Silver Is the New GameStop as Musk’s #Bitcoin Stalls
Bitcoin (BTC) quickly settled back into the past couple weeks’ range between roughly $30,000 and $36,000, after a short-lived price spike Friday when Elon Musk, the electric-vehicle and private-spaceflight entrepreneur who’s also reportedly the world’s richest person, added “#bitcoin” to his Twitter profile.
“The longer we stay at the current level, the stronger the base to bounce back up,” Matt Blom, head of sales and trading for the exchange firm EQUOS, wrote early Monday. Bitcoin prices finished January up 14% on the year.
Last week’s Reddit-fueled trading in GameStop bore uncanny similarities to the fevered, anything-goes trading culture that has long defined cryptocurrencies. The five-fold jump in prices for dogecoin (DOGE) – a blockchain-based token representing little more than a doggie-faced meme – showed some of that retail-trader-driven mania spilling over into digital markets.
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During an audio chat late Sunday on the app Clubhouse, Musk said he was a “supporter” of bitcoin and that it’s “on the verge of getting broad acceptance by conventional finance people.” He added that the “most entertaining and ironic outcome” would be if DOGE became the “currency of earth in the future.”
Where will markets go next? The news of India’s proposed crypto ban has made some bitcoin investors nervous, CoinDesk’s Tanzeel Akhtar reported Saturday. Meanwhile, Chinese traders late last week were already speculating on which cryptocurrencies might be the next to get a major price pump, CoinDesk’s Muyao Shen reported.
Prices for the digital token XRP (XRP) have nearly tripled in the past five days. They had fallen 67% in December, when U.S. securities regulators brought charges against Ripple Labs, which uses XRP in its payments network.
In traditional markets on Monday, stocks were higher in Europe and Asia, but the real action was in silver, where prices have climbed 16% over the past three days to about $30 an ounce amid a Reddit-fueled buying frenzy. Gold strengthened 0.9% to $1,860 an ounce.
Bitcoin price chart puts Elon Musk’s #bitcoin moment into context. Source: TradingView/CoinDesk
Market Moves
The “Grayscale premium” is shrinking, and analysts are speculating why.
The “Grayscale premium,” a closely watched gauge in the bitcoin market, has recently fallen to a historically low level. Source: NYDIG/Bybit
A growing number of cryptocurrency analysts are watching a steep contraction recently in a closely-tracked ratio in the bitcoin market known as the “Grayscale premium.”
This premium represents the difference in market prices for bitcoin and the price implied by the Grayscale Bitcoin Trust (GBTC), one of the most popular vehicles for investing in the cryptocurrency via the stock market. (EDITOR’S NOTE: Grayscale Investments, which sponsors GBTC, is a unit of Digital Currency Group, which also owns CoinDesk.)
What’s getting attention now is that the Grayscale premium last week fell to as low as 3.5%, from upwards of 40% late last year, according to Ycharts.
Many observers say one explanation for the premium might be the lack of alternatives, especially since the U.S. Securities and Exchange Commission has yet to approve a bitcoin-focused exchange-traded fund in the U.S. When the premium is elevated, it’s seen as a sign of just how eager retail stock traders are to bet on bitcoin’s price.
So the recent decline might be explained by signs that greater competition is on the way: BlockFi, a major hub for crypto lending, has filed to start a new bitcoin trust, CoinDesk’s Danny Nelson reported. According to The Block, Osprey Bitcoin Trust will list on over-the-counter markets in coming days. In Canada, the investment firm Ninepoint Partners completed an initial public offering of a cryptocurrency fund worth a reported C$230 million (US$180 million).
Yet there may be another factor: Flagging demand for bitcoin with prices over $30,000, double their level just a couple months ago. Some institutional investors who were betting on the price to keep mooning may have lost their nerve, and the premium collapsed as they rushed to exit positions.
“The dissipation of this premium is further evidence of the internal stresses of the markets on bitcoin,” Greg Cipolaro, global head of research for NYDIG, a digital-asset investment firm, wrote Friday in a weekly report.
He noted that the gap has also compressed between spot prices for bitcoin and futures contracts traded on the Chicago-based CME – possibly another indication that traders are taking less market risk in the face of heightened volatility.
Bitcoin Watch
“A BTC bull and believer”
Bitcoin’s daily chart shows the cryptocurrency probing bearish trendline hurdle. Source: TradingView/CoinDesk
The rally triggered by Tesla CEO Elon Musk adding “#bitcoin” to his Twitter profile quickly fizzled, but Su Zhu, CEO of the cryptocurrency investment firm Three Arrows Capital, says that “long-term, it’s very bullish.”
“Elon news is a watershed moment for crypto as the wealthiest man in the world and operator of the world’s most successful companies is now a BTC bull and believer,” Zhu told CoinDesk in a Telegram chat.
Denis Vinokourov, head of research at the London-based prime brokerage Bequant, expects range-bound trading to continue for a while. He points to healthy market signs, including growth in blockchain-based trading and lending systems of decentralized finance (DeFi). Flow into exchange-traded products remains strong, he said.
“Everyone is looking for catalysts but I don’t think any new catalysts per se are required,” Vinokourov told CoinDesk.
– Omkar Godbole
Token Watch
CoinDesk 20 Returns in January
Stellar (XLM), the payments token, surged 143% in the first month of the year to dominate the CoinDesk 20 set of digital assets. Ether (ETH), the native cryptocurrency of the Ethereum blockchain, gained 77% on the month. Bitcoin rose 14%.
CoinDesk 20 returns in January, versus the U.S. dollar. (Note there are only 17 shown here, because the other three are dollar-linked stablecoins whose value usually doesn’t fluctuate much.) Source: CoinDesk
What’s Hot
Crypto industry booms but doesn’t quite “Zoom,” while Elon Musk gets immortalized on the Bitcoin blockchain.
One of the biggest questions facing the crypto industry over the past year has been whether the companies and their new-tech platforms could “Zoom” – where suddenly everyone starts using the product. Last week showed there’s plenty of progress still to be made on that front. The industry groaned under the newfound attention from ready customers, some of them ostensibly fleeing the trading platform Robinhood following a series of anger-inducing trading suspensions. Outages were reported at crypto trading venues including Coinbase, Kraken, Binance and Voyager. New York Department of Financial Services Superintendent Linda Lacewell tweeted that, as the state’s virtual-currency regulator, she was “actively monitoring market volatility.”
Elon Musk’s Twitter account got a hat tip in the form of a message encoded into the Bitcoin blockchain. The phrase, “In retrospect, it was inevitable,” was written by a clever bitcoin miner into the record for data block 668197, shortly after the world’s richest man updated his profile to include the hashtag #bitcoin.
Bitcoin blockchain explorer reveals message encoded into blockchain data block 668197 – quoting Elon Musk’s Twitter account. Source: BTC.com
Analogs
The latest on the economy and traditional finance
The hedge fund Greylock is known for making bets on the government debt of troubled nations like Argentina, Lebanon and Venezuela. Now, according to Bloomberg, Greylock, led by and CEO Hans Humes, has filed for bankruptcy protection, apparently seeking the court’s help to wriggle out of its own liabilities. The proceedings reportedly will allow Greylock to terminate its $100,000-a-month office lease in Manhattan. (Bloomberg)
Reddit user “DeepF—Value” who helped direct WallStreetBets campaign on is a 34-year-old former insurance-marketing executive who has just made $20M from gains on GameStop shares and options. (WSJ)
“Fundamentals have never mattered less” as GameStop saga “makes a mockery of the idea that markets provide an efficient form of capital allocation in the economy,” James Mackintosh writes in column. (WSJ)
For public companies, there are benefits to having no supply caps: Data show a rise in “shelf” registrations for potential securities sales, as CEO prepare to take advantage of buoyant market conditions. (WSJ)
FTX Adds Silver Stocks Amid Reddit-Led Market Surge
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Key Takeaways Popular cryptocurrency exchange FTX has added silver to its growing list of traditional assets.
Thanks in part to a large group of Reddit users, silver is up almost 20% since Thursday.
Rising demand for the precious metal has caused many established dealers to run out of physical silver.
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First GameStop, now silver: crypto’s most agile exchange, FTX, has listed more stocks as a result of the Reddit-organized frenzy.
FTX Responds to Silver Demand
FTX has listed tokenized stocks and futures for silver, as demand for the precious metal reaches a peak.
The cryptocurrency exchange, which is run by the popular crypto figurehead Sam Bankman-Fried, added the stocks over the weekend.
FTX has earned a reputation for its nimble response to market activity.
Last week, it listed GameStop stocks so that traders could speculate on the asset while markets were closed. That was during a week of drama centered around GameStop and members of the subreddit group r/wallstreetbets, who were responsible for a widely-reported GME short squeeze.
The investors succeeded in pushing GME’s price as high as $490 pre-market Thursday, up from only $19 at the beginning of the month. The events led hedge fund Melvin Capital to liquidate their short position on GME, with news outlets reporting a 53% loss for the fund in January alone.
The Reddit group, led by the now-infamous user Roaring Kitty, then turned to Dogecoin. The meme currency surged towards the end of the week, helped along by Elon Musk, among others.
Trading app Robinhood began blocking users from accessing certain assets due to the rising prices, leading some to raise calls for the importance of decentralized finance.
The week was described by many as one of the most remarkable events in stock market history.
Market Turns to Silver
Now, retail investors have turned their interest to silver. Over the weekend, Reddit users began congregating on the subreddit r/wallstreetsilver.
One of the most active threads is titled “Silver $25 to $1000 #silversqueeze.”
The thread argues that larger-scale institutions have been controlling the price of precious metals. “Big banks are manipulating metals,” the original post reads.
The metal touched $30 per ounce today, its highest price since 2013. It’s up around 20% since Thursday.
The silver frenzy has led to rising demand for the physical asset. Major silver dealers like SD Bullion, JM Bullion, and Apmex have reported shortages, possibly due to investors placing more trust in the physical commodity.
Apmex briefly closed orders citing “unprecedented demand on silver products,” while SD Bullion and JM Bullion note that customers should expect shipping delays due to an increased number of orders.
Interestingly, one post on the subreddit has tried to convince other users against buying silver, arguing that “the silver squeeze is a hedge-fund coordinated attack.”
Whichever way the market moves, it looks like it could be another eventful week ahead.
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XRP falls sharply after soaring 50% but Dogecoin is holding on, with day traders looking for new targets and Elon Musk fanning interest
Dogecoin is a ‘meme’ cryptocurrency, seemingly created as a joke Yuriko Nakao/Getty
Ripple’s digital token XRP rose more than 50% before tumbling into the red.
‘Meme’ currency Dogecoin held on to its gains, with Elon Musk driving interest.
Day traders copied the tactics that sent GameStop soaring last week.
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Cryptocurrency XRP tumbled into the red on Monday, after rising more than 50% in early trading, as a “pump and hold” scheme organized by day traders ran into trouble.
Yet “meme” currency Dogecoin held on gains of around 34% as amateur investors zeroed in on new assets in the wake of the GameStop saga and Elon Musk boosted interest in cryptocurrencies.
XRP was down 7.14% to $0.43779 by 9.50am ET. It had risen more than 50% to above $0.74 in early morning trading.
Dogecoin was 33.87% higher at $0.04007, but remained well below a high of more than $0.07 hit last week. Bitcoin, the biggest cryptocurrency by market value, was up 0.56% to $33,548.
Last week, day traders on the Reddit forum Wall Street Bets sent the shares of video-game store GameStop soaring.
Read More: A chief investment strategist breaks down how the GameStop saga could upend long-standing practices on Wall Street - and shares her 4-part advice for navigating the frenzied trading environment
The army of amateur investors appeared to have locked on to a broader array of targets on Monday, with silver hitting its highest level in 8 years and XRP and Dogecoin both jumping.
XRP is both a cryptocurrency and digital payments network created by US firm Ripple, which stumbled last year after the firm ran into legal trouble. It denies allegations of wrongdoing.
Dogecoin is a “meme” cryptocurrency created in 2013, seemingly as a joke, but which has picked up a growing following. A cryptocurrency is a secure digital currency, often without a central controlling authority.
Tesla founder Elon Musk has encouraged the recent surge in interest in cryptocurrencies. In a Sunday night video on the app Clubhouse, Musk said it would be funny if “Dogecoin becomes the currency of Earth in the future.”
Read More: As Redditors flood the stock market, UBS breaks down 6 options strategies investors can use right now to protect their portfolio
Part of the early-morning XRP price rise was driven by a concerted effort among the currency’s fans, echoing the GameStop phenomenon. A group on the messaging app Telegram called Buy & Hold XRP hit the maximum 200,000 member threshold.
Yet the strategy looked shaky shortly after 7am ET, as the price stumbled. One popular post on the XRP channel on the social network Reddit said: “Stop panic selling!! We can do this! We just had it to .74 USD, let it rise!”
Another Reddit user posted: “People that sell now are the ones that are going to be the most disappointed! HOLD.”