First Mover: Ethereum Steals Limelight With New All-Time High Price as Bitcoiners HODL

Market Trading EssentialsJanuary 19, 2021

5 minutes read

Bitcoin (BTC) was higher for a second day, staying in the past two weeks’ range of between roughly $34,000 and $40,000.

“This period of consolidation is building a solid base, giving those who wish to sell bitcoin plenty of time,” according to the cryptocurrency exchange firm Diginex.

Ether (ETH), the Ethereum blockchain’s main cryptocurrency, rose Tuesday to a new all-time high of $1,499.33, reaching price levels not seen since early 2018. The LINK token from Chainlink, which provides price feeds to decentralized trading and lending systems built atop blockchain networks, also set a record price.

With the bitcoin market trading sideways, some investors might be rotating into so-called alternative cryptocurrencies for faster returns, Edward Moya, a senior market analyst for the foreign-exchange broker Oanda, said in emailed comments.

“The cryptoverse is growing again, and right now many cryptocurrency traders are diversifying into other coins,” Moya said.

In traditional markets, Asian and European shares rose and U.S. stock futures pointed to a higher open ahead of Treasury Secretary nominee Janet Yellen’s confirmation hearing. The former Federal Reserve chair is expected to call for the government to “act big” on stimulus borrowing and spending, to aid the economic recovery.

Gold strengthened 0.2% to $1,845 an ounce.

Market moves

With bitcoin prices up 26% so far in January after quadrupling in 2020 and doubling the year before that, a trader might be forgiven for looking to take some profits.

But based on data extracted from the underlying blockchain network, investors appear content to sit tight, apparently betting a new rally could quickly take the cryptocurrency to fresh all-time highs.

Delphi Digital, a cryptocurrency analysis firm, noted last week in a report that bitcoin balances on cryptocurrency exchanges had decreased to about 2.3 million from 2.4 million over the past month as prices rose. Often, when prices rise the balances increase as more investors transfer bitcoins to the exchange to be liquidated.

“The net outflow this time around is potentially indicative of the long-term focused nature of recent investors,” according to the Delphi analysts, Yan Liberman and Kevin Kelly.

The exchange outflows dovetail with other blockchain data showing more bitcoin being held by investors for the long term, known in crypto-industry jargon as HODLing.

Analysts for Glassnode, a blockchain-data firm, noted Monday that the number of bitcoins held in “accumulation addresses” has climbed by 17% over the past year to more than 2.7 million. These are addresses that have only ever received bitcoin and never spent them.

“This increase highlights the massive supply restriction that is occurring in the BTC market, with almost 15% of the total supply held in these addresses,” according to the firm.

Some 14.6 million out of the 18.6 million bitcoins mined over the blockchain network’s 12-year history are “either lost or being HODLed long term,” Glassnode says. That means new buyers coming in, such as big investors or companies looking to use the cryptocurrency as a hedge against potential inflation, would have to compete for the remaining 4 million or so bitcoins still circulating.

“When combined with the general decrease in bitcoin’s liquid supply and the number of lost coins, this leads to an even more limited supply, which is helping BTC maintain the highest prices it has ever seen,” the analysts wrote.

– Bradley Keoun

Bitcoin watch

Bitcoin remains locked in a narrowing price range despite resurgent institutional demand.

The top cryptocurrency has charted a symmetrical triangle over the past few days, as seen on the hourly chart. It’s a sign both buyers and sellers are unwilling to lead the price action.

Grayscale Bitcoin Trust (GBTC), the biggest publicly traded crypto investment trust, purchased a total of 16,244 BTC ($607 million) on Monday, taking out 18 times more supply from the market than what miners added. This was after the trust reopened last week following a month-long pause and quickly accumulated another 4,700 BTC. (Grayscale is owned by Digital Currency Group, the parent company of CoinDesk.)

Even so, the cryptocurrency is struggling to gather upside traction. The bulls look to be taking a hiatus, having engineered a rally of more than 200% over the past three months.

Digital-asset traders appear to have shifted toward alternative cryptocurrencies such as ether, the second-largest cryptocurrency, which rose to a new record high early Tuesday.

The focus could move back to bitcoin if the largest cryptocurrency breaks out of its hourly chart triangle pattern. That would imply a resumption of the broader trend and put $50,000 on the map, as noted by Vinny Lingham, investor and founder of crypto wallet and identity verification firm Civic.

– Omkar Godbole

Token watch

Enjin (ENJ): Enjin Coin becomes first gaming cryptocurrency whitelisted for use in Japan (CoinDesk)

Tether (USDT): Anonymous columnist questions whether Tether’s true peg is distorted by promotional awards (Medium)

Celsius (CEL): Alex Mashinsky, CEO of crypto lender Celsius, says in interview that company filed SEC exemption form on CEL tokens “because the regulations are not clear” (CoinDesk)

XRP (XRP): Kraken exchange becomes latest to halt XRP trading for U.S. residents after SEC suit against Ripple Labs (CoinDesk)

What’s Hot

Goldman Sachs reportedly planning to enter crypto market soon with custody play (CoinDesk)

Huobi Global connects to European banking system via UK’s BCB Group (CoinDesk)

Coinbase cryptocurrency exchange, hounded by snarky social-media comments about reliability, plans improvements to infrastructure (CoinDesk)

CoinShares starts exchange-traded bitcoin product (Bloomberg)

MetLife’s investment arm predicts “true central bank digital-currency launch among Western countries seems unlikely to occur anytime soon” (CoinDesk)

Bitcoin takes over as “most-crowded trade” in Bank of America survey after passing “long tech” (CoinDesk)

“No, bitcoin is not in a bubble,” CoinDesk Research Director Noelle Acheson writes in Crypto Long & Short newsletter (CoinDesk)

JPMorgan analysts see $40,000 as a key bitcoin price threshold before bullish uptrend continues, Bloomberg reports (CoinDesk)

Former Canadian Prime Minister Stephen Harper, in interview, lists bitcoin among U.S. dollar alternatives that could make inroads as an international reserve asset (CoinDesk)

Wall Street chief financial officers (CFO) are more wary of putting company funds into bitcoin after last week’s 30% price plunge (CoinDesk)

Bitcoin is “two bets in one: a sound, unimpeachable monetary protocol and the reserve asset for a rapidly expanding crypto-financial network,” Castle Island Ventures’ Nic Carter writes (New York Magazine)

South Korea’s Dunamu launches its own bitcoin “fear and greed” index (CoinDesk):

Analogs

The latest on the economy and traditional finance

Biden Treasury secretary nominee (and former Federal Reserve Chair) Janet Yellen says in prepared remarks for Tuesday’s confirmation hearing that “with interest rates at historic lows, the smartest thing we can do is act big” (FT)

Jamie Dimon says JPMorgan Chase should absolutely be “scared s—less” about threat from fintech rivals, names PayPal, Square, Stripe, Ant Financial, Amazon, Apple, Google (CNBC)

Beleaguered U.S. bank Wells Fargo targets $8B in cost savings over three years, including job cuts, and considers options for exiting asset-management and corporate-trust businesses (Pensions & Investments)

Foreign investors expect U.S. dollar to remain weak under Biden (WSJ)

U.S. corporate bond spreads shrink to 0.93 percentage point, narrowest since January 2020, at least partly reflecting investor confidence in ongoing economic stimulus and easy money from the Federal Reserve (WSJ)

Reserve Bank of Australia could shut down quantitative easing program in April (Australian Financial Review)

China’s GDP grew 2.3% in 2020, lowest lowest in 44 years (Nikkei Asia Review)

Taiwanese chip maker startup Kneron eyes global expansion, aims for 8x growth in 2021 as U.S. blacklists hit Chinese rivals (Nikkei Asia Review)

Southeast Asian ride-hailing company Grab considers U.S. IPO estimated at $2B (Reuters)