The price of bitcoin neared $68,400 on Wednesday, reaching its highest level since July and sparking a rally across the crypto sector.
Bitcoin is up more than 9% over the past week and ether is up about 7%. Other popular coins have also rallied, with solana up close to 10% in the past seven days and dogecoin up 15%.
The gains have made their way to crypto-pegged stocks. Digital asset exchange Coinbase climbed almost 7% on Wednesday, bringing its three-day rally to 19%. The stock is at its highest since August.
Bitcoin and Coinbase move higher in the last week.
One reason for bitcoin’s 53% gain so far this year is a host of new spot bitcoin exchange-traded funds that hit the market in January, welcoming in a host of new investors. Ether ETFs followed in July.
Investors have bought $1.2 billion in ETF shares in the past three days, bringing total holdings to more than $63 billion. BlackRock’s iShares Bitcoin Trust (IBIT) has accounted for more than 30% of the new purchases.
Samara Cohen, chief investment officer of ETF and index investments at BlackRock, told CNBC recently that 80% of buyers of IBIT are direct investors. Of those, 75% have never owned a BlackRock ETF, she said.
“We went into this journey with the expectation that we needed to educate ETF investors on crypto and on bitcoin specifically,” Cohen said. “As it turns out, we have done a lot of education of crypto investors on the benefits of the ETP wrapper.”
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AUSTIN — There is a sort of clubhouse for Austin’s bitcoin believers on the second floor of the Littlefield Building at the corner of Congress Avenue and Sixth Street. The hideaway is at the crossroads of two worlds — the majestic thoroughfare that leads to the Texas State Capitol and the iconic, albeit notorious, stretch of bars, restaurants, and live music that define the capital’s party vibes. It’s an apt metaphor for the space itself.
The Bitcoin Commons is, at once, many things.
By day, it functions as an open plan, fluorescent-lit co-working space for the more corporate-minded bitcoin operators, but at night, it moonlights as a safe space for underground meet-ups of the industry’s rogue actors. Periodically, it plays host to conferences that draw in a mix of attendees ranging from venture capitalists to armed preppers living entirely off the grid. And on some afternoons, once happy hour hits, the kitchen at the back is retrofit with a stowaway bar.
“We also fund developers, and we help them advance their projects,” said Parker Lewis, one of the stewards of the Commons, as well as the author of a new book on bitcoin called “Gradually, Then Suddenly.”
“We help advance bitcoin through education and actually developing the monetary network, the code base, and the applications,” said Lewis, who is widely considered to be one of Texas’ de facto bitcoin ambassadors.
Francisco Chavarria was born in Mexico City and spent time in Salt Lake City, but three years ago, he made the move to Austin to be a part of a community of like-minded thinkers. His company, Yopaki, which is a neobank for bitcoin focused on the Latin American market, just won first place in a hackathon put on at the Commons.
“If you talk to other builders in the competition, a lot happens here,” said Chavarria. “There definitely is a sense of, ‘I don’t need for others to lose for me to win.’ There really is a relationship and a collaboration for bitcoin to succeed.”
“Right now it feels like we’re all winning because of the price, but those of us who have been building in the bear market, we know,” Chavarria added.
Austin’s “Bitcoin Commons” hosts regular meetups and conferences for the city’s bitcoiners.
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Bear or bull market, bitcoiners have flocked to Austin because of a combination of pro-crypto policies, abundant, renewable energy, and an ever-growing network of some of the brightest developers and miners on the planet. And even in the price doldrums, they typically bring the same level of enthusiasm to the conversation — though bitcoin’s recent stretch of record-breaking price moves has gone a long way toward boosting morale.
In March, bitcoin hit multiple, fresh all-time highs, as trader enthusiasm for the digital asset sector soared. A lot of that price run-up has to do with the record flows into the newly-launched spot bitcoin exchange-traded funds in the U.S., led by the world’s largest asset manager Blackrock and its $15.5 billion iShares Bitcoin Trust, which have helped to solidify bitcoin’s place as an asset class that’s here to stay.
Collectively, these spot ETFs have brought in around $60 billion, and in some cases, they have been breaking records for ETF flows altogether.
“The biggest driver is certainly the ETF flows, which have surpassed the expectations of all but the most bullish pundits,” said Castle Island Venture’s Nic Carter of bitcoin’s record price moves this month. “And these blockbuster flows have materialized before the major wirehouses, asset managers, and RIAs have actually approved the ETF for their clients.”
Carter added that there is also new liquidity coming into bitcoin from Asian markets via two main pathways: bitcoin’s version of non-fungible tokens known as ordinals, as well as bitcoin-issued coins called BRC20 tokens.
In the last 20 years, Austin has matured into one of the country’s leading tech centers, a trend accelerated by the Covid pandemic, which saw industry leaders migrate en masse from California.
“Bitcoin was founded in 2009. A lot has happened post-financial crisis. Austin was already emerging as a tech center, and you know, enter bitcoin, and it just became the logical home,” said Lewis, who runs business development at Zaprite, a bitcoin-native financial services firm.
It helps that Texas is a libertarian-friendly state that actively supports free market policies. It has proven to be a big draw for a group of people who think of bitcoin as a way of life — that is, a monetary network that is decentralized, borderless, and doesn’t answer to central banks or governments.
Austin’s “Bitcoin Commons” draws in an eclectic mix of people, including venture capitalists, bitcoin miners, and coders.
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Many hardcore bitcoiners ironically embrace the term maximalist or maxi as a way to self describe. In Texas, though maxis exist along a professional spectrum from venture capitalists, to miners, coders, company executives, and generalist techies, the eclectic tribe have a few things in common. Many are family-oriented, patriotic carnivores with an aversion to the overreach of government and a strong belief in the right to bear arms, among multiple other personal, individual liberties.
Bitcoin’s eponymous Austin lair, which is adorned with the Texas state flag and bitcoin memorabilia, has adopted Chatham House rules for many of its events to protect the identities of those conversing within its walls. One such meetup is the monthly BitDevs (short for bitcoin developers) gathering, where bitcoin builders, investors, and the bitcoin curious are all welcomed, so long as no pictures or videos are taken.
At these meetings, topics run the gamut, from detailed discussions about code to concerns that the Microsoft-maintained GitHub may pose a greater existential threat to the bitcoin network since much of the development work and conversations among coders happen on that platform. At one such gathering, the moderator of the two-hour session asked the room who ran a bitcoin node. More than half of the people in attendance raised their hands.
After attending multiple Austin BitDev meetups over the last three years, a few common conversation themes have emerged, including the focus on identifying threat vectors to the network and brainstorming workarounds. Beyond software, there are also concerns over hardware vulnerabilities, given that the ASIC chip used in bitcoin mining rigs are manufactured out of China, a country which has proven hostile to the crypto sector in recent years.
The “Bitcoin Commons” functions as a sort of clubhouse for the city’s bitcoin believers. It puts on a mix of programming, including conferences and hackathons, as well as hosts a co-working space by day.
The Commons hosted a hackathon, BitDevs, and a one-day conference dubbed the Bitcoin Takeover on the sidelines of the annual South by Southwest tech festival, which put on virtually no crypto programming this year.
Across those multiple gatherings, there was a newfound interest in talking about the burgeoning ecosystem of projects building on top of bitcoin’s blockchain, which began to heat up with the introduction of ordinals in Jan. 2023 — bitcoin’s version of non-fungible tokens.
One underrated driver of bitcoin’s recent rally is new programming innovations that may allow it to reach technological parity with ethereum. These advancements involve beefing up the bitcoin ecosystem with tools like smart contracts, which are programmable pieces of code that help to eliminate middlemen like banks and lawyers from transactions. That makes it easier for developers to create products and applications for consumers.
BitVM, for example, has a promising plan to do just that. It is ultimately trying to bring smart contracts to the bitcoin network, which has helped spur this renaissance of interest in layer two technology — that is, the startups being built on top of bitcoin’s base chain.
“I’ve never seen deal pacing move this aggressively in the bitcoin space in my entire career,” Carter tells CNBC.
Indeed, the VC appetite for these layer two bitcoin projects has been picking up in the last few months.
PitchBook says that the fourth quarter of 2023 was the first time in almost two years that deal value in the crypto sector had increased, reaching $1.9 billion — up 2.5% from the previous quarter. While still well off the 2021 high of $31 billion, funds are building back interest, and trust, in the space.
Grant Gilliam spent 15 years working in private equity in New York before pivoting to run a bitcoin VC fund called Ten31. This investment platform, which is focused exclusively on bitcoin, has invested $125 million of equity in aggregate since launching five years ago. More than $100 million was deployed in the last two years during the bear market.
“We invest across the bitcoin ecosystem across every major theme,” Gilliam told CNBC. “Anything that is relevant to bitcoin infrastructure, we like to say the picks and shovels of companies building products and services for holders of bitcoin.”
Gilliam, who spent a few years commuting from New York to Austin every month for the BitDevs meetup, said that some of the layer two bitcoin investments are more hype than substance, but he’s still bullish overall on the deal space.
“There’s been a lot of L2 hype lately, mainly driven by the ordinals, and inscriptions, developments or innovations, if you want to call it that,” Gilliam said. “There’s a lot of activity in that right now, but we haven’t been as focused on that. It’s our firm view that the ordinals will prove to be a passing fad.”
Gilliam says that Ten31 is focused on basic building blocks of the ecosystem, such as companies that are providing financial services, which could be custody trading and lending, or projects that are working to scale the lightning network.
Lightning, with is the layer two payment technology meant to realize bitcoin’s original vision of being peer-to-peer cash continues to struggle with the issue of reaching scale. Developers tell CNBC that a lot of engineering work remains to close that gap.
The Boys Club put on its own Austin summit on the sidelines of SXSW with programming on the new internet, crypto, and digital culture.
“Number go up” is a big mantra among bitcoiners, but as the community evolves, so too does the thinking about the price of the coin.
“Price is really an output of many inputs of human beings, building tools to make bitcoin both more secure and a greater utility,” Lewis said. “Price is the best indicator of more people coming to the conclusion that bitcoin is money, and it’s a better store of value, so it is very relevant.”
Every four years, bitcoin undergoes a market making event known as the halving. It cuts the production of new bitcoin in half, and it has typically come before a major run-up in the price of bitcoin.
Miners from around the world flocked to Texas when China banned the practice in 2021, attracted by the abundant renewable energy and a grid that’s friendly to flexible buyers of power — both ideal conditions for miners.
In April, however, the profits for these bitcoin miners will be cut in half.
For some, it may prove an Armageddon-level event. Others have braced for impact by swapping out their fleet of machines for more efficient rigs. The price run-up in bitcoin has also helped to give some of these companies a buffer in their profit margins.
West Texas miner Jamie McAvity has 60 megawatts at his mining site. It runs on a part of the grid that is 90% powered by a mix of solar and wind power.
“If you’ve been in for more than one cycle, you have situated yourself in a place where you can resist the halving to the best of your ability,” McAvity told CNBC at Austin’s Bitcoin Commons.
McAvity, who previously worked for ten years as a trader on the floor of the New York Mercantile Exchange, added that ETF flows have helped to change the pricing dynamics for the world’s largest coin.
“The spot ETF inflows are so massive that reducing the available supply of newly mined bitcoins from 900 to 450, is probably going to be immaterial relative to that,” he said.
“But who knows, the ETFs could cool off for a while, and it’s hard for someone to credibly say that a reduction in supply is not going to change the market price equilibrium, because that’s a fundamental principle of market economics,” he added.
A ten minute walk west from the Bitcoin Commons is the Austin Proper Hotel, a five-star establishment where the lighting is intentionally dim to strike a certain mood. Here, the Boys Club, a popular and buzzy, female-led organization which self-describes as a “social collective bringing new voices to the new internet” put on its own crypto conference on the sidelines of South by Southwest.
The Boys Club caters to a more blockchain agnostic crowd, where the focus is less on exclusivity to one coin or chain — and more about borrowing the best features from across the ecosystem to solve problems in the real world.
CNBC caught up with Micha Benoliel at the one-day summit. Benoliel built Nodle, a decentralized wireless network that’s now getting into the business of using the blockchain to battle AI-powered deepfakes.
“Blockchain is the only way to make a record that is immutable, and is going to prove the time at which this photo has been taken, or video, and also to help you prove the location and other elements that are going to reinforce that proof, so it creates a real immutable proof of authenticity,” he said.
The Boys Club put on its own Austin summit on the sidelines of SXSW with programming on the new internet, crypto, and digital culture.
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The one-day popup event gathered together more of a web3 crowd to talk about everything from the latest trends in tokenization to the resurgence of on-chain meme culture.
Similar to other bull runs in the price of bitcoin, some altcoins have seen a meteoric rise alongside blue chip names in crypto, because they’re seen as a comparatively cheaper buy.
Dogecoin, a meme-coin that was started as a joke, now has a market cap of nearly $25 billion, placing it in the top ten most valuable cryptocurrencies on the planet. Boden, a coin named after President Joe Biden, saw a run-up of more than 800% in a six-hour window after Super Tuesday, and the newly popular DogWifHat is collectively worth more than $2 billion.
Typically, this is the bellwether of a peak bubble moment, but analysts say that despite frothy conditions, this bull run is different to past cycles.
The price of bitcoin is cyclical, and it sees price run-ups roughly every four years. Each time, the price floor is higher. What’s also a departure this time around is the fact that institutional money is here in a way that it hasn’t been during past bull runs.
Fundamentals in the crypto market are playing a big role, as well.
In a note from JPMorgan on Mar. 15, analysts credit ether, the world’s second-biggest crypto token by market cap, for being a significant driver of crypto’s recent gains, including Coinbase‘s stock price rise. Ether has rallied nearly 50% so far this year, recently breaching the $4,000 price level and outpacing bitcoin’s returns, before paring back some gains.
“While the focus of the cryptocurrency marketplace has been the net new money going into U.S. spot Bitcoin ETFs and the positive impact on Bitcoin token prices (here, the spot Bitcoin ETF and its ultimate launch in January has driven the cryptoecosystem over the past several months), we see impact of ETH appreciation also as particularly meaningful,” JPMorgan wrote.
Regulators in the U.S. remain a universal concern for the crypto sector, especially amid reports of the Securities and Exchange Commission probing crypto companies building on the ethereum network.
Still, many in the space, including coders and investors remain optimistic.
Ethereum, the blockchain that underpins ether, underwent a major upgrade on Mar. 13 dubbed Dencun. Developers told CNBC it was expected to slash transaction fees by up to 90%. That is game-changing not just for the end-users, but also for the coders building apps on top of ethereum.
Base, crypto exchange Coinbase’s self-built layer two network, is ethereum-based and allows developers to more easily build decentralized apps. Coinbase’s Base lead, Jesse Pollak, anticipates this will open the door to applications in both the gaming and decentralized social media arena now that it is no longer nearly as cost prohibitive to build these types of programs.
“The thing that is happening with Dencun is we’re going to create a whole new kind of storage on ethereum that’s purpose built for Layer 2s like Base,” Pollak told CNBC.
“That means that right now we pay a ton to ethereum, and we’re going to pay a lot less, which is going to lower the fees for everyone. Because ethereum is basically going to build a product purpose built for us,” continued Pollak.
Chris Dixon, crypto chief at venture firm a16z, echoed that sentiment, noting that part of their portfolio is focused on these startups.
“The core idea is that if you build a social network, or a game or a financial service, on top of the blockchain, it has all sorts of benefits where the money and control flow out to the users and the creators that access the network, as opposed to the companies that control it,” said Dixon. “In the same way that steel was a better way to build bridges and buildings than wood was in the Industrial Revolution, blockchains are a building material.”
Bitcoin surged to kick off 2024, topping $45,000 for the first time since April 2022 as investor confidence in a potential bitcoin exchange-traded fund approval continued to build.
The world’s largest cryptocurrency hit an intraday high of $45,913.30 early Tuesday morning, according to Coin Metrics. That was its highest level since April 5, 2022, and the first time it has traded above the $45,000 mark since then. It was last higher by 3%, trading at $45,045.65.
The move comes amid growing excitement among traders that the U.S. could approve the first bitcoin ETF. This would allow investors to buy a product that tracks the price of bitcoin without having to own the cryptocurrency directly, likely appealing to larger institutional investors.
On Friday, BlackRock and other potential issuers updated the registration forms for their proposed bitcoin ETFs, including names of authorized participants. Investors are reading that extra detail as evidence that a decision by the U.S. Securities and Exchange Commission is coming soon. Many industry experts expect the funds to be approved in January.
The continued price gains for bitcoin come off the back of the bumper of 2023, when the price of the digital coin rose 157% — and many expect the bold rises to continue.
Investors have high hopes for bitcoin in 2024. A decision on an ETF is widely expected to come sometime in January. Shortly after, in the spring, the Bitcoin halving is expected to take place, an event that historically has preceded steep price rises. Plus, Fed officials are anticipating at least three interest rate cuts this year after almost two years of hikes that have hurt the cryptocurrency.
Other cryptocurrencies also rallied overnight into Tuesday. Ether traded at around $2,387, up around 4%, while Solana surged 7% to around $113.
A representation of cryptocurrency Ethereum is placed on a PC motherboard in this illustration taken on June 16, 2023.
Dado Ruvic | Reuters
The price of ether jumped on Wednesday as investors moved into the cryptocurrency ahead of key upside catalysts expected in January.
Ether was last higher by 6%, according to Coin Metrics. Solana’s SOL token, among the top performers in crypto this year, was up 2%.
“We believe it’s attributed to … a rotation back into the Ethereum ecosystem from other [Layer] 1s, which so far have outperformed ETH,” Needham analyst John Todaro told CNBC. “Solana and Avax among others have outperformed ETH, and now ETH is playing catch up on the rotation.”
Ether has trailed SOL throughout 2023. This month, it’s up about 15% compared to the SOL token’s 82% gain. On the year, ether has advanced 95%, while SOL has soared more than 980%.
Ether’s rise on Wednesday “signals that the market is finally rotating into an ETH-centric trade, though it probably will not fully manifest until after the U.S. spot Bitcoin ETF receives appropriate regulatory approvals,” said Matt Maximo, a senior research analyst at Grayscale Investments. “Ethereum’s on-chain activity remains extremely strong, so I believe it is less of ‘if’ rather than ‘when’ ETH will catch up.”
Investors are watching two key events in January. The first is Ethereum’s big “Dencun” upgrade, expected around Jan. 17. It’s meant to reduce the costs associated with Ethereum’s Layer 2 solutions, Maximo told CNBC.
Investors have also been closely monitoring developments in the potential approval by the U.S. Securities and Exchange Commission of a spot bitcoin exchange-traded fund. The decision is widely expected to come in January.
Some investors are trading on optimism that if a spot bitcoin ETF gets the green light, that could bode well for the potential of a spot ether ETF, Todaro said.
Crypto prices have recovered from a big dip earlier in the week, with bitcoin hitting a new high for 2023 on Friday.
Bitcoin touched a high of $38,015.16 on Friday morning, according to CoinMetrics, its highest level in more than a year. It was last up by about 1% at $37,709.50, and it’s on pace to end the week higher by 3.5%.
Meanwhile, ether has moved back above the key psychological level of $2,000, last trading nearly 2% higher at $2,101.78. The second largest token by market cap is outperforming the crypto market this week, on pace to end up more than 8%.
Solana, the big outperformer on the year – up more than 470% compared to bitcoin’s 130% – trailed the major tokens this week. It’s roughly flat on the week.
Bitcoin topped $38,000 to hit a fresh high for 2023.
While Binance serves as the most significant liquidity pool for crypto trading, many see the exchange’s settlement as a necessary development to allow the crypto industry – still recovering from FTX’s 2022 collapse – to move forward. With the Binance investigation resolved, some say it may even clear the path for a bitcoin ETF approval, which many investors expect to be the major catalyst that sends bitcoin to major new highs.
Traders are also weighing the minutes of the latest Federal Reserve meeting, which were also released the day of the Binance settlement and showed officials expressed little appetite for cutting interest rates anytime soon.
Bitcoin extended its weekly gains on Friday, briefly topping $30,000 for the second time this week, as confidence a spot bitcoin ETF will soon be greenlit grew and crypto investors continued weighing uncertainty in the U.S. and abroad.
The price of the flagship cryptocurrency was last higher by 2.76% on Friday at $29,538.99, according to Coin Metrics. It ended the week with a 10.4% gain, making it its best week since June 23 when it added 17%. At one point, it climbed as high as $30,193.87. Ether added 2.46% to trade at $1,606.42 on the day and was up 4% for the week — best week since Sept. 29, when it gained 4.4%. On Friday, Ether rose to a high of $1,630.03.
The gains come even as the benchmark 10-year U.S. Treasury yield briefly topped 5% for the first time in 16 years. Higher yields historically have had a negative effect on bitcoin, but the crypto asset is benefiting from a key catalyst investors have been watching all year: the approval of what would be the first spot bitcoin ETF in the U.S. Earlier this week, JPMorgan said the Securities and Exchange Commission is likely to approve an ETF in the next few months. Mike Novogratz, whose Galaxy Digital has an ETF application with the SEC in partnership with Invesco, told CNBC he thinks it could happen as soon as the end of the year.
Bitcoin has hit the $30,000 mark Friday for the second time this week
Several firms have also amended their filings in the past couple weeks to address earlier concerns by the SEC, which investors are taking as a positive sign that the agency is engaging with the firms.
Throughout the week, bitcoin has also been driven by a flight to safety.
“Fears of an escalation in the Middle East conflict, nervousness about the U.S. banking system and overall market tension are pushing bitcoin and gold higher,” said Noelle Acheson, economist and author of the “Crypto is Macro Now” newsletter. “Plus, the public support for this narrative from renowned investors such as Larry Fink and Paul Tudor Jones doesn’t hurt.”
In the rest of the market, altcoins climbed after the SEC Thursday night dropped claims against two Ripple Labs executives – CEO Brad Garlinghouse and co-founder Chris Larsen – in its lawsuit alleging the company violated U.S. securities law.
“Many are – mistakenly, perhaps – taking the SEC’s dismissal of its case against [them] as a sign that the regulatory heat will ease,” Acheson said. “This is unlikely to be the case, unfortunately, as by canceling the trial scheduled for next April, the SEC can now appeal the original ruling. I don’t know for sure that it will do this, but in theory it can.”
Ripple’s XRP jumped 6.5%. Litecoin added 3.5%, and Ethereum competitors Solana and Polygon saw their tokens rise 6.5% and 3.7%, respectively. All ended the week in the green.
Brian Armstrong, chief executive officer of Coinbase Global Inc., speaks during the Messari Mainnet summit in New York, on Thursday, Sept. 21, 2023.
Michael Nagle | Bloomberg | Getty Images
Coinbase CEO Brian Armstrong is unhappy with JPMorgan Chase’s decision to block crypto-related transactions at its U.K. digital banking subsidiary, Chase UK.
Chase UK earlier this week put out a notice to customers saying it will no longer allow its customers to purchase cryptocurrencies using its debit cards or through bank transfers, citing concerns over the risk of fraud to users from digital tokens.
The bank, which has operated as a standalone entity in the U.K. since 2021, said it was taking the step because “fraudsters are increasingly using crypto assets to steal large sums of money from people.”
“Once in a while we see a bank in the world that decides they want to de-platform this whole industry,” Armstrong said in an interview with CNBC’s “Squawk Box” on Thursday.
“I don’t think that’s OK. I don’t think that’s the rule of things in our society. I think the government should decide what is allowed and what’s not.”
The move from Chase UK has not happened in a vacuum. Other British lenders have taken similar steps to bar crypto transactions, citing the risk of fraud.
Examples include NatWest, which placed limits on the amount of cash that can be sent to crypto exchanges, and HSBC, which banned crypto purchases altogether.
In its note to customers Tuesday, Chase UK said that it was blocking the use of crypto by its customers due to concerns over a rise in fraud.
Data from Action Fraud, the U.K. fraud reporting agency, shows that U.K. consumer losses to crypto fraud increased by over 40% in the last year, surpassing £300 million for the first time.
Bitcoin, ether, XRP and other cryptocurrencies are not legal currency.
Originally created as an alternative, online form of money meant to bypass the need for bank accounts and other financial middlemen, they have increasingly been embraced by mainstream financial institutions such as PayPal, Visa, and Mastercard.
The people transacting in bitcoin and other digital currencies don’t disclose their real identity, making it harder for banks to trace them for suspicious payments versus digital fiat currency transactions.
Nevertheless, crypto’s proponents say that the industry has matured a great deal in the wake of the collapse of FTX and numerous other scandals. They say it can become part of everyday payments and trading in a way that is legitimate.
For its part, the U.K. has been working to develop legislation that would regulate retail trading in crypto assets.
The Financial Services and Markets Bill is one example of legislation that already includes some provisions on cryptocurrency. That specific law aims to bring crypto assets into the regulatory fold. But it is not a comprehensive law addressing crypto through tailored laws.
Jurisdictions around the world from Dubai to Singapore have been trying to position themselves as crypto-friendly places to encourage firms to set up shop there.
The U.S., meanwhile, has taken a hard line on cryptocurrency firms with its regulators stepping up enforcement action against companies.
Armstrong suggested that the U.K. government should take heed of Chase UK’s move to ban crypto payments — though he acknowledged the country’s ambition to become a “Web3 and crypto hub.”
“The government in the U.K. through [U.K. PM] Rishi Sunak and Andrew Griffith the city minister in London have it made clear they want to make the U.K. a Web3 and crypto hub,” Armstrong said.
“They are trying to attract businesses there. I was disappointed to see Chase UK’s stance on that. I hope that was a misunderstanding that will be clarified in the coming weeks.”
The U.S. Court of Appeals for the D.C. Circuit has paved the way for bitcoin exchange-traded funds.
On Tuesday, the court sided with Grayscale in a lawsuit against the Securities and Exchange Commission which had denied the company’s application to convert the Grayscale Bitcoin Trust to an ETF. The decision could impact other companies that want to create bitcoin ETFs, like BlackRock and Fidelity.
A spot bitcoin ETF would be traded through a traditional stock exchange, although the bitcoin would be held by a brokerage, and would allow investors to gain exposure to the world’s biggest cryptocurrency without having to own the coin themselves. Many crypto bulls believe that approval of a spot bitcoin ETF will lead to more mainstream institutional adoption.
Bitcoin, ether and other major cap crypto coins surged on the news, and Coinbase, which is listed as the custodian partner in multiple spot bitcoin ETF applications, was up more than 14% on Tuesday.
“The Commission failed to adequately explain why it approved the listing of two bitcoin futures ETPs but not Grayscale’s proposed bitcoin ETP,” the court said, referring to exchange-traded products. “In the absence of a coherent explanation, this unlike regulatory treatment of like products is unlawful.”
Grayscale Investments, which manages the world’s biggest crypto fund, initiated its lawsuit against the SEC in June 2022 after the agency rejected its application to turn its flagship bitcoin fund, better known by its ticker GBTC, into an ETF. The company decided to pursue the ETF, which would be backed by bitcoin rather than bitcoin derivatives, after the SEC approved ProShares’ futures-based bitcoin ETF in October 2021.
The ruling faced multiple delays but the SEC ultimately rejected the application last summer, citing failure by Grayscale to answer questions related to concerns about possible market manipulation and investor protections.
“We are reviewing the court’s decision to determine next steps,” the SEC said in a statement.
A spokeswoman for Grayscale called Tuesday’s ruling “a monumental step forward for American investors, the Bitcoin ecosystem, and all those who have been advocating for Bitcoin exposure through the added protections of the ETF wrapper.”
“The Grayscale team and our legal advisors are actively reviewing the details outlined in the Court’s opinion and will be pursuing next steps with the SEC. We will share more information as soon as practicable,” continued the written statement.
One expert says the SEC’s enforcement action is basically dead in the water.
“The bottom line is that while the SEC can try to take the case to the Supreme Court, they have no other avenue to deny Grayscale’s application,” said Renato Mariotti, a former federal prosecutor in the Securities and Commodities Fraud Section of the United States Attorney’s Office — and now a trial partner in Chicago with Bryan Cave Leighton Paisner.
“If the SEC changed their rationale for denying their application, it would appear even more arbitrary. The SEC already put their best argument forward, and the Court of Appeals rejected it,” continued Mariotti.
Castle Island Venture’s Nic Carter agrees, adding that while the SEC can go back and try to deny the application on different grounds, the best next step is for the agency “to accept the decision as a way to ‘save face’ and allow the spot ETF in a way that shows they disagree with the decision but respect the court’s ruling.”
CoinRoutes CEO, Dave Weisberger, tells CNBC it could even net SEC Chairman Gary Gensler a political win — a spot bitcoin ETF would grant the regulator some oversight of the bitcoin spot market even though the token is not considered a security.
GBTC, which has $16 billion in assets under management as of Tuesday, was the first crypto product investors could trade in their brokerage accounts to get exposure to bitcoin. It was launched in 2013, well before the approval of bitcoin ETFs in Canada or bitcoin futures ETFs in the U.S. Grayscale charges a 2% annual fee to investors, making it a cash cow for parent company Digital Currency Group, led by Barry Silbert.
“It virtually guarantees they will approve BlackRock and Fidelity,” said Dave Weisberger, CEO of CoinRoutes, a platform that provides algorithmic trading and consolidated market data products for digital assets across multiple exchanges and liquidity providers. “Grayscale may need to refile, but they will almost certainly be approved as well.”
Firms have been applying for spot bitcoin ETFs for more than two years, but so far, the SEC has denied more than 30 proposals since 2021 — a 100% rejection rate. But investor sentiment was buoyed in June when BlackRock, the world’s largest asset manager with some $9 trillion in assets under management, put in an application. The firm has had all but one of its previous 575 ETF applications accepted.
A worsening macroeconomic climate and the collapse of industry giants such as FTX and Terra have weighed on bitcoin’s price this year.
STR | Nurphoto via Getty Images
Cryptocurrency prices remained under pressure to end the week.
Bitcoin ended the day lower by about 6% at $26,038.41, according to Coin Metrics. It wavered over $26,000 throughout the day Friday, following a stunning fall that began late Thursday.
The move pulled the rest of the crypto market lower. Ether and Binance coin each fell about 4%, while Cardano’s ada lost more than 3% Friday. Ripple’s XRP slid 13% and the Solana token lost 7%.
For the week, bitcoin ended down 11.28% for its seventh weekly loss in the past eight and its worst week since November. Coin Metrics measures a week in crypto, which trades 24 hours a day, from the 4:00 p.m. ET stock market close one Friday to the next.
Crypto was under pressure throughout Thursday but dropped sharply around 6 p.m. ET., following a report in The Wall Street Journal that Elon Musk‘s SpaceX wrote down the value of its bitcoin holdings by $373 million last year and in 2021, and sold the cryptocurrency.
Bitcoin heads for its worst week since May
“The selloff appears to largely have been fear-induced on the back of headlines that SpaceX sold off Bitcoin assets,” said Darius Tabatabai, co-founder at decentralized exchange Vertex Protocol. “No proof has emerged that happened, and thin summer liquidity led to prices gapping dramatically downward, causing cascading liquidations in derivatives markets, further amplifying the drop similarly to how we’ve seen selloffs occur in panic selling episodes.”
“Currently, we’re seeing negative funding rates for perpetual futures, which can portend bearish momentum for the time being, but in this case it could very well turn on a dime, given the speed and violence of the move,” Tabatabai added.
Bitcoin has been stagnant for much of the third quarter, a historically weak one for the cryptocurrency. It’s now off 14.25% for the quarter and about 10.69% for August. Despite recent softness in the market even ahead of this week’s dramatic slide, bitcoin is still up about 57% in 2023.
ETHPrague 2023 was held at Paralelní Polis in the Czech Republic
Pavel Sinagl
PRAGUE — In 2007, a group of Czech guerrilla artists scaled a transmitter tower belonging to the country’s national television station and hacked into a live webcam of the Krkonoše mountain range typically used during the weather segment. In the midst of a live broadcast on June 17 of that year, the rebel collective — dubbed Ztohoven — faked a nuclear bomb detonation. Viewers watched as a camera shot panning across the landscape flashed white and revealed a mushroom cloud in the distance, reminiscent of a war-era newsreel threatening Armageddon.
The stunt was a signature move for the consortium of Bohemian subversives, one among many disruptive pranks over the course of decades designed to provoke onlookers and foster a sense of resistance and revolt against prescribed societal norms. Ztohoven has since added the banner of crypto anarchy to its mantle, embracing the hackers and provocateurs who helped mobilize themovement since its inception.
Today, that union of minds finds refuge in Prague in a retrofitted factory building called Paralelní Polis, or “parallel world.” The name pays homage to Czech philosopher and dissident, Václav Benda, who coined the phrase in the 1970s as a way to describe an emerging underground counterculture quietly subverting the ruling communist regime.
Ztohoven’s parallel world offers a different kind of anarchy. The space functions as a living example of how the world could look — a crucible for decentralized and defiant technologies designed to operate beyond the reach of governments, laws, and central banks.
It’s a place where cryptography replaces control, cryptocurrency supplants fiat, and controversial concepts aren’t just discussed, but are lived ideologies binding people together.
For more than two years, Dan Ligocký has been working from Polis three to five days a week. Ligocký, who is an event producer with deep ties to the ethereum community, tells CNBC that the space has served as a catalyst for innovation and the exploration of decentralized technologies.
“Its commitment to privacy, freedom, and self-sovereignty aligns with the core principles of the Web3 movement,” continued Ligocký. “We’re here to support the ecosystem and are open to collaborating with anyone whose ethos aligns with ours.”
Indeed, the vast factory-turned-forum pulses with the collective energy of digital rights activists, privacy-obsessed cypherpunks, and crypto-faithful ideologues. Its diverse denizens ranging from transient visitors like the Czech prince William Lobkowicz, to ethereum co-founder Vitalik Buterin.
Polis is a place where technology, philosophy, and activism converge.
Ethereum co-founder Vitalik Buterin speaks at ETHPrague 2023
The Czech Republic’s den of crypto anarchy sits in the heart of Holešovice — a district bound by the left bank of the Vltava River to the east and Letná Hill to the west. The neighborhood was once the epicenter of industrial Prague, synonymous with slaughterhouses and steam mills, but today is home to art galleries and ateliers.
At the opposite end of the city in a district called Hradčany — about three-and-a-half miles south-west of Polis — is a 750,000 square foot castle complex that appears frozen in a Renaissance-era alternate dimension. Its imposing Gothic spires loom over the Czech capital — a vestige of a time when inherited nobility meant something quite different to the people of Prague.
Private dinner held with coders and crypto enthusiasts at the Lobkowicz Palace in Prague
MacKenzie Sigalos | CNBC
Once the seat of Bohemian kings and Holy Roman emperors, Czech presidents now occupy the castle complex — a sprawling massof palaces, churches, towers, hidden passageways, and gardens.
Two young nobles, William and Ileana Lobkowicz, sometimes holdcrypto-centric events there. Neither live at the palace, but they use the stately halls and manors once inhabited by their ancestors for industry working groups on digital assets.
A multi-day annual conference called Non-Fungible Castle is their banner event, and the siblings have also spent the last few years tinkering with using NFTs as a way to fund restoration projects — an ambition that appears to have faded during the bear market as NFT sales and prices plummet.
This summer, however, the Lobkowicz family expanded their crypto outreach efforts by hosting some of the most established coders in the ethereum ecosystem for a one-day working session. The workshops were followed by a private tour of the castle and a multi-course gala dinner in the Imperial Hall at Lobkowicz Palace — an event where the conversation effortlessly shifted from Europe’s groundbreaking new crypto law to the convergence of generative AI and blockchain tech.
Private dinner held with coders and crypto enthusiasts at the Lobkowicz Palace in Prague
MacKenzie Sigalos | CNBC
The easiest way to get to the palace from Polis is to walk three minutes to the Maniny station, where Tram 25 stops every ten minutes before sweeping passengers up the hill to Prašný Most, which borders the castle grounds. The intricate web of trolley rails traces Prague’s cobblestoned streets, a pattern of steel tracks etched into the old-world urban landscape, while the stoic steel and glass trams serve as a moving tableau of life in Prague.
Although only 25 minutes apart, the two locations represent the split personality of the Czech people.
One side is the storybook Prague most people associate with the city — soaring towers, grand chandeliers, and original frescoes. The other is the secret Bohemian underground that has spent decades thwarting authoritarian regimes. For centuries, the Czech capital has been caught between historic powers with a bent toward world domination, which has helped the populace develop a thick skin and the knowhow to fight back against the world’s biggest villains.
Private dinner held with coders and crypto enthusiasts at the Lobkowicz Palace in Prague
MacKenzie Sigalos | CNBC
“Czechs are naturally skeptical of authority, a result of the tough 20th century during which Czechs experienced monarchy, Nazi occupation, and communist rule,” said Josef Tětek, a crypto economist and bitcoin analyst at hardware wallet provider, Trezor.
“A prime example of this skepticism is the fact that the Czech Republic never adopted the euro, even though it has been a member of the European Union since 2004,” Tětek added.
Call it the ultimate anti-fairytale.
In this story, the main character isn’t a prince in a high castle, but a decentralized collective of shadowy coders and hackers living in pockets across Prague who sometimes converge on Polis to swap trade secrets and sound a call to action.
The dark stucco of Polis’ Prague headquarters is an outlier among the ornate, brightly-colored buildings that tower over it. The interior of this deceptively nondescript structure is a honeycomb of winding,labyrinthinecorridors and castle-like passageways that stretch endlessly higher and deeper into its fortress-like belly.
ETHPrague 2023 was held at Paralelní Polis in the Czech Republic
Pavel Sinagl
The ‘parallel world’ concept is sticky.
Franchises of Polis have sprung up in Vienna, Barcelona, and two Slovak cities — a testament to the enduring allure of anarchy. The Vienna branch goes so far as to self-describe as a living example of how “the Paralelní Polis cryptoliberation virus is spreading.”
These hubs share certain physical features — there are co-working tables for hire, conference halls for hackathons and blockchain-specific meet-ups, as well as spaces dedicated to experimental tech, where you can dabble with 3D printing and laser cuts.
In addition to hosting regular bitcoin and ethereum meetups, the Bratislava chapter also holds sessions dedicated to biohacking — or augmenting the human body with tech custom-engineered to create a new breed of superhumans. On the other side of Slovakia, in Košice, the Polis offers formal lectures and technical support, where locals can drop by for impromptu consultations on how blockchain and cryptocurrencies can support their business.
Another common fixture across these chapters is the so-called Institute of Cryptoanarchy, a sort of sub-franchise that provides free educational resources and classes to people keen to learn more about the unregulated internet, as well as the anonymous tools — blockchain-based virtual currencies and anti-spyware encryption protocols — that can help power a decentralized economy.
ETHPrague 2023 was held at Paralelní Polis in the Czech Republic
Pavel Sinagl
The crypto schooling helps with spurring adoption and enlisting more troops to the cause.
Today’s enemy is a little different than the communist and Nazi occupiers of the 20th century. Instead of a military-powered regime, these coders see their rival as a more insidious villain. The Austrian hub characterizes the threat not as a “distant dictatorial world,” but as the way current governments attempt to control the flow of information.
“States and their security agencies globally control access to information and use the protection of intellectual property as an excuse to apply total censorship to control the available resources,” reads part of the mission statement on their website.
As the U.S. crypto scene is imploding and companies dealing in digital assets face growing scrutiny from regulators, much of the developer community has flocked to international tech hubs like the Czech Republic to seek like-minded coders with a view to stick it to the man — or to at least steer clear of the establishment.
One reason why Prague has become the center of gravity for the industry has to do with its roots in the Austrian school of economics, a concept born out of 19th-century Vienna that remains quite popular in the Czech Republic today.
Carl Menger and Friedrich Hayek helped birth this particular brand of classical economic liberalism — not to be confused with the American concept of political liberalism. It holds independent individuals acting in their best economic self-interest is the optimal way to run a society and create a thriving economy, rather than centralized control or the heavy hand of state intervention.
ETHPrague 2023 was held at Paralelní Polis in the Czech Republic
Pavel Sinagl
“Adherents of this school of thought have been writing articles and books on bitcoin for the Czech audience since 2016,” Tětek told CNBC, who went on to note some of the natural synergies between bitcoin believers and economists schooled in Austrian economics.
“The Austrian school is very compatible with bitcoin adoption,” he said. “A central aspect is the call for a separation of money and state.”
Adherents of both worlds do not think the Federal Reserve can rescue the economy. Tětek added that bitcoin as an alternative independent monetary instrument thrives in this environment.
It helps that Prague has a long track record of drawing the sector’s top talent. The Czech capital is home to the world’s first hardware wallet and the first bitcoin mining pool. Bitcoin is accepted in Alza, one of the largest retail chains in the country, as well as in hundreds of other smaller businesses. The city also plays host to major international conferences drawing thousands to Bohemia each year.
“Overall, the bitcoin community in the Czech Republic is very strong, especially when measured per-capita,” said Tětek. “There are around 10 million Czech speakers. The most popular Czech bitcoin YouTuber boasts 90k subscribers, while the annual Czech-only bitcoin conference called Chaincamp attracts around 2000 visitors, even during the bear market.”
ETHPrague 2023 was held at Paralelní Polis in the Czech Republic
Pavel Sinagl
“Czechs are natural-born tinkerers; the early bitcoin projects such as Trezor and General Bytes emerged in the Prague hacker scene,” said Tětek, who has a background in Austrian economics and political philosophy. General Bytes is one of the larger bitcoin and crypto ATM manufacturers, which also provides software for Bitcoin ATM operators.
This summer, ETHPrague and BTCPrague held major summits in the capital over the same one-week window. The ethereum event organizers rented out space from Polis, while the bitcoiners descended on Prague’s jumbo-sized expo center at the outskirts of town.
BTCPrague talked a big game on event stats — 100+ speakers across four stages, 100+ companies and open-source projects at the expo, and 10,000+ attendees from all across Europe and beyond. While the venue was sprawling and packed on its first day, CNBC cannot independently confirm attendance numbers.
Some of the most notable names in the bitcoin ecosystem were there, including Microstrategy’s Michael Saylor, suspected Satoshi cryptographer and cypherpunk Adam Back, and best-selling economist and author Saifedean Ammous.
BTCPrague 2023 was held at the expo hall in the outskirts of the Czech capital
CNBC
Ancillary events complementing the dual crypto conferences took place across the city.
One was hosted in the private dining room of a steakhouse in Old Town where the merits of bitcoin — and its imminent threats — were debated until midnight. One point in contention: Whether Securities and Exchange Commission Chairman Gary Gensler is a closeted bitcoin maximalist, given it is the one digital asset that he has explicitly omitted from his concerted campaign to police and dismantle the ecosystem.
Meanwhile, ethereum enthusiasts descended on a modern houseboat in Holešovice for a beer tasting by the Czech Craft brewery Václav, where the Czech classic 12° Pils Vaclav and the buttery IPA 17° Sexy Hafanana were both on tap.
Another side event took place one morning at Trezor’s office, a modest space in the SatoshiLabs building located in a remote, residential suburb two miles north-east of Polis. The session included some of Prague’s top bitcoin founders — Matěj Žák, the CEO of Trezor; Jan Čapek, co-founder of Braiins, which proclaims to be the first company to introduce the concept of bitcoin mining pools; Christoph Kassas of General Bytes; and prominent Bitcoin YouTuber Jakub Vejmola. The discussion was more of a lecture-style format, with each of the leaders talking about current expansion efforts during the bear market.
The Braiins team also spoke about how they are bracing for imminent regulation in the space. The team described a protocol in development now that would make it so that pools are not capable of choosing the transactions that comprise each block — that way, they would avoid being blamed for violating any impending rules from the U.S. Treasury restricting the exchange of cryptocurrency.
“This extension to the protocol is essentially managed so that miners can choose their own work templates being approved by the pool, but then basically, the pool as a legal entity is out of the game, in terms of not being responsible for selecting the transaction,” explained Čapek.
A look around the room revealed an audience of a couple dozen people, filled with some of today’s most influential bitcoiners, including technologist and software engineer Jameson Lopp, a cypherpunk and co-founder of bitcoin security provider Casa, as well as the popular podcast hosts Stephan Livera and hedge fund manager-turned-bitcoiner Robert Breedlove.
Across town at Polis, Duct Tape Production put on ETHPrague, in coordination with the Ethereum Foundation.
ETHPrague 2023 was held at Paralelní Polis in the Czech Republic
Pavel Sinagl
The multi-day conference drew in the most influential thinkers in the space — including Buterin, one of the most prominent coders on the planet, and Stani Kulechov, founder and CEO of Aave and Lens.
Programming consisted of a mix of lectures and panels on everything from MiCA and self-regulation within decentralized finance, to the nuances of layer two protocols being built on top of ethereum. These working sessions brought together technologists, lawyers, and politicians from across the continent to discuss next steps for the industry.
“I was genuinely surprised at how helpful and friendly the participants were, how much altruism and reciprocity could be felt in their views and presentations, and the fact that they are close to the ‘build homes, not empires’ vision,” said Ondrej Polak, executive director of the newly-founded Czech Blockchain Association, who also describes himself as a practicing technology optimist and AI advocate.
ETHPrague 2023 was held at Paralelní Polis in the Czech Republic
Pavel Sinagl
Ligocky had a similar reaction to ETHPrague, saying it reaffirmed his belief that “the future of the internet is being reshaped by a vibrant global community of visionaries, developers, and entrepreneurs.”
“The sense of community and shared purpose was truly inspiring, as we collectively strive to unlock the limitless possibilities that lie ahead in this decentralized frontier,” continued Ligocky.
“ETHPrague is just the beginning,” he said, adding that they’re working on more events across Europe for teams that share the same vision.
Representations of cryptocurrency Bitcoin, August 10, 2022.
Dado Ruvic | Reuters
Crypto prices climbed to end the week Friday, a day after the largest asset manager in the world jumped into the race to launch the first spot bitcoin exchange-traded fund in the U.S.
Bitcoin was last higher by about 4% at $26,438.00, according to CoinMetrics, while ether advanced 3% to $1,718.06.
Even altcoins rose, with the tokens tied to Solana and Cardano gaining 4.5% and 2%, respectively. Binance Coin was 2.75% higher, litecoin gained 3% and the Uniswap token advanced 4%.
For the week, bitcoin is on track to end just below the flatline, while ether is heading for a 6% loss.
Bitcoin (BTC) this week
Investors were weighing the latest development in the crypto industry’s battle with the U.S. Securities and Exchange Commission for regulatory recognition and guidance. After the bell Thursday, BlackRock — the largest asset manager in the world — filed for spot bitcoin ETF, with Coinbase as its crypto custodian.
“One of the big purposes bitcoin serves as an asset class is really diversification. It just has a different risk profile than traditional financial markets,” Gustavo Schwenkler, associate professor at the Leavey School of Business at Santa Clara University said. “If this were to get approved, then I could anticipate a lot more institutional investors adding bitcoin to their investment to their portfolios … it would institutionalize the market in a way that is not possible right now.”
If allowed to move forward, the iShares Bitcoin Trust would become the first approved ETF in the U.S. to track the price of bitcoin, versus the futures contracts tied to the cryptocurrency. It’s been about 10 years since the first filing for a potential spot bitcoin ETF. Since then, every application that has gone through the SEC has been rejected.
The filing comes about a week after the SEC sued its crypto custody partner, Coinbase, for violating securities laws, leaving many questioning the timing of BlackRock’s application.
“That apparent commitment to Coinbase is almost as important near term as their commitment to bitcoin is in the long term,” said Mark Connors, head of research at 3iQ. “It’s a big deal.”
AI-themed cryptocurrencies got a lift on Thursday from excitement around Nvidia and its increasing demand for chips that power artificial intelligence applications.
SingularityNET (AGIX) rose as much as 19%, according to CoinMarketCap, to 29 cents. Cortex (CTXC) rose 6% to 17 cents and Measurable Data Token (MDT) added 6.5% to reach 4 cents a coin. All of these tokens have a market cap of less than $40 million.
Fetch.ai (FET), with a market cap of $195 million, gained nearly 5% to trade at 23 cents.
Meanwhile, most of the rest of the cryptocurrency market, including bitcoin and ether, was flat.
Nvidia, A.I. and other investment ideas
“AI cryptocurrencies” refer to blockchain-based AI projects’ corresponding tokens. For example, Fetch.ai is dedicated to building infrastructure for “smart, autonomous services” in supply chain, finance, travel and more. Cortext aims to be the “first decentralized world computer capable of running AI and AI-powered dApps on the blockchain.”
Crypto traders got a sentiment boost from the rally in the S&P 500 and Nasdaq Composite, driven by Nvidia, which issued astounding sales guidance late Wednesday and cited demand for AI capabilities. Its projected sales for the second quarter of its fiscal 2024 were more than 50% above what analysts had expected.
In a certain pocket of the technology world, some market participants have long believed that the wild west of AI can benefit from blockchain technology and potentially be a positive catalyst for the crypto market at large. Specifically, as AI gets smarter and better at manipulating people’s identities on the internet, blockchain technology could potentially help using its ability to deploy digital identity solutions at scale.
That could be a long way down the road, however, as it’s still early days for both technologies.
Bitcoin and ether hovered around the flat line Thursday as investors remained focused on the ongoing debt ceiling negotiations heading into an extended holiday weekend. The minutes from the most recent Federal Reserve meeting, released Wednesday, also showed officials are divided over what the central bank’s next move should be when it comes to interest rate hikes.
Bitcoin is facing a number of headwinds including low liquidity which is contributing to volatility. U.S. regulators are also heavily scrutinizing the crypto industry.
Nurphoto | Getty Images
Bitcoin traded at its lowest level since mid-March on Friday as volatility, driven by low liquidity, continued to hit cryptocurrency markets.
Bitcoin ended the day lower by 2.58% at 26,181.46 after briefly hitting a low of 25,833.34 the lowest level since March 17, according to Coin Metrics. The biggest crypto asset by market cap posted a weekly loss of 11.25%, making it its worst week since Nov. 11.
There are a number of issues facing crypto markets right now including low liquidity, a crackdown on the industry from regulators in the U.S. and macroeconomic worries.
Bitcoin is up around 59% this year but prices have remained volatile, with low liquidity exacerbating moves higher and lower.
Clara Medalie, director of research at Kaiko, said there has been a “notable drop in market depth” for bitcoin.
Market depth refers to a market’s ability to absorb relatively large buy and sell orders. When market depth is low, then relatively small orders can cause the price of an asset to move up or down in a substantial way.
And the liquidity situation could be set to get worse after Bloomberg reported that Jane Street and Jump Crypto, two of the biggest crypto market makers, will take a step back from crypto trading in the U.S. as the country’s regulators continue their crackdown on the nascent industry.
Read more about tech and crypto from CNBC Pro
“While it is yet unclear the catalyst for today’s sharp drop, the volatility is to be expected given the current state of liquidity, especially after larger market maker Jane Street and Jump Crypto revealed they were winding down their crypto exposure,” Medalie said.
Liquidity has been a big issue for crypto markets since the closure of Silvergate and Signature Bank — two key platforms that people used to buy into the crypto market.
Scrutiny from U.S. regulators on the digital currency industry has ramped up since the collapse of crypto exchange FTX last year.
The U.S. Securities and Exchange Commission warned American crypto exchange Coinbase in March over potential securities law violations. Coinbase CEO Brian Armstrong said the company is preparing for a years-long court battle with the SEC.
The crypto industry is in a battle with U.S. regulators, accusing the SEC and the U.S. government of not laying out clear rules.
Meanwhile, the bitcoin network itself has faced congestion in recent days with Binance last week forced to temporarily halt bitcoin withdrawals. Bitcoin transaction fees spiked this week and while they are coming down, they still remain at elevated levels. The original bitcoin network was not designed to handle high-volume transactions.
“Bitcoin’s attempts to break through $30,000 have come undone amidst a triple whammy of congestion issues on the blockchain, liquidity constraints caused by the scaling back of top market-makers Jane Street and Jump Crypto, and ever-circling regulators,” Antoni Trenchev, co-founder at Nexo, told CNBC via email on Friday.
Crypto prices slid on Thursday as investors weighed a news report about two of the biggest institutional liquidity providers dialing back their crypto-trading businesses in the U.S.
Bitcoin fell nearly 3% to $26,937.29, according to Coin Metrics, while ether lost 3.1% to trade at $1,793.82. They’re on pace to end the week down more than 8% and 9%, respectively.
Earlier this week, Bloomberg reported that Jane Street and Jump Crypto, two of the biggest crypto market makers, will take a step back from crypto trading in the U.S. as the country’s regulators continue their crackdown on the nascent industry. CNBC’s “Crypto World” reached out to the firms. Jane Street declined to comment, and Jump did not respond.
“In general, we’re going to see much larger swings in price both ways since so many large market makers have significantly reduced providing,” said David Wells, CEO of Enclave Markets.
“Larger market makers create more stability in prices due to the liquidity they provide,” he added. “You’ll see more frequent gaps up and down since order books are thinner in general.”
Bitcoin (BTC) this week
In late February, the Federal Reserve, the Federal Deposit Insurance Corporation and the Office of the Comptroller of the Currency issued a joint statement warning banks of the liquidity risks associated with banking crypto firms.
The new illiquidity in the market became a bigger theme following the closure of Silvergate and Signature Bank, which operated the two main fiat onramps into the crypto market.
Bitcoin hit the $30,000 level one month ago for the first time since June and has struggled to break higher for longer since then. It’s been floating between that threshold and the upper part of the $26,000 level since then. Investors have been unfazed by the down moves, however.
Chart analysts have been watching $25,200 as a key threshold before worrying about a more meaningful drop down.
Bitcoin fell to start the week, extending losses from a sharp drop over the weekend following reports by one of the biggest crypto exchanges in the world about “congestion” on the Bitcoin network.
The price of bitcoin was lower by about 5% at $27,503.76, according to Coin Metrics. It has fallen more than 5% since Saturday. Ether fell 4% on Monday to $1,839.40.
“Reports of a large bitcoin outflow and withdrawals being paused at a major exchange could be factoring into some of the weakness we’re seeing. Ultimately however, there haven’t been any major developments as far as price action goes, with bitcoin still very much confined to a multiday bullish consolidation,” said Joel Kruger, market strategist at LMAX Group.
“Only a break back below $25,000 would give reason for concern. Until then, we suspect dips will continue to be very well supported,” he added.
Bitcoin (BTC) slides after reports of network congestion
Monday’s drop came after Binance tweeted Sunday that the Bitcoin network was “experiencing a congestion issue” and that it was temporarily closing bitcoin withdrawals as a result until the network stabilized. Some market participants have argued that the Bitcoin network is stable and Binance should have prepared for a high-fee environment on Bitcoin.
The issue has highlighted a long-known setback of the Bitcoin network: It wasn’t designed to handle a large number of transactions at scale. It processes just seven to 10 transactions per second, making it unviable as a potential rival to companies such as Visa and Mastercard — an idea many have explored over the years but largely put to rest. This is why projects such as the Lightning Network, which helps speed up transactions without affecting the network, have gained in popularity.
Service on Binance resumed, but later on Sunday evening the exchange again halted withdrawals.
“To prevent a similar recurrence in the future, our fees have been adjusted,” the Binance account tweeted. “We will continue to monitor on-chain activity and adjust accordingly if needed. Our team has also been working on enabling BTC Lightning Network withdrawals, which will help in such situations.”
A ‘parabolic spike’
Alex Thorn, head of firmwide research at Galaxy, noted a “parabolic spike” in transaction fees on the Bitcoin network last week, attributing it to users minting BRC-20 tokens. These are an experimental token on the Bitcoin blockchain that ultimately allow users to create NFTs on Bitcoin. They’re inspired by Ethereum’s ERC-20 token.
On May 1, about 50% of bitcoin transactions were BRC-20 mints, Thorn highlighted in a note Friday. In the 14 days preceding Friday, mean transaction fees on Bitcoin increased 297%.
“There is an increasing demand for BRC-20 tokens which include transferring digital collectibles on Bitcoin network,” said Oppenheimer analyst Owen Lau. “The Bitcoin network has gradually supported more different types of tokens like NFTs. This adoption should be a positive sign longer term but it looks like it has slowed down the network.”
The price of ether jumped on Friday as investors gambled on crypto’s newest memecoins.
Ether closed higher by 5.61% at about $1,990, according to Coin Metrics. It’s still below the key $2,000 level it briefly broke through in April following the Shapella upgrade. Earlier in the day it rose more than 6% to hit a high of $1,999.59.
Bitcoin ended the day higher by at $29,501.16. It’s inching back towards the $30,000 level it’s struggled to recover since mid-April.
Market participants put the move on attempts to bring meme mania back to crypto. Cryptocurrencies rallied to start the year but has largely seen low volatility. Many investors have kept on the sidelines following the collapse of FTX, waiting for the market to wash out bad actors and irresponsible or otherwise unserious ventures that contributed to some of the catastrophic events of 2022.
Memecoins like PEPE and SPONGE as well as dogecoin or shiba inu are driven by hype and social media and many investors have suffered significant losses from investing in them.
“There’s a ton of memecoin activity on chain right now that’s generating a lot of gas fees,” or transaction fees on the Ethereum network, and “pushing ETH further deflationary,” meaning its supply is decreasing rather than increasing, said Michael Rinko, a research analyst at Delphi Digital.
The newly created SpongeBob token (SPONGE), which is based on Spongebob Squarepants and launched Thursday, has surged almost 600% since and is trading at less than 1 cent per coin, according to CoinMarketCap.
Pepecoin (PEPE), based on the Pepe the Frog internet meme, is up more than 120% over the past 24 hours, CoinMarketCap said. Pepe the Frog was created by cartoonist Matt Furie in the early 2000s. In 2016 it was appropriated by the alt-right to the point that the U.S.-based Anti-Defamation League put on a list of hate symbols.
“One of the main reasons ETH is up … is down to a resurgence of memecoins,” said Conor Ryder, research analyst at crypto data provider Kaiko. “Whatever your thoughts on memecoins, the facts are they drive users to transact on Ethereum, which helps the network earn more fees. Ethereum gas fees have been revived by the return of memecoins, just today hitting 1-year highs.”
“As gas fees increase, more ETH is burned, and at current activity levels ETH is a deflationary asset, which should help boost ETH’s price,” Ryder added. “In the last 24 hours, trading volumes for PEPE on Uniswap have surpassed the volumes of Tether and Wrapped Bitcoin, some of the highest volume tokens on the exchange.”
Ether ended the week higher by 4.53%, marking its second straight positive week and the seventh in the last eight. Coin Metrics measures a week in crypto, which trades 24 hours a day, from the 4:00 p.m. ET stock market close one Friday to the next.
Bitcoin closed the week up just 0.35%. It’s the second straight positive week for bitcoin and its third positive week in four.
Bitcoin climbed on Monday evening, topping the key psychological level of $30,000 as investors awaited key inflation data later in the week that could steer crypto prices.
The largest cryptocurrency by market cap rose 7% to $30,193.25 for the first time since June, according to Coin Metrics. Ether advanced more than 3.5% to $1,925.11 for the first time since August as investors awaited the Ethereum network’s latest tech upgrade, scheduled for Wednesday.
Now that bitcoin has touched $30,000, a move into the mid- to high-30s will be “likely” if it pushes through with conviction and would “force short speculators to cover and buy instead,” said James Lavish, managing partner at the Bitcoin Opportunity Fund. “Some investors are trying to get positioned ahead of that,” he said.
Bitcoin (BTC) and ether (ETH) YTD
Traders are likely speculating that Wednesday’s consumer price index number “could come in at a level that gives the Fed reason to think about pausing raising rates in the next meeting, thereby giving a boost to assets like bitcoin,” Lavish added.
Investors are also watching the latest reading on the producer price index, due out Thursday.
Cryptocurrencies have been rallying this year. Monday night’s action brings bitcoin’s year-to-date gains to more than 80%, while ether has now added 60% for the year so far. Price moves for the two crypto assets have historically tracked relatively in line on a percentage basis, but the top two crypto assets “decoupled” in March, thanks to a “flight to quality” in bitcoin following bank closures.
Nevertheless, the two cryptocurrencies remain somewhat correlated for the time being and macro drivers continue to influence both assets. The upcoming inflation data will be key in determining if or when the Fed will pause or put an end to its rate hiking campaign.
Meanwhile, ether has been climbing ahead of its planned “Shanghai” tech upgrade, which is expected to bring a wave of negative sell pressure on the market as previously locked funds on Ethereum are released over the next few weeks.
Ether has spiked this week to a nine-month high, ahead of a major network upgrade that some crypto enthusiasts say will make the digital currency a more profitable long-term investment.
The world’s second-biggest cryptocurrency is up about 6% over the past three days, surpassing $1,900, while bitcoin is roughly flat over that stretch.
Beginning next Wednesday, an upgrade to the blockchain, dubbed “Shapella,” will allow owners of ether to withdraw their assets. Up to this point, investors would have to use centralized exchanges like Coinbase or decentralized finance (DeFi) protocols like Lido, to essentially exchange their locked-up ether for a token of equivalent value.
Ethereum previously had a vast network of miners all over the planet running highly specialized computers that crunched math equations in order to validate transactions. After the so-called “Merge” upgrade in September, ethereum migrated to a proof-of-stake system, swapping out miners for validators. Instead of running large banks of computers, validators leverage their existing cache of ether as a means to verify transactions and mint new tokens.
“Ether itself becomes a productive asset,” said Danny Ryan, a researcher at the Ethereum Foundation, regarding the September upgrade. “It’s not something you might just speculate on, but it’s something that can earn returns.”
In the post-merge era, ether has taken on some characteristics of a traditional financial asset, paying interest to holders.
“It’s probably the lowest-risk return inside of the ethereum ecosystem,” said Ryan, adding that yield in other corners of DeFi involve smart contracts and other types of counter-party risk.
So far this year, ether has underperformed bitcoin, but recent gains have helped to close the gap. Ether is up nearly 59% this year, versus bitcoin’s gain of 70% in 2023.
Currently, over 18 million ether tokens worth about $32.5 billion are staked, meaning that 15% of ether’s total supply are considered locked assets.
While the coming upgrade will unlock much of that value, giving holders more control over their assets, there’s some concern that the release of so many tokens will have a flooding effect of sorts on the market. Even with capped withdrawals, some $2.4 billion worth of ether could hit the open market, K33 Research said in a note on Tuesday.
“A plunge is likely to happen shortly after the completion of the upgrade, as a huge amount of ETH will be unlocked, and many people will also be selling their ETH,” said Ilya Volkov, who runs a blockchain-based fintech platform. Volkov said he’s bullish over the long term.
The ratio between the open interest of ether put and call options reached its highest level since May on Tuesday, according to data presented by crypto data analytics and news firm The Block. That could signal a buildup of bearish bets leading up to the network upgrade.
According to research from Bernstein, of the 18 million ether tokens locked on the blockchain, almost 70% are staked through protocols like Lido, creating a measure of liquidity for investors.
“Liquidity for 70% of staked ETH is not new, they could do it anyways,” Bernstein wrote. The firm described the remaining 30% of holders as “original believers,” who are unlikely exit their positions at this price.
Having the ability to deposit and withdraw tokens might encourage more investors to stake ether, and some analysts said they expect a significant influx of capital onto the network once it proves that money that’s been staked can be taken out with relative ease.
A man entering Signature Bank in New York City on March 12, 2023.
Reuters
Two of the banks that were friendliest to the crypto sector and the biggest bank for tech startups all failed in less than a week. While cryptocurrency prices rallied Sunday night after the federal government stepped in to provide a backstop for depositors in two of the banks, the events sparked instability in the stablecoin market.
Silvergate Capital, a central lender to the crypto industry, said on Wednesday that it would be winding down operations and liquidating its bank. Silicon Valley Bank, a major lender to startups, collapsed on Friday after depositors withdrew more than $42 billion following the bank’s Wednesday statement that it needed to raise $2.25 billion to shore up its balance sheet. Signature, which also had a strong crypto focus but was much larger than Silvergate, was seized on Sunday evening by banking regulators.
Signature and Silvergate were the two main banks for crypto companies, and nearly half of all U.S. venture-backed startups kept cash with Silicon Valley Bank, including crypto-friendly venture capital funds and some digital asset firms.
The federal government stepped in on Sunday to guarantee all deposits for SVB and Signature depositors, adding confidence and sparking a small rally in the crypto markets. Both bitcoin and ether are nearly 10% higher in the last 24 hours.
According to Nic Carter of Castle Island Ventures, the government’s willingness to backstop both banks signifies that it’s back in the mode of providing liquidity, rather than tightening, and loose monetary policy has historically proven to be a boon for cryptocurrencies and other speculative asset classes.
But the instability once again showed the vulnerability of stablecoins, a subset of the crypto ecosystem investors can typically rely on to maintain a set price. Stablecoins are supposed to be pegged to the value of a real-world asset, such as a fiat currency like the U.S. dollar or a commodity like gold. But unusual financial conditions can cause them to drop below their pegged value.
A lot of crypto’s problems in the last year originated in the stablecoin sector, beginning with TerraUSD’s collapse last May. Meanwhile, regulators have been homing in on stablecoins in the last few weeks. Binance’s dollar-pegged stablecoin, BUSD, saw massive outflows after New York regulators and the Securities and Exchange Commission applied pressure on its issuer, Paxos.
Over the weekend, confidence in this sector again took a hit as USDC – the second-most liquid U.S. dollar-pegged stablecoin – lost its peg, dropping below 87 cents at one point on Saturday after its issuer, Circle, admitted to having $3.3 billion banked with SVB. Within the digital assets ecosystem, Circle has long been regarded as one of the adults in the room, boasting close connections and backing from the world of traditional finance. It raised $850 million from investors like BlackRock and Fidelity and had long said it planned to go public.
DAI, another popular dollar-pegged virtual currency that is partially backed by USDC, traded as low as 90 cents on Saturday. Both Coinbase and Binance temporarily paused USDC-to-dollar conversions.
On Saturday, some traders began swapping their USDC and DAI for tether, the world’s biggest stablecoin with a market value of more than $72 billion. Tether’s issuing company did not have any exposure to SVB and it’s currently trading above its $1 peg as traders flock to safer pastures, even though tether’s business practices have been called into question, as have the state of its reserves.
The stablecoin market began to rebound as of Sunday evening after Circle released a blog post saying that it would “cover any shortfall using corporate resources.” Both USDC and DAI have since shifted back toward their dollar peg.
Now that it is clear that SVB depositors will be made whole, Carter tells CNBC that he expects USDC to trade at par.
In the long run, the shutdown of the crypto banking trifecta could present problems for bitcoin, the world’s largest cryptocurrency, with a market value of $422 billion.
The Silvergate Exchange Network (SEN) and Signature’s Signet were real-time payment platforms that crypto customers considered core offerings. Both allowed commercial clients to make payments 24 hours a day, seven days a week, through their respective instant settlement services.
“Bitcoin liquidity and crypto liquidity overall will be somewhat impaired because Signet and SEN were key for firms to get fiat in on the weekend,” said Carter, who added that he is hopeful that customer banks will step in to fill the void left by SEN and Signet.
“These were the two most bitcoin-friendly banks, supporting the lion’s share of fiat settlement for bitcoin trades between trading counterparties in the U.S.,” wrote Mike Brock in a post on social media app Damus. Brock is the CEO of TBD at Block, a unit which focuses on cryptocurrency and decentralized finance.
Although Carter thinks the Fed stepping in to guarantee depositors of SVB will prevent a larger bank run on Monday, he says it is still dispiriting to see the three largest crypto-friendly banks taken offline in a matter of days.
“There are very few options now for crypto firms and the industry will be strapped for liquidity until new banks step in,” said Carter.
Mike Bucella, a longtime investor and executive in the crypto space, says that many in the industry are pivoting to Mercury and Axos, two other banks that cater to startups. Meanwhile, Circle has already publicly said that it is shifting is assets to BNY Mellon now that Signature bank is closing.
“Near-term, crypto banking in North America is a tough place,” said Bucella. “However there is a long tail of challenger banks that may take up that slack.”
Bitcoin has had a strong start to the year with the cryptocurrency seeing a huge rally.
Jakub Porzycki | Nurphoto | Getty Images
Crypto markets rallied on Thursday, shrugging off a tougher regulatory stance from the U.S. government.
Bitcoin surged 11% to $24,655.94 at around 3:36 a.m. ET while ether was up more than 8% at $1,684.59, according to CoinDesk.
The value of the entire cryptocurrency market rose more than $84.8 billion in the 24 hours before 3:39 a.m. ET.
There are ” increasing signs that the market bottomed last November and has turned bullish,” Vijay Ayyar, vice president of corporate development and international at crypto exchange Luno, told CNBC.
“We are gaining in momentum here and any bad news is being shrugged off, typical signs that the market believes the worst is over.”
Crypto markets were on edge earlier this week following increased regulatory scrutiny from U.S. authorities on digital currencies.
On Monday, the New York State Department of Financial Services told Paxos to stop minting new Binance USD, or BUSD, stablecoins. A stablecoin is a type of cryptocurrency pegged to a real-world asset and some are backed by assets such as bonds or cash. BUSD is pegged one-to-one to the U.S. dollar.
Paxos also confirmed that the Securities and Exchange Commission has notified the company that the agency could recommend an action that alleges BUSD is a security. The SEC has not yet formally levelled any charges against Paxos.
Bitcoin’s price on Thursday sat at its highest level since mid-August 2022. Last year, nearly $1.4 trillion was wiped off the crypto market after turmoil which saw bankruptcies, failures of projects and companies. All that was topped off by the collapse of major exchange FTX.
Yuya Hasegawa, an analyst at Japanese crypto firm Bitcoin Bank, said there is a shift from so-called altcoins, or alternative coins, to bitcoin in the wake of the regulatory action.
“Wednesday’s crypto rally was a bit of a surprise but one thing stood out: it was led by bitcoin,” Hasegawa told CNBC.
“The current regulatory environment surely looks like a headwind for the crypto market, but it seems like some money is moving from altcoins to bitcoin, since bitcoin is the only cryptocurrency that is labeled ‘commodity’ by the SEC chair. Consequently, bitcoin’s market dominance is on the rise.”
Gary Gensler, chair of the SEC, reiterated last year that the agency views bitcoin as a commodity rather than a security. Commodities are assets like gold whereas stocks are considered securities. They are regulated differently.
Rising interest rates from the Federal Reserve designed to fight inflation also weighed on crypto markets. Bitcoin is also closely correlated to equity markets and in particular the tech-heavy Nasdaq index. The Nasdaq is up about 16% year-to-date. Bitcoin has outperformed the index and is up 49% this year.
Bullish sentiment in risk assets has been aided by a view that the economic downturn might not be as bad as expected, and the Fed might slow down the pace of interest rate hikes.
“In general, the markets like the fact that inflation is coming down, interest rate hikes are slated to ease from here, but also that we may end up with either no big recession or something very mild,” Ayyar said.
