Bitcoin's Latest Rally Proving Irresistible as Bitwise Assets Top $100M

ALSO: JPMorgan's blockchain play and Microstrategy's future (bitcoin) plans

October 28, 2020 Sponsored By: By the CoinDesk Markets Team Edited by Bradley Keoun If you were forwarded this newsletter and would like to receive it, sign up here.  Bitcoin (BTC) -1.1% $13,516 Ether (ETH)  -2.9% $392 (Price data as of Oct. 28 @11:49 UTC) TODAY: Price Point: Bitcoin pauses after rallying 25% this month toward the June 2019 high.  Market Moves: The latest price rally has extended bitcoin's lead over U.S. stocks in year-to-date performance, setting up what could become a self-reinforcing trend as more investors take notice.   Bitcoin Watch: Blockchain data point "market value to realized value," or MVRV, suggests prices have ample room to run, CoinDesk's Omkar Godbole writes.    What's Hot: JPMorgan formalizes blockchain play, Microstrategy plans more bitcoin purchases, financing options proliferate for crypto miners, BlockFi takes big stake in GBTC.  Price Point Bitcoin was lower, pausing a powerful rally that has seen the largest cryptocurrency jump 25% in October to the highest levels since June 2019. Traditional financial-media outlets like Bloomberg News were writing about it.    Prices appeared to hit resistance just below $13,900, close to last year's high. But analysts said that if the level is breached, there appear to be few brake points before the 11-year-old cryptocurrency ascends to $14,000 or beyond.    "Between the levels of $14,000 and $20,000, there is insufficient price data to single out any specific points of resistance," Mati Greenspan, founder of the foreign-exchange and cryptocurrency research firm Quantum Economics, told subscribers in a newsletter.    In traditional markets, European stocks dropped to a five-month low and U.S. equity futures were declining, amid investor concerns about rising coronavirus case loads. Gold weakened 0.4% to $1,900 an ounce.  Market Moves Bitcoin's recent rally as U.S. stocks floundered has simply widened the cryptocurrency's outperformance compared with traditional markets. As more investors tune in, the expanding gap could become a self-reinforcing trend.    Following Tuesday's price surge to a new 2020 high around $13,700, bitcoin is now up 90% year-to-date. That puts the cryptocurrency well on pace to exceed last year's 94% gain.   It's also far ahead of the Standard & Poor's 500 Index of large U.S. stocks, where a recent slide has trimmed the year-to-date gains to just 5%, after a 27% rise in 2019.    Many big institutional investors, such as pension funds, are under pressure to hit annual return targets of 7%, and with stocks now faltering and bond yields close to historic lows, they're casting about for alternatives. Bitcoin's track record alone might be enough of a sell, but the 11-year-old cryptocurrency also represents what could be the beachhead of a brand new, state-of-the-art financial system – the digital rails, as the crypto-market ecosystem is described by some industry executives.   Then there's the theory among many investors that bitcoin's fixed supply makes it a useful hedge against central-bank money printing – yet another compelling narrative at a time when top authorities from the Federal Reserve to the European Central Bank and International Monetary Fund say massive stimulus is needed to keep the global economy from faltering. As highlighted in this column earlier this week, even analysts for the once-naysaying JPMorgan Chase, the biggest U.S. bank, are now opening discussing bitcoin's potential upside.     "Every major institution is re-looking at it right now," Matt Hougan, chief investment officer of the cryptocurrency-focused money management firm Bitwise, told CoinDesk in a phone interview. "There's lots of pings in my LinkedIn inbox." The San Francisco-based firm announced Wednesday that its assets under management recently crossed above $100 million for the first time.  Bitcoin's year-to-date returns versus gold and the Standard & Poor's 500, through Tuesday. (Arcane Research) According to Hougan, there are a few key differences now from prior bull runs in bitcoin, such as in 2017 when the cryptocurrency's price shot to up to about $20,000.    There's been a rapid explosion in the industry's support infrastructure, from the development of regulated asset custodians to more reliable pricing feeds and more recently U.S. officials' move to explicitly authorize banks to provide services to cryptocurrency companies. Last week's move by PayPal to let users buy bitcoinoffers a new seal of approval from an established company along with an incentive for other big financial firms to follow suit, in order to avoid getting left behind.    Notably, Bitwise has repeatedly failed in its years-long efforts to win approval for a bitcoin exchange-traded fund. But Hougan said his firm has found a growing and welcoming cadre of financial advisors looking to steer money into its cryptocurrency investment funds, since they're among the few assets having any major positive impact in 2020 on clients' portfolios.   "We're reaping the harvest of two years of building infrastructure in this space," Hougan said. "It's no surprise that we're hitting multiyear highs."    Digital-asset traders are so familiar with bitcoin's infamous price swings that such bullishness can sometimes sound fawning, breathless, credulous. But right now it's not just crypto money managers selling the story; bitcoin is getting a shot of credibility from its own market performance.     Surge in bitcoin futures open contracts on the Chicago-based CME reflects increasing speculation by institutional investors. (Arcane Research)  SPONSORED BY KAIKO Kaiko is the premier cryptocurrency market data provider for professional traders, researchers, exchanges, fund managers, and custodians.   Our data services enable seamless connectivity to historical and live data feeds from 100+ spot and derivatives exchanges. Highly-granular data for professionals: Trade data, order book snapshots, tick-level order books, OHLCV candlesticks, exchange rates, and more. Extensive coverage: 6+ years of history for more than 40,000 traded instruments (spot, futures, swaps, and options). Flexible data delivery: Robust REST and WebSocket APIs designed for enterprise-use and downloadable CSV files through a cloud-based Data Feed. On-call support: Private slack channels, SLA's and integration assistance. Request a free trial, browse our data dictionary, and subscribe to our weekly research newsletter today! Learn More Bitcoin Watch Blockchain data point "market value to realized value," or MVRV, currently with a Z-score well below 7, suggests prices have ample room to run. (Glassnode) Bitcoin has decoupled from stocks this week. Prices narrowly missed the June 20019 high of $13,880 early Wednesday and were last seen at $13,550.   The minor pullback could be attributed to the overbought conditions signaled by the above-70 reading on the 14-day relative strength index (RSI). The 14-week RSI has also crossed above 70.   An overbought reading does not imply a bearish reversal. That said, it often yields a temporary consolidation or pullback similar to the one seen in May and July.   Dips, however, could end up recharging bulls' engine for a stronger rally, as fundamental indicators such as market value to realized value (MVRV) Z-score, which measures market value's deviation from realized value to assess undervalued and overvalued conditions. Right now the indicator suggests that bitcoin is far from overvalued and has plenty of room to extend the sharp rally from $3,867 to $13,800 seen over the past 7.5 months.   The MVRV Z-score, currently at 2.12, is hovering at two-year highs, according to data source Glassnode. That's still well below the 7.0 score at which an asset is considered near a top.   All things considered, the path of least resistance for bitcoin remains to the higher side and bigger gains look likely albeit after minor consolidation.   – Omkar Godbole Read More: Is Bitcoin's Rally Overstretched? This Key Indicator Says No What's Hot JPMorgan invites banks and financial technology companies to build on revamped blockchain network (CoinDesk)     Ethereum developer ConsenSys to assist French bank Societe Generale with research on central bank digital currency pilot (CoinDesk)    MicroStrategy's bitcoin stash now at $521M, executives planning to buy more (CoinDesk)   Proliferation of financing options for bitcoin miners drives down profit margins in increasingly crowded space (CoinDesk)     Crypto lender BlockFi takes 5% stake in Grayscale's $4.8B bitcoin trust (CoinDesk) (EDITOR'S NOTE: Grayscale is owned by Digital Currency Group, the parent of CoinDesk)    Startup Yield Protocol aims to create DeFi money market (CoinDesk)    Bitcoin's Lightning network vulnerable to attacks via multiple routes (CoinDesk)    Analogs Consumer confidence declines in three U.S. states vital for Trump re-election as economic worries increase (Reuters) Australia's two biggest IPOs of 2020 highlight "barbelled" global economy – coal terminal paying high dividends and high-tech software maker offering fast growth (Reuters) Singapore central bank sees economic recovery "gradual and uneven" (Bloomberg) Pro-democracy protests in Thailand fail to rattle country's IPO boom (Nikkei Asian Review)   Tweet of the Day Most Influential 2020: Cast Your Vote   Every year, CoinDesk recognizes the "Most Influential" people working to expand cryptocurrency and blockchain's reach. It's a list of the 10 outsized individuals who have gone the furthest and done the most.   In this most unusual year, we need your help determining who should be named as Most Influential. Check out the list of the top contenders and cast your vote by Oct. 31. With the U.S. Election Day next week, much is at stake - including crypto policy over the next four years.   Like it or not, this election will matter for the crypto industry. Our latest limited-run newsletter, The State of Crypto: Election 2020 by regulatory reporter Nikhilesh De, aims to walk you through why.   At stake: Will new crypto products be approved or allowed to operate in the U.S.? Will regulators target more overseas exchanges and platforms like BitMEX? Will the U.S. launch a "digital dollar" or some other form of central bank digital currency?   These questions will come down to who takes the reins at the various financial regulators and government departments. Over the next several days, we map out the possible outcomes and introduce analysis of the candidates.   Our limited-run newsletter runs Mondays, Wednesdays and Fridays at least until Election Day. Subscribe to The State of Crypto: Election 2020. Disclaimer: The information presented in this message is intended as a news item that provides a brief summary of various events and developments that affect, or that might in the future affect, the value of one or more of the cryptocurrencies described above. The information contained in this message, and any information liked through the items contained herein, is not intended to provide sufficient information to form the basis for an investment decision. The information presented herein is accurate only as of its date, and it was not prepared by a research analyst or other investment professional. 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