-19 pandemic in 2020, and has fallen from its all-time high in November 2021 as the central bank started tapering its large asset-purchase programs and raised interest rates.
DCG sells shares in crypto trusts
Crypto conglomerate Digital Currency Group reportedly has been selling shares in several crypto trusts run by its subsidiary Grayscale at a deep discount, as it strives to raise money to repay creditors of its bankrupt lending arm Genesi, according to a report by the Financial Times this week.
It is one of DCG's latest efforts to raise money to help Genesis repay over $3.5 billion to its creditors. DCG is both the parent company and a debtor to Genesis.
DCG has sold about a quarter of its shares in the Grayscale ethereum trust (ETHE) to raise as much as $22 million in several trades since January 24, according to the FT report citing U.S. securities filings.
"This is simply part of our ongoing portfolio rebalancing," DCG told the Financial Times. A company spokesperson declined to comment further to MarketWatch.
DCG has also been selling smaller blocks of shares in Grayscale's Litecoin Trust, Bitcoin Cash Trust, Ethereum Classic Trust, and Digital Large Cap Fund, the report said.
A potential staking ban?
A ban on crypto staking by the U.S. Securities and Exchange Commission would be a "terrible path" for the industry, said Brian Armstrong, chief executive and co-founder of crypto exchange Coinbase.
In a series of Tweets on Wednesday, Armstrong suggested that he'd been hearing rumors that regulators would like to get rid of crypto staking, which is a way for crypto holders to earn passive income by directly running open crypto networks. Staking allows users to earn cryptocurrency as a reward for using their existing holdings to secure transactions on an underlying blockchain network.
MarketWatch's Anushree Dave wrote more about it here
Crypto in a snap
Bitcoin lost 4.7% during the past week, and was trading at around $22,466 on Thursday, according to CoinDesk data. Ether slid 2.3% during the same period to around $1,617.
Biggest Gainers Price %7-day return
SingularityNET $0.43 124.5%
Baby Doge Coin $0.000000003 111%
The Graph $0.16 70%
Fetch.ai $0.43 50%
ImmutableX $1 23%
Source: CoinGecko as of Feb. 9
Biggest Decliners Price %7-day return
Aptos $14.02 -23%
Radix $0.05 -20.7%
Fantom $0.47 -18%
Trust Wallet $1.47 -12.8%
Internet Computer $5.35 -11.6%
Source: CoinGeko as of Feb. 9
Crypto companies, funds
Shares of Coinbase Global Inc. (COIN) lost 27% for the week to around $59.60. MicroStrategy Inc. (MSTR) slid 15% thus far on the week, to $248.39.
Crypto mining company Riot Blockchain Inc. (RIOT) tumbled 24%, to $5.68, as of Thursday. Shares of rival Marathon Digital Holdings Inc. (MARA) were down 26% to $5.91, over the past week. Ebang International Holdings Inc. (EBON) tanked 16% over the past week and was trading at $7.46.
Overstock.com Inc. shares (OSTK) declined 17% to $20.83, over the week.
Shares of Block Inc. (SQ), formerly known as Square, decreased 14% to $76.07 for the week thus far. Tesla Inc. shares (TSLA) rallied 9.6% to $206.41.
PayPal Holdings Inc. (PYPL) dropped 9.8% over the week, to trade at around $78.43. Nvidia Corp. (NVDA) added 2.3% at $222.01 for the past week.
Advanced Micro Devices Inc. shares (AMD) went down 6% to $83.07 for the week.
Among crypto funds, ProShares Bitcoin Strategy (BITO) declined 6.35% over the week to $13.64 Thursday, while counterpart Short Bitcoin Strategy ETF(BITI) rose 6.5% to $29.37. Valkyrie Bitcoin Strategy ETF (BTF) went down 6.3% over the past week to $8.68, while VanEck Bitcoin Strategy ETF (XBTF) fell 6.3% to $22.18.
Grayscale Bitcoin Trust(GBTC) plunged 16% for the past five days to $10.66 on Thursday.
-Frances Yue
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February 09, 2023 16:02 ET (21:02 GMT)
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