Ethereum rallied more than 15% in the past week, while bitcoin hovered in the mid-$30,000s, as investor sentiment towards cryptoassets remained lukewarm.

Unsplash

Following the worst month on record in May for bitcoin (BITCOMP), investors in the world’s largest cryptoasset and its peer ethereum (ETH-X) have climbed off lows but are yet to return anywhere near previous highs.

Nonetheless, caution remains the watchword for bitcoin in particular after a sell-off sparked by a crackdown in China on trading, as well as a bout of profit-taking. Whilst it rallied from $34,000 at the start of last week to hit a high above $39,000, bitcoin was unable to hold this level and retreated to trade just below $36,000 this morning. This was despite a flurry of positive news, including talk that El Salvador could adopt it as legal tender (see story below)

Ethereum fared better, surging from below $2,300 last week to trade at $2,728 this morning, albeit slightly off highs seen over the weekend.

Professional investors remain concerned about the near-term outlook. A note from Goldman Sachs (GS) said their meetings with 25 chief investment officers of long-only and hedge funds revealed bitcoin as the least favorite asset for investment.

El Salvador develops law to recognise bitcoin as legal tender

El Salvador could become the first country in the world to make bitcoin legal tender under proposals by its president.

President Nayib Bukele said in a recorded message to the Bitcoin 2021 conference in Miami that the move would "generate jobs and help provide financial inclusion to thousands outside the formal economy". 

He said bitcoin could be "the fastest growing way" to transfer money sent home from abroad. He plans to put the legislation to congress for approval this month.

The US dollar is the current official currency of the Central American nation. About one quarter of El Salvador's citizens live in the US.

Mr Bukele, who has maintained approval ratings above 90% since taking office in 2019, added that a large portion of the $6bn sent home each year by El Salvador nationals living abroad is "lost to intermediaries".

The president, whose New Ideas party has a super-majority in congress, touted adopting bitcoin as an idea that could help El Salvador progress.

"By using #Bitcoin, the amount received by more than a million low income families will increase in the equivalent of billions of dollars every year," he said.

Square eyes hardware wallet for bitcoin

Square (SQ) is considering making a bitcoin hardware wallet to make the cryptocurrency easier for everyone to access, according to its CEO Jack Dorsey.

In a 13-part Twitter thread, Dorsey revealed his thoughts on the topic, stating: “Bitcoin is for everyone. “It’s important for us to build an inclusive product that brings a non-custodial solution to the global market.”

He said any potential hardware wallet from Square would include some kind of phone integration. “An uncompromising focus on mobile interaction is likely to include the most people,” said Dorsey.

Crucially, Dorsey said any solution from Square would be done in conjunction with the cryptoasset world.

“If we do it, we would build it entirely in the open, from software to hardware design, and in collaboration with the community,” he said.

A hardware device would help make bitcoin tangible in a way that could allow for more understanding to the average consumer.

Ruffer cashes out of bitcoin (for now) with $1bn profit 

Asset manager Ruffer has made more than $1 billion in profit from a $600 million Bitcoin investment it made during November 2020.

Speaking to The Times, investment director at the London-based asset management firm, Hamish Baillie, revealed that Ruffer closed out its bitcoin position for more than $1.1 billion in profit during April.

He said: “When the price doubled we took some profits for our clients in December and early January. We actively managed the position and by the time we sold the last tranche in April the total profit was slightly more than $1.1 billion.”

Baillie claims Ruffer became one of the first fund managers to buy BTC in what was a rare short-term investment for the company. At the time of the investment, bitcoin’s price had cleared $15,000 and was pushing up to test the then all-time highs near $20,000 that had been set in 2017.

The investment director attributed bitcoin’s late 2020 parabolic price rally to the pandemic lockdown and stimulus payouts in the United States. He said the company sold its holdings partly because younger investors would not be spending as much time trading crypto now that lockdowns are ending.

The firm has moved the profits it made on the BTC trade into other “protective” assets such as inflation-linked government bonds. However, Baillie is confident that major financial institutions, including Ruffer (RUFIF) and Goldman Sachs, will continue to buy bitcoin, stating that another purchase is “certainly not off the menu.”