Floodgates Opened
Market Recap
The price of Bitcoin surged another astonishing 18.7% last week, breaking the year to date high, last traded at $15,490. The strength of the first and foremost cryptocurrency has injected confidence into the altcoin market as well. The price of Ether (ETH) is up 11.92% at 454.70, while BCH and BSV underperformed, down -1.35% and -8.40% respectively. The total cryptocurrency market capitalization has increased another 7.8% since this time yesterday. It now sits above $450 billion with BTC dominance now measuring 64.4%.
The tumultuous U.S. election was undoubtedly the biggest event to affect markets this week. Most of the toss-up states were headed to Trump at the beginning of the election night, but after the mail-in ballots were counted, Biden regained the lead in a number of battleground states. Markets reacted quickly to this flip, as Bitcoin bottomed out along with the stock market after the election polls reversed in Wisconsin on Wednesday morning. While bitcoin rocketed higher this week, decentralized finance (DeFi) market had a tough one initially. DeFi tokens fell by 10–30% across the board, before bouncing back strongly over the weekend recuperating most of the loss. Defi Pulse Index has surged 21.24% and traded at $81.52 amid institutional investors scooping up Defi Tokens.
U.S. stocks logged its best weekly gain since early April as investors reacted to the increased possibility of a divided government, including a controversial Biden win and continued Republican control in the Senate. The result of the U.S. election is still debatable as of Sunday afternoon with some major media coverage called a win for Biden. However, the market began to price in the scenario of a split government that potentially reduces the likelihood of immediate tax hikes and increased regulations, while not removing the potential for an agreement on some form of fiscal-aid package. On the economic front, jobs report showed that despite the lack of additional stimulus, election uncertainty, and rising virus cases, the labor market continues to heal, signaling the economic recovery is still on track. Elsewhere, Chinese stocks advanced as the prospect of a Biden presidency raised the outlook for improved U.S.-China relations. The benchmark Shanghai Composite Index ended up 2.2% and the large-cap CSI 300 Index rose 3.4%, according to Reuters data.
What is Happening?
The ETH 2.0 upgrade, also known as Serenity, has long been notorious for its vague and ever-changing timeline. Finally, ETH 2.0 is on track to launch very shortly. After initial concerns of a security audit potentially delaying the launch, this week Vitalik Buterin, founder of Ethereum, confirmed the release of the ETH 2.0 Deposit Contract. ETH 2.0 is expected to launch in a number of phases, which will activate different parts of this new chain. The phase expected to be launched this year will only include Proof of Stake (PoS), a consensus mechanism that removes the need for miners. PoS will give those that participate the opportunity to earn a return on their ethereum, as long as they properly validate blocks. The technological improvements contained in ETH2, such as the introduction of sharding, is also expected to bolster DeFi by improving user experience. On the other hand, crypto research firm Messari’s analysis shows that Wall Street trading firm Jump Trading holds at least $75 million worth of ETH-based tokens and ETH. While the exact distribution of Jump Trading’s holdings was not disclosed, analysis discovered that the firm has purchased 47,000 COMP in the past week alone. 47,000 COMP is currently worth approximately $4,000,000.
Conclusion
As Bitcoin has surpassed 14k, the flood gates are now wide open. While google search trend reflects a much lower interest from the retail investors compared to 2017, Grayscale sees unprecedented inflow into its Bitcoin Trust as well as AUM hitting $1B mark in its newly registered Ethereum Trust. The OI across major exchanges for both BTC futures and Options went through the roof and registered new all-time highs. All factors signal a more calculated portfolio allocation from institutions and professional investors than a retail mania this round of rally, and this might just be the beginning.
Good Luck!
