Cryptocurrency Analyst
Summary: The crypto-market was coloured in red over the weekend upon a fairly hectic week. Bitcoin tumbled to a low of 53,000 BTC/USD while Ethereum declined to a low of 2,000 ETH/USD on Sunday. Extended regulation and a 'buy the rumor, sell the news' moment were most likely the reasons for the red market. Since then, the market has recovered slightly.
Buy the rumour, sell the news
Over the weekend, the crypto-market took a sharp turn and turned red across close to all major cryptocurrencies after several weeks with strong momentum. Multiple elements contributed to the negative price movement. First, the highly anticipated Coinbase direct listing last week. There is a strong indication that the Coinbase direct listing has impacted the prices positively the weeks before as it was a significant milestone for the crypto-market. Throughout the weekend, there was sort of a “buy the rumour, sell the news” spirit in the market, where investors locked in profit upon the listing. Additionally, news and rumours extended the regulatory uncertainty. On Friday, Turkey announced the plan to ban Bitcoin and cryptocurrency payments in the country. On Saturday, rumors circulated that US regulators were about to charge unnamed companies with crypto-related money laundering. The increasing regulatory uncertainty over the weekend did for sure not influence the market positively.
Silvergate Bank joins Coinbase with Q1 result
A week before going public, Coinbase shared its Q1 2021 estimated result indicating a profit of between $730mn to $800mn with a revenue of $1.8mn. The result was rather positive as it was more than double the profit of the company’s entire 2020. However, the result also illustrated Combase’s dependence on trading fees to financially perform well – and in particular, retail trading as the fees there are extremely high. We expect that growing competition will put Coinbase’s large margins on especially retail trading under pressure. For example, PayPal-owned Venmo announced today that they are rolling out cryptocurrency trading for its 70 million users, joining Coinbase in the race for retail investors. On Thursday last week, Coinbase earned a spot on our cryptocurrency theme basket. Another US-based company also in the basket, Silvergate Capital Corporation, released its Q1 result earlier today. The result showed a profit of $12.7 million in the past quarter, compared to a profit of $9.1 million in Q4 2020. Silvergate is a Federal Reserve member bank only focused on institutional clients, in particular cryptocurrency institutional investors and exchanges. The backbone of the company is its Silvergate Exchange Network (SEN) enabling institutional investors to instantly fund exchanges, including Coinbase and OTC-desks with USD. The SEN handled $166.5 billion of USD transfers in the past quarter compared to $59.2 billion the quarter before. Silvergate onboarded close to 150 new cryptocurrency clients in the quarter, totaling now 1,104 clients. As expected, the key figures from Silvergate show a strong institutional inflow and trading activity in the crypto-market the past quarter. Another bank in the basket also having onboarded several exchanges and institutional investors, Signature Bank, is expected to release its Q1 result tomorrow. The issuer of USDC, the second-largest stablecoin, Circle announced yesterday a partnership with Signature Bank to make the bank the leading financial institution for Circle’s over $13bn hold as reserve.
WeWork to accept cryptocurrencies as payments
While Turkey is about to ban cryptocurrencies for payments, one company is planning to accept them as payment. The rather controversial US-based commercial real estate firm WeWork is about to let clients pay with Bitcoin, Ethereum, the two stablecoins USDC and Paxos, and several other cryptocurrencies. According to a statement from WeWork, the company intends to hold the cryptocurrencies on its balance sheets, joining companies like MicroStrategy and Tesla. As a WeWork tenant, Coinbase will allegedly start paying WeWork in the before-mentioned cryptocurrencies.
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Markets are driven by election optimism, overshadowing growing debt and liquidity concerns. The 2024 elections loom large, but economic fundamentals and debt issues warrant cautious investment.
As US economic slowdown hints at a shift away from exceptionalism, USD faces downside with looming Fed cuts. AUD and NZD set to outperform as their rate cuts lag. JPY gains on carry unwind bets and BOJ pivot.
Amid AI and obesity drug excitement, equities see varied prospects: neutral on overvalued US stocks, negative on Japan due to JPY risks, positive on Europe. European defence stocks gain appeal.
With the economic slowdown, quality assets will gain favour, especially sovereign bonds up to 5 years. Central banks' potential rate cuts in Q2 suggest extending duration, despite policy and inflation concerns.
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