First Mover: Bitcoin Pause, Ethereum Snafu, 1,000% Returns Put Focus on Exchange Tokens


Bitcoin was higher, pushing toward the upper edge of its recent range between about $14,700 and $15,600.

“The positive sentiment towards bitcoin has not gone away,” said Denis Vinokourov, head of research at crypto prime broker Bequant. 

In traditional markets, Asian shares tumbled, led by Alibaba and Tencent, as Chinese government issues regulations designed to curb growing influence of big tech companies. European shares were up, and U.S. stock futures pointed to a higher open. Gold weakened 0.1% to $1,875 an ounce. 

Market Moves

Crypto-exchange tokens like Binance coin (BNB) and FTX’s FTX (FTT) started out as a sort of in-house currency: Traders could use them within the closed environment to buy digital assets, getting discounts on transaction fees. 

But recently some digital-asset traders are thinking of them a bit more like traditional stocks – as a bet on the exchange itself. It’s also increasingly possible to park the tokens in various systems and protocols for yield, not too dissimilar from a dividend. 

And some of them are registering outsize gains. Binance’s BNB tokens have gained about 30% this year, while FTX token is up 157% and upstart Hxro’s token has increased 10-fold in price. 

Exchange management teams increasingly viewing the tokens as a way to bind loyalty among customers. The rationale, according to Jack Purdy, senior research analyst at the cryptocurrency research firm Messari, could be that the exchanges now view token holders as an important component to their long-term business success.

The specter of an unexpected move by authorities to crack down on the tokens – precisely because of their resemblance to stocks – remains a threat.

Exchange tokens “are a gray area with equity-like characteristics,” Purdy said. “Regulatory concerns are definitely a problem because they definitely look like securities under U.S. laws.” 

Read More: Exchange Tokens Are Skyrocketing as They Act More Like Equity; That Could be a Problem

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Prices for Binance Coin over past year.
Source: TradingView

Bitcoin watch

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Bitcoin daily price chart (on left) and weekly chart on right, showing key RSI levels above 70.
Source: TradingView

After the recent rapid rally, the bitcoin market is likely to take a breather before continuing its rise toward the end of the year, analysts told CoinDesk.

“The cryptocurrency may consolidate for a short period before moving higher” toward the end of the year, said Chris Thomas, head of digital assets at Swissquote Bank.

Indeed, further notable gains look unlikely in the short term, as the cryptocurrency’s 60% rally from $9,800 to $15,900 seen over the past two months looks overstretched, per the technical charts. Both the 14-day and 14-week relative strength indexes are hovering well above 70, indicating overbought conditions and scope for consolidation or minor pullback.

Patrick Heusser, senior cryptocurrency trader at Zurich-based Crypto Broker AG, expects bitcoin to consolidate in the range of $14,000 to $16,000 in the next few weeks. 

He expects the pause to allow a rally in alternative cryptocurrencies, most of which have lagged bitcoin in the past two months.

Read More: Bitcoin Likely to Consolidate Before December Rise Toward $20K, Say Analysts

Token watch

Ether (ETH): Prices hold firm as Ethereum service provider Infura suffers outage from reported blockchain split

Bitcoin (BTC): Nearly $360 million of bitcoin tokenized on Ethereum blockchain in October despite cool-down in the thriving cryptocurrency subsector of decentralized finance, known as DeFi.  

Filecoin (FIL): Winklevosses’ Gemini crypto exchange is developing a wrapped version of decentralized data-storage provider’s tokens

Balancer (BAL): Cryptocurrency funds Pantera Capital and Alameda Research invest in liquidity provider via direct purchase from Balancer Labs treasury

Algorand (ALGO), cosmos (ATOM), cardano (ADA), kyber network (KNC), omg network (OMG): Growth in trading volume means tokens are added to CoinDesk 20 while bitcoin sv (BSV), dai (DAI), zcash (ZEC), monero (XMR) and dash (DASH) are out. 

cd20-volume

What’s hot

  • DeFi fever returns as total collateral value locked into protcols hits all-time-high above $12.8B (CoinDesk)
  • Former CFTC Chair Gary Gensler, a crypto-savvy veteran of Wall Street and Washington, plans to lead projected President-elect Joe Biden’s financial-policy transition team (CoinDesk
  • Chinese bank, world’s second-biggest, plans to issue $3B of tokenized certificates of deposit on blockchain via a branch in Malaysia, and they’ll be tradeable for bitcoin on the Hong Kong-based digital-asset exchange Fusang, according to the South China Morning Post (CoinDesk
  • Ethereum 2.0 deposit contract tops $22.5M, week after launch (CoinDesk
  • Cred bankruptcy highlights need for crypto-lending industry to adopt best practices absent “paternalistic state to backstop credit and bail out excessive risk-taking” (CoinDesk)
  • MicroStrategy CEO Michael Saylor explained why gold is “an antiquated approach to storing value,” while bitcoin is “a million times better.” (CoinDesk)

Analogs

The latest on the economy and traditional finance

  • This time might actually be different, since “another round of massive fiscal+QE MMT combo” would likely push up inflation and asset prices too far, Lyn Alden Schwartzer writes (SeekingAlpha
  • U.S. job openings increase less than expected in September while hiring fell, suggesting labor market recovery was petering out even before recent coronavirus resurgence (Reuters
  • Stimulus, spending bills top U.S. lawmakers’ “to-do list” in lame-duck session (WSJ
  • Greece, debt defaulter as recently as 2015, now sees yields on its short-term bonds going negative (WSJ
  • European banks worry over $1.7T of bad loans that could take toll when government rescue packages end, possibly necessitating state support (WSJ)  
  • Biden faces resistance from U.S. Senate over $2T tax increase unless Democrats win Georgia seats (WSJ
  • U.S. corporate tenants put record 42M square feet of office space on rental market with many employees remote working for foreseeable future (WSJ
  • Lenders see big opportunities in bailing out financially strapped hotel owners (WSJ
  • Australian mining giant BHP links with China’s Baowu Steel in bid to reduce environmental footprint through carbon capture research (Nikkei Asian Review)
  • Fitch report chronicles how far Chinese yuan has to go before challenging U.S. dollar’s dominant role in foreign exchange markets (Fitch):

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