May 10, 2021
Much Wow, DOGE Up
10 May 2021
Market Recap
A crypto bull market is not complete without a full-blown alt season. There seems to be no stopping of Ethereum as it flirts around $4,000 vs. lacklustre performance by bitcoin struggling to clear key resistance at $60,000. Bitcoin dominance now lies at 44.3% (Chart 1), a level not seen since July, 2018.
The main narrative is that money is rotating out of bitcoin into alts, and that new money is flowing into the market attracted by the alluring 1000x meme coins that cost a fraction of bitcoin’s eye-watering $59,000 price tag. $DOGE traded more than $BTC or $ETH in a few sessions, in anticipation of Elon Musk’s shilling of the coin in SNL. Aside from $DOGE, the rest of legacy alt-coins also saw big price gains, including $ADA (+31%), $BCH (+45%), LTC (+47%), $ETC (+168%), $EOS (+55%)
Meanwhile, on the institutional side, FOMO is real as instis continue to pile in, expanding their digital assets endeavours — Goldman Sachs executed its first crypto trades and formalised the set-up of its bitcoin desk on Friday and also led US$ 15mio Series B funding round for Coin Metrics, a crypto-intelligence firm; Citi is considering launching crypto trading, custody and financing services. On the corporate side, MercadoLibre, the biggest e-commerce company in LatAm, disclosed $7.8mio worth of bitcoin purchase for its treasury, and also offered Argentinian properties on sale from agencies that accept bitcoin as the only payment method. Digital asset investment products saw inflows of US$ 489mio 2 weeks ago as well — the largest inflow since Feb’21 (Chart 2); Ethereum products inflow saw US$ 30mio, bringing total investment AUM to a record US$ 13.9bn. Insti focus seems to have shifted to ether, with VanEck recently submitting ether ETF application to the SEC, and real-world practicality of its blockchain technology (Visa, EIB).
With both gas price and funding rate for ether under control, ether’s outperformance appears to be spot-driven. Whether bitcoin’s dominance would be challenged is yet to be seen, but real-world application of Ethereum, and growing DeFi adoption could really change the tide.
On the macro side, stocks jumped to record levels on Friday despite disappointing April jobs report that showed NFP rising by only 266k (vs. Est. 1 million). The weak number caused investors to believe easy monetary policies will stay in place for longer, and provide a boost to Biden’s economic stimulus agenda. The dollar slumped towards the lowest since February, and value outpaced growth for the week as Nasdaq ended lower for the 3rd straight week.
What is Happening?
Paypal is exploring the launch of a stablecoin. Paypal has reportedly been making rounds amongst the industry’s stablecoin protocol developers, including Ava Labs, the team behind the Avalanche ($AVAX) blockchain. Paypal has been making steady expansion into the digital assets space, including allowing users to purchase digital assets, pay through digital assets, acquiring crypto security firm Curv.
Square’s bitcoin revenue grew 11x year-on-year in Q1’21. According to Square, its Cash App generated US$ 3.51bn of bitcoin revenue and US$ 75mio of bitcoin gross profit. Bitcoin revenue has become a major driver of Square’s revenue, given its Q1 total revenue of $5.06bn (70%). Square also bought $220mio of Bitcoin for its treasuries, and its CEO Jack Dorsey is also a vocal Bitcoin proponent.
Conclusion
In a bull market, everyone is a genius. However, all good things must eventually come to an end. As much as we are secularly bullish on digital assets space and express that view via our portfolio, we are also actively looking for signs of overheating and pull-backs in the traditional macro space. Respect the fundamental and pumpamental, and may your PnL always be green.
Good Luck!
