First Mover: $1 Trillion of Cryptocurrencies Shows Booming 'Asset Class'

PLUS: Bitcoin hits new record about $38K

January 7, 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) +4.0% $38,340 Ether (ETH)  +0.9% $1,224 (Price data as of Jan. 7 @13:34 UTC) TODAY: Price Point: Bitcoin shot to a new record above $38K, as a day of mayhem in Washington yielded to fresh optimism for further economic stimulus.  Market Moves: The total market capitalization of all cryptocurrencies has eclipsed $1 trillion for the first time, CoinDesk's Zack Voell writes. The milestone comes just months after the digital-asset industry surpassed the $500 billion milestone.   Bitcoin Watch: The options market is emanating signals that traders might be rotating away from bitcoin toward alternative cryptocurrencies like Ethereum's ether, CoinDesk's Omkar Godbole writes.  What's Hot: Maker's governance token MKR surges with DeFi growth, Voyager suspends trading in XRP tokens, former Fed Governor says bitcoin "makes sense," ShapeShift phases out centralized trading, U.S. private payrolls decline.     SPONSORED BY KAIKO Kaiko is the premier cryptocurrency market data provider for professional traders, fund managers, researchers, exchanges, 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: The oldest historical data in the industry for more than 40,000 traded instruments (spot, futures, swaps, and options). Flexible data delivery: Downloadable CSV files available through AWS or GCP and robust REST and WebSocket APIs designed for enterprise-use. 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 Price Point Bitcoin rose for a third straight day, pushing early Thursday to a new all-time high price above $38,000 and setting bullish traders' sights on $40,000.   "Momentum has been building over time, and it's anyone's guess where or when we might eventually top out," Mati Greenspan, founder of the foreign-exchange and cryptocurrency analysis firm Quantum Economics, told clients in a newsletter.   The gains came after a day of turmoil in Washington during which supporters of U.S. President Donald Trump stormed the Capitol building and disrupted a Congressional vote to formalize challenger Joe Biden's victory in last November's election. The shocking images prompted world leaders from the U.K., European Union and Canada to condemn what they characterized as an unacceptable attack on democracy. U.S. lawmakers later reconvened and certified the election result early Thursday.    The upshot, according to Bloomberg News, is that global investors are now focusing on the likelihood that a Biden White House, backed by a legislature controlled by his Democratic Party in both chambers, could more easily pass new U.S. stimulus measures. Bitcoin prices quadrupled in 2020 as a growing number of big Wall Street investors said the cryptocurrency could serve as a hedge against the potential negative impact on the dollar's value from trillions of dollars of fiscal and monetary stimulus.     In traditional markets, European and Asian shares rose on Thursday and U.S. stock futures pointed to a higher open. Gold weakened 0.1% to $1,916 an ounce.  Market Moves Earlier this week, First Mover flagged the possibility that the total market capitalization of all cryptocurrencies combined could surpass $1 trillion within a few months.    Turns out it only took a few days. The total market value of bitcoin and all the other digital tokens and stablecoins pushed into the trillion-dollar zone late Wednesday for the first time. As reported by CoinDesk's Zack Voell, the industry had topped out at $760 billion during the last big bull run in late 2017.     The milestone could prove another catalyst for big Wall Street funds to look more seriously at cryptocurrencies for a potential portfolio allocation. It's getting harder and harder to argue, as the big bank and brokerage firm Goldman Sachs did last May, that cryptocurrencies are "not an asset class." The sums are getting too big to ignore.      "Is it frothy? A little bit in the short term," Qiao Wang, co-founder of decentralized finance (DeFi) accelerator firm DeFi Alliance, told Voell. But is it ridiculous? "Nope."   One of the biggest stories in finance during the last decade was the rapid (and concerning) growth in so-called leveraged loans, which are big loans that are arranged by Wall Street firms on behalf of junk-grade or even unrated companies, and then typically apportioned to other banks, sold off to investors or even transformed into new triple-A bonds via the alchemy of structured finance.   Headlines abounded when the outstanding amount of U.S. leveraged loans grew to about $500 billion in late 2010, and then doubled to $1 trillion by early 2018.   Cryptocurrencies have now traversed that chasm in just a few months.     "The $1 trillion mark cements cryptocurrency as an investable asset class that no longer sits on the fringes of traditional finance as a toy for retail investors," Jack Purdy, of the crypto-market analysis firm Messari, told Voell. "It demonstrates that this asset class is large enough to absorb large orders like we've seen recently with the slew of institutions entering over the last few months." (TradingView/CoinDesk)  Bitcoin, the original cryptocurrency and the largest by far, represents about 70% of the industry's total market capitalization. So the push toward the $1 trillion milestone came largely on the heels of bitcoin's rally over the past year.   Bitcoin now has a market capitalization of about $700 billion, up from about $130 billion at the start of 2020. According to the website fiatmarketcap.com, bitcoin's outstanding value would rank it as the 16th biggest global currency, just ahead of the Mexican peso and one rung below the Russian ruble.     And if bitcoin were a publicly traded company, it would rank as the world's eighth-largest, according to another website, AssetDash, well behind Apple's $2.1 trillion valuation, Amazon's $1.6 trillion and Facebook's $751 billion valuation, but far in excess of the big U.S. financial institutions like Visa ($468 billion), JPMorgan Chase ($401 billion) and Citigroup ($135 billion).   If the recent trend is any indication, bitcoin could keep climbing these ranks.   Bitcoin Watch A rising spread between the implied volatilities on bitcoin and ether options might signal a rotation toward alternative cryptocurrencies. (Skew.)    Options traders are signaling a looming change in digital-asset markets – from a focus on bitcoin to relatively undervalued ether (ETH) and alternative cryptocurrencies.   The spread between the six-month implied volatility (IV) for ether and bitcoin – a measure of the expected relative price volatility between the two – has risen to a record high of 46%. That surpasses the previous peak of 45% seen on Feb. 21, 2020, according to data provider Skew. The three- and six-month spreads have risen to an 11-month high of 32% and 23%, respectively.   The widening of the IV spreads indicates that the market expects ether and other alternative coins to chart bigger percentage moves than bitcoin in the near term.   "Traders are expecting increased volatility for ether relative to bitcoin," Skew CEO Emmanuel Goh told CoinDesk. "This is consistent with decreasing correlation and a pick-up in interest across alternative cryptocurrencies."   Some may argue that implied volatility reflects investor expectations of price turbulence and may not turn out to be reflected in the charts going forward. However, historical data show that implied volatility spreads are reliable indicators of upcoming shifts in the market. For example, the ether-bitcoin IV spread nosedived in the second half of September 2020, portending a big shift toward bitcoin. And the largest cryptocurrency delivered, outperforming most other cryptocurrencies by a significant margin in the final quarter of last year, with a 168% rally.  - Omkar Godbole   Read More: Expected Rise in Ether-Bitcoin Volatility Points to Altcoin Season Ahead  Bitcoin. DeFi. Ethereum 2.0. The biggest trends in crypto this year began to move the needle in the rest of the world. Multi-billion dollar funds bought bitcoin as an inflation hedge. Institutions began discussing the merits of decentralization. And the banking sector warmed to crypto.    CoinDesk's 2020 Year in Review covers the major events, ideas and themes in crypto, and why they matter. The series is a comprehensive collection of op-eds, essays and interviews from some of the biggest names in crypto, published throughout the month.   Read more on how 2020 was crypto's biggest year yet. What's Hot CME becomes biggest bitcoin futures exchange as institutional interest rises (CoinDesk)  Maker governance token MKR surges 44% in 24 hours to highest in two years, as issuance of stablecoin dai (DAI) surges along with DeFi's rapid growth (CoinDesk)    Crypto brokerage Voyager to suspend trading in XRP tokens after SEC suit against Ripple Labs (CoinDesk)  Bitcoin investment makes sense in current economic climate, former Fed Governor Kevin Warsh tells CNBC (CoinDesk)  Kraken users are staking more than $1B in crypto, including ether (ETH), tezos (XTZ) and polkadot (DOT) (CoinDesk)   Eric Vorhees's ShapeShift plans phase-out of centralized trading activity, will route orders through DeFi applications, which "frees users from having to provide personal, private information" (CoinDesk)  Iranian authorities close 1,620 illegal cryptocurrency mining farms, Financial Tribune says (CoinDesk)  Analogs The latest on the economy and traditional finance U.S. economy seen getting boost with Democrats' Georgia sweep, possibly another $1T stimulus (Bloomberg)  Danish 20-year home mortgages now carry a fixed interest rate of 0% (Bloomberg)  Italian government could take on $17B of lender UniCredit bad loans to facilitate takoever of state-owned bank Monte dei Paschi (Reuters)   U.S. private payrolls post first decline in eight months as coronavirus cases skyrocket (Reuters) Private employment growth in U.S. turned negative in December for the first time in eight months, according to paycheck processor ADP (ADP)    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. First Mover   A newsletter from CoinDesk   See Previous Editions Copyright © 2020 CoinDesk, All rights reserved.    250 Park Avenue South New York, NY 10003, USA You can manage your preferences here or unsubscribe from all CoinDesk email.