Cryptocurrencies and blockchain and sizzling hot. Want to know the latest trends, happenings, and news?
Here at AIBC, we keep our finger on the crypto pulse and we’ve prepared this monthly trading digest to help you keep track of everything that’s going on.
This month: potential interest rate hikes trigger cryptocurrency downturn, but the market soon recovers. Microstrategy CEO Michael Saylor remains bullish on Bitcoin as the company holds more than $5 billion BTC in reserve.
Meanwhile, the leading global asset management company BlackRock will soon offer institutional investors the opportunity to invest in crypto currencies, sources reveal. At the same time, another asset management company, CI Financial Corp., acquires a stake in the Canadian crypto-trading platform Newton.
Fed Concerns, Traditional Market Uncertainty Reasons for Major Crypto Decline in January
Crypto enthusiasts and investors were dealt a blow in January, when the crypto market started to decline majorly with all of the major currencies recording a significant drop.
According to CoinDesk, the price of BTC fell below $33,000 on January 23, the lowest it has been since July of last year.
What has been driving this fall, exactly? According to Nick Casares, head of product at PolyientX, a platform for nonfungible token projects, it’s about a coupling between the cryptocurrency landscape and the traditional economy.
Originally, the blockchain-driven crypto space was relatively uncoupled from the goings on in the “regular” economy, but this has changed in recent times.
“This time around, we’ve seen a lot more retail investment,” Casares explains, “We also have institutional money in crypto now that has come in a big way. And when that happens, it tends to create a coupling between traditional markets and the crypto market.”
Retail investing, of course, refers to single individuals who invest in various ways, as opposed to institutional investors which are banks, hedge funds, and venture capitalists among others.
With the rise of apps such as Robinhood, and crypto trading platforms Crypto.com, Binance, Kraken, and others many people from all walks of life have taken their first steps into investment waters facilitated by the ease of use and low barriers of entry that these platforms offer.
A lot of these newly minted investors have chosen Bitcoin, Ethereum, and other cryptocurrencies to try their luck in the markets.
Along with this increase, however, what happens in traditional markets is now more likely to affect crypto markets as well. Party because retail investors tend to sell off shares more quickly at signs of uncertainty. It goes without saying that with the COVID pandemic of the last two years, markets in general have been more uncertain.
On January, the Fed met to determine whether or not a rate increase would tackle rising inflation and labor shortages. It is expected by experts that the Fed will raise interest rates soon, which some experts think will not be good for workers.
“Everybody in the markets was nervous and speculating about what might happen there. So, interest rate conversations coupled with a rising inflation rate, I think it’s affecting all asset classes,” Casares added.
However, according to a survey by the crypto trading company Voyager, most crypto owners (87%) plan to hold on to their assets in the medium and long term, making the drop of Bitcoin (and other currencies) just a bump in the road for them.
Crypto Market Recovers with Over $160 Billion in Gains
Those holding on were shortly proven right, as the crypto market has since recovered, following weeks of harsh volatility.
At the moment of writing, Bitcoin is back to being valued at above $40,000, reaching $45,000 on February 10. This means that BTC now has the same value it did a month ago.
The cryptocurrency has regained its $1.9 trillion market capitalization as of February 6, according to Finbold.
With interest hikes being the main reason for this volatility, however, it’s not clear what that means for the short and medium-term future of crypto. Given the fact that these interest hikes in the US may still occur, as many experts expect they will.
At the moment, Bitcoin is leading the market recovery having shot up past the $40,000 magic limit that makes holders and investors confident in its future. Experts also consider this rally to be connected with tech stocks rising. Amazon has led his rise.
There was good news for other blockchain investors, as leading cryptocurrencies such as Ethereum also recorded growth during the week.
Ethereum has risen by more than 15% over the last week while Solana has risen by 19% meaning those who stuck the downturn out now have reason to be happy. Similarly, Avalanche (AVAX) and Polkadot (DOT) have risen by 10% and 13% respectively.
According to experts from Finbold, this series of bearish and bullish price movements have resulted in the formation of a broadening falling wedge which has historically signaled an imminent price surge.
Will that happen this time? It’s likely, but not guaranteed. What is clear is that Bitcoin has recovered from the weeks of volatility bringing some much-needed stability to its investors and the cryptocurrency investing space.
According to Finbold’s report, one part of the rallying of Bitcoin came from GoFundMe cancelling the funding campaign for the controversial Canadian trucker protest against Covid-19 restrictions. When the crowdfunding platform shut the money-raising campaign down (which had collected over $9 million at the time), many supporters turned to Bitcoin.
As always, what happens next for Bitcoin is hard to predict, but for those in the long haul, the value shooting back is without doubt a good sign.
CEO of Microstrategy Unmoved by Frequent Bitcoin Declines
One of the people who are definitely in for the long haul when it comes to Bitcoin is Michael Saylor, the CEO of business intelligence company Microstrategy.
Microstrategy holds a reserve of $5 billion in Bitcoin.
“Never. No. We’re not sellers,” Saylor said. “We’re only acquiring and holding bitcoin, right? That’s our strategy.”
His company became the first Nasdaq-listed entity in the United States to buy and hold BTC in August of 2020. And it has continued to do since then, as it now holds more than 124,000 Bitcoins in its coffers according to the most recent available data.
This has been a winning strategy for the company as its shares have increased by more than 900% at one point after it has announced its plans to hoard Bitcoin.
Saylor commented in an interview with Bloomberg TV that Bitcoin is the most interesting thing in the current global financial sector, with the only downside being that it can be causing concern to investors in the short term.
“The best defense against inflation is a Bitcoin standard. So, I don’t really think we could do anything better to position our company in an inflationary environment than to convert our balance sheet to Bitcoin.”
It’s no surprise then that MicroStrategy has revealed at their Q3 financial briefing that it plans to purchase even more Bitcoin in the future.
Under Saylor’s leadership, the company has retained its bullish crypto investing stance when it comes to Bitcoin and it’s clear this will not change any time soon.
BlackRock Gets in on Crypto Trading Business
One of the largest asset management companies in the world, BlackRock, is keeping itself busy in other ways than just buying up real-estate across the United States.
According to well-informed sources that CoinDesk has quoted, the company plans to enter the cryptocurrency investing space presently and offer a trading service to its investor clients.
The New York-headquartered company that manages more than $10 trillion in various assets will enter the cryptocurrency market with client support trading and then also with a credit facility of their own.
In essence, this means that clients would be able to borrow from BlackRock while pledging crypto-based assets as collateral.
One of the sources has revealed to the press that BlackRock intends to allow its clients to trade cryptocurrency though its Aladdin platform (“Asset, Liability, Debt and Derivative Investment Network”). The management company’s clients include public pension schemes, endowments, and sovereign (state-owned) wealth funds.
Or to put it in proper terms, serious institutional investors with a lot of wealth. With serious investors such as venture capitalists already in the crypto space, it was only a matter of time before large institutions got interested too.
BlackRock hasn’t confirmed or denied what they sources have said to CoinDesk.
Nevertheless, the company may have been signaling its intention as early as June of last year when it started hiring for an “Aladdin blockchain strategy lead.” BlackRock isn’t the only large institutional player with plans to get into the cryptocurrency space with it being common knowledge that the types of Goldman Sachs, Morgan Stanley, and Citigroup have similar aims in the near future.
This isn’t the first time that BlackRock has sent positive signals around crypto. It now trades CME Bitcoin futures and has plans to launch an iShares Blockchain and Tech EFT, an exchange=traded funded that will track ad index made up of companies involved in crypto tech in the US and the world.
In addition, the fund owns 16.3% of MicroStrategy, the very same firm led by Michael Saylor and his extremely positive outlook on Bitcoin.
According to sources quoted in the CoinDesk story, BlackRock is “looking to get hands-on with outright crypto” and also “looking at providers in the space.”
A working group of “twenty or so people” inside BlackRock that is evaluating crypto is also mentioned.
“They see all the flow that everyone else is getting and want to start making some money from this,” said the unnamed source.
CI Announces Investment in Cryptocurrency Trading Platforms
CI Financial Corp has announced it has acquired a minority stake in Newton Crypto Ltd, a Canada-based crypto trading platform.
Both the size of the stake and the asking price are undisclosed at the time of writing.
The asset management company acquired this stake as part of Newton’s $20 million Series B funding round completed on February 4. This funding round, led by partners with DV Chain, brough the Canadian crypto platform’s valuation to about $200 million.
“This investment in Newton reinforces CI’s commitment to strengthen our leadership position in digital assets in Canada,” said Darie Urbanky, CI President and Chief Operating Officer in a press release. “Cryptocurrencies and blockchain are transforming the world of finance and we’re excited to expand access for investors to this growing category.”
“We made this investment specifically to accelerate the timeline by which we can extend crypto trading capabilities to our wealth management clients.”
“CI believes that our participation in crypto, whether through our cryptocurrency funds and ETFs or through trading, benefits clients by providing them with a trusted and secure way to gain exposure to these emerging asset classes,” a CI spokesperson has told the industry outlet Investment Executive.
CI Global Asset Management (“CI GAM”) states it is the first business in the world to provide both ETFs and mutual funds that invest directly in Bitcoin and Ether, the two most valuable cryptocurrencies in terms of market capitalization. CI now provides a market-leading range of cryptocurrency options, including three exchange-traded funds (ETFs) and two mutual funds.
As a trusted low-cost crypto asset trading platform, Newton provides a simple and easy way for Canadians to onboard and offboard fiat, trade cryptocurrency from a list of over 60 different cryptocurrencies, and withdraw or deposit cryptocurrency on any device, while also providing access to some of the best crypto asset prices in the country.