Bitcoin is falling, but it may have already entered a bull market

by James · February 9, 2023

Welcome back to the Distributed Ledger. This is Frances Yue, crypto reporter at MarketWatch.

Bitcoin may have already entered a bull market, despite the carnage from the crypto industry, according to Dan Morehead, founder and managing partner of Pantera Capital.

Meanwhile, crypto conglomerate Digital Currency Group has reportedly sold shares in several crypto trusts run by subsidiary Grayscale at a steep discount.

Coinbase’s CEO hinted that he had heard rumors that regulators want to get rid of crypto stakes, and dismissed such a possibility.

Find me on Twitter at @FrancesYue_ to share some thoughts about crypto, this newsletter, or your personal stories with digital assets.

Another bull market?

Bitcoin lost over 4% on Thursday, falling below $22,000 to a three-week low, down 68% from its all-time high, according to CoinDesk data. Still, its 37% rally so far this year may have marked the start of a new bull market cycle, according to Pantera’s Morehead.

Morehead wrote in a Wednesday note that the last bear market for bitcoin started in November 2021 and ended in November 2022, and lasted 376 days, while the median length of bitcoin’s previous bear cycles is 307 days.

Meanwhile, the median drawdown for bitcoin has been 73%, while during the most recent bear market, the crypto lost 77% of its value from its all-time high, according to Morehead.

The recent bear market has also been the only one to wipe out all the gains from the previous bull market, resulting in even bigger losses, Morehead noted.

To be sure, crypto traders are looking for more potential fallout from the collapses of Genesis and FTX, while uncertainty remains in the macroeconomic environment, with inflation still high and the risk of a US recession.

Bitcoin as an inflation hedge?

In recent years, bitcoin has often traded in tandem with stocks, especially growth stocks, dashing some of its backers’ hopes that the crypto could be seen as a hedge against inflation.

However, John Haar, CEO of Swan bitcoin and a former Goldman Sachs veteran, said the narrative may still hold, but it may be too late to buy bitcoin for this reason given inflation has already peaked in the US

Bitcoin, which has a limited supply of 21 million, is a hedge against expansionary monetary policy, which often leads to increased levels of inflation, Haar said.

“If someone is waiting until the day when the CPI goes up to buy Bitcoin, they’ve probably waited too long because money growth often causes consumer prices to go up lagging,” Haar noted.

Bitcoin climbed as the Federal Reserve began easing monetary policy following the outbreak of the Covid-19 pandemic in 2020, and has fallen from its all-time high in November 2021 as the central bank began tapering its large asset purchase programs and increased interest. prices.

DCG sells shares in crypto trusts

Crypto conglomerate Digital Currency Group has reportedly sold shares in several crypto trusts run by subsidiary Grayscale at a deep discount as it seeks to raise money to repay creditors of bankrupt lending arm Genesi, according to a Financial Times report this week. .

It is one of DCG’s latest efforts to raise money to help Genesis pay back more than $3.5 billion to creditors. DCG is both the parent company and debtor of Genesis.

DCG has sold about a quarter of its shares in the Grayscale ethereum trust

ETHE

raising as much as $22 million in multiple trades since Jan. 24, according to the FT report citing U.S. securities filings.

“This is simply part of our ongoing rebalancing of the portfolio,” DCG told the Financial Times. A spokesperson for the company declined to comment further to MarketWatch.

DCG has also sold smaller blocks of shares in Grayscale’s Litecoin Trust, Bitcoin Cash Trust, Ethereum Classic Trust and Digital Large Cap Fund, the report said.

A potential betting ban?

A ban on crypto betting by the US Securities and Exchange Commission would be a “terrible path” for the industry, said Brian Armstrong, CEO and co-founder of crypto exchange Coinbase.

In a series of tweets on Wednesday, Armstrong suggested he had heard rumors that regulators want to get rid of crypto-staking, which is a way for crypto holders to earn passive income by directly operating open crypto networks. Staking allows users to earn cryptocurrency as a reward for using their existing holdings to secure transactions on an underlying blockchain network.

MarketWatch’s Anushree Dave wrote more about it here.

Crypto in a flash

Bitcoin lost 4.7% over the past week, trading at around $22,466 on Thursday, according to CoinDesk data. Ether

ETHUSD

fell 2.3% over the same period to around $1,617.

Biggest winners	Price	%7-day return
SingularityNET	$0.43	124.5%
Baby Doge Coin	$0.000000003	111%
The graph	$0.16	70%
Fetch.ai	$0.43	50%
ImmutableX	$1	23%
		Source: CoinGecko as of February 9

Biggest losers	Price	%7-day return
Aptos	$14.02	-23%
Radix	$0.05	-20.7%
Phantom	$0.47	-18%
Trust Wallet	$1.47	-12.8%
Internet computer	$5.35	-11.6%
		Source: CoinGeko as of February 9