Dogecoin is not a cryptocurrency you would expect to read about much in this column since it is not exactly an “institutional grade” asset. It has a market cap of over $8 billion at time of writing (less than 1/100th of bitcoin’s), no unique use case and no lively derivatives market. But bear with me while I explain why it embodies two key themes impacting institutional interest in crypto assets: the role of “fundamentals,” and the likelihood of successful government bans. You’re reading Crypto Long & Short, a newsletter that looks closely at the forces driving cryptocurrency markets. Authored by CoinDesk’s head […]
Noelle Acheson
40 posts
With the wild journey that is bitcoin price swings so far this year, you might have missed the accelerating rhythm of companies announcing services to support bitcoin for payments. We’re not talking about small idealistic startups, either. A week ago, on Visa’s Q1 earnings call, CEO Al Kelly said the company may add cryptocurrencies to its payments network. He acknowledged that bitcoin is “not used as a form of payment in a significant way at this point,” but went on to discuss a strategy to “enable users to purchase these currencies using their Visa credentials or to cash out onto our […]
Es difícil ser justo con el significado e importancia que ha tenido el escándalo de Reddit-Robinhood-GameStop ocurrido la semana pasada. Con esto no quiero decir que no haya sido sobreestimado en algunos lugares. He oído comparaciones con los disturbios del Capitolio. Y no es lo mismo: aquello se trató de una sedición; esto es rebelión, algo muy diferente. He visto peticiones para que los reguladores intervinieran y cerraran las plataformas de trading minorista, a pesar de que no haya sido clarificado si un delito fue cometido. Y he leído críticas que trataron a los líderes de este movimiento como “inadaptados”. Esa […]
It’s hard to do justice to the symbolism and significance of the Reddit-Robinhood-GameStop drama of this past week. That’s not to say it hasn’t been overblown in some quarters. I’ve heard it compared to the Capitol riots – no, that was sedition, this is rebellion, very different. I’ve seen calls for the regulators to step in and shut down retail trading platforms, even though it’s not clear a crime has been committed. And I’ve read takes painting the leaders of this charge as “misfits.” That condescension itself is part of the problem. The protagonists are not misfits – they are retail […]
Maybe it’s just that winter is dragging on, but I find myself getting increasingly irritated with mainstream reports about Bitcoin that say it was a result of the financial crisis. It wasn’t, and that matters. First, let’s look at why it wasn’t, and then I’ll explain why this misunderstanding bothers me. Bitcoin’s pseudonymous creator Satoshi Nakamoto started working on the Bitcoin white paper in early 2007, over a year before the financial crisis hit mainstream markets. In early 2007, the subprime mortgage industry was collapsing, but even lifelong finance insiders didn’t foresee the scale of what was to unfold. As Satoshi […]
To think that such a festive concept, one that evokes both sophistication and childlike wonder, could become so financially charged … Last week, Bank of America Securities chief investment strategist Michael Hartnett said in a note that bitcoin looks like “the mother of all bubbles.” Harnett seems to be using the strength and speed of bitcoin’s price rise as the base for his diagnosis, as if that is the main feature of a financial bubble. It isn’t. Continuing the misuse of the word, in a note quoted on Bloomberg this week, investment management firm Man Group said: “Every time a bitcoin […]
One of the fun things about jigsaw puzzles, for those of you that haven’t tried them, is the satisfying snap of pieces fitting together to reveal part of a picture. Another is watching the whole picture emerge as more pieces join. In July of last year, the U.S. Office of the Comptroller of the Currency (OCC) said that national banks could custody crypto assets. That was a pretty big deal, as, should national banks start to offer this service, investors could in theory ask their habitual institution to custody all their holdings, be they stocks, bonds or crypto. So much easier. […]
If the 2020 Q1 was the quarter of market turmoil, Q2 the bitcoin halving and Q3 the explosion of stablecoins and decentralized finance applications, Q4 was the quarter of institutional FOMO for bitcoin and of Ethereum launching the first phase of its ambitious migration to a proof-of-stake (PoS) blockchain. The latest CoinDesk Quarterly Review looks at the data and timelines behind these two strong narratives, and what they mean for asset prices. While the 2017 bitcoin rally was largely driven by retail frenzy, the 2020 rally was driven mainly by institutions. The accelerating rhythm of large institutional investors publicly talking about […]
The first Crypto Long & Short of 2021 has a different format: Instead of the usual article, I’ve asked some leading industry analysts – from Kaiko, IntoTheBlock, skew.com and Arcane Crypto – to share their favorite charts with you. The depth and quality of metrics available to market observers has grown by leaps and bounds this year, and the work of these analysts and others goes a long way toward helping investors to not only understand the crypto ecosystem better, but also to appreciate how different and fascinating the assets and their markets are. Click on the below links to find […]
In a departure from our usual Crypto Long & Short format, in honor of the holiday season, I’ve written a poem that reviews the year and reflects some of the progress made in our industry. It’s not rigorous analysis, but I hope the change in rhythm lightens the festive period. Go ahead and laugh, but may I say in my defense that “good at rhymes” was not in my original job description. A Cryptomas Rhyme ‘Twas the day after Christmas. Instead of some rest I decided to review how we had progressed. In January, headlines screamed military tension. Bitcoin as “safe […]
Earlier this week, JPMorgan published a global markets strategy note that points out that money has flowed out of gold and into bitcoin since October, and predicts that this trend will continue over the medium to longer term. The easy conclusion is that investors are finally understanding that bitcoin is a superior future store of value to gold, and are rotating out of one and into the other. I’m not convinced that’s what we’re seeing. I agree with the analysts, though, that inflows into bitcoin will continue to increase, but not because investors are changing their minds. There’s something else going […]
It is frustrating. But at the same time, interesting. Over the past couple of weeks, I’ve heard two well-respected investment managers say that they don’t believe in bitcoin’s supply limit. If it’s easy to spin up another Bitcoin, they claim, then there is really no limit. Most of you reading this will be rolling your eyes at this stage, but since it seems to be a firmly held view by some smart people, we should dig deeper. We’ll find that it’s about more than a lack of research. First, let’s look at what the two investment managers I’m referring to actually […]
Today I want to talk about code. I know, this newsletter is for professional investors and not developers – why aren’t we talking about price? Don’t worry, we will further down. But things are evolving with Bitcoin technology that are worth keeping an eye on. While these changes have little to do with the short-term price movements, they are likely to play a significant role in bitcoin’s long-term value proposition. Two things happened this week to make this top-of-mind: a new development funding source was announced, and progress is being made on a particularly ambitious protocol upgrade. Before we go into […]
The chorus is getting louder. Adding his sonorous voice to the chorus of renowned investors talking about bitcoin recently, hedge fund manager Stanley Druckenmiller stated on a CNBC interview this week that he believed bitcoin could perform better than gold. Here’s part of the quote: “I own many, many more times gold than I own bitcoin, but frankly if the gold bet works, the bitcoin bet will probably work better because it’s thinner and more illiquid and has a lot more beta to it.“ This is worth diving into a bit, because the statement is good news for the industry, but […]
Of all of the many clever things Mark Twain is alleged to have said, one of my favorites, especially these days, is: “It ain’t what you don’t know that gets you into trouble. It’s what you know for sure that just ain’t so.” In the turmoil that is 2020, many market “truths” have morphed into myths. And many trusted investment adages no longer make sense. One that continues to puzzle me is how many financial advisers still recommend the 60/40 portfolio balance between equities and bonds. Equities will give you growth, the theory goes. And bonds will give you income as well […]
The phrase “gradually then suddenly” has been overused in the crypto industry to emphasize the importance of each step towards regulatory support and institutional interest. But it’s not yet a case of “suddenly.” We are still in the “gradual” phase. Each month brings progress that seems momentous at the time, but in the grand scheme of market evolution we are still at the beginning. We have left the starting block, for sure. But we are not even a quarter of the way around the track. In CoinDesk Research’s latest monthly report, we take a brief look at the progress bitcoin and […]
In the world of financial regulation, it may seem like progress is slow and arduous. But then there are weeks in which a lot happens, and pieces fall into place with loud clangs and reverberations. This past week was one of those, and the pieces in question are being largely overlooked as they are settling into place in a relatively small corner of the crypto landscape. Yet their impact is significant even at this early stage. And, as part of the bigger picture, these pieces are forming the base of a new crypto-based financial system whose influence is likely to extend […]
The bigger you are, the bigger the splash when you jump in the water. And when it comes to mainstream payments companies, there are few bigger than PayPal. In case you’ve been totally avoiding the headlines over the past few days (and who could blame you), PayPal (NASDAQ: PYPL) this week confirmed its entry into the crypto asset industry with the announcement that it was enabling the buying, selling and holding of cryptocurrencies on its platform. Within the next few weeks, users in the U.S. will be able to trade bitcoin (BTC), ether (ETH), litecoin (LTC) and bitcoin cash (BCH) using […]
This week saw more exchange drama rock the crypto markets. OKEx, one of the industry’s largest crypto-fiat exchanges, suspended all cryptocurrency withdrawals, saying one of the exchange’s key holders has “been out of touch” with the exchange because they are “currently cooperating with a public security bureau in investigations.” Coming hard on the heels of the BitMEX indictments from a couple of weeks ago, this surely will focus the market’s attention on the security of the withdrawal protocols of large exchanges. At the time, concerns surfaced that withdrawals might be halted from BitMEX, one of the largest derivatives exchanges in the […]
This week the U.K.’s Financial Conduct Authority (FCA), which regulates the country’s financial services, issued a ban on the sale of crypto derivatives and ETNs to retail investors. While this may not seem particularly material to crypto asset markets overall – U.K. retail investors weren’t that much into crypto derivatives anyway, and the market hardly reacted at all – it is worth paying attention to for the alarming message contained within. This message loudly says: “We don’t like crypto assets.” In case you think I’m exaggerating, the policy statement opens with the sentence: “There is growing evidence that cryptoassets are causing […]
In such a fast-growing industry as crypto asset markets, it can be overwhelming to try to extract the main themes driving liquidity and investor interest. Yet, doing so helps to understand how relatively new markets evolve, and what the catalysts will be for the next big steps forward. The latest CoinDesk Research Quarterly Review focuses on three features that have exhibited astonishing growth in Q3 and are playing a significant role in the evolving maturity of the digital asset markets. In 24 charts, we look at stablecoins, decentralized finance (DeFi) and derivatives, and tease out some intriguing findings. It is a […]
As if the ructions of the year aren’t giving us enough cause to re-examine things we thought we understood, now we find ourselves questioning what a company is for, and what role it should occupy in society and in employees’ lives. Earlier this week, Coinbase co-founder and CEO Brian Armstrong published a post in which he stressed the company’s focus on the mission of creating “an open financial system for the world,” and asked that political issues be left out of workplace discourse. The questions this raises are huge, and the timing fits right into tectonic shifts already underway in the […]
An unsurprising statement from a financial regulator is sending some welcome signals that point to a spurt of innovation ahead. The U.S. Office of the Comptroller of the Currency (OCC) issued a statement earlier this week saying that national banks can provide services to stablecoin issuers in the U.S. This is not a surprise, as banks have been doing so for some time. But they have been doing so under a cloud of regulatory uncertainty. The statement gives the first sign of official clarity on the idea that stablecoins are legitimate representations of value. Acceptance and support Why is this significant […]
Some say that meaningful change happens gradually. Others insist it erupts unexpectedly. This week, we saw that both are true. Earlier this week, the Wyoming Banking Board voted to approve the application from San Francisco-based crypto exchange Kraken for a Special Purpose Depositary Institution (SPDI) banking charter. Yes, one of the crypto industry’s oldest exchanges has become a bank. This is a big deal, one that heralds a coming transformation of the crypto asset industry. Market participants and commentators understandably reacted with glee and surprise. Both are warranted, yet both overlook the bigger shift that has been building up for some […]
In a week in which we are yet again reminded how sharply sentiment can shift in crypto asset markets, it’s appropriate to look at the role volatility plays in our narratives, our portfolios and our psyches. I also want to examine what volatility is not, as its specter takes on a disproportionate influence in times of turmoil. This confusion is not unique to crypto markets – volatility is misunderstood across all asset groups. As with virtually all market metrics, however, it has particular nuances when applied to our industry. Setting the table First, let’s review what we mean by volatility. Technically, it […]
Bitcoin had a lackluster August while Ethereum “gas” fees are soaring. In 15 charts, CoinDesk Research’s Monthly Review for August looks at bitcoin (BTC) performance compared to traditional assets, its relationship to the dollar and other fiat currencies, and at Ethereum’s increasing congestion. Some of the key takeaways: Source link
There has been no shortage of epoch-changing twists so far this year. I mean, seriously, take your pick: even aside from the pandemic, we have riots on the streets of American cities, an alarming trade war, negative oil prices and gold briefly above $2,000/oz. These are just some of the loud, headline-grabbing changes that were once unthinkable but now form part of our new normal. A much quieter shift, but equally transformative, started to make its presence more felt on Thursday, when the Chairman of the U.S. Federal Reserve, Jerome Powell, outlined a new focus for the institution: inflation will […]
When the news came out last month that the U.S. Office of the Comptroller of the Currency (OCC) had cleared banks to custody crypto assets, you may remember that I expressed surprise that the new crypto-friendly Acting Comptroller Brian Brooks had managed to get such a bold move through the channels of bureaucracy so fast. It turns out that he didn’t. Apparently the OCC had been working on this letter for some time, according to regulatory sources who spoke to my colleague Nik De. While this may sound like a “so what?” revelation, let’s zoom in on the interesting part: the […]
Every epic tale needs a tragic hero, and one of the top candidates for that role in this century’s dramatic passage so far has to be the hedge fund manager. Toppled from their masters-of-the-universe pedestal in the early 2000s, they now eke out meager gains, dodge investor recriminations about fees and occasionally attempt to stay relevant by explaining to the rest of us where the current confusion is taking the global economy. True, there are some formidable brains and admirable initiatives among the former kings of finance. But so far, after a promising legacy and the occasional shining moment, this has not […]
An interesting op-ed by Leah Callon-Butler in CoinDesk this week got me to change my mind about something pretty fundamental. She asked: “Is crypto fintech?” My instinctive answer was “no!” For me, fintech is technology applied to finance, while cryptocurrency is a technology unto itself. That technology is giving rise to a new type of finance. You’re reading Crypto Long & Short, a newsletter that looks closely at the forces driving cryptocurrency markets. Authored by CoinDesk’s head of research, Noelle Acheson, it goes out every Sunday and offers a recap of the week – with insights and analysis – from a professional investor’s […]
Every year has a handful of days that you’ll never forget. Sometimes for great reasons, sometimes for awful ones, and sometimes because a level of noise and action coalesces into an awareness that something big has shifted. Wednesday was one of those days, with the staccato of compromised Twitter accounts (including ours) escalating to reach prominent public figures including current and former heads of state. The scale of the hack was spectacular. You’re reading Crypto Long & Short, a newsletter that looks closely at the forces driving cryptocurrency markets. Authored by CoinDesk’s head of research, Noelle Acheson, it goes out every Sunday […]
This week saw a 125% rise in the price of dogecoin, a cryptocurrency based on a popular 2013 internet meme, created in the same year as both a parody and a “let’s see if this sticks” experiment. Much to even the founder’s surprise, it has not only survived, it has accumulated a loyal following. Clearly. A group of teenagers on the extremely popular but recently beleaguered social platform TikTok decided to use their voice and audience to move the price of dogecoin up. It has nothing to do with fundamentals, potential or even government handouts – most participants probably don’t even […]
Now, I have no idea how old you are, nor do I want to make any assumptions. I will assume, though, that since you are reading this, you have an interest in markets and/or crypto assets. And since this is a newsletter aimed at professional investors, I will assume that you care about a bit more than prices going up/down/sideways. That should put us on more or less the same page as to what we explore here. However, this week I want us all to question the lens through which we judge the evolution of markets. Not just crypto markets – […]
By this stage, pretty much everyone knows that bitcoin’s volatility is well above that of equity markets. This is still true, even after the ructions of March. What is less well-known is that the balance of power when it comes to volatility is shifting. Market data indicates that bitcoin markets are becoming less volatile, and equity markets more so. This seems to be unrelated to the crash in markets earlier this year. You’re reading Crypto Long & Short, a newsletter that looks closely at the forces driving cryptocurrency markets. Authored by CoinDesk’s head of research, Noelle Acheson, it goes out every Sunday […]
One of the things I most enjoy about working in the crypto sector (apart from my awesome colleagues and the constant flow of fascinating change) is the level of debate. I’m not being sarcastic – there are many takes I strongly disagree with, but when they are put forward by people with rational and inquisitive minds (which can be most of the time, depending on your Twitter filters), the engagement invariably ends up enriching my own opinion. And, sometimes, bouncing someone else’s conviction off yours opens your eyes to nuances you hadn’t seen. Who knows? Entertaining conflicting points might actually change […]
One underappreciated feature of crypto markets is the lack of centralization. I mean, people know crypto assets are decentralized and trade on exchanges all over the world. But what’s often overlooked is the relative ease with which people can change the venues they buy and sell their holdings on. If, for instance, Jeff Sprecher (chairman of the New York Stock Exchange) says something that upsets you, you couldn’t exactly stop trading on the NYSE without liquidating a good percentage of your portfolio, because, for many stocks, it is the only trading venue. However, if a crypto exchange does something you fundamentally […]
The tensions that have spilled over into the streets of U.S. cities this week are a heartbreaking expression of a long-standing problem that has the whole world in its grip. Inequality is not specific to the U.S. Nor is it limited to a handful of relatively well-off geographies. It stratifies societies within borders, trapping the majority within a narrow income band while markets pour wealth into the accounts of the few. It also divides the haves from the have-nots on a spectacularly global scale, relegating some countries to the back of the hand-out queue while others, blessed by nature and exploited […]
There are many types of hockey-stick evolutions in new industries. Startups dream of the lying-on-its-back L shape for their sales growth. Entrepreneurs chase the “escape velocity” funding momentum. And a subsector can simmer along with a low hum of activity until boom, years of progress and feverish months of under-the-surface connecting explode in a series of announcements and launches that signal a new phase of development. Ok, maybe hockey sticks are not the best metaphor as they are made of a solid piece of something (you’ll notice I don’t know much about hockey). And the crypto markets are far from a […]
Famed Silicon Valley venture capital firm Andreessen Horowitz (a16z) stirred up some discussion last week by dividing crypto history into cycles that look something like this: The price goes up, which leads to new interest, which triggers new ideas and use cases, which leads to new startups and funding, which leads to product launches that bring in more people. Rinse and repeat. This would pass as a simple “hunh, cool” if it weren’t for their recent fund raise. Crypto Fund II hoped to reach $450 million; in April, the firm announced that the raise closed at $515 million. Given that […]
Well, it happened. Block 630,000 was processed on the Bitcoin blockchain (while we were on the air with our Crypto Long & Short show on Monday, how cool is that!), and the bitcoin subsidy paid to miners was cut from 12.5 bitcoins to 6.25. It felt momentous, as we all witnessed a pre-programmed economic system immutably do its thing. (Allen Farrington’s essay beautifully describes what it meant to those of us watching.) Many of you are probably breathing a sigh of relief now that you don’t have to hear about the halving again for a few years. Understandable – it has dominated […]