Grayscale Investments, the world’s largest digital currency asset manager, has announced the launch of its newest diversified investment product, the Grayscale Decentralised Finance Fund.
Today we’re unveiling Grayscale DeFi Fund, our second diversified investment product, which tracks the @CoinDesk#DeFi Index. Accredited Investors are now able to gain exposure to a selection of industry-leading DeFi protocols through the Fund. Learn more: https://t.co/i0hm9vrklBpic.twitter.com/QASEp9SpfK
Grayscale is perhaps best known for its flagship product, the Grayscale Bitcoin Trust (GBTC) – the biggest buyer of bitcoin in 2020 and for years the only only viable way institutional investors could gain exposure to the asset without physical custody.
However, following strong institutional interest, Grayscale has partnered with CoinDesk to create the Grayscale DeFi Fund (Fund) which aims to provides investors with exposure to a selection of industry-leading DeFi protocols through a market-capitalisation weighted portfolio designed to track the CoinDesk DeFi Index (Index).
With increasing attention on the innovations within decentralised finance, it’s critical for the investment community to have tools that deliver calculated exposure to this exciting area of innovation. This collaboration offers investors the data and tools they need to gain exposure to decentralised finance into their portfolios.
Bitcoin dropped below $30,000 on July 20, breaking below a trading range that had held for the previous four weeks. Analysts fear that a deeper price decline may be on the cards.
— Bitcoin Fear and Greed Index (@BitcoinFear) July 20, 2021
Bitcoin had appeared somewhat rangebound between US$30,000 and US$40,000 since mid-May. Analysts noted that this mimicked a pattern last witnessed in 2018 when Bitcoin went sideways between US$5,900 and US$7,400.
Source: Tradingview
What Could Be Driving the Fear?
From an investment perspective, crypto doesn’t exist in a vacuum. Data, trends and sentiment experienced in traditional markets will necessarily impact what happens in crypto. Therefore, one argument has been that the digital asset space is currently facing strong macro and regulatory headwinds.
At present, investors in traditional markets are pulling away from risky assets (such as Bitcoin) on the back of weaker monetary and fiscal stimulus, in addition to rising Covid-19 cases, including those caused by the Delta variant. As US government stimulus declines, Wall Street is “seeing too much froth” and “selling the best performing assets such as Bitcoin” according to Edward Moya, a senior market analyst at Oanda.
On the regulatory side, central banks have keyed in on crypto and, more specifically, stablecoins. The US Federal Reserve is currently putting stablecoins under regulatory scrutiny and just days ago, the People’s Bank of China called cryptocurrencies “mostly speculative instruments” that “pose potential risks to financial security and social stability”.
For the moment, institutional and retail interest has cooled off, at least according to “Bitcoin” Google searches.
Google Trends data vs. the price of bitcoin – Coin Metrics’ State of the Network report, issue 112.
While most investors have a strong sense of where Bitcoin is going over the next five to 10 years, the near term is far less certain. In April, Bitcoin easily supported prices over US$50,000 but at present appears to be struggling at US$30,000.
For now at least, it isn’t clear whether a breakout is more likely than a breakdown. Only time will tell.
US inflation is running hot at 5.4 percent for the year ending June 30, a level last seen in 2008. Bitcoin is often touted as the solution, but is that necessarily the case?
Inflation is controversial since not everyone agrees about its constituents. Many consider CPI little more than a tool used to steer policy since it often excludes food, energy, housing and investment assets – all things the average person would typically want.
There is also a raging debate in the US about whether the current inflation levels are “transitory” as reflected in this recent tweet:
Powell just said that if #inflation proves not to be transitory on its own, the #Fed will do whatever it takes to make sure it's transitory, regardless of the negative effects on the economy, employment, the Federal budget, or financial markets. What if he's telling the truth?
Transitory or not, Bitcoin advocates argue that Bitcoin is a hedge against inflation. In making their argument, they lean on principles of Austrian economics and sound money. In short the argument is:
There are two forms of money – hard/sound money and soft/unsound money.
Hard/sound money is money that tends to retain its purchasing power over time and whose supply is difficult to increase.
By contrast, easy/soft money is money that tends to depreciate over time and whose supply is generally easy to increase.
Historically, human beings tend to flourish during times of sound money, whereas the opposite is true of unsound money which tends to result in inequality, civil unrest and socioeconomic turmoil – hyperinflation in Venezuela would be an extreme example.
Hard money tends to be deflationary whereas soft money tends to be inflationary (ie, you can buy less goods/services with it over time).
Fiat currency is unsound money and leads to long-term currency devaluation.
Bitcoin by contrast is the opposite – it is the soundest money we’ve seen since it has a fixed supply with a predictable and immutable deflationary monetary policy.
This line of thinking is broadly shared throughout the Bitcoin community, including US Senators.
While that may be true, the same argument could also be made against gold, which is traditionally considered an inflation hedge. In the past 12 months, it is down 0.26 percent.
With that being said, if you are going to be comparing the relative strength of inflation hedges, a longer timeframe is critical. Short-term volatility in the market is to be expected and can’t viably be used as an argument against Bitcoin, gold, real estate or any other traditional inflation hedge.
When faced with strongly held beliefs on both sides of the debate, it is often best to consult balanced analysts such as Lyn Alden. For a comprehensive overview of how Bitcoin could play a role as an inflation hedge within a portfolio, this fascinating video is well worth a watch.
Bitcoin Could Be an Inflation Hedge … in the Long Run
Since Bitcoin’s inception, it has proven to be a long-term store of value whose purchasing power has increased dramatically, notwithstanding its volatility in the short term.
By contrast, the US dollar has lost purchasing power, accelerated even more over the past 18 months. Note the sudden increase in money supply since March 2020 described by some as the greatest monetary expansion in history.
US money supply increase since 2020. Source: US Fed
Compared to the US dollar, Bitcoin is deflationary and its supply is entirely predictable and slowing down over time due to the inbuilt four-year halvings as seen below:
Based on historical patterns and Bitcoin’s intrinsic scarcity, it looks like it has a good chance of being an effective inflation hedge in the long run. If, however, your goal is to protect against short-term currency devaluation, less volatile assets may be more suitable. One thing is for sure – we’ve never seen this much liquidity injected into the market within such a short space of time. How this plays out over the long term remains to be seen.
Assessing the market performance of cryptocurrencies just got easier for investors with S&P Dow Jones Indices launching a range of new crypto-focused indices.
The leading index provider added five products to benchmark the performance of emerging digital assets, building on three existing benchmarks released earlier this year that focused on Bitcoin and Ethereum.
For more than a century, our indices have offered insight into how the markets are performing. Now, with the introduction of the S&P Cryptocurrency Broad Digital Market Index, we’re providing that answer to cryptocurrency investors.
Peter Roffman, S&P Dow Jones Indices
The indices use pricing data provided by crypto software and data company Lukka.
Transparency Needed as Financial Markets Open the Door to Crypto
Indices offering transparent benchmarking for cryptos is another example of how financial markets are moving towards enabling investment in digital assets.
A growing number of countries are approving crypto-based EFTs to be listed on financial exchanges, including multiple Canadian funds, and Bitcoin EFTs in Brazil and Dubai.
Although investor demand is high, many countries remain cautious about introducing crypto EFTs. The US Securities and Exchange Commission (SEC) is considering a number of requests for crypto EFTs, including one filed by investment bank Goldman Sachs in March. The ASX said in May that it’s exploring the safeguards required to enable Australians to access a crypto-based EFT, because “these assets are broadly being sought by retail investors … ”
Melbourne-based SelfWealth, a non-bank low-cost online share trading platform listed on the Australian Securities Exchange (ASX), has announced plans to open crypto trading for its customers.
The company has enjoyed strong growth over the past 12 months on the back of its compelling value proposition – namely low-cost, simplified trading of both Australian and international stocks on one platform.
The ability to trade US stocks, which was only launched in December last year, has proven to be particularly popular. Currently, the value of total securities held on the platform is around A$5.9 billion.
Earlier this year, SelfWealth conducted a survey of its customers and established that more than half were already crypto investors. Furthermore, two-thirds of respondents expressed an interest in the sector.
Australians have decided that cryptocurrency is here to stay and are looking for trusted platforms to facilitate their investment decisions … we want to make investing for our customers as seamless as possible.
SelfWealth chief executive Cath Whitaker
Whitaker touted the new functionality, offering customers a single platform to invest in both local and US shares as well as crypto assets, an “Australian first”.
Basic Details of the Move
The company plans to add up to 10 cryptos by the end of the year, which will include both Bitcoin and Ethereum. Details of which other cryptos will be included are not clear.
Much like conventional share trading, SelfWealth will look to charge a flat percentage fee for all crypto trades and the current plan appears to be that the crypto will be held in an integrated third-party wallet.
SelfWealth has not yet elaborated on specific details relating to which exchange it would be working with and whether users would be given the choice of custodying their own crypto assets. However, the company had this to say in its official press release:
We will be partnering with an established and secure cryptocurrency exchange to provide access to cryptocurrencies … we will factor in popularity, liquidity and security.
Jarrod Purchase, marketing manager, SelfWealth
It’s clear that crypto is slowly gaining mainstream approval as traditional financial institutions increasingly look to offer their clients crypto exposure. Unlike most financial products, it appears that customers are the driving force behind the change, not the institutions themselves.
The highly anticipated Aussie crypto ETF is undoubtedly going to accelerate the process of greater crypto adoption, although the timing of an ASX approval remains unclear at this juncture.
After recent record losses, Bitcoin (BTC) HODLers enjoyed gains over the weekend for the first time in weeks as the digital asset surged over 5 percent overnight. This was largely attributed to the influx of Bitcoin whales holding 100 to 10,000 Bitcoin accumulating over 60,000 coins in a single day, worth US$2.7 billion.
Bullish Signs as Bitcoin Whales Steadily Accumulate
On-chain analyst and trader Willy Woo had a humorous take on the aggressive whale accumulation, tweeting:
According to on-chain analysts Santiment, these addresses now hold 9.12 million coins combined, up over 100,000 from only six weeks ago.
The total number of coins held by whale entities – addresses controlled by a single network participant holding 1,000 to 10,000 Bitcoin – rose by over 80,000 to 4.216 million Bitcoin on 2 July, hitting the highest level since May. For context, this remains some way below the record high of 4.542 million reached in February.
Source: Glassnode
The number of whale entities has now jumped to a three-week high of 1,922, which read together with signs that Bitcoin may have bottomed out, offers bullish support.
Whale Accumulation Coincided with Largest Downward Bitcoin Mining Difficulty Adjustment in History
Source: Glassnode
Interestingly, this recent whale accumulation coincided perfectly with the largest negative difficulty adjustment (-28 percent) in the history of the Bitcoin network.
In short, the difficulty adjustment refers to the difficulty of mining Bitcoin and is linked to the hashpower. As hashpower is removed, the difficulty decreases and where hashpower increases, difficulty is increased. The record 28 percent reduction in the difficulty adjustment was a direct consequence of China banning Bitcoin mining.
Most, however, view the mining ban in a positive light. As hashrate migrates out of China, the network becomes more decentralised and given the network’s response to the recent negative difficulty adjustment, it appears as resilient as ever.
At the moment, whales appear bullish. Historically, this tends to provide evidence of a broader shift in sentiment. It remains to be seen whether this trend will continue in the coming months.
Despite Bitcoin’s breakout performance in 2020, much of the gains have been erased over the past three months as Bitcoin slid 43 percent amid a barrage of relentless FUD relating to China and environmental concerns.
While the grounds for such concerns can be challenged, there is mounting evidence that Bitcoin may be turning the corner.
A Difficult Bull Market for HODLers
Based on Bitcoin’s halving cycle and subsequent price movements, we ought to be somewhere near the middle of a bull market. Given that Q2 2021’s performance was the worst in eight years, even the most bullish of HODLers have had their conviction tested in the face of persistent, and seemingly coordinated, FUD.
June 2021 brought the most aggressive sovereign assault on #Bitcoin ever. That is not hyperbole, that is fact. Check this timeline- 25 discrete events in 30 days and I'm sure I missed a couple. A massive concerted effort from China. Yet here we are, making blocks & trading $33k. pic.twitter.com/YeRucQsUae
Throughout this latest round of FUD, Bitcoin has been enormously volatile, with ongoing support seemingly around the US$30,000 mark. However, a number of indicators suggest this may indeed be the bottom and that there is cause for optimism in the near term.
This metric explores market cycles from a mining revenue perspective by looking at the supply side of Bitcoin’s economy – Bitcoin miners and their revenue. Miners are considered sellers by necessity since their operating costs tend to be fixed in fiat terms. When the value of Bitcoin mined and entering the ecosystem is too large or too small by historical standards, it can provide an opportunity for investors.
Notice below how the indicator has slipped into the green, last seen in March 2020. For long-term HODLers, now seems to be the time to accumulate.
As short-term HODLers capitulated in droves during May and June, long-term HODLers continued to accumulate, as highlighted in the chart below.
Source: Glassnode
#3 Funding Rates Shifting Away from NegativeTerritory
Funding rates are payments between traders to make the perpetual futures contract price close to the index price, representing the sentiment of traders on the positions they take in the perpetual swaps market. In the simplest of terms, positive funding rates are indicative of bullish sentiment whereas negative funding rates imply many traders are bearish.
Based on the chart below, funding is gradually moving into positive territory, a historically optimistic indicator for short- to medium-term price movements.
Source: CryptoQuant
#4 Bitcoin NVT Ratio Shows Bitcoin is Undervalued
The Bitcoin NVT ratio is equivalent to a traditional price-to-earnings ratio used to assess whether a stock is under- or overvalued.
Based on the chart below by respected Bitcoin analyst Willy Woo, the current price of Bitcoin is operating along the lower bounds of undervalued (marked by the green dotted line). The upper bounds (i.e a strong sell indicator) is the red dotted line, indicating Bitcoin would be overvalued at around US$121,000.
The strategy employed by successful accumulators has been remarkably simple – don’t use leverage, dollar-cost average, and have a long-term horizon of four or more years.
Bitcoin’s logarithmic price chart clearly demonstrates that long-term holders tend to be rewarded. Short-term price volatility, however, is the price they have to pay to enjoy exceptional long-term returns.
Up to US$3.4 billion in realised losses in Bitcoin were recorded last week, according to on-chain data by Glassnode. This is the highest capitulation ever recorded in the history of Bitcoin.
Last week, the largest dollar value capitulation in #Bitcoin history occurred, with over $3.45B in net losses realised on-chain.
Losses are realised when coins purchased higher, are spent at lower prices.
Realised Losses Spike as Investor Uncertainty Rages
Losses in Bitcoin are realised when bitcoin bought at a higher price is spent or sold at a lower price. Last week’s panic selling indicates a high level of uncertainty in the market, especially among short-term holders.
About 23.5% of Bitcoin in circulation is held by short-term holders and according to Glassnode, the majority is underwater (unrealised loss). This shows why the selling pressure is higher among short-term holders than long-term holders, most of whom are still in profit.
Source: Glassnode
Despite that, some long-term holders sold during the week, their spending offset about US$383 million from the total realised loss of $3.833 billion in Bitcoin to US$3.45 billion. This is because most of them sold for a profit. Only 2.44% of Bitcoin’s circulating supply held by long-term holders is underwater.
Bullish Factors For Bitcoin
Bitcoin was trading at US$34,905 on 1 July and was down only about 4.18% over the previous 24 hours. Judging by Bitcoin’s market performance, this past month and the whole of Q2 were not exactly favourable for Bitcoin in terms of value. However, there have been a lot of indicators to suggest Bitcoin has not yet reached the top of the bull cycle.
For the fifth time, the “Puell Multiple” indicator has signalled another buying opportunity for Bitcoin, which raises traders’ hopes that the leading cryptocurrency may be set for another rally.
The Puell Multiple indicator calculates the ratio of daily coin issuance (in USD) and the 365 moving average of daily coin issuance. It examines the fundamentals of mining profitability on the view that the revenue miners generate can influence price over time.
As seen in the chart, this is the fifth time “the value of Bitcoins issued on a daily basis has historically been extremely low” . This indicates a buying opportunity for Bitcoin investors and traders. The indicator may be another bullish signal to hold on this week; however, the creator of the indicator, analyst David Puell, also warns investors to be wary due to the Bitcoin hashrate.
Hash rate follows price AND other exogenous factors, as we have clearly seen with the China situation.
The last time the Puell Multiple signalled investors to buy Bitcoin was after the Covid 19-led market crash last year.
More Factors Suggesting Bitcoin Recovery
Bitcoin has shed a lot of value since hitting an all-time high in April. This is bearish to the extent that this current quarter will be the worst ever recorded over the past eight years. However, there have been factors that suggest the leading crypto won’t be in this state for long.
Crypto News Australia recently reported that the number of stablecoins on all exchanges has been increasing, which suggests investors may be positioning themselves for another pump. These bullish indicators are becoming easier to believe, as Bitcoin has been holding on pretty well since the beginning of this week.
Bitcoin was trading at US$36,258 on CoinMarketCap, which accounts for a 5.87 percent hike over the past 24 hours leading up to time of publication. This is the highest level Bitcoin has reached in the past seven days.
Cryptocurrency trading volume across decentralized exchanges (DEXes) reached an all-time high above US$161 billion in the past month, according to market data shared by CryptoRank. Overall, trading volume in the crypto market grew significantly in May as centralized exchanges also saw a record high in monthly volume.
DEXes Gain 16% in Monthly Volume
The massive jump in trading volume represents a 16 percent increase on the previous month (US$138.1 billion). The May figure also translates to a 157 percent rise since January 2021.
To break down the volume, Uniswap was ranked the largest decentralized exchange with nearly US$58 billion in volume, while the Uniswap V3 closed at US$24 billion, according to data from TheBlock. Uniswap is followed by SushiSwap, 0x Protocol, and 13 other exchanges.
At the time of writing, PancakeSwap leads in reported 24-hour volume with US$371 million, followed by Uniswap, SushiSwap, 0x Protocol, Balancer, BakerySwap, and 1inch.
The total value of digital assets locked in decentralized exchanges was US$21 billion as at June 2.
Centralized Exchanges Exceed $2 Trillion in May Volume
The crypto market gained more trading volume last month regardless of the drops in major coins. This is evident as centralized exchanges also reported a 37 percent increase in trading volume to more than US$2.2 trillion last month, consecutively closing a trillion-dollar volume for the fourth time. Binance accounts for about 66 percent of the entire volume in May (+US$1.5 trillion).
