Good morning. Here’s what’s happening:
Prices: Bitcoin clings tight near $21,000; ether also rises.
Insights: USDC’s may be «flippening» of USDT, and the stablecoin bear market continues.
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Bitcoin (BTC): $20,621 +0.9%
Ether (ETH): $1,124 +1.7%
Asset Ticker Returns DACS Sector Shiba Inu SHIB +30.7% Currency Dogecoin DOGE +10.6% Currency Polygon MATIC +7.8% Smart Contract Platform
Bitcoin Rises – for Now; Ether Is in the Green
So far, so good this week in crypto markets, but investors may not want to raise their hopes too much for a long-term rebound.
The largest cryptocurrency by market capitalization gained ground for a third consecutive day, jumping past $21,000 in Tuesday trading. Bitcoin was recently trading at about $20,600, up approximately 1% and far removed from the two-year low under $18,000 to which it plummeted on Saturday.
Still, analysts were pessimistic of the rally’s staying power, noting a rise in volatility perhaps tied to large investors buying the recent price dips and the continuation of underlying conditions, including the global turbulence, rising prices and recession distress that have plagued crypto markets for the past eight months. Investors are scared, and the occasional surge notwithstanding, have assumed a defensive crouch until firm evidence emerges that the economy has taken a more permanent upturn, say analysts.
Last month’s collapse of the TerraUSD stablecoin (UST) and more recent fiascos involving the DeFi lending platform Celsius and crypto hedge fund Three Arrows have further stoked their fears.
«Last week was bad,» Jeff Dorman, chief investment officer of digital investment management firm Arca, told CNBC. «It was not unprecedented in the sense that we’ve had multiple 30% to 50% moves in short periods of time. But it was historically bad in the sense that it was the first time it was happening in conjunction with bad things happening everywhere else.»
Ether, the second largest crypto by market cap, was recently trading at roughly $1,130, up 1.7%. Other major altcoins were recently in the green with DOGE up 10% at one point and SOL rising more than 5%.
Cryptos’ price increases dovetailed with equity markets, which rose amid investors’ likely, temporary return to riskier assets. The tech-focused Nasdaq climbed 2.5%, while the S&P 500, which has a heavy tech component, rose nearly the same.
Still, in a Monday report, Goldman Sachs economists upped the likelihood of a recession from 15%, their previous prediction, to 30%. Investors will be nervously watching U.S. central bank Chair Jerome Powell’s testimony before Congress on Wednesday and Thursday. Powell has been adamant about the Federal Reserve’s recently more, aggressive commitment to tame U.S. inflation by raising interest rates and reducing liquidity in the economy.
Dorman said that he expects crypto investors to continue «to hunker down,» and that will translate to «less growth from growth companies in the [crypto] space, in hiring and new product launches.» Last week, as bitcoin’s price sank, investors redeemed a net $5.8 million from short bitcoin funds in the seven days through June 17, the crypto asset manager CoinShares wrote Monday in a report. (A «short» position in financial markets is a bet on a price decline.)
Yet Dorman noted that the current crash differs significantly from earlier steep downturns in crypto’s history in the range of vibrant products and services now available. «I think people are going to flock to DeFi much faster than anyone expected because it holds up,» he said. He was sanguine about the prospects of a recovery this year.
«My guess would be we probably start to see higher prices in the second half of this year,» he said. «There really isn’t a lot of carnage in the applications themselves.»
S&P 500: 3,764 +2.4%
DJIA: 30,530 +2.1%
Nasdaq: 11,069 +2.5%
Gold: $1,833 -0.3%
USDC’s ‘Flippening’ of USDT and the Continuation of the Stablecoin Bear Market
Tether (USDT) has been of particular interest to the crypto industry post-collapse of LUNA, because like UST, there has been a lot of skepticism about what exactly is backing it. Interest in the reserves that back USDT isn’t exactly something new, but the general crisis of confidence in crypto has placed pressure on USDT’s tenuous peg.
Recently, the number of transactions on USDC surpassed those on USDT. For long-time, stablecoin war observers, that’s a substantial «flippening.» USDT’s share of the supply of stablecoins in smart contracts is dropping fast. What began around 20% in January is now dipping to the 13% point. But what is unexpected is that USDC, which doesn’t have the same questions about its reserves as they are properly held in trust, is also seeing its share drop too.
This is largely a product of the primary use case for stablecoins, Decentralized Finance (DeFi) has seen its locked-in value decline significantly since the beginning of the year. What was once a $236 billion asset when the year began, according to DeFiLlama, now only has $74 billion locked-in as traders flee.
And with this comes a big decline in the number of active addresses on both USDT and USDC – to be expected as the liquidity contributed to these protocols is often in stablecoins.
But again, all this seems to be a problem localized in the worlds of DeFi and stablecoins. Even as the price of bitcoin declines as institutions and miners sell, retail continues to buy what it can with the number of wallets containing more than 0.1 BTC rising from 3.4 million as of May 16 to around 3.6 million by June 21, according to Glassnode data.
So while there might be trouble in the land of digitized dollars and DeFi, there’s still confidence in digital gold (though its analog version might have been a better investment).
Said and heard
3oSE…uRbE has started moving funds (Solent Protocol for lending and borrowing on Solana/Twitter) … «One thing most people don’t fully grasp: it takes years, often decades, to go from a new infrastructure-level technology breakthrough (like crypto) to a vibrant ecosystem of mainstream applications. (Paradigm co-founder Fred Ehrsam) … «Today @BlockFi signed a term sheet with @FTX_Official to secure a $250M revolving credit facility providing us with access to capital that further bolsters our balance sheet and platform strength. (BlockFi CEO Zac Prince/Twitter) … «Approval of an ETF that provides inverse exposure to #Bitcoin futures could be a positive sign for #crypto. Here’s a 🧵 on why…» (Grayscale Investments CEO Michael Sonnenshein)