Kategorie: Crypto Markets

It feels like nothing but the words of Jerome Powell matter in markets right now.

In looking at the data, it’s kind of true. I plotted the correlation of Bitcoin against the S&P 500 since the beginning of 2017, and the results show that the correlation has generally picked up over time. This really does shoot down talk of the “inflation hedge” narrative that proved so popular during the pandemic.  

But should correlations not come down over time? Well, not really. Think back to 2017, and the texture of the crypto landscape. It was still a niche asset; it was only beginning to get covered in the mainstream – and certainly nowhere near the level of digital ink that is spilled over it these days.

Today, we have public companies holding it. I took a visit to El Salvador this summer, where I paid for goods with it. These are remarkable developments compared to just a few years ago. Point being, Bitcoin is now in the mainstream.

And being a mainstream financial asset – and one that is substantially further out on the risk spectrum – it will indeed be influenced by the market.

2022

Indeed, this correlation has hit all-time highs this year, moving in lockstep with the stock market. What was the upward shift caused by? The interest rate environment has transformed entirely.

Following a decade of historically low interest rates, inflation has burst out at the seams as a result of incessant money printing and stimulus spending through the pandemic. In order to rein this in, central banks have been forced to hike, with the Federal Reserve in the US leading the charge.

Nothing sucks liquidity out of a market more than rising interest rates, and this is particularly true for high risk assets, such as tech stocks, which discount cash flows back to the present – discount rates which are now measurably higher.

And so – and this is something that is frequently overlooked – Bitcoin is now in a bear market while the wider market is too. Because for the first time in its existence, Bitcoin is experiencing a macro climate not awash with quantitative easing, basement-level interest rates and bullish sentiment. And it’s creaking at the knees – just like every other financial asset is.

Correlations rise in crises. Sellers are indiscriminate when a flight to quality occurs; liquidity is sought, defensive positions are taken and cash reserves rise. Bitcoin, for the first time in its history, is experiencing that the hard way.

In this context, it is no surprise that the correlation has risen.

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Quant (QNT) cryptocurrency has been on a sustained bullish trend in the past week as the majority of cryptocurrencies including Bitcoin and Ethereum struggled to get a footing after months of a bear market.

Although QNT is on a downtrend today, having lost about 6% in the past 24 hours, the coin has gained about 26.3% in the past seven days. The coin has seen a resurgence that has seen it beat Bitcoin and Ethereum, the two largest cryptocurrencies by market cap. But why?

Let’s delve into the forces propelling this cryptocurrency high in such tough times.

Why Quant price surged 26% in the past week

Interestingly, there has not been any major news about Quant blockchain or its QNT token over the recent past that would spur such a performance for the coin. But all the same, a blockchain analytics startup called Santiment has attributed Quant’s price surge to “Volume, daily active addresses, and whale accumulation.” The startup says that whales have accumulated 15% of QNT tokens in just five months.

Data from Intotheblock also shows that about 60% of holders purchased QNT between one and twelve months ago.

The majority of Quant’s network activity can be attributed to the recent changes where the network introduced the Tokenize mechanism back in June allowing users to generate QRC20 tokens that are compatible with ERC20 tokens. Quant also supports QRC21 tokens allowing users to build and deploy safe, interoperable non-fungible tokens (NFTs).

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Japanese anime-inspired NFT initiative Azuki is expanding its presence in Web3 with the launch of a physically-backed token (PBT). The PBT will allow users to generate digital tokens to represent real objects on the Ethereum blockchain allowing on-chain ownership of tangible assets.

The PBT will give businesses and content creators a tool for creating experiences and next-generation storytelling for their audiences.

Physical Backed Token standard

Creating digital representations of real-world objects is not a new concept. However, maintaining the link with the object throughout its lifetime is still a challenge and that is what Azuki’s new PBT token standard aims to solve.

The Physical Backed Token standard technology provides complete on-chain, decentralized identification, and monitoring of the entire ownership history of physical goods through their digital representations. It introduces trustless authentication where anyone and everyone can freely authenticate, validate, and construct interactions with the objects.

Azuki’s scan-to-own experience

Azuki’s PBT offers a “scan-to-own” experience that allows users to generate digital tokens by simply scanning real objects. The person who scanned the physical item (who is also the owner of a physical item) then becomes the owner of the generated digital token.

According to Azuki, several Web3 projects have developed ways of developing digital tokens for physical products but in most cases, the physical product and the generated digital token are immediately separated after the digital token is minted. Azuri has gotten around this drawback by providing decentralized authentication and tracking of the physical product throughout its lifetime.

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BlockFills has partnered with Basis Capital Markets, an FCA-regulated affiliate, to offer both spot crypto assets and cash-settled contracts for difference (CFD).

BlockFills, one of the crypto industry’s fastest growing trading and financial technology providers, is looking to bring more investors into the market via its integration of digital assets CFDs (“contracts for differences”).

BlockFills adds cash-settled CFDs via front-end Phoenix

In an announcement on Monday, BlockFills said it would be offering the CFD product via its Software-as-a-Service (SaaS) solution Phoenix. The premier front-end platform that previously only supported spot crypto trading, is targeted for institutional investors.

According to the fintech firm, Phoenix will now support both spot crypto assets and cash-settled CFDs or the so-called perpetual futures.

Nick Hammer, the co-founder and CEO of the Chicago-based company, noted in a statement that the integration is key to a market that has long sought “a trading solution that combines deep liquidity in cash-settled crypto derivatives with a superior front end.” 

“The appeal of trading in volatile markets without the complexity of physical settlement has already generated large amounts of interest in our offering. We expect that trend to continue,” Hammer commented via a press release.

To offer the new product, BlockFills has partnered with Basis Capital Markets, the company’s FCA-regulated London-based affiliate. The institutional-focused platform will help bring the perpetual futures product to non-US institutions around the world.

The company says qualified clients will have access to deep crypto CFD liquidity, available 24/7 and with prices across multiple fiat currencies, including the US dollar, Euro, British Pound and Japanese yen.

BlockFills launched in 2018 and currently offers its digital asset technology to institutional clients in more than 50 countries. In February 2022, as CoinJournal reported, BlockFills and Nexo partnered in a deal aimed at extending prime brokerage services to leading cryptocurrency miners.

In June, the company announced the listing of CME Group crypto derivatives products.

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Bitcoin has been one of the fastest-accelerating asset classes in history.

Trading at fractions of a penny 14 years ago, it ran all the way up to close to $69,000 last year.

It is against this context of outrageous gains which shows how remarkable it is that most of the Bitcoin supply is now loss-making. Comparing the current price of Bitcoin to the price at which coins within each address last moved, only 49.4% of addresses are in profit.

Aside from a couple of brief visits below 50% in September, this marks the first time since the COVID-panic of March 2020 that the majority of Bitcoin addresses have been in the red.

Human emotion

Perhaps there is a lesson in FOMO here somewhere.

It is stunning how much money poured into the crypto markets during the pandemic, with cryptocurrency constantly residing in media coverage, Zoom chatrooms and mainstream consciousness, that the bulk of the network is now underwater.

Zooming out further to Bitcoin’s inception in 2010, shows how the price really ramped up in latter years – as well as the number of addresses in profit plummeting thereafter when the music stopped playing.  

This doesn’t really show us anything we don’t know already, but I nonetheless thought it underlined quite how brutal this bear market has been. In looking back at the 2018 bear market, the bottom was hit when the addresses in profit dipped below 40%.

In March 2020, although an extreme outlier month given it was when COVID truly arrived, we dipped below 45%.

In that context, we have a bit more to go here. But what exactly is that context? I actually think that metrics from previous crypto winters here are largely irrelevant. Crypto has evolved too much to be compared to those days anymore, when liquidity was so scarce and Bitcoin was confined to faraway corners of the Internet. It was not a mainstream financial asset, and so I am hesitant to draw too much from studying these time periods.

Secondly, the previous cycles did not occur in conjunction with a bear market across all financial assets. The stock market has printed unstoppable gains since 2009, which was the year Satoshi Nakamoto essentially invented crypto when he published the Bitcoin whitepaper.

Let me be very clear, therefore: crypto has never existed while there has been a wider market bear, or – dare I say it – recession. With that in mind, comparisons to previous cycles need to be made prudently. This is not a case of simply waiting to inevitably bounce back.

Maybe that is exactly what will happen. Who knows – but my point is that such blind optimism is misplaced. This is an unprecedented environment for crypto.

And more addresses than not being loss-making shows quite how far we have fallen.

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