Market Update- January 20th, 2021


BTC to USD, fell by 2.17% on Tuesday. Reversing a 2.22% gain from Monday, Bitcoin ended the day at $35,890.0.

It was a mixed start to the day. Bitcoin rose to an early morning high $37,450.0 before hitting reverse.

Falling short of the first major resistance level at $37,889, Bitcoin slid to a mid-morning low $36,299.0.

Steering clear of the first major support level at $35,176, however, Bitcoin rallied to a late afternoon intraday high $37,936.6.

Continuing to fall short of the first major resistance level at $37,889 Bitcoin slid to a final hour intraday low $35,863.0.

In spite of the late sell-off, Bitcoin continued to steer clear of the first major support level at $35,176.

The near-term bullish trend remained intact, in spite of the latest reversal. For the bears, Bitcoin would need to slide through the 62% FIB of $18,504 to form a near-term bearish trend.


The Rest of the Pack

Across the rest of the majors, it was another mixed day on Tuesday.

Binance Coin and Chainlink slid by 6.05% and by 6.79% respectively to lead the way down.

Cardano’s ADA (-1.04%) also saw red on the day.

It was a bullish start to the week for the rest of the majors, however.

Ethereum rallied by 8.70% to lead the way.

Crypto.com Coin (+5.12%), and Ripple’s XRP (+2.87%) also found strong support.

Bitcoin Cash SV (+0.10%), Litecoin (+0.06%) and Polkadot (+0.92%) trailed the front runners, however.

In the current week, the crypto total market cap fell to a Monday low $958.80bn before rising to a Tuesday high $1,080.72bn. At the time of writing, the total market cap stood at $1,029.91bn.

Bitcoin’s dominance rose to a Monday high 67.47% before falling to a Tuesday low 65.20%. At the time of writing, Bitcoin’s dominance stood at 65.65%.


News


Winklevoss Twins Consider Taking Gemini Crypto Exchange Public

Morgan Stanley Boosts Stake in Bitcoin-Laden MicroStrategy to 10.9%

In a First for the Crypto Industry, Visa-backed Anchorage Gets a Federal Bank Charter

ECB’s Christine Lagarde Says ‘Speculative’ Bitcoin Needs Global Regulation

Goldman Sachs Exec Says More Institutional Investment Would Calm Bitcoin Volatility

Kentucky Lawmakers Propose Tax Incentives to Draw in Bitcoin Miners


U.S. President Donald Trump has pardoned Ken Kurson, a former Ripple board member and the co-founder of Modern Consensus, a crypto media outlet. Kurson was one of 73 individuals who received a full pardon from Trump early Wednesday, less than 12 hours before his presidency is set to end. A further 70 individuals had their sentences commuted, but the list did not include Ross Ulbricht, the Silk Road founder who was reportedly considered for a pardon last month; Julian Assange, the Wikileaks founder who helped popularize the use of bitcoin; or Edward Snowden, who released details about a U.S. surveillance program to Glenn Greenwald, then a reporter at The Guardian. Other recipients of Wednesday’s pardons include former campaign strategist Steve Bannon, who said in 2018 he was working on a cryptocurrency project before his 2020 arrest on fraud charges, rapper Lil Wayne, who faced jail time on a firearms charge, and Kodak Black, who is serving a 3-year sentence on weapons charges. Kurson was arrested last October on charges of cyberstalking his ex-wife, after a background check raised accusations of sending threatening messages, installing keystroke-monitoring software and making false accusations to someone’s employer, the New York Times reported at the time. “In a powerful letter to the prosecutors, Mr. Kurson’s ex-wife wrote on his behalf that she never wanted this investigation or arrest and, ‘repeatedly asked for the FBI to drop it… I hired a lawyer to protect me from being forced into yet another round of questioning. My disgust with this arrest and the subsequent articles is bottomless,'” Wednesday’s pardon notice read. The pardon notice continued on to praise Kurson, who is a friend to Trump’s son-in-law and presidential adviser Jared Kushner, calling him a “community leader.” The lack of Ulbricht’s name on the list is likely to disappoint many in the crypto industry, who have been advocating for the Silk Road founder’s pardon for years. Rep. Thomas Massie (R-W.V.), a Congressman since 2012, has been a vocal advocate for Ulbricht’s pardon, alongside individuals like Snowden.


Deep Dive with Arca Capital

“Crypto Indexes” are an Absolute Farce The digital assets market was on fire last week, with some of the biggest broad-based weekly gains we’ve ever witnessed. No, this is not a joke. Yes, I know the table above indicates the exact opposite. But the digital assets market actually exploded higher last week… you just wouldn’t know it based on how this industry continues to be covered, both from a media standpoint and from a passive index benchmark standpoint. This isn’t the first time we’ve discussed this problem, but it is getting worse. Much worse. Bitcoin was down 4.5% last week after a violent leveraged unwind on Monday resulted in a 20% peak-to-trough correction, causing futures liquidations of almost $3 billion in the process. Most “crypto indexes” were down similarly throughout the week. BTC Long Liquidations hit almost $3 billion on Monday alone


Source: Bybt.com But after Bitcoin stopped going down, and chopped around for the rest of the week, just about every other type of digital asset that isn’t represented in a “crypto index” rallied, many in the +50-100% range last week. Every sector other than “Cryptocurrencies” had an amazing week


Digital assets are complex, just like fixed income securities. There are different types of digital assets (cryptocurrencies, protocols, asset-backed tokens, pass-thru tokens), there are different sectors within digital assets (Centralized Exchange tokens, Decentralized Finance or DeFi tokens, Web 3.0 tokens, gaming tokens, sports tokens, privacy tokens, etc), and there are different token structures (amortizing tokens, inflationary tokens, velocity sink tokens, mint and burn, etc). And yet none of these are being represented by your so-called “diversified crypto indexes”. Let’s take a look behind the curtain. Here are the almost laughable index constructions of the three most well-known, investable, and widely followed digital asset indexes.


These are absolute jokes. Each of these indexes is over 90% weighted to two assets (BTC and ETH, as LTC is essentially the same thing as BTC from a correlation and beta standpoint). Aside from Chainlink, not one of these indices contains a single asset that a legitimate fundamental fund manager or independent research firm would ever write a research report about or take to Investment Committee. And we’re not just saying this because Arca runs a research-based actively managed fund. It's actually the converse: we run a research-based actively managed fund because it is the only way to get true exposure to the growth in this amazing asset class. As we wrote six months ago: “Every investor gets some things wrong; that is to be expected. But there is nothing worse than when you get the investment idea right, but express that view incorrectly. And that is happening more often than not in digital assets because the investable products available to most investors no longer accurately reflect the industry.” There is a good reason why bond investors differentiate between the Barclays Aggregate Bond Index versus the high yield bond index, the investment grade bond index, and the municipal bond index. There is good reason why equity investors differentiate between the MSCI World Index versus the S&P 500, Russell 2000, Nasdaq and sector ETFs. Could you imagine taking a technology index seriously that just refused to include internet and social media stocks? That’s essentially what these “Cryptocurrency Indexes” are doing as their outdated, market-weighted rules-based approach is ignoring the real growth of the industry. Further, in the past six months, we have seen an explosion in investable Bitcoin products. From Grayscale to 3iQ to Skybridge to NYDIG, not to mention a variety of publicly traded equities of mining companies and brokerages that essentially just track Bitcoin, there are now ample Bitcoin-only product offerings. Any investor who wants to get Bitcoin exposure can now do so easily. Do we really need a “Crypto Index'' that is 80% weighted to Bitcoin? To illustrate what these indices are missing, the following is a small, select subset of real projects and real companies with investable tokens, and their 7-day returns last week (to see a comprehensive list, click here). If you’re tracking an index that doesn’t include, or at least mention some assets like these, you are just not getting an adequate representation of this growing asset class.


Anthony Pompliano recently wrote: “We may see the repeat of the 1990s equivalent. In the 1990s, you made a lot of money if you took existing businesses in the analog world and brought them online. In the 2020s, you are probably going to make a lot of money if you take existing businesses and figure out how to build decentralized versions.” That sure seems like a much bigger investable opportunity set than a “diversified” basket of Bitcoin and Ethereum. Tether Fears and FCA Warnings are Back It’s not a bull market until the “bubble” and “fraud” allegations resurface. Last week, the FCA warned customers about the risks of investing in firms that promise high returns related to "cryptoassets", citing high risk as a reason to be gun shy. Not to be outdone, an anonymous author once again resurfaced arguments against the largest stablecoin (Tether USDT), specifically, that the only reason Bitcoin has risen is because of fraudulent creations of Tether. Let’s start with the FCA. We agree with them -- investing has risks, and we applaud any organization that helps retail investors stay safe. Though it is a bit hypocritical that a residential mortgage broker can tell a homeowner whatever they want with regard to seemingly guaranteed upside when you buy a house, yet they are so worried about a digital asset industry that is 10x smaller and has no brokers. Nonetheless, this warning rings true. Stay safe and be careful. The second argument regarding Tether being a stablecoin printed out of thin air for the sole purpose of manipulating Bitcoin’s price is just pure nonsense. This article makes the following illogical argument: People convert dollars, yen and euros into Tether, and then Tether is used to buy Bitcoin -- therefore, there isn’t real demand for Bitcoin because if there was, these people would just buy Bitcoin directly with dollars, yens and euros. Therefore, both Tether and Bitcoin must be fraudulent. This is the equivalent of saying that parking meters are fraudulent because you have to convert dollars into quarters before using parking meters, and if it wasn’t fraudulent, people would just jam the dollar bills into the parking meters. Independent of your feelings regarding Tether’s parent company and its legitimacy, the fact is that it is still very difficult to use traditional banks when dealing with digital assets. Despite the progress from the OCC, many banks and brokerages still deny customers the ability to interact with any company labeled as a digital asset company. Therefore, it is very hard to go directly from dollars, yen or Euros into Bitcoin. As such, the Tether (USDT) stablecoin became an on-ramp solution. Is it perfect? Absolutely not. Is it 100% backed by US dollars? No one knows for sure. But is there real demand for Tether from investors (typically overseas) who want to get out of their local currencies into USD assets, and then use those USDT to buy Bitcoin? Yes, unequivocally. The author then urges well capitalized hedge funds to try to break the peg by shorting USDT until it breaks. Sure, this could work. If you short enough of an asset, the peg will probably break. Similarly, if every owner of Apple stock sold all at once, or every owner of government bonds sold all at once, those markets would structurally break too. That doesn’t make something fraudulent; that means if supply is greater than demand, a price will go down. We challenge our assumptions every day, and constantly look for reasons that we’re wrong rather than confirmation that we’re right. But this article’s argument should be flat out dismissed.

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