Equities

Crypto Weekly: Fatigue in the crypto-market

Summary:  Several cryptocurrencies hit a new all-time high last week, including Bitcoin and Ethereum. However, this week has so far been colored in red as the crypto-market tumbled. Speculative investors are getting nervous across markets, and Elon Musk is tweeting that the Bitcoin and Ethereum prices seem high.


Multiple events are causing the negative market sentiment

Bitcoin was trading at an intra-day high of 57,500 BTC/USD on Saturday before surging to an all-time high of $58,350 on Sunday. Afterwards, it tumbled through Monday and it is currently trading at $47,500, and multiple events may have contributed to this decline. Speculative investors have been riding the uptrend in both the crypto and stocks markets, but may now be frightened by the recent drawdowns – as e.g. seen by the recent decline in the Tesla stock. Speaking about Tesla, Tesla’s $1.5 billion Bitcoin purchase two weeks ago, did not prevent Elon Musk from saying in a public tweet on Saturday that he thinks the Bitcoin and Ethereum prices seem too high. The tweet was in response to a tweet from Peter Schiff, a financial commentator, who has been extremely outspoken for years on Bitcoin in a negative manner. This is not the first time Elon Musk has talked negatively about positions he directly or indirectly holds. Back in May 2020, Musk wrote in a tweet that he thought the Tesla stock was priced too high: “Tesla stock price is too high imo (in my opinion)”. Though it is unclear whether Musk holds any position in Ethereum, he holds directly in Tesla and at least indirectly in Bitcoin through his Tesla holdings. Another element contributing negatively to the market was when Treasury Secretary Janet Yellen published a statement yesterday warning investors of Bitcoin. In the statement, she added that the questions about legitimacy and stability remain unanswered.

Is Ethereum losing its first-mover advantage?

Notably, Ethereum has tumbled over the past days. After hitting an all-time high on Saturday at 2,033 ETH/USD, marking the first time it has been trading above $2,000, the cryptocurrency declined to a current price of $1,450 just days after hitting a new all-time high. The main reasons behind the price decline are the three factors mentioned above combined with the scalability issues that Ethereum faces. The cryptocurrency influencer Lark Davis was stressing Ethereum developers yesterday that they need to hurry up to solve the scalability issues, warning that rival chains will take over if the issues are not solved quickly enough. Lark Davis has previously been exceedingly talking well about Ethereum and this bull-run contributing to hitting several new all-time highs. Last week, we wrote that the decentralized exchange PancakeSwap on Binance Smart Chain (BSC) would most likely become the most used decentralized exchange measured on daily volume in the foreseeable future. Thereby, it would overtake the most popular decentralized exchange on Ethereum called Uniswap. Surprisingly, this happened already the other day sending a shock wave through the community as it signals the major scalability issues Ethereum has. Many are simply worried whether Ethereum will lose its first-mover advantage in the smart contract crypto-space. However, for the past 24 hours Uniswap has been handling slightly more volume compared to PancakeSwap.

Are CFOs about to put Bitcoin on their balance sheet?

Before the tumbling of Bitcoin, Ethereum and other cryptocurrencies the past days, a survey conducted by Gartner published last week concluded that 5% of CFOs or other executives plan to buy Bitcoins in 2021 for their balance sheet. Thereby, other companies might join Tesla and MicroStrategy shortly. Furthermore, 11% stated that potentially they will execute a Bitcoin purchase by 2024. Especially the technology sector was keener on the idea compared to other industries. On the other hand, 84% of the total respondents stated that their main concern by putting Bitcoin on their balance sheet correlates to the volatility of the cryptocurrency. Most likely this percentage is higher after the volatility throughout the past days. The survey was only conducted on 77 respondents making the survey fairly small and less reliable.

BTC against USD. Source: CoinMarketCap.
ETH against USD. Source: CoinMarketCap.

Disclaimer

The Saxo Bank Group entities each provide execution-only service and access to Analysis permitting a person to view and/or use content available on or via the website. This content is not intended to and does not change or expand on the execution-only service. Such access and use are at all times subject to (i) The Terms of Use; (ii) Full Disclaimer; (iii) The Risk Warning; (iv) the Rules of Engagement and (v) Notices applying to Saxo News & Research and/or its content in addition (where relevant) to the terms governing the use of hyperlinks on the website of a member of the Saxo Bank Group by which access to Saxo News & Research is gained. Such content is therefore provided as no more than information. In particular no advice is intended to be provided or to be relied on as provided nor endorsed by any Saxo Bank Group entity; nor is it to be construed as solicitation or an incentive provided to subscribe for or sell or purchase any financial instrument. All trading or investments you make must be pursuant to your own unprompted and informed self-directed decision. As such no Saxo Bank Group entity will have or be liable for any losses that you may sustain as a result of any investment decision made in reliance on information which is available on Saxo News & Research or as a result of the use of the Saxo News & Research. Orders given and trades effected are deemed intended to be given or effected for the account of the customer with the Saxo Bank Group entity operating in the jurisdiction in which the customer resides and/or with whom the customer opened and maintains his/her trading account. Saxo News & Research does not contain (and should not be construed as containing) financial, investment, tax or trading advice or advice of any sort offered, recommended or endorsed by Saxo Bank Group and should not be construed as a record of our trading prices, or as an offer, incentive or solicitation for the subscription, sale or purchase in any financial instrument. To the extent that any content is construed as investment research, you must note and accept that the content was not intended to and has not been prepared in accordance with legal requirements designed to promote the independence of investment research and as such, would be considered as a marketing communication under relevant laws.

Please read our disclaimers:
- Notification on Non-Independent Investment Research (https://www.home.saxo/legal/niird/notification)
- Full disclaimer (https://www.home.saxo/en-gb/legal/disclaimer/saxo-disclaimer)

Saxo Markets
40 Bank Street, 26th floor
E14 5DA
London
United Kingdom

Support Centre
For existing clients, please click here to request support via the Support Centre.

Have a question about our products, platforms or services? Visit the Support Centre to find answers for our most frequently asked questions. If you are still unable to locate an answer to your question, you will also find contact details for your local Saxo office to speak with a representative.

Contact Saxo

Select region

United Kingdom
United Kingdom

Trade Responsibly
All trading carries risk. To help you understand the risks involved we have put together a series of Key Information Documents (KIDs) highlighting the risks and rewards related to each product. Read more
Additional Key Information Documents are available in our trading platform.

Saxo Markets is a registered Trading Name of Saxo Capital Markets UK Ltd (‘SCML’). SCML is authorised and regulated by the Financial Conduct Authority, Firm Reference Number 551422. Registered address: 26th Floor, 40 Bank Street, Canary Wharf, London E14 5DA. Company number 7413871.

This website, including the information and materials contained in it, are not directed at, or intended for distribution to or use by, any person or entity who is a citizen or resident of or located in the United States, Belgium or any other jurisdiction where such distribution, publication, availability or use would be contrary to applicable law or regulation.

It is important that you understand that with investments, your capital is at risk. Past performance is not a guide to future performance. It is your responsibility to ensure that you make an informed decision about whether or not to invest with us. If you are still unsure if investing is right for you, please seek independent advice. Saxo Markets assumes no liability for any loss sustained from trading in accordance with a recommendation.

Apple, iPad and iPhone are trademarks of Apple Inc., registered in the U.S. and other countries. App Store is a service mark of Apple Inc. Android is a trademark of Google Inc.