First Mover: It's 'Dorsey's Node' as Bitcoin Marches Higher, DOGE Chokes

Bitcoin breaks out, Twitter CEO Jack Dorsey sets up a bitcoin node and Bank of England warns on negative rates. Meanwhile, it's DeFi that's mooning.

AccessTimeIconFeb 5, 2021 at 2:34 p.m. UTC
Updated Sep 14, 2021 at 12:07 p.m. UTC

Bitcoin (BTC) was higher early Friday, pushing toward $38,000, around the highest levels in about three weeks. 

The news overnight was mixed, with an Australian central bank official telling lawmakers in the country that bitcoin is "not a payment instrument and it's not even really money," while Twitter and Square (SQ) CEO Jack Dorsey tweeted that he had set up his own bitcoin node.

Key price levels: "Should we go higher, we'll be eyeing the $40,035 mark as the next resistance," Matt Blom, head of sales and trading for the cryptocurrency exchange firm EQUOS, wrote early Friday in an emailed note. "Should we edge back down, the $34,855 mark will be the level to watch."

DeFi to the moon: CoinDesk's Omkar Godbole reported Friday that some investors "look to be temporarily shifting focus away from bitcoin and toward crypto tokens associated with decentralized finance," such as Compound's COMP token and Aave's AAVE. (Read more about this in Bitcoin Watch and Token Watch, below.) 

And dogecoin (DOGE)? The price of the token, symbolized by the dog breed Shiba Inu, was down 16% on Friday, after a brief rally late Thursday. The post below was representative of the flavor of the chatter on Reddit:


Market Moves: Bank of England takes baby step toward negative interest rates 

The Bank of England has asked British banks to prepare for negative interest rates within six months, opening the possibility the U.K. central bank could eventually join counterparts in Europe and Japan in pursuing ultra-loose monetary policy. 

Only an option, we swear: Officials were quick to note the central bank wasn't signaling an intention to actually push borrowing rates below zero – just that option might be needed at some point. The main bank rate is currently set at 0.1%.  

"The BOE wants to have its cake and eat it, too: recognize that negative interest rates as a possible tool, which may help keep rates down without delivering what would appear to be a disruptive move," Marc Chandler, a former head currency strategist for foreign-exchange giants Brown Brothers Harriman and HSBC, wrote Thursday on SeekingAlpha.   

Negative interest rates have always been a head-scratcher, given the prospect that borrowers in the country may at some point find themselves getting to take out loans, rather than forking over interest payments to their lenders. Or that savers might end up paying banks to hold their money, instead of receiving income on deposits.

Bitcoin's validation? The announcement – made via a published letter that was sent to bankers, with a subsequent news conference held by Bank of England Governor Andrew Bailey – offers the latest validation of the economic scenario many bitcoin bulls are betting on: that despite the ongoing rollout of coronavirus vaccines, the world's monetary authorities aren't likely to stop stoking global financial markets with easy money anytime soon. 

More money printing: Economists are reading the tea leaves and coming to the conclusion the Bank of England may also opt to increase its £895 billion (US$1.3 trillion) target for asset purchases, a form of stimulus pioneered by the U.S. Federal Reserve in which central banks essentially pump new money into financial markets. Pantheon, the forecasting firm, predicted Thursday the U.K. central bank will increase the target by £50 billion later this year.   

The Federal Reserve, for what it's worth, is currently buying $120 billion of assets a month, and Chair Jerome Powell has said there's no need to cut interest rates to negative levels; currently, the key U.S. short-term rate is set at just above zero. But pressure might build on the Fed to experiment with more unconventional monetary policies if the world's other major central banks keep moving in that direction.    

The Bank of England's target for asset purchases under its "quantitative easing" program has increased over recent years, and some economist now see it going even higher.
The Bank of England's target for asset purchases under its "quantitative easing" program has increased over recent years, and some economist now see it going even higher.

Bitcoin Watch

In a bullish sign, bitcoin appears to have broken out from a "descending channel" on the daily price chart.
In a bullish sign, bitcoin appears to have broken out from a "descending channel" on the daily price chart.

The path of least resistance for bitcoin appears to be to the upside, writes CoinDesk's Omkar Godbole, as demand continues to outstrip supply.

  • The cryptocurrency has broken out of a descending channel on the daily chart, indicating scope for a re-test of record highs above $41,900, Godbole wrote Friday. The market focus may shift back to bitcoin if the cryptocurrency charts a quick move upwards. (See chart above.)
  • Stimulus plan moves forward: The U.S. Senate narrowly voted early Friday to adopt a budget blueprint for President Joe Biden's $1.9 billion coronavirus relief package, a legislative track that's being closely watched by bitcoin bulls betting the cryptocurrency can serve as an inflation hedge during an era of outsize government and monetary stimulus.
  • Dollar strength: The U.S. dollar is on track for its strongest weekly gain since October on investor optimism for a faster economic recovery. The greenback's strength makes bitcoin's 14% gain since Sunday look more impressive because the cryptocurrency's price is denominated in dollars.

Token Watch

DEFI TOKENS MOON: In the past 24 hours, DeFi-linked tokens such as COMP, AAVE, KNC and ZRX leapt to fresh all-time highs. Compound’s governance token COMP clocked a new record of $500, taking the month-to-date gain to above 40%. Oracle provider Chainlink’s LINK token is also benefitting from the broad-based rally across DeFi. AAVE, the token of the DeFi lending protocol Aave, rose 21% to a record. ZRX, from the Ethereum-based decentralized exchange 0x, is up 60% in the past 24 hours.

ETHER GAS PRICE FALLOUT: Japan cryptocurrency exchange Liquid temporarily halted ether (ETH) withdrawals as gas fees hit new highs.

COMPOUND VS. AAVE: Aave has a "fighting chance" to the take the crown from Compound as "DeFi's most popular lending protocol," according to The Defiant.  

Celebrity Watch

Who ISN'T investing in crypto these days? LL Cool J, the Queens, N.Y.-born rapper and entrepreneur, is among a glitzy roster of limited partners backing North Island Ventures' newly revealed $72 million fund, CoinDesk's Zack Seward reported Thursday. Paul Tudor Jones II, the legendary hedge fund manager who last year was among the first big institutional investors to espouse bitcoin as an inflation hedge, is also involved. North Island Ventures is chaired by Glenn Hutchins, a co-founder of the technology-investment firm Silver Lake and until recently a board member of the Federal Reserve Bank of New York. 

Jack Dorsey has set up his own bitcoin node. The Twitter and Square CEO, who has used his posts to promote the cryptocurrency, shared an image Friday "showing the node in the action of synchronizing with the bitcoin blockchain," CoinDesk's Tanzeel Akhtar reported. In the latest post he wrote simply, “Running #bitcoin.”


What Else

$90M hedge fund deceit: Cryptocurrency hedge fund founder Stefan Qin pleaded guilty in New York Thursday to deceiving investors out of more than $90 million. According to a press release from the U.S. Department of Justice on Thursday, Qin, a 24-year-old Australian national and founder of Virgil Capital, had been charged with a single count of securities fraud in Manhattan’s federal court.

Arcane stock goes live: Shares in the Norwegian cryptocurrency analysis firm Arcane Crypto started trading Friday under the ticker ARCANE on Nasdaq First North Growth Market, after completion of reverse takeover. According to this, the stock has a market capitalization of about 1.7 billion Swedish krona ($200 million). 

Move over, GameStop: Brokerage firms report boom in online bond trading, including corporate debt and mortgage-backed securities. 

Was anything wrong with the GameStop saga, or just markets being markets?

U.S. Securities and Exchange Commission investigators are combing social-media and message-board posts for signs that fraud played a role in the recent GameStop (GME) stock-price pump, Bloomberg News reported. Regulators in Massachusetts are also looking into the case.  

Prosecutors reaching: The story shows how pressed the official overseers of traditional markets are to bring a solid case over the move, which appeared to be coordinated by retail stock traders on the Reddit forum r/WallStreetBets. The basic defense is that they were just sharing their opinions publicly, perhaps less suspicious than the type of private information sharing and insider access that's prized on Wall Street. 

What's the big deal? Cryptocurrency analysts have noted the similarities between the GameStop saga and the type of anything-goes trading that happens every day in 24-hours-a-day, seven-days-a-week, international digital-asset markets, where no single exchange or country dominates the action and regulations seem to be constantly catching up to the industry's fast-evolving growth. Coordination on social media? Check. Triple-digit percentage moves? Check. A sometimes complete lack of news to explain price pumps or price dumps? Check.  

So it's perhaps not surprising some crypto-industry executives are using the opportunity to tee off on everything that's wrong with the traditional financial system. Or maybe what's wrong with believing there's a right way to think about a trade and a wrong way. 

William Quigley, managing director of Magnetic, a blockchain and cryptocurrency investment and incubation firm, said in emailed comments Thursday that "at its core, investing all about convincing someone else of the merits of buying a stock or other asset – or the opposite."

Even in traditional markets, there are all sorts of reasons for getting in and out of the market – including "programmatic trading that pays no heed at all to underlying fundamentals."  

"The notion that WallStreetBets is somehow illegitimate because it is encouraging going long GME without solid fundamentals to back it up there is irrelevant," Quigley said.

The "pure speculation" in dogecoin recently is no different, he added.

Dogecoin, for those who haven't followed the thread, is a "meme token," symbolized by the Japanese dog breed Shina Inu, was launched in 2013 as a joke. Elon Musk, the electric-vehicle and private-spaceflight entrepreneur who's reportedly the world's richest man, likes to tweet about it. People are talking about it on the Reddit forum r/SatoshiStreetBets

"It has no fundamental value drivers," Quigley said. "People buy dogecoin for one reason: pure speculation. They hope other people will buy it and pay a higher price.”

Quigley is giving his opinion. Just like the commenters on Reddit and Warren Buffett on CNBC when he talks about the virtues of his conglomerate Berkshire Hathaway's investments in railroads and Coca-Cola.

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