First Mover Asia: Bitcoin Stays Rooted Near $23.5K

ALSO: Sam Reynolds writes about the complicated relationship between layer 1 blockchain Coinflux’s CFX token and China and asks if it has triple-digit growth potential.

AccessTimeIconFeb 28, 2023 at 1:43 a.m. UTC
Updated Apr 14, 2024 at 10:25 p.m. UTC

Good morning. Here’s what’s happening:

Prices: Bitcoin stays rooted near the $23.5K threshold. Ether and many other major cryptos trade flat.

Insights: China-based developers can interact with layer 1 blockchain Conflux, but the protocol's relationship with the country remains complicated.


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S&P 500
+12.2 0.3%
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Nikkei 225
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BTC/ETH prices per CoinDesk Indices, as of 7 a.m. ET (11 a.m. UTC)

Bitcoin Holds Firm Near $23.5K

Bitcoin continued its weekend encampment near $23,500 into Monday as investors spent yet another day weighing fiendishly stubborn inflation and the prospects of the U.S. Federal Reserve hiking interest rates more hawkishly than was previously expected.

The largest cryptocurrency by market capitalization was recently trading at $23,481, roughly flat over the past 24 hours, but down from its highs a week ago over $25,000 – before surprisingly strong jobs and price data had markets increasingly contemplating the prospect of a 50 basis point rate increase instead of 25 bps.

“Markets of late have been pricing in rates that will remain higher for longer than previously anticipated because of inflation numbers that seem to be rather stubborn," Brent Xu, CEO and co-founder of Web 3 bond-market platform Umee, wrote in an email to CoinDesk. "A possible 50-basis-point hike could be in the offing now, too."

Yet Xu also noted hopefully that crypto markets have not seen "a massive drawdown ... that the more alarmist crypto Twitter commentators have been warning about."

"I suspect that we haven’t seen a massive pullback because the forced sellers have already sold," he wrote, adding: "Last year’s daisy chain of blowups appears to have mostly come to an end. This isn’t to say that we can’t go lower from here. But a bottom for this cycle is probably in now, and in turn we are probably in an accumulation phase. I think we need to be prepared for sideways action for some time.”

Ether was almost equally flat, changing hands at about $1,630. Most other major cryptocurrencies were flat or edged down slightly with layer 2 platform Polygon's MATIC token and decentralized finance protocol Aave's AAVE token both recently down about 3%. The CoinDesk Market Index, a measure of crypto markets overall performance ticked down about 0.36%.

After a week to forget, equity markets returned to their winning ways, however slightly. The tech-focused Nasdaq, S&P 500 and Dow Jones Industrial Average (DJIA) all ticked up a few fractions of a percentage point. Treasury yields dipped slightly but remained fretfully high at above $3.90 on a 10-year note.

To be sure, some crypto news Monday was ominous for markets, none more than a report by crypto asset manager CoinShares that short-bitcoin funds had $10 million in inflows during the week ended Feb. 24 and that long-bitcoin funds bled $12 million, the third straight weekly outflow. Later in the day, crypto exchange Coinbase tweeted that it would suspend trading of Binance USD (BUSD) starting March 13 because the stablecoin doesn’t meet its listing standards – the latest body blow to the stablecoin sector.

Yet, at least one other analyst was feeling at least partly upbeat about crypto prices' path forward. In an interview with CoinDesk TV, Bruno Ramos de Sousa, head of new markets at crypto asset manager Hashdex, said that markets were "in the recovery phase already ... past the bottom." Ramos de Sousa noted increased interest among institutional investors in recent months.

"They're educated in the sector, and they're looking for interesting windows to come in," he said. "These are hedge funds, family offices, people concerned with bottoms and ups."

Biggest Gainers

Asset Ticker Returns DACS Sector
Terra LUNA +1.1% Smart Contract Platform

Biggest Losers

Asset Ticker Returns DACS Sector
Polygon MATIC −3.6% Smart Contract Platform
Avalanche AVAX −2.8% Smart Contract Platform
Chainlink LINK −2.6% Computing


Layer 1 Blockchain Conflux Has a Complicated Relationship With China

Beijing is pro-blockchain, but anti-crypto. It sees the former as a key technology, as important in the 21st century as the hypertext transport protocol (HTTP) was in the 20th; the latter is a speculative asset that inhibits the worst parts of capitalism.

Meanwhile, "China" tokens are surging. "China" is in quotes because most of these projects like NEO, VeChain (VET), and Conflux (CFX) go to great lengths to limit their exposure to China. They have development teams in China, but the company is registered offshore.

You can use the technology within the country, just not trade the token. A version of NEO is available on China’s Blockchain Service Network, for instance, but this exists as a seperate universe from the NEO the rest of the world sees in order to comply with local law.

In many cases, these tokens are divorced from the project. You can’t see China data on-chain, and it might be questionable as to what is driving the token’s growth.

Conflux’s CFX token is the exception to this.

Can you trade Conflux’s CFX token in China? No.

Can someone within China interact with the Western-facing portion of the Conflux chain? Also no, these parts are segregated.

But at the same time, CFX is the tie that binds the two together.

"There is only one chain, but we have two spaces," Fan Long, Conflux’s co-founder, told CoinDesk by email. "You can think of the spaces acting like independent chains but they share the same consensus engine. There is no security risk of moving assets across two spaces."

Within China, CFX relies on Conflux’s sponsorship mechanism, which allows ordinary users to interact with smart contracts without holding crypto. Stuff still exists on-chain minus the gas fees.

Developers of decentralized applications, such as China’s version of Instagram called “Little Red Book,” buy CFX from Conflux directly. They pay in fiat and get an official receipt. In many ways, it would be similar to paying for a cloud service hosting bill.

“Because the public chain must have a native token governing its resources for gas, and China does not encourage anything related to fungible tokens, we choose to have foreign entities to govern the token issuance of CFX,” Long said.

One can see on-chain how CFX is used. Below shows the on-chain activity for a digital collectible, China’s version of a non-fungible token (which it calls “digital collectibles,” and tolerates if speculation is not involved) on its version of Instagram.


In many ways, CFX could be thought of as a proxy of success for Conflux within China. But is there enough interest to drive and sustain triple-digit growth on the CFX token?

Important events

12:00 a.m. HKT/SGT(16:00 UTC) China Non-Manufacturing PMI (Jan)

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James Rubin

James Rubin was CoinDesk's U.S. news editor based on the West Coast.