You don't need me to tell you that Bitcoin (BTC) is collapsing. The first and largest cryptocurrency by market capitalization rose more than 6% in the past 24 hours alone after crossing the psychologically important $65,000 threshold, according to data from CoinDesk Indices. It is now within striking distance of the all-time high of around $69,000, which was last recorded at the end of 2021, before the worst happened.
This price move surprised many, even industry insiders, considering how bleak market sentiment surrounding cryptocurrencies was even just a few months ago. Even major exchanges like Coinbase didn't expect this to happen, given that increased trading activity has created (new) hurdles. It's surprising enough that some are hesitant to say this is the beginning of a new bull market, given that things could come down just as quickly as Bitcoin went up.
This is an excerpt from The Node newsletter, a daily roundup of the most important crypto news from CoinDesk and beyond.You can subscribe to get the full version Click here for the newsletter.
But there are already legitimate differences that distinguish this cycle from the 2020-2021 hype cycle, with the bear market washing away some of the worst aspects of the industry. Is it inevitable that increased interest in cryptocurrencies will be linked to fraud, crime, and unsavory behavior? It's dangerous to say, but this time it might be different.
First, there's the billion-dollar question. Will Spot Bitcoin Exchange Traded Funds continue to grow? The 10 live funds have seen net inflows of $8 billion to date, and have only contributed to the re-legalization of cryptocurrencies through the involvement of trusted financial institutions such as BlackRock, Fidelity, and Bank of America's Merrill Lynch. It is also putting significant buying pressure on the underlying assets. Product, Bitcoin.
ETFs may have changed market dynamics by giving people a safer way to gain exposure. Rather, these ETFs prove that there was pent-up demand for Bitcoin across all corners of the market, from individual investors to the ultra-high-net-worth individuals seeking crypto exposure from their banks. BlackRock's Bitcoin ETF, for example, is the first fund to reach $10 billion in assets so quickly, and some say the next $10 billion could come in even faster.
But TradFi's focus isn't just on ETFs. CME Group's crypto derivatives products, which are generally seen as proxies for the interests of institutional investors, have seen record trading volumes. A similar trend occurred in the last cycle, with interest in cryptocurrencies attracting interest from more and more sectors. The more cryptocurrencies rise, the more people want to play with them.
Interestingly, the current cycle has not attracted the same level of engagement from celebrities, at least not yet. This may be a factor in the absence of figures like Sam Bankman Freed, who sought to gain public trust in FTX by funding celebrity endorsements. Hollywood could stay away as the SEC sues Kim Kardashian and other characters who allegedly promoted TRON without making it public.
Of course, all that could change – Paris Hilton might promote Boring Monkey again at any moment – but for now, the lack of “influencers” means that surveys have shown that their investments ” A positive development considering how inadequate 'advice' tends to be. Similarly, the voices that dominated the previous cycle, figures such as Alex Machinski, Bit Boy, Qiao Changpeng, Do Kwon, SBF, and Hsu Tzu, are largely discredited, which is a sign that cryptocurrencies are empty. It seems to be a power vacuum that wants things to stay that way.
That in itself could be wishful thinking, and it's worth considering why influencers emerge in the first place. One theory is that the price of cryptocurrencies is self-reflexive (a.k.a. “technologies that go up in numbers”), and that cryptocurrencies have a lot of influence because someone tends to come along to adjust the attention to one project or another. There is a person who has. As Bloomberg points out, this is amplified by the ability of traders to accumulate borrowed funds and gain leverage in an effort to maximize trading profits.
The amount of trust already built up in the cryptocurrency market (on platforms like Binance, OKX, and BitMEX, where up to 100x leverage is available, open interest in Bitcoin futures has increased by 90% since last fall) and the meme Considering the huge amount of capital coming in, looking at coins like DOGE and SHIB, it's clear that people are looking to gamble big this time around.
Given that the crypto lending sector ended up being dominated by a handful of now-bankrupt “hedge funds” like Alameda Research and Three Arrows Capital, it's unlikely things will turn out as badly as last time. There is hope that this will not happen. It generates yields paid to customers of now-bankrupt lending platforms like Celius, BlockFi, and Genesis.
For example, tokenization giant Securitize recently launched an “Earn” program for financial giants KKR and Hamilton Lane that provides yield through over-collateralized loans and tokenized funds. For now, Securitize will pay for itself, charging users a “sustainable” yield from its balance sheet while it assesses demand for its products, said Reid Simon, Securitize's head of credit. He said this in an interview with CoinDesk.
This in itself is an interesting move and shows how important lending programs are as one of the few ways to put digital assets into productive use. “This is a business we want to be in,” Simon said, noting that it’s “unclear” how much crypto-native companies’ brands resonate with crypto. “I don't necessarily think of Securitize and Bitcoin together,” he says.
There is no guarantee that the same mistakes will not be made again (or that Bitcoin will continue to rise even if it regains all-time highs). It's worth noting that the recent rally has been accompanied by strong gains in the S&P 500 and Nasdaq indexes, as well as renewed growth in the US tech sector, with investors believing that rising interest rates will move capital away from riskier sectors. This surprised many onlookers.
Simply by the nature of how these hype cycles play out, cryptocurrencies are doomed to a Sisyphean cycle in which each time the price soars, the rate of support and greed increases leading to illegal use, fraud, speculation, and hatred. there is a possibility. But for now, it's worth praying that things don't get any worse, as the worst aspects of the industry have been washed away and many people (rightly) want to do things differently.
Does everything that goes up have to come down? Is it really different this time?
