This week in crypto: Mar 30-Apr 5
In our new report, Crypto market cap breaks $2 trillion, Wall Street giants make Bitcoin moves. Also: what is happening with Filecoin?
Published on April 5, 2021
The big picture
In a major milestone, the total market cap for all cryptocurrencies has exceeded $2 trillion. The two largest, Bitcoin and Ethereum, currently hover above $1.2 trillion combined.
The broader ecosystem is also growing at a rapid pace — with crypto-related companies (infrastructure, loans, games, and more) receiving more funding in the first quarter of 2021 than in all of 2020. As Bloomberg reports: “The increase was fueled by several large rounds for startups including crypto lender BlockFi Inc., game-maker Dapper Labs Inc. and crypto wallet provider Blockchain.com.”
And in other news…
This week saw the return of South Korea’s “Kimchi Premium” — in which Bitcoin prices via the nation’s biggest exchange command a premium (currently around 15 percent) compared to prices on non-Korean exchanges like Coinbase. Ether is also trading at a premium, indicating higher-than-average crypto demand from South Koreans.
China’s central-bank digital-currency project is accelerating its rollout, raising questions around financial both privacy and the U.S. dollar’s role as the dominant currency for the global financial system. The Wall Street Journal reports: “When Bitcoin launched in 2009, most nations’ policy makers largely played down its significance. China paid attention.”
That said, China isn’t alone — as we reported last week, central banks from many of the biggest economies in the world, including the U.S., are pursuing similar efforts.
Wall Street meets Bitcoin
In March, CNBC reported that Morgan Stanley would be the first big U.S. bank to offer Bitcoin investment for wealthy clients. Now, new regulatory filings indicate that the financial-services giant will allow funds to invest ‘indirectly’ in Bitcoin through cash-settled Bitcoin futures and the Grayscale Bitcoin Trust — which are both popular methods for institutions looking to invest in Bitcoin.
Has (relatively) low Bitcoin volatility been driving Wall Street’s interest? A recent report from JP Morgan suggests that: “The recent pullback in Bitcoin’s volatility is setting the stage for a trend that could encourage institutions to dive in.”
What’s going on with Filecoin?
Compared to the beginning of 2021, Bitcoin has offered around 100 percent returns — making it a famously strong investment opportunity. But it’s not even close to the top performer in the space. Over the last three months, Filecoin has surged nearly 700 percent — and last week it cracked the Top 10 largest cryptocurrencies by market cap.
What is filecoin? Filecoin (FIL) is a cryptocurrency that powers the Filecoin network, which is a decentralized, peer-to-peer competitor to cloud storage products like Dropbox or Amazon Web Services. Data stored via Filecoin is distributed across the entire network — as opposed to traditional centralized-server storage. FIL tokens are used as payment for these services and as an economic incentive to ensure files are stored reliably over time.
So what exactly is happening? For one, a few prominent crypto funds have begun tracking Filecoin:
Last week, the cryptocurrency was added to the Bitwise 10 Crypto Index Fund. As of writing, the Bitwise 10 has over $1 billion in assets under management.
In March, Grayscale offered a new investment trust for Filecoin (alongside four other cryptocurrencies). The new Grayscale Filecoin Trust has grown to $8.7 million in its first few weeks of operation.
Search interest for Filecoin has also risen, with Google Trends showing especially high interest from China in recent days. Companies that invest in crypto mining in that country have made major moves into Filecoin this year. In February, publicly traded firm The9 Limited announced an agreement to purchase $10 million in Filecoin mining machines. Another Chinese company, New Universal, recently announced a $90 million investment in Filecoin mining.
The Filecoin network includes a system where some coins are “burnt,” thereby reducing circulating supply and potentially driving up prices.
Filecoin miners both verify new transactions and provide peer-to-peer file storage for the network’s users — miners who wish to participate in peer-to-peer storage “lock” some of their FIL as collateral, and earn rewards in exchange for the service.
As of writing, there is 108.9 million FIL in circulation.
20.8 million FIL has been burnt.
57 million FIL are locked by miners, who are currently providing over 4,500 petabytes of data storage. How much is that? 4,500 petabytes is estimated to be enough space to store more than 1,000 copies of Netflix’s entire library.