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What investors think about this rally

What investors think about this rally

As the crypto market stages a January rally, bulls and bears are weighing if it will last. [Jakie Niam via Getty Images]

There’s never a dull moment on the blockchain. Here’s what you need to know this week:

Bitcoin revisited $23,000 for the first time since summer. But not all investors and analysts agree on the crypto rally’s momentum.

Key cryptoverse quotes. FTX’s new CEO talks restarting the business, and Jamie Dimon unveils his wild theory about Bitcoin. 

Numbers to know. The long odds an individual miner overcame to secure a Bitcoin block, and other stats from this week.

MARKET UPDATE

Investors are split on one big question: Will this rally keep going?

As January’s crypto rebound maintains momentum, Bitcoin and Ethereum notched a third straight week of gains, both up more than 30% since the year began. And while some market analysts are beginning to believe that the worst of the crypto downturn could be behind us, others are far more tentative about crypto’s hot start to 2023. Let’s take a closer look at this week’s market moves — and what some investors and analysts are saying about this early-year rally.

Crypto’s total market cap hovers above $1 trillion, while BTC and ETH continue to reach new highs for the year.

  • Bitcoin crossed the $23,000 threshold over the weekend for the first time since August. The largest cryptocurrency by market cap has also dramatically outperformed stocks so far this year, with BTC up about 38% year-to-date, compared to 5% for the S&P 500, as of Tuesday morning.

  • Ethereum jumped more than 7% last week, topping $1,600 for the first time since the FTX collapse in November. Some investors believe that the coming Shanghai upgrade, which will enable investors who staked ETH to begin withdrawing their crypto and unlocking rewards, is a key catalyst for ETH’s momentum. The network’s developers began their first tests of the new upgrade on Monday morning.

  • Some long-dormant altcoins also showed signs of life recently. AXS, the native token of the web3 game Axie Infinity, rose 40% over the weekend to reach a four-month high of $13.94. Memecoins DOGE and SHIB have also rallied an impressive 25% and 30% since the beginning of the year — likely boosted by a combination of easing risk aversion and technical updates

Investor and analyst sentiment is split regarding the potential longevity of this rally, which was boosted by a lower inflation reading this month.

  • A Twitter poll from the widely-followed @Bitcoin account received more than 18,000 responses about BTC’s rally — 44% of respondents believed the runup was a “bull trap” and that a retracement was imminent, while 34% believed it was the start of a new bull run.

  • Wall Street giant Bernstein described the current rally as a “mean reversion” for crypto prices and noted that BTC has never had two consecutive years of negative returns. “We would be cautious to be bearish here,” read an analyst note. “But is this the start of a new sustained rally? Unlikely.” 

  • According to Morgan Stanley analysts, liquidations of short BTC futures have propelled the rally. However, BTC options analyses have offered mixed signals lately. Per a CoinShares report, bearish traders dominate the market, and of the $37.7 million of new capital poured into crypto-related funds last week, 68% was short the market. But according to Kaiko Research’s analysis, bulls are in charge: “The share of calls relative to put volume is currently at more than 66%, its highest level in over a year.”

Why it matters… Perhaps the most straightforward, or at least, honest, take on the crypto uptick came, surprisingly, from J.P. Morgan (more on CEO Jamie Dimon’s renewed crypto skepticism in Takes): “We don’t have a great answer on the January-to-date rally of crypto.” So what are hodlers, investors, and analysts to make of this rally, even as crypto markets remain in a vulnerable position? According to J.P. Morgan, this moment is ”emblematic of the underlying conviction many still have in cryptocurrencies.”  

TAKES

FTX’s new CEO talks about restarting the exchange, and other key quotes from this week

FTX 2.0… “If there is a path forward on that, then we will not only explore that, we’ll do it,” said FTX’s new CEO, John J. Ray III, regarding the idea of, wait for it, restarting the bankrupt crypto exchange. Despite former FTX executives facing charges of criminal misconduct, Ray told the Wall Street Journal that he’s created a task force to explore rebooting the business: “Everything is on the table.”

Forever 21?... “Maybe it's gonna get to 21 million and Satoshi’s picture is gonna come up and laugh at you all” was how J.P. Morgan CEO Jamie Dimon described his — extremely unlikely (if, okay, kind of funny) — theory that the total supply of Bitcoin won’t ultimately be limited to 21 million coins. A longstanding critic of Bitcoin, Dimon has made similar statements before, which crypto Twitter has enjoyed debunking

Common Ground… “Wonder if they would consider moving to Bitcoin - that would probably be the right long term bet,” Coinbase CEO Brian Armstrong suggested in response to the news that Brazil and Argentina are exploring the creation of a common currency which would unite South America’s two largest economies in forming the world’s second-largest currency bloc. The countries’ common-currency proposal was met with skepticism from some economists. 

Stealth Mode… “One of the largest remaining challenges in the Ethereum ecosystem is privacy,” wrote Ethereum co-founder Vitalk Buterin in a new blog post in which he went on to discuss a new tool that could address the fact that what goes onto a public blockchain is public: “stealth addresses.”

NUMBERS TO KNOW

$4.6 billion

Approximate value of Ether (2.8 million ETH) that’s been burned — or removed permanently from circulation — since Ethereum’s EIP-1559 network upgrade went into effect in August 2021. EIP-1559 is intended to make transaction fees more predictable while reducing ETH’s circulating supply, which is now over 120 million coins.

$700 million

Value of assets linked to FTX and disgraced former CEO Sam Bankman-Fried that U.S. prosecutors have seized, per a Friday court filing. Comprising the bulk of the repossessed funds were roughly 55 million shares of Robinhood stock (worth about $530 million), which law enforcement alleges had been purchased with stolen FTX customer funds. Last May, SBF announced he had purchased a 7.6% stake in Robinhood.

2

Number of consecutive months (December and January) that saw an increase in Ethereum NFT sales — the first month-to-month improvement since the end of 2021. Leading NFT marketplace OpenSea has processed over $320 million in NFT volume this month, already beating December’s total of $283.5 million.

1 in 26.9 million

Estimated odds a lucky amateur miner overcame on January 20 to add a new block of data to Bitcoin’s blockchain and claim a 6.25 BTC block reward (worth about $143,000 as of January 23). In Bitcoin’s early years, anyone with a decently powerful PC could feasibly participate in mining; these days the industry is powered by vast mining farms full of specialized equipment. Individuals are still welcome to join the network, but the odds of winning against corporate miners, like Marathon Digital or Argo Blockchain, are extremely long. 

DISCLAIMER

This material is the property of Coinbase, Inc., its parent and affiliates (“Coinbase”). The views and opinions expressed herein are those of the author and do not necessarily reflect the views of Coinbase or its employees and summarizes information and articles with respect to cryptocurrencies or related topics that the author believes may be of interest.

TOKEN TRIVIA

What is a DAO?

A

Decentralized autonomous organization

B

A smart-contract powered way to organize people

C

A versatile group structure that allows strangers to share ownership

D

All of the above

Find the answer below.

Trivia Answer

D

All of the above