Despite solid news on vaccination rates in the UK, the FTSE 100 struggled throughout last week as the potential for negative rates weighed on investors’ minds, although ‘super Thursday’ helped boost the index, with major firms Tesco (TSCDY), Boohoo (BHOOY) and Primark (ASBFY) posting quarterly results. 

Bitcoin (BITCOMP) shook off volatility and market fears from the week before, loitering around the $35,000 mark before steadily rising to $40,000 on Thursday. Ethereum (ETH-X) followed suit, shaking off its own dip below $1,000 to hit $1,238. 

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Simon Peters, analyst, eToro:

Bitcoin catches breath following 7 day boom and bust  

Instead of a tumultuous week with talks of crashes and bubbles, last week was relatively steady for bitcoin for the most part. Starting at just $30,000, bitcoin rose to $40,000 on Thursday, before dipping again over the weekend. It currently sits at $36,389.

Whilst some commentators have pointed out that, from a technical standpoint, we are currently in a bear market, I don’t personally ascribe to that view. This level of volatility is no different to what we have seen in previous bull runs, but because bitcoin is at such a substantial price, the fluctuations in dollar terms appear much more significant. In percentage terms, they are not. 

As we have outlined in previous notes, there are several reasons for the current bitcoin bull market: institutional investment, demand outweighing supply with investors hodling, and an increase in appetite from retail investors, too. The backdrop for bitcoin remains supportive and so, to myself and to many in the community, it was not a surprise to see bitcoin recover relatively easily last week from its setback. 

For many investors, the recent drop towards the $30,000 level would have represented a compelling opportunity to ‘buy the dip’. For those who didn’t, they may be looking at the recent bout of volatility with yearning and regret. Grayscale Bitcoin Trust, which recently reopened to investors, has already been diving in and hoovering up recently mined coins. Decrypt reports that the closed-ended investment fund bought 2,172 bitcoin on its first day back.

With the price having risen so quickly in 2021, the next target is clearly the $45,000-$50,000 level. That is a staggering number, given that bitcoin was at an incredibly low $4,100 less than 12 months ago.

David Derhy, analyst, eToro:

Ethereum’s high fees yet to dissuade DeFi participants 

Whilst social and traditional media chatter has been focusing on bitcoin,  the Ethereum Foundation continues to work towards the completion of Ethereum 2.0. With more detail published on its roadmap and confidence from the Ethereum community ($1.5bn of ETH staked), 2021 looks to be a positive year for the network.

Nevertheless, high fees remain its primary issue – and the community has been actively working on Layer 2 solutions to reduce them. 

Despite such fees, DeFi apps like Synthetix, AAVE and REN have all been performing very well, indicating that DeFi is not disappearing but instead performing as intended, shaking off the hype that occurred during summer.

Decentralised exchanges continue to be a major theme in 2021. Sushiswap, Uniswap and Loopring have all been exciting investors this year – and rightly so, given some strong performance.

Simon Peters, analyst, eToro:

Crypto kicks off new year with crypto moves aplenty 

In a noteworthy departure last week, the OCC’s acting head Brian Brooks stepped down from the federal banking regulator. 

Brooks, previously the chief legal officer at Coinbase, had recently won the adoration of some in the crypto community following the OCC’s interpretive letter on banks using stablecoins and blockchain technology (see last week’s newsletter, Bitcoin’s new year’s resolution: Steal the headlines). 

We will wait with bated breath to see who Brooks’ successor will be and what path they will take in relation to cryptoassets and other nascent technologies. Given Brooks’ propensity for being positive on crypto, I hope that his successor will follow in his footsteps. It could just matter more than we think.

Dan Larimer also announced his departure, leaving Block. One to focus on ‘censorship-resistant technologies’. EOS, the cryptoasset developed by Block. One, was hit hard by the announcement, dropping nearly 30pc.