First Mover: Ether Eyed as Value Play With Bitcoin Pressing $20K

December 3, 2020

Everything you need to make sense of the crypto markets and beyond

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By the CoinDesk Markets Team

Edited by Bradley Keoun

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Bitcoin (BTC)

+1.0% $19,424

Ether (ETH)

+2.6% $614

(Price data as of Dec. 3 @11:34 UTC)

TODAY:

Price Point: Bitcoin was rising for a second day, approaching this week's all-time high.

Market Moves: With bitcoin prices close to record levels, some investors are asking if Ethereum's native cryptocurrency, ether, might represent a better source of value, CoinDesk's Muyao Shen writes.

Bitcoin Watch: As prices appear to consolidate below $20K in the short term, traders cue off macroeconomic factors and secular trends like institutional adoption, CoinDesk's Omkar Godbole writes.

What's Hot: Visa looks at USDC credit card, Ripple's Garlinghouse walks back threat to leave U.S., lawmakers introduce bill that could require stablecoin issuers to obtain bank charters, Biden calls $908B stimulus proposal "down payment."

Price Point

Bitcoin was rising back toward the all-time high price of $19,920 notched earlier this week.

"So far, prices remain constrained, either with sellers unwilling to part with their coins at any lower price or buyers unwilling to take further bets on a rally," Matt Blom, head of sales and trading at the cryptocurrency-focused financial firm Diginex, wrote Thursday.

In traditional markets, European shares slid and U.S. stock futures pointed to a lower open after coronavirus-related fatalities in the country surged Wednesday to at least 2,760, the deadliest day since the pandemic began. Gold strengthened 0.4% to $1,838 an ounce.

Market Moves

Those new to crypto, such as the institutional investors recently buying into bitcoin’s “digital gold” narrative, might now be looking around for the next big thing.

With the long-anticipated arrival of the Ethereum 2.0 upgrade on Dec. 1, that could be the network’s native token, ether. But analysts say ether should be judged on its own merits and not as a bitcoin replacement.

“I’ve always thought this digital asset space is huge – and it’s not just bitcoin – because there are going to be different applications for different things,” Raoul Pal, CEO and co-founder of financial media group Real Vision, said in Real Vision’s documentary “Ethereum – An Investigation,” which was released on Nov. 30. “I think of the two [bitcoin and ether] as having a very nice combined asset allocation.”

Chart shows weakening but still strong correlation between prices for bitcoin and ether (CoinDesk Research)

For Pal, an early bitcoin investor, the rationale seems even more plausible these days: As bitcoin’s price hits a new all-time high, the number one cryptocurrency by market capitalization is now more expensive and thus potentially a riskier bet for new investors.

It can be expected investors are looking for a new opportunity in crypto at affordable prices. Given that ether is trading roughly 59% below its all-time high of $1,432.88, it is tempting to believe there’s a bargain to be had. What’s more, the Ethereum 2.0 upgrade to increase the network’s scalability, security and energy efficiency has generated a lot of hype.

However, at least for now, analysts and traders who spoke with CoinDesk don’t think ether will replace the FOMO over bitcoin.

“For institutional investors, they are buying BTC for the digital gold narrative,” Ryan Watkins, senior research analyst at Messari told CoinDesk. “ETH just isn’t in that conversation yet.”

- Muyao Shen

Read More: Why Ethereum and Bitcoin Are Very Different Investments

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Looking Back, Moving Forward: Crypto’s Most Influential in 2020

Each year since 2014, CoinDesk has identified the crypto community's “most influential” members. The community needed influencers to spread awareness, build confidence and set precedents for the digital currency industry to reach its full potential.

These evangelists broke through all the white noise and ushered in a new wave of enthusiasts into the space. To recognize their contributions, CoinDesk launched its “Most Influential” franchise to highlight individuals who moved the needle.

Over two days on Dec. 7-8, a special CoinDesk Live series looks back to the first list and takes stock of the industry’s progress, and zooms forward to reveal CoinDesks' seventh Most Influential list to recognize the latest pioneers who helped take the industry forward.

Watch CoinDesk Live: Most Influential 2020 on CoinDesk.com, YouTube and Twitter on Dec. 7-8.

Bitcoin Watch

On the left: bitcoin prices charted against the U.S. dollar index. On the right: bitcoin daily candle price chart showing recent trading range. (TradingView/CoinDesk)

Bitcoin is locked in the range of $18,000 to $20,000 since Tuesday, having nearly doubled to a record price of $19,920 in the past eight weeks.

"Large sell orders near $20,000 and consistent dip demand have led to price consolidation, according to Patrick Heusser, a senior cryptocurrency trader at Zurich-based Crypto Broker AG. “If either side breaks, I believe we would see fireworks, especially to the upside."

Macro factors point to a continued bull run. The U.S. 10-year breakeven inflation rate, which represents how the market foresees long-term inflation, rose to 1.85% on Wednesday. That’s the highest level since May 2019. The Dollar Index, which tracks the greenback’s value against major currencies, is seen near 91.00 at press time, a level last seen in April 2018, according to TradingView.

The USD drop and rising inflation expectations typically force both institutions and retail investors to buy traditional store-of-value assets such as gold. This year, institutions have increasingly poured money into bitcoin, reinforcing its use as an inflation hedge. The trend may well continue, with Morgan Stanley predicting another 10% decline in the dollar over the next 12 months.

A breakout, if confirmed, would shift the focus to $20,300, where sizable open interest appears to be building in the options market. Alternatively, acceptance under $18,000 would expose the Nov. 27 low of $16,218.

- Omkar Godbole

Read More: Worsening U.S. Dollar, Inflation Metrics Bode Well for Bitcoin's Continued Rally

Token Watch

USD Coin (USDC): Visa may issue USDC credit card after adding Circle to "fast track" program.

XRP (XRP): Brad Garlinghouse, CEO of Ripple, provider of XRP-based payment network, walks back threat to leave U.S.

Ampleforth (AMPL): supply-rebalancing stablecoin launches on Tron, Pokadot and NEAR blockchains.

What's Hot

Analogs

The latest on the economy and traditional finance

Dollar skids to fresh 2.5-year low as U.S. stimulus talks revive (Reuters)

U.S. private payrolls miss expectations in November as coronavirus infections spread, according to ADP, with growth of 307K versus an estimated 410K and 404K the prior month (Reuters)

Tweet of the Day

Disclaimer: The information presented in this message is intended as a news item that provides a brief summary of various events and developments that affect, or that might in the future affect, the value of one or more of the cryptocurrencies described above. The information contained in this message, and any information liked through the items contained herein, is not intended to provide sufficient information to form the basis for an investment decision. The information presented herein is accurate only as of its date, and it was not prepared by a research analyst or other investment professional. You should seek additional information regarding the merits and risks of investing in any cryptocurrency before deciding to purchase or sell any such instruments.

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