Bitcoin was stuck in a narrow range of between $36,000 and $37,000 on Thursday as some analysts remain cautious on speculative assets, including cryptocurrencies, while macroeconomic risks continue to linger.
Recent price jumps in both crypto and equities have stalled, while oil prices approached six-year highs on Thursday. Choppy trading conditions may reflect uncertainty among investors, many of whom typically rotate into less volatile assets during the early phases of a tightening cycle (rising interest rates).
And the threat of rising inflation could force central banks to drain liquidity from financial markets, which has underpinned the rise in stocks and cryptos over the past year.
"We expect that inflation will continue to surprise the Fed on the upside, especially next year and beyond, when inflation is likely to trend above 3% for some time instead of easing toward 2% as the Fed expects to achieve with its benign policy hiking cycle," Prajakta Bhide, a strategist at MRB Partners, wrote in a Thursday briefing.
Similar to equities, crypto markets have also shifted from risk-on to risk-off over the past two weeks. Traders typically overweight bitcoin because of its lower risk profile relative to alternative cryptocurrencies (altcoins). And on Thursday, altcoins underperformed, suggesting that some crypto bulls remain on the sidelines.
●Bitcoin (BTC): $36785, −1.84%
●Ether (ETH): $2620, −3.34%
●S&P 500 daily close: $4477, −2.44%
●Gold: $1807 per troy ounce, −0.15%
●Ten-year Treasury yield daily close: 1.83%
Bitcoin, ether and gold prices are taken at approximately 4pm New York time. Bitcoin is the CoinDesk Bitcoin Price Index (XBX); Ether is the CoinDesk Ether Price Index (ETX); Gold is the COMEX spot price. Information about CoinDesk Indices can be found at coindesk.com/indices.
So far this year, bitcoin's return gap relative to the S&P 500 has narrowed significantly. Meanwhile, the Thomson Reuters Commodity Index is up 12% year to date, compared with a 23% drop in BTC and a 5% decline in the S&P 500. Commodities are an inflation hedge when the demand for goods and services outstrip supply.
Ether options volume rise
Deribit, the biggest crypto options exchange, wrote in its newsletter to investors Thursday that the volume of option trades on its platform in ether, the native cryptocurrency of the Ethereum blockchain, rose 36% in January from December. For bitcoin options, volume rose 10% during the same period.
The increased volume was partly due to trading strategies around the price drop in January. Despite the significant number of transactions, lower underlying price levels made total volumes measured in U.S. dollars slightly lower than last month.
- Blockchain bridge Wormhole hacked and backed by parent company: On Wednesday night, the Wormhole bridge suffered an exploit to its Solana-Ethereum bridge, with an attacker fraudulently minting 120,000 ether worth over $320 million. The attacker moved the majority of the funds to the Ethereum main chain, while keeping 40,000 wrapped ETH on Solana and trading portions of that ether for other assets. The cross-blockchain bridge’s parent company, Jump Trading, has reportedly stepped in to backstop funds – a move that may have prevented widespread damage in the Solana decentralized finance (DeFi) ecosystem, according to Andrew Thurman. Read more here.
- Nintendo's metaverse plan: The president of Nintendo says the video game company will hold off on expanding into the metaverse until it can be sure that the medium will provide the "surprise and fun" its players expect. This comes a week after another giant in the Japanese gaming industry, PlayStation creator Ken Kutaragi, came out against the metaverse, calling it “isolating” and VR (virtual reality) headsets “annoying”. Metaverse tokens such as MANA and SAND were down as much as 5% over the past 24 hours. Read more here.
- The SandBox virtual real estate: Land transfers on The SandBox have become much more active over the past week, peaking at 10,000 daily transfers a few days back, according to data compiled by Delphi Digital. "However, the volume is still well below November’s 'Meta' season, when Facebook announced its major initiative," Delphi wrote in a blog post.
Digital assets in the CoinDesk 20 ended the day lower.
Sector classifications are provided via the Digital Asset Classification Standard (DACS), developed by CoinDesk Indices to provide a reliable, comprehensive, and standardized classification system for digital assets. The CoinDesk 20 is a ranking of the largest digital assets by volume on trusted exchanges.
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