A booming bitcoin has reignited the digital asset markets in the last week. The largest crypto asset on the Brave New Coin market cap table, Bitcoin (BTC) ended the week up an impressive ~13%. The second and third largest assets on the table, Ethereum (ETH), and Cardano(ADA), were up ~2%, and down ~3% respectively. However, most of the altcoin market lagged behind Bitcoin, and BTC’s dominance of the overall cryptocurrency market cap has increased. It started the week at 42.39% of the total cryptocurrency market, and is now up to 45.12% as crypto holders increase their BTC exposure.
In a recent note to investors, analysts at investment banking giant JP Morgan pointed to three key fundamental factors that have driven the BTC price from US$40,000 to US$55,000 in the last few weeks. Recent assurances by policymakers that the U.S. has no intention to follow China’s steps towards banning the use or mining of cryptocurrencies, the surge in usage of the Lightning Network that has been helped by El Salvador’s adoption of layer 2 payments, and rising global inflation concerns (spurring interest in BTC as an inflation hedge) — are the three factors.
The bank dived deeper into the third point, pointing out that Bitcoin is now challenging gold as an inflation hedge. It added that a prior trend of money flowing out of gold markets into Bitcoin is re-emerging. Over the last year, gold prices have remained flat in the midst of ongoing inflation while BTC prices have risen considerably. JP Morgan says that this shift in investment preferences is being made by institutional buyers.
An indication of the re-emergence of institutions can be seen in rising Bitcoin futures activity on the Chicago Mercantile Exchange (CME). The CME has jumped to third on the list of the world’s largest Bitcoin futures exchanges by open interest and was temporarily in second position. The open interest on the CME is now well above popular retail-focused platforms like OKex and Bybit.
Trading activity on the CME is often used as a proxy for institutional demand for Bitcoin. The minimum size of a contract on the CME is 5 BTC and they are available for purchase on the CME Globex platform. To trade on CME Globex, you must have a CME Group clearing firm relationship, CME Group-certified trading application, and connectivity to CME Globex.
The narrative of bubbling institutional interest is further endorsed by a growing premium on the CME contract futures. This suggests that institutions are buying BTC contracts as committed long positions and not for the otherwise popular cash and carry arbitrage trade that attempts to capture the difference between the spot price and the futures price of BTC. The popularity of the cash and carry trade keeps the CME futures price of BTC close to its spot price.
With global economic growth being stalled by supply squeezes, rising energy costs, and surging inflation, large investors are seeking macro hedges to protect their positions. Bitcoin’s role as a hedge is strengthening and is poised to have a strong Q4 and close to the year.
Crypto news for the week ahead
October 13th-14th – World Blockchain Summit Dubai
One of the biggest in-person crypto events of the year is set to take place in Dubai with a number of industry luminaries attending. This year’s list of speakers includes Samson Mow of Blockstream, Henri Arsalanian from PWC, and Alex Höptner from Bitmex. Key discussion topics for the conference include the Bitcoin ecosystem roadmap to mass adoption, CBDCs and the NFT market.
October 11th – Biconomy will list the Solana token
On Monday, October 11th, Canadian exchange Biconomy will begin to support the trading of the Solana (SOL) token. Solana has enjoyed astronomic growth in the last year to become the 7th largest asset in crypto. It continues to challenge Ethereum’s position as the leading layer 1 platform blockchain in the market and is expanding its ecosystem to secondary markets like Biconomy. In the last year, the price of SOL has risen by over 5,500%.
Top 10 Crypto Summary
It was a mixed week for large-cap assets on the Brave New Coin market cap top 10. While most altcoins have struggled to keep pace with BTC, some, such as XRP (XRP), have managed it. XRP is up ~9% this week after strong legal moves made by the platform’s legal team during its ongoing 10 month legal battle with the SEC. Ripple filed a letter to a magistrate judge claiming negligence from the SEC and used a statement made by former director of the SEC’s Division of Corporate Finance, Bill Hinman as evidence of contradictory statements made by the agency.
__Bitcoin Price Chart__
Bitcoin’s excellent start to Q4 2021 continued as it surged past US$50,000. Data from blockchain analytics firm Glassnode indicates that large transfers of BTC (> US$10M) hit an all-time high in the last month. This is an indication that whales/institutions are driving the recent push in price and not smaller retail traders.
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