Market Wrap: Bitcoin Trudges Past $11.7K as DeFi Lending Rates Gyrate

Bitcoin’s price is trending up. Meanwhile, interest rates for lending crypto in DeFi are still unpredictable.

AccessTimeIconAug 5, 2020 at 8:20 p.m. UTC
Updated Sep 14, 2021 at 9:40 a.m. UTC
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Bitcoin gained Wednesday while DeFi interest rate volatility is causing concern over its long-term viability.

  • Bitcoin (BTC) trading around $11,670 as of 20:00 UTC (4 p.m. ET). Gaining 4% over the previous 24 hours.
  • Bitcoin’s 24-hour range: $11,072-$11,735
  • BTC above 10-day and 50-day moving averages, a bullish signal for market technicians.
Bitcoin trading on Coinbase since August 3.
Bitcoin trading on Coinbase since August 3.

Traders are mostly buying bitcoin Wednesday, with the world’s oldest cryptocurrency going as high as $11,735 on spot exchanges such as Coinbase. 

“I think we’ll hit $12,000 by Friday. There’s a lot of momentum in the market just now,” said Chris Thomas, head of digital assets for broker Swissquote. “Tuesday was a pause for breath, but we didn’t react negatively.” 

Thomas noted bitcoin spot volumes have been rising this past week after a month of relative feebleness. 

Volumes on major USD/BTC spot exchanges the past three months.
Volumes on major USD/BTC spot exchanges the past three months.

“Flows are definitely picking up and more people are feeling the excitement, which naturally helps the markets move higher still,” added Thomas. 

While bitcoin’s pace is picking up,  gold, the original hedge against economic uncertainty, has been on an absolute tear. The yellow metal was up 1.1% and at $2,041 as of press time, hitting a fresh intraday high at $2,056. However, while gold has rallied 14% over the past month, bitcoin has done twice as well, up 28% during that same period. 

Bitcoin (orange) versus gold (yellow) the past month.
Bitcoin (orange) versus gold (yellow) the past month.

Bitcoin bugs continue to believe its price can keep making outsized gains in unsettled economic times. “I'm bullish on bitcoin,” said George Clayton, managing partner of Cryptanalysis Capital. “I do not have a strong view on timing, but I'm expecting a move higher.” 

Volatile DeFi lending rates

The second-largest cryptocurrency by market capitalization, ether (ETH), was up Wednesday, trading around $399 after climbing 3% in 24 hours as of 20:00 UTC (4:00 p.m. ET). 

Interest rates in Ethereum-powered decentralized finance, or DeFi, have see-sawed wildly over the past few months. Composite Lend Rate, a metric calculated by DeFi Pulse, determines how much profit an investor would return lending out crypto. It has fluctuated mostly due to the volatility of lender Compound’s rates, which have been as low as 0.122% on June 17 and as high as 18.6% on June 26. Compound dominates the DeFi lending market and had 3% rates for lenders as of Wednesday.

Lending rates on major DeFi platforms in the past three months.
Lending rates on major DeFi platforms in the past three months.

“A number of new applications are adjusting their protocol and token incentives, which can trigger extreme volatility,” said Jean-Marc Bonnefous, managing partner for Tellurian Capital, which has been investing in crypto projects since 2014. “There is also a lot of shuffling of short-term liquidity among the DeFI protocols, which is not very conducive to longer-term sustainability and adoption,” he added. 

Other markets

Digital assets on the CoinDesk 20 are mostly flashing green Wednesday. Notable winners as of 20:00 UTC (4:00 p.m. ET): 

Notable losers as of 20:00 UTC (4:00 p.m. ET):

Equities:

Commodities:

  • Oil is up 1.6%. Price per barrel of West Texas Intermediate crude: $42.14

Treasurys:

  • U.S. Treasury bonds were mixed Wednesday. Yields, which move in the opposite direction as price, were up most on the 10-year, in the green 7.5%.
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