First Mover: Bitcoin's Failure to Break $20K Shows Big Investors Only Just Arriving

PLUS: Ethereum's 2.0 Beacon chain goes live

December 1, 2020 Everything you need to make sense of the crypto markets and beyond 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) -6.8% $18,901 Ether (ETH)  -6.6% $575 (Price data as of Dec. 1 @13:18 UTC) TODAY: Price Point: Bitcoin was tumbling early Tuesday after soaring to a new all-time high on Monday.  Market Moves: Institutional adoption is the buzzword of the day, and it was probably a factor in bitcoin's recent price rally close to $20,000. But it's not even really happening yet in the truest sense.   Bitcoin Watch: Options market signals volatility ahead, while blockchain data show some holders might be queuing up to sell, CoinDesk's Omkar Godbole writes.  What's Hot: Ethereum 2.0 Beacon chain goes live, ECB's Lagarde sees risks in private stablecoins as she presses forward on digital euro, BitMEX parent picks new CEO. Price Point Bitcoin was lower, retreating after rallying over the past 24 hours to a new all-time-high price of $19,920, based on CoinDesk's Bitcoin Price Index.   Cryptocurrency analysts predicted that bullish traders might next target the $20,000 threshold, though the market could struggle to break through if large potential holders choose to take profits at that level.    The "resistance into $20,000 could be more psychological than anything else," said Denis Vinokourov, head of research at the digital-asset prime broker Bequant. "It would make sense that once we are finally able to get past this threshold, that the rally has legs."   In traditional markets, European shares rose, led by banks and energy firms, and U.S. stock futures pointed to a higher open on the first day of the final month of a tumultuous 2020. Gold strengthened 1.2% to $1,798 an ounce.  Market Moves All sorts of reasons were cited Monday as bitcoin pushed to a new all-time-high, ranging from PayPal's recent entry into the space to the collective market shrug in response to the massive outflows from the OKEx cryptocurrency exchange following after a five-month withdrawal suspension was lifted.    What's clear is that most analysts, traders and industry executives are talking about the sudden influx of big investors and Wall Street firms nosing into bitcoin and digital-asset markets for the first time. As noted Monday in First Mover, "institutional adoption" has become among the buzziest of buzzwords from bitcoin bulls and marketeers.  The key driver of their interest appears to be the desire for a hedge against inflation, during a year when the deep economic toll from the coronavirus has prompted the U.S. Federal Reserve and other central banks to pump trillions of dollars of emergency liquidity and monetary stimulus global financial markets.    "With so much excess liquidity in the system, the original investment case for bitcoin is being vindicated." Rich Rosenblum, who heads trading at the crypto firm GSR, told CoinDesk's Daniel Cawrey. On Monday, just before bitcoin prices began their single-day price climb of 8.3% to end the month, the market was filled with chatter about a new endorsement from an analyst at the $631 billion investment firm AllianceBernstein. ("I have changed my mind about bitcoin.") Later in the day, CNBC reported that strategists for another Wall Street firm, BTIG, said cryptocurrency had come of age, and that bitcoin should reach $50,000 by the end of next year.    "The stream of institutions commenting and allocating to BTC became a flood of good news that reinforced the narrative," Matt Blom, head of sales and trading at the cryptocurrency-focused financial firm Diginex, told subscribers in an email.    CoinDesk's Muyao Shen reported that support from institutional investors might help to sustain the latest rally, contrasted with the bull run of 2017 when prices briefly touched these levels before quickly tumbling and then hibernating in a bear market for most of 2018.     "Broadly speaking, institutional positions and high-net-worth individuals are leading the way this time," Jason Deane, an analyst at Quantum Economics, told Decrypt.   Another difference from 2017 is that digital-asset markets appear to have evolved dramatically in the past few years and appeared to have handled the recent uptick in intensity and transaction volumes without too many glitches. (The well-trod fiat-to-cryptocurrency on-ramp Coinbase did report delays in processing some bitcoin withdrawals due to network congestion.)    "The trading, settlement and custody services are all far more sophisticated and mature, which instills confidence," GSR's Rosenblum said.    Major spot exchanges, where retail customers casually buy the world's oldest cryptocurrency, have seen an uptick. Combined daily volume for Coinbase, Bitstamp, Kraken, Gemini and ItBit was at $1.5 billion as of press time Monday, much higher the $488 million average of the past six months, Cawrey reported.   Jeff Dorman, chief investment officer at Arca Funds, wrote in his weekly blog that some big investors, due to regulatory concerns, might be using futures on U.S. commodities exchanges or publicly-traded investment vehicles in traditional stock markets to gain exposure to bitcoin – instead of just jumping into digital-asset markets. He provided a chart showing how key closures on public U.S. markets over the past week coincided with big swings in 24-hours-a-day, 7-days-a-week cryptocurrency markets.   "The institutions are coming all right, but they are taking the local bus while the rest of us are on the express," Dorman wrote.    The upshot is that bitcoin is reaching new all-time-highs when institutional adoption hasn't even really got going, in the truest sense.  - Bradley Keoun Chart showing hourly price changes in bitcoin from Wednesday through Sunday, with yellow lines denoting when the CME closed and white lines the subsequent open. According to Arca's Jeff Doramn, the CME was only open for a brief time period and missed both the move down and subsequent move higher. (Arca Funds)  SPONSORED BY NEXO Your digital assets deserve a savings account in their BEST INTEREST. Leading crypto lender Nexo treats you, your crypto and your fiat to industry-best Crypto & Fiat services, featuring:    * Up to 12% interest on digital assets, paid out daily! * Yields available on BTC, ETH, LTC, BCH, XRP, XLM, EOS, TRX, LINK, BNB, PAXG, USDT, USDC, TUSD, PAX, DAI, HUSD, GBP and EUR. * No minimum or maximum limits on funds deposited, offering infinite opportunities to earn. * Full flexibility with no lock-in periods, so you can withdraw your funds anytime. * #ZeroFees on all transactions. * Military-grade wallet security and top-tier insurance on all custodial assets with SOC 2 Type 2 certified crypto custodian BitGo.   Get started at nexo.io Introducing Valid Points, a CoinDesk Newsletter CoinDesk is staking 32 ETH in Ethereum's historic upgrade, and research analyst Christine Kim and tech reporter Will Foxley are breaking down Ethereum 2.0 and its sweeping impacts on crypto markets, weekly. Using data direct from CoinDesk's own Eth 2 validator node, Valid Points features original insights about what the future of Ethereum looks like for industry stakeholders and investors. The Valid Points newsletter launches with Eth 2.0's launch. Learn why CoinDesk staked 32 ETH in the new blockchain protocol and follow our journey and insights by subscribing to Valid Points here. Bitcoin Watch Bitcoin's implied volatility rises to multi-month highs. (Skew) Bitcoin's one-month implied volatility has risen to 6.5-month highs, reflecting increased expectations of price turbulence over the next four weeks.   According to data source Skew, the metric influenced by demand for call and put options has increased to 89%, the highest level since May 18, having bottomed out near 44% in September. The doubling of implied volatility has happened alongside bitcoin's rally from $10,000 to $19,920 and looks to have been caused by relatively higher demand for call options (bullish bets).   That's evident from the record low one-, three-, and six-month put-call skews, which measure the cost of puts (bearish bets) relative to calls. The options market looks positioned for a continued rally.   Some analysts say a healthy pullback could be in the offing as bitcoin's inflow to exchanges has exceeded outflows since the Thanksgiving sell-off, according to data source CryptoQuant. "That on-chain metric could indicate a short-term bearish trend, sending bitcoin back to a level of around $16,000," said Ki Yong Ju, chief executive officer of CryptoQuant.   At press time, bitcoin is trading near $18,800, representing a 4% drop on the day. - Omkar Godbole   Read More: Google searches for "bitcoin price" hit 18-month high What's Hot Ethereum 2.0 Beacon chain goes live as "world computer" begins long-awaited overhaul (CoinDesk)  Coinbase reported delays processing bitcoin withdrawals on Monday as cryptocurrency's price move to all-time-high created congestion on blockchain network (CoinDesk)  Over-the-counter cryptocurrency trading firms report uptick in purchases by institutional investors during latest bitcoin rally (The Block)  While some near-term pricing correction is likely to be expected, analysts who spoke to CoinDesk said bitcoin's latest rally will be more sustainable for the long term compared with 2017 (CoinDesk) European Central Bank President Lagarde says stablecoins "pose serious risks" to financial security (CoinDesk)  100x Group, holding company for embattled cryptocurrency exchange BitMEX, picks former head of German stock exchange as new CEO (CoinDesk)  Upstart bitcoin exchange LVL, backed by Anthony Pompliano, Jimmy Song and Willy Woo, cuts trading fees to ratchet up competition with Coinbase and Gemini, plans new debit card with Mastercard (CoinDesk)  Authorities shut off electricity to bitcoin miners in China's Yunnan province (CoinTelegraph) Webinar: How to Value Ethereum   Transaction volumes on Ethereum represent the movement of a diverse array of crypto assets. In the fourth and final episode of How to Value Ethereum, CoinDesk Research explores unique insights about decentralized applications and their tokens based on volume data.   Register to join the final episode of How to Value Ethereum on Dec. 1. Analogs The latest on the economy and traditional finance "Rather than seeking to create a Chinese-style digital dollar, Joe Biden's nascent administration should recognize the benefits of integrating Bitcoin into the U.S. financial system," economic historian Niall Ferguson writes in op-ed (Bloomberg Opinion)   Fed Chair Powell calls economic outlook "extraordinarily uncertain" in prepared remarks ahead of scheduled appearance Tuesday before U.S. Congress (CNBC) China's new anti-dumping rules on Australian wine could escalate tensions, signal broad effort to tamp down dissent among trading partners (Bloomberg) As coronavirus cases surge in Hong Kong, banks including Goldman Sachs, Standard Chartered, UBS and Citigroup bring back work-from-home policies (Bloomberg) Tech startups are helping to modernize India's agriculture industry (Nikkei Asia Review)   Tweet of the Day 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. You should seek additional information regarding the merits and risks of investing in any cryptocurrency before deciding to purchase or sell any such instruments.  ATTENTION: Scammers have been sending fraudulent emails with links to sites disguised to look like coindesk.com. If you are in doubt about a link, type https://www.coindesk.com directly into your browser; do not copy and paste. Remember, if something seems too good to be true, it probably is. 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