The Wind at His Back
Saylor attempts to make corporate BTC investment mainstream while ETH readies for CME futures listing
In BTC land, after the brief pop from the buzz generated by Elon Musk’s tweet and support last week, we are starting to see another round of institutional support led largely by Microstrategy’s Michael Saylor. Saylor has been on a campaign to convince other major companies to adopt a policy of holding a portion of their treasury cash in BTC. While there have not been any official announcements by any other companies, there is a growing sense that he is gaining some traction.
Yesterday and today, Saylor has been hosting a global summit discussing the legal considerations and logistics for companies to integrate BTC into their corporate strategy. If Saylor is successful in kicking off this trend, it would be a strong catalyst for the next leg of the bull market in BTC. Kathy Wood, the superstar head of ARK investments, has also opined on the idea and benefits of corporations holding at least some of their treasury reserves in digital assets. Wood estimates that if all S&P 500 companies converted just 1% of their cash reserves into BTC that it would add $40,000 to the price of Bitcoin.
During the last few weeks as BTC has been in consolidation, ETH has shown relative strength. There are two factors that I think are drawing attention and contributing excitement to the ETH market at the moment.
First, the near breakdown in global stock markets as the craze in several equities promoted on social media forums caused problems for several retail brokerages as clearing firms boosted capital requirements for the brokers to cover the added systematic risk. The financial industry has been slowly working on many blockchain based innovations to streamline clearing and transfers, and the chaos at the end of last week showed a bright light on how beneficial a revamp of infrastructure behind capital markets could be. Many of these innovations that will see their way into the industry are built on a backbone of ETH.
The second factor that I believe is adding fuel to the current run is the imminent listing of ETH futures on the CME, slated for February 8th. While the listing of BTC futures on CME in December of 2017 might have been the catalyst for the end of the bull market of 2017 and ushered in the next bear market in BTC, I believe that the context of crypto markets today is significantly different than in 2017. In 2017, there were many players who thought BTC was overheated and wanted to take a short position, but there were not many ways for them to put on that trade. When CME listed futures, suddenly there was an easy method to short BTC. Today, with crypto markets maturing and institutional adoption well on its way, the addition of CME futures as an ETH investment vehicle will open the door to many investors who are hesitant or unable to trade on crypto markets but are more than willing and able to trade on the CME. I see the listing of ETH futures on CME as a positive catalyst for ETH prices.
ETH has continued to rise steadily over the last few days, pushing to new highs every few hours. This morning, after nearly touching $1,700, there was a quick selloff just as European traders were starting their trading day. These sharp but brief and confined selloffs during a bull run are to be expected, and prices are already starting to recover as the US markets get ready for the day. I’ll be watching to see if BTC can potentially break $39,000 and if ETH can break $1,700, levels that both assets approached but failed to breach during Asian trading hours.
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