First step: 1 trillion US in cryptocurrencies present a booming "asset class"


Bitcoin (BTC) rose for the third year in a row, hitting a new all-time high of over $ 38,000 early Thursday, pushing bullish traders to $ 40,000.

"The momentum has increased over time, and it is unclear where or when we will eventually get the top result," Mati Greenspan, founder of forex and cryptocurrency analysis company Quantum Economics, told clients in a newsletter.

The gains came after a day of turmoil in Washington, DC, when US President Donald Trump's supporters stormed the Capitol and disrupted a Congressional vote to formalize challenger Joe Biden's victory in the presidential election last November. The shocking images prompted world leaders from Britain, the European Union and Canada to condemn what they termed an unacceptable attack on democracy. US lawmakers re-convened and confirmed the election results later early Thursday.

According to Bloomberg News, global investors are now focusing on the likelihood that a Biden White House, backed by a Democratic Party-controlled legislature in both chambers, could more easily pass new US stimulus measures. Bitcoin prices quadrupled in 2020 as a growing number of large Wall Street investors said the cryptocurrency could serve as a hedge against the possible negative impact of trillions of dollars in fiscal and monetary stimulus on the value of the dollar.

In traditional markets, European and Asian stocks rose on Thursday and US stock futures indicated a higher open. Gold weakened 0.1% to $ 1,916 an ounce.

Market moves

Earlier this week, First Mover pointed out the possibility that the total market capitalization of all cryptocurrencies combined could exceed $ 1 trillion within a few months.

It turned out that it only took a few days. The total market value of Bitcoin and all other digital tokens and stablecoins surged into the trillion dollar zone for the first time late Wednesday. As reported by CoinDesk's Zack Voell, the industry peaked at $ 760 billion in the last big bull run in late 2017.

The milestone could prove to be another catalyst for large Wall Street funds to look more seriously at cryptocurrencies for possible portfolio allocation. It's getting harder and harder to argue, as the big bank and brokerage firm Goldman Sachs did last May, that cryptocurrencies are "not an asset class". The sums are getting too big to ignore.

“Is it frothy? A bit in the short term, ”Qiao Wang, co-founder of the DeFi Alliance, an accelerator company for decentralized finance (DeFi), told Voell. But is it ridiculous? "Nah."

One of the biggest financial stories over the last decade has been the rapid (and worrying) growth of so-called leveraged loans, which are large loans made by Wall Street companies on behalf of junk-grade or even unrated companies and then usually allocated to other banks, sold to investors or even converted into new triple A-rated bonds through the alchemy of structured finance.

The headlines were big when the outstanding amount of US leveraged loans rose to around $ 500 billion in late 2010 and doubled to $ 1 trillion in early 2018.

Cryptocurrencies have now overcome this gap in just a few months.

"The $ 1 trillion mark cements cryptocurrency as an investable asset class that is no longer on the fringes of traditional finance as a toy for private investors," Jack Purdy of crypto market analyst Messari told Voell. "It shows that this asset class is large enough to accept large orders, as we have recently seen at a large number of institutions over the past few months."

Source: TradingView

Bitcoin, the original cryptocurrency and by far the largest, makes up around 70% of the industry's total market capitalization. So the push towards the $ 1 trillion milestone largely followed last year's Bitcoin rally.

Bitcoin now has a market capitalization of around $ 700 billion, up from $ 130 billion at the beginning of 2020. According to website, Bitcoin would be ranked the 16th largest global currency because of its outstanding value, just ahead of the Mexican peso and one rung under the Russian ruble.

And if Bitcoin were a publicly traded company, it would be the eighth largest in the world, well behind Apple's valuation of $ 2.1 trillion, Amazon of $ 1.6 trillion and Facebook of $ 751 billion, according to another website, AssetDash Dollars, but well above the major US financial institutions like Visa ($ 468 billion), JPMorgan Chase ($ 401 billion), and Citigroup ($ 135 billion).

If the recent trend is any indication, Bitcoin could further improve these ranks.

Bitcoin clock

An increasing spread between the implied volatilities in Bitcoin and Ether options could signal a rotation towards alternative cryptocurrencies.

Source: Skew.

Options traders are signaling an emerging shift in the digital asset markets – from a focus on Bitcoin to a relatively undervalued ether (ETH) and alternative cryptocurrencies.

The spread between the six-month implied volatility (IV) for Ether and Bitcoin – a measure of the expected relative price volatility between the two – has risen to a record high of 46%. According to data provider Skew, this exceeds the previous high of 45% on February 21, 2020. The three- and six-month spreads have risen to 11-month highs of 32% and 23%, respectively.

The widening of IV spreads suggests that the market expects ether and other alternative coins to see larger percentage moves than Bitcoin in the short term.

"Traders expect increased volatility for ether compared to Bitcoin," Emmanuel Goh, CEO of Skew, told CoinDesk. "This is consistent with a decreasing correlation and an increase in interest in alternative cryptocurrencies."

Some may argue that the implied volatility reflects investors' expectations of the price turmoil and may not be reflected on future charts. However, historical data shows that implied volatility spreads are reliable indicators of impending market shifts. For example, the Ether-Bitcoin IV spread plummeted in the second half of September 2020, suggesting a large shift towards Bitcoin. And the largest cryptocurrency shipped, significantly outperforming most other cryptocurrencies in the final quarter of last year, rallying 168%.

Read More: Expected Increase In Ether Bitcoin Volatility Points On Altcoin Season Ahead

What is hot?

With increasing institutional interest, CME becomes the largest Bitcoin futures exchange (CoinDesk)

The Maker Governance Token MKR climbs 44% in 24 hours to its highest level in two years as the emission of Stablecoin Dai (DAI) rises along with the rapid growth of DeFi (CoinDesk).

Crypto Brokerage Voyager suspends trading in XRP tokens after SEC lawsuit against Ripple Labs (CoinDesk)

Bitcoin investments make sense in the current economic climate, former Fed Governor Kevin Warsh told CNBC (CoinDesk).

Kraken users are putting more than $ 1 billion into crypto, including Ether (ETH), Tezos (XTZ), and Polkadot (DOT) (CoinDesk).

Eric Vorhees & # 39; ShapeShift plans to exit the centralized trading activity and forwards orders via DeFi applications, whereby “users no longer have to provide personal, private information” (CoinDesk).

Iranian Authorities Shut Down 1,620 Illegal Cryptocurrency Mining Farms According to Financial Tribune (CoinDesk)


The latest on economics and traditional finance

The US economy was rebounded on the Georgia sweep of the Democrats, possibly another 1-ton incentive (Bloomberg).

Danish 20 year mortgages now have a fixed rate of 0% (Bloomberg)

The Italian government could borrow US $ 17 billion from UniCredit to facilitate the takeover of the state-owned Monte dei Paschi (Reuters).

U.S. private payrolls see first drop in eight months as coronavirus cases skyrocket (Reuters)

US private employment growth turned negative for the first time in eight months in December, according to paycheck processor ADP.

Source: ADP

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Melinda Martin