This week in crypto: Apr 13-19
Volatility hits crypto prices, Wall Street eyes Ethereum, and BTC ETF anticipation builds
Published on April 19, 2021
The big picture
Volatility is the story as bitcoin prices briefly rallied today after falling by more than 16 percent in weekend trading — bottoming out at a three-week low of around $52,000. Other cryptocurrencies, including Ethereum and many DeFi tokens, also saw major swings.
So what’s been driving this volatility? Theories abound, ranging from a sharp drop in the Bitcoin network’s hash rate following blackouts in China that shut down miners to news about a ban on crypto payments in Turkey to a spiral of liquidations from leveraged traders.
As prices began to decline overnight on Saturday, traders liquidated nearly $8 billion in BTC long positions in an hour. According to two analysts interviewed by Forbes, that selloff, combined with typically lower weekend liquidity, were the major drivers of the decline.
Prices did bounce back some subsequently, and the week looks to have ended around where it began. As Chad Steinglass, head of trading at digital assets firm CrossTower, told Forbes, “The support and bounce back is encouraging and indicates that the long underlying trend of increased confidence and increased institutional adoption has not disappeared.”
Institutional crypto news from Wall Street and beyond
On April 14, Coinbase became a publicly traded company, listed on Nasdaq under the symbol COIN. For more information, read CEO Brian Armstrong's letter to mark the occasion as well as our listing announcements. In other institutional news:
Hedge fund Brevan Howard announced that it will begin investing up to 1.5 percent of its main $5.6 billion fund in cryptocurrencies. As another sign of institutional interest, the CEO of BlackRock, the world’s largest asset manager, said of crypto: “It may become a great asset class and I do believe this can become a great asset class."
Is Ethereum the next cryptocurrency to attract institutional interest? Some signs are positive. Consensys, a crypto-technology company focused on Ethereum, raised $65 million from firms including JP Morgan Chase, Mastercard, and UBS.
Open interest for Ethereum hit all-time highs on the Chicago Mercantile Exchange (CME). Futures allow investors to bet on (and hedge against) price movements, and are commonly used by institutions. As reported by The Block, “Crypto trading on CME has become a barometer for broader institutional activity in the digital assets sector.”
Canada approves Ethereum ETFs; U.S. crypto ETFs await SEC greenlight
After more than $1 billon in investment has flowed into Bitcoin ETFs (or exchange-traded funds) in Canada in recent weeks, the nation is now on the verge of approving three Ethereum ETFs. In the U.S., eight applications for Bitcoin ETFs have been filed with the SEC since December. According to Bloomberg, “industry-watchers are wagering the agency will follow its northern neighbor’s lead.”
ETFs are similar in many ways to mutual funds. They generally track the price of an asset (like bitcoin) or basket of assets (like the S&P 500) — making it easy for investors to diversify their portfolios without having to hold crypto or stock directly. As their name suggests, they trade on exchanges and can be bought and sold like stock via a traditional brokerage account.
Deep dive: Understanding China’s digital yuan
The Biden administration is taking a closer look at China’s rollout of its digital yuan — out of concern that the move is part of a long-term challenge to the U.S. dollar’s status as the world’s reserve currency.
But according to China’s central bank, challenging the dollar may not be China’s central goal — instead it says it seeks to replace physical currency, reduce the allure of crypto, and create an alternative to hugely popular payment platforms from companies like Alibaba and Tencent.
As China presses forward with the digital yuan, Bitcoin has found new support from both current and former U.S. government officials. Former acting CIA director Michael Morrell recently challenged crypto myths: “We need to make sure that the conventional wisdom that is wrong about the illicit use of Bitcoin doesn't hold us back from pushing forward the technological changes that are going to allow us to keep pace with China.”
In an interview on CNBC, Republican House leader Kevin McCarthy expressed a similar concern, saying that regulators need to better engage with Bitcoin as it grows: “Those who regulate, those who are in government that make policy better start understanding what it means for the future because other countries are moving forward, especially China.”
Quick hits: NFTs continue to boom, memestock forum eyes crypto
Miami’s county commissioner has proposed the creation of a task force to assess the viability of accepting crypto for county taxes, fees, and services.
Another week, another eye-popping NFT price tag. From Bloomberg: “NFT Frenzy Shows Staying Power With $16.8 Million Sotheby's Sale”. (Learn about NFTs.)
WallStreetBets, the Reddit forum at the center of this year’s memestock saga, is now allowing discussion of cryptocurrency.
Want to see which crypto investments are generating the highest returns? Each week we chart the return on investment (or ROI) over the last week, month, and year for the ten most popular cryptocurrencies tradable via Coinbase.