Image Source: Pixabay

The S&P 500 saw multiple dips last week, especially on Wednesday, as the index suffered in conjunction with the other key US indices such as the Dow and Nasdaq. The FTSE 100 saw a similar performance last week, with a steady fall starting on Tuesday afternoon and continuing through Wednesday and Thursday. 

On the crypto front, bitcoin dipped below $30,000 on Wednesday, following a push towards $35,000 on Monday. In altcoins, Ethereum hit a convincing all-time high last week, touching $1,467 before a marginal dip to the $1,200s, ending the week at $1,315.

David Derhy

Bitcoin dips below $30,000 and further drops remain a possibility 

After a brief dip, it is now evident that $30,000 is going to play an important level of support. If prices started to decline below $29,500, then we could be in for a fairly heavy correction toward $24,000. It is easy to be bullish on crypto when the market is heading in a positive direction, but I always think it prudent to urge caution. Despite this, bitcoin’s current stability and relatively low volatility compared with other cryptoassets at the moment is positive for the sector overall.

Simon Peters

Stop mechanisms could be a benefit to crypto but antithetical to the concept 

Bitcoin has consistently remained above $30,000 since breaking above on 2nd January 2021 and with this support level now established, in my opinion, it is now time to see some upside. 

But what if there is a considerable drop? A key characteristic of the crypto sector is that, unlike traditional stock markets, it does not have a means of suspending trading on assets that are seemingly in freefall. Which begs the question: should it? Should the sector employ mechanisms that traditional markets can use, such as trading suspension or pumping in liquidity from central banks? Not necessarily. A preeminent benefit of the cryptoasset sector has always been its decentralization, but this opens investors up to additional risks. Volatility and risk is something that people should be taking into account regardless of what they are investing in. 

It is especially important in crypto that investors do their due diligence. They should research their prospective investments, read around the topic, and research the cryptoasset’s whitepaper to ensure that the risk/return profile of the asset matches their own. It is also essential for investors to be cognisant of relatively low liquidity in the crypto sector generally, which can lead to big price swings. Hopefully, as we continue to see further investment in the sector and more participation from the institutional sector, this liquidity will be improved and we will see erratic price movements tamed in the future. 

Simon Peters

Marathon Patent Group in bitcoin for the long haul 

Last week, cryptocurrency miner Marathon Patent Group bought $150m worth of bitcoin at an average price of $31,167 per coin. The firm, as with MicroStrategy and Square before it, has added the cryptoasset to its balance sheets. Tellingly, the firm’s CEO, Merrick Okamoto, explained the motive: “We also believe that holding part of our Treasury reserves in bitcoin will be a better long-term strategy than holding US Dollars,” he said, the move clearly inspired by fears of continued USD devaluation.  

We continue to see companies add bitcoin to their balance sheets, but the trickle has not yet developed into a snowball on a mass institutional scale. The fears of a falling dollar are very real, so what might drive more firms and CEOs to move some cash into bitcoin? 

I believe it will be a chain of events. We’ve discussed previously the OCC decision on stablecoins, and I really think we shouldn’t understate the importance of this move; it could well be the catalyst for huge listed companies with large cash reserves to move into bitcoin. Digital platforms that have large cash reserves and minimum OPEX are well suited to moving their cash reserves into bitcoin to protect against inflation. It might just take a small spark.

David Derhy

Simon mentioned earlier that it is important for investors to do their research and due diligence on potential investments. This is especially true at the moment when a small number of scammers have been creating fake tokens and selling them on Uniswap, claiming to be from popular DeFi projects such as Opyn or Argent. Not only do these moves have the potential to damage people’s perception of DeFi, but they are also a reminder for all investors to remain vigilant, especially in such moments of market euphoria. 

Simon Peters

Cardano’s hard fork could back investment thesis for ADA 

Cardano is set to hard fork this month. The move will mean that developers are essentially more easily able to create tokens on Cardano versus say Ethereum as custom code is not needed. Tokens will be ‘native’ and they are supported by the underlying blockchain, whereas Ethereum for example requires customized code for tokens to be supported by the underlying blockchain introducing further complexity. It also adds costs as gas is needed to pay for the execution of the custom code. There would be no execution fees when transferring native tokens on Cardano, something which could be significant for the growth of DeFi given the controversy the topic of high fees in a growing DeFi space is causing on Ethereum. 

With Cardano already proof of stake consensus mechanism, investors may look at the continued development of the platform and see an investment opportunity. Combine a potential price appreciation with the staking rewards (currently retail investors can stake ADA on eToro)and Cardano looks set for a renewal of interest in 2021, especially with the next major upgrade - Goguen - which will bring smart contracts to Cardano, planned for main net launch in a few months.