Daily Market Update - November 24, 2020- BTC in Range of Breaking All Time High

Bitcoin (BTC) passed above $19,000 on Tuesday, after rallying $7,000 in one month. The leading cryptocurrency is now within sight of its all-time high of $19,783 reached on Dec. 17, 2017.

  • On Friday, the world’s largest asset manager BlackRock’s chief investment officer, Rick Rieder, said on CNBC that bitcoin could take the place of gold to a large extent because crypto is “so much more functional than passing a bar of gold around.”

  • The market capitalization of bitcoin also hit its all time high this week to about $329 billion, according to data provided by crypto analytic firm CryptoQuant.

  • According to Guy Hirsch, managing director for US at eToro, 2020’s bull market “debunks” the idea that bitcoin is a “Tulip Bubble” because “tulips never had a second wave of buying the same way bitcoin has.”

  • With retail on-ramp platforms including PayPal and CashApp being more prevalent in 2020 than 2017, bitcoin’s price could break $20,000 “in the not-too-distant” future, Hirsch added, predicting that the retail investors will kick in the market and propel the price.

  • All but two of the other coins from the CoinDesk 20 including ether and XRP have also been in green in the past 24 hours.

  • With increased institutional investors entering the bitcoin market, as well as miners not liquidating their positions, “it appears likely that price will continue to rise,” according to a newsletter by CryptoQuant on Nov. 13.

Digital assets market:

On the digital assets side, we’re in the midst of another bull run with a fresh wave of money that has pumped many alts, that would have previously been considered on the brink of obscurity, to push towards 2020 ATHs.  

  • Overall market cap is now well into $500B, currently at $543B, up 16% over the past seven days.

  • $BTC has not seen much positive price action after an eventful week prior. Trading within a wide range of $700 USD as it hovers above $18K support for its fourth day. Currently trading at $18,300 levels, on the upper Bollinger bands, since Oct 9th. 

  • Though the past couple of days have seen a bit of a sell off in favour of alts, $BTC dominance at 61.3% from local highs of 64% (a few weeks ago). 

  • $ETH gains 6% overnight, up from 470 levels 

Alts and DeFi watch:

  • $BCH +26% over past seven days, up 7% overnight, trading low 300s

  • $XRP more than doubled over the past week, up 33% overnight to 0.6 levels after maintaining around 0.20-25 levels throughout the majority of 2020.

  • DeFi TVL dipped slightly to 14.26B, within arms-reach of its ATH from 14.4B yesterday

  • $LINK nearing 16 levels, after trading range bound around 12-13 levels, moved up 16% this week and now is seeing +52% for the past month. 

  • $SNX doubles over the past month at +112% to 5.5 levels

  • $NANO +35% overnight, up 56% in the past seven days

  • $FTM and $ALGO also jumped more than 20% overnight, as the green wave builds   

News that caught our eye:

  • JP Morgan’s “Flows and Liquidity” report states that in Q3 it saw retail users buying $1.6 billion worth of bitcoin using Square’s Cash App, around 3x more than what was invested in Grayscale’s bitcoin product. 

  • On the topic of widespread adoption, Australia-based West Coast Aquaculture (WCA) has completed an A$5 million (US$3.65 million) initial public offering with USDT, becoming the first firm in the nation to use cryptocurrency for its capital raise

  • IRS sends a warning regarding under-reported crypto gains

Weekly Deep Dive with Arca

The Market is Ripping, and No One Will Stop Talking About It

If you’re reading this, chances are you already know that digital assets were on fire again last week, which continued in force throughout the weekend. Unlike the past few months, where each move higher in certain sub-sectors of digital assets stemmed from some rational qualitative source, this past week seemed more like blind panic buying, and the front-running of possible continued panic buying. Regardless of merit, this is what it looks like when small asset classes begin to go mainstream - the sheer lack of supply is on full display.

  • Bitcoin was higher (+15%)

  • Ethereum was higher (+29%)

  • DeFi was higher (+16%)

  • Small-caps were higher (various)

  • Forgotten tokens from 2017’s graveyard were higher (XRP +58%, XLM +28%, EOS +20%)

We’re at the stage of the rally where all of us who are heavily involved in digital assets are getting bombarded with phone calls and texts, and those that crave attention can’t stop making wild price predictions on CNBC and Bloomberg. There appears to be two types of investors right now:

  • Those that are heavily invested are celebrating, perhaps exorbitantly, as they feel long-awaited validation.

  • Those who are not invested continue to publicly deny this market’s existence, and are finding new ways to justify their lack of involvement, some going as far as calling it fraudulent.

If this sounds familiar, it’s exactly what just happened following our Presidential election, and it’s not exactly healthy. This religious-like belief in one’s preconceived notions makes it difficult to accept new information, which is why it is so important to see folks like Ray Dalio of Bridgewater and Rick Rieder of Blackrock, amongst others, begin to slowly change their tune on Bitcoin. It’s also why those of us who invest beyond “cryptocurrencies” into the world of digital assets issued by real value-producing companies and projects are so excited -- because we’re about 2 years away from the rest of the world waking up to these assets as well.

However, we still have a long way to go. Every Bitcoin or Ethereum breakthrough comes with endless speculation about nonsense that should have died years ago, but remains stubbornly in the public eye. The thing about religious-like opinions is that they don’t easily die, even when it seems obvious to others that it should.

For example, here’s a look at the CRYP page on Bloomberg. While it’s nice to see Bloomberg embracing this portion of the financial markets so traditional financial investors can begin their educational journey, outside of Bitcoin and Ethereum (and reluctantly Zcash), not one of these other tokens would ever be seriously considered by research-minded digital asset investors. Bitcoin is digital money, Ethereum is like the Apple app store, in that almost every blockchain application is built on top of it, but the rest are longshot “show me” stories from the 2017 VC investing class. I’d love to see an investment memo explaining investments in any of the others -- my guess is they don’t exist since these tokens exist purely because algos/quants/retail traders keep them alive. I for one have been investing in this space professionally for 3+ years now and I have no idea what Dash does, or is supposed to become. Yet the casual investor will likely stumble upon Dash before hundreds of other digital assets that do have a real purpose and value.

Our opinions aside (which like Rieder and Dalio above, we reserve the right to change our mind), as an industry we still have not gotten to a point where the best and most relevant information is accessible to all investors. Market fragmentation and misinformation create a lot of alpha for a small group of investors, but also severely hinders the speed of growth and adoption.

As an industry, we can do better.

Even a 10-year old understands why all companies will eventually have a token

Arca’s head of Investor Relations, Peter Hans, had an interesting conversation with his 10-year old daughter this weekend:

Peter: “The first stock I ever bought was Southwest Airlines (LUV) in 1993.”

Lucy: “When you buy stock in Southwest Airlines you, do you get a free ticket?”

Peter: “No, but that is a really good idea.”

Lucy: “ I feel like you should at least get a 10% discount on tickets or something.”

That innocent conversation explains years of divergence between the 1% and the 99%. According to Gallup, “ just a modest majority of Americans, some 55%, own stocks”. Despite our entire economy being driven by consumers, very few actually benefit financially from their own consumption.

This conversation does, however, perfectly explain what has been happening in digital assets over the past two years, and why several companies who have issued tokens to their customers have grown faster than any other companies in history. Some companies are issuing digital assets specifically to wedge that gap between those who benefit financially (shareholders) and those who benefit via utility (customers) - a dynamic that makes even more sense if viewed through the differences between Amazon shareholders and Amazon Prime members. We refer to these hybrid tokens as “pass-thru” tokens, as they represent a hybrid security that is part loyalty / reward program to be used within a closed ecosystem, and part quasi-equity ownership via financial value that is passed through directly to tokenholders. This type of arrangement leads to customer evangelism and rapid growth, as early customers are incentivized financially to help their favorite companies grow.

It should come as no surprise then that some of the best performing tokens and fastest growing companies over the past several years are those with tokens issued by actual companies, not decentralized protocols. These companies have given financial rewards to their customers via pass-thru tokens. A few examples can be seen below:

  • Binance’s BNB token: +1500% (from $2 to $30)

  • Hxro’s HXRO token: +1000% (from $0.02 to $0.20)

  • Celsius’ CEL token: +6200% (from $0.04 to $2.50)

  • Helium’s HNT token: +800% (from $0.20 to $1.60)

Further, in the wake of economic destruction of small businesses around the world due to the pandemic, it’s both embarrassing and extremely disheartening that more companies haven’t embraced this financial innovation yet. There is a way out of this endless loop:

Between a lack of investment bankers, and a lack of education, most companies don’t even know this type of capital raising and growth hacking instrument even exists. Instead, we continue to layer on debt that will never be repaid. According to Deutsche Bank:

“The cost of the pandemic will only be truly known in years to come but we can get some good early indications by looking at debt increases around the world. Yesterday the IIF suggested that global debt will hit $277 trillion by the end of 2020, up around $20 trillion over the year (just shy of the annual size of the US economy). Excluding financial debt (where there is double counting risk), global debt/GDP will go up by 35 percentage points in 2020. It’s hard to believe there’s been a bigger global increase in history.”          

This is just outright irresponsible. We are sitting on a new form of capital formation that consumers actually want, which fuels growth, and does not create a liability, yet the regulators are dragging their feet while the majority of companies don’t even know this is an option. Meanwhile, investment banks are trying to figure out how to cover Bitcoin from a research perspective, a service absolutely no one needs. We’ve received four calls in the past month from investment banks asking us to help them map out the “publicly tradable universe”, but instead of embracing tokens issued by small companies and doing their jobs as investment bankers to create more investable products, they are scrambling to write research on “Bitcoin tracking stocks” like Galaxy Digital, Hut 8, Microstrategy and of course the upcoming Coinbase IPO. The same bankers and broker-dealers that blockchain aims to disrupt would rather write research no one needs in an effort to get a piece of the trading fees they are missing out on rather than try to avoid disruption by getting ahead of the inevitable shift in capital formation and investing.

As an industry, we can do better.

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