This week in crypto: What’s causing prices to tumble?
From China’s crackdown to the Fed’s interest-rate warning, understand the forces at work. Also: VCs, hedge funds are bullish about crypto’s future
Published on June 21, 2021
Prices for a wide variety of major cryptocurrencies — everything from Bitcoin and Ethereum to buzzy cryptos like Dogecoin and DeFi tokens like Uniswap’s UNI — tumbled sharply this week. Bitcoin dropped from around $41,000 to a low near $31,000 (less than half of its April high of $65,000) and ETH dropped below $2,000. Some investors took advantage of low prices to “buy the dip,” while others bailed on fast-falling tokens. Just last week, we were reporting a slew of positive news (including El Salavador’s legislation that will make Bitcoin legal tender) that had buoyed prices. So what happened since? Let’s dig in…
The big picture
The broader cryptocurrency market has lost $1 trillion in value since May — down from around $2.5 trillion to $1.5 trillion. A major factor driving the decline has likely been China’s weeks-long crackdown on crypto, which entered a new phase this week. The province of Sichuan ordered mining operations to shut down on Friday; Weibo, a hugely popular social-media platform in China, reportedly shuttered the accounts of popular crypto commentators; and on Monday, China’s central bank doubled down on warning the nation’s financial firms not to conduct crypto business. According to a Bloomberg report, “China … summoned officials from its biggest banks to a meeting to reiterate a ban on providing cryptocurrency services. It’s the latest sign that China plans to do whatever it takes to close any loopholes left in crypto trading.”
Another potential factor? Following Wednesday’s meeting of the Federal Reserve, the central bank signalled it may raise interest rates sooner than expected in response to rising inflation. The dollar strengthened initially following the meeting, and stocks briefly dipped before returning to all-time highs. Crypto, on the other hand, continued its downward trend following the meeting.
In the world of DeFi, a high-profile project backed by Mark Cuban called Iron Finance saw prices for its TITAN token collapse from a high of around $65 to near zero as panicked sellers bailed. According to Bloomberg, Cuban hasn’t revealed the size of his loss, but said, "as a percentage of my crypto portfolio it was small ... but it was enough that I wasn't happy about it." (Reminder to crypto beginners looking to explore high-yield DeFi projects: only invest what you can afford to lose.)
Some other prominent declines? “Internet computer's ICP token is down over 90% from its all-time high price set shortly after its launch in May,” Forbes reports, “while EOS, which made headlines when it raised $4.1 billion ahead of its launch in 2018, is trading 80% lower.”
Of course, many investors took advantage of low prices to increase their holdings. Bitcoin’s biggest corporate backer, Microstrategy, doubled down and purchased nearly $500 million more Bitcoin.
Looking for some strategies that can help you weather a down market? We have you covered.
Is Bitcoin good politics?
Miami, which recently hosted the Bitcoin 2021 conference, is now trying to woo displaced Chinese Bitcoin-mining operations with low energy prices and, according to CNBC, “essentially unlimited supply of cheap nuclear energy nuclear power.” Mayor Francis Suarez told the network that the city is working to lower the cost of electricity in order to entice miners to make the move to Florida. In terms of climate emissions, nuclear energy is a “clean” source of power. Also this week:
The National Republican Congressional Committee announced it will begin accepting campaign contributions in crypto. As Bloomberg reports, “The group said it was the first national campaign committee to accept contributions via cryptocurrency.”
At least four hearings related to cryptocurrency are being held by Congress this month. The hearings come as Washington increasingly attempts to clarify regulation around the industry.
Institutional report: hedge funds, VCs bullish on crypto
A survey of 100 hedge fund CFOs found that they expect to hold more than 7 percent of their assets in crypto within five years — holdings which would total around $312 billion.
Crypto asset manager Grayscale is exploring 13 new products, including funds tied to Solana (SOL) and Polygon (MATIC) tokens. As the Block reports, “Grayscale is the largest crypto asset manager in the world, managing more than $34 billion in client assets.”
Goldman Sachs, which relaunched its crypto-trading desk earlier this year to provide Bitcoin exposure to certain clients is now expanding into Ethereum via futures and options contracts.
High-profile investors including Peter Thiel backed a decentralized autonomous organization called BitDAO’s $230 million fundraise. BitDAO will provide grants to fund DeFi projects.
Wedbush Securities, a brokerage and wealth manager that manages assets worth more than $2.4 billion, became the fifth financial institution (others include Bank of America and Credit Suisse) to join Paxos’s blockchain-based equities settlement network — which allows two parties to settle stock trades in under a day.
More than $17 billion in venture capital has poured into the crypto industry so far this year — only slightly less than all previous years combined.
In other news: Fox bets $100 million on NFT studio
Fox Entertainment announced $100 million in funding for its new NFT business division Blockchain Creative Labs, which it’s launching in partnership with Bob’s Burgers producer Bento Box. “Blockchain Creative Labs will build, launch, manage and sell NFT content and experiences, and fungible tokens, as well as digital goods and assets,” according to The Hollywood Reporter. “BCL’s first focus will be creating NFTs for Rick and Morty co-creator Dan Harmon’s upcoming Ancient Greece-set animated series Krapopolis.”
According to a new survey by the U.K. regulator FCA, nearly 80 percent of British people have heard of crypto, but fewer than five percent have purchased some.
Formula 1 team McLaren Racing announced plans to build a NFT platform on the Tezos blockchain — chosen because Tezos is an energy-efficient proof-of-stake blockchain. And in NASCAR, Landon Cassill will be the first driver to be paid entirely in cryptocurrency by his main sponsor.
Wondering which cryptocurrencies would have provided the biggest return on investment (or ROI) over the last week, month, and year? Then check out our weekly chart: