Tag Archives: bitcoin bulls

Tim Draper Paid 18 Million For His First Bitcoin Batch What’s it Worth Now?

Tim Draper Paid $18 Million For His First Bitcoin Batch, What's it Worth Now?

Tim Draper Paid $18 Million For His First Bitcoin Batch, What’s it Worth Now?

If someone was to ask about fervent crypto investors, who would come to mind? For most Bitcoin enthusiasts and investors, Mike Novogratz, the Winklevoss Twins, and Tim Draper would be the first mentioned. And for good reason too, as the aforementioned four have invested copious amounts of time, money, and mental capacity into the nascent blockchain world.

Tim Draper, often clad in a grey suit, white dress shirt, and purple Bitcoin logo-studded tie, recently divulged his hero origin story, if you will, taking to Coindesk.

Tim Draper — A Fervent Crypto Bull

To celebrate Bitcoin’s tenth birthday, Tim Draper, the world-renowned American venture capitalist and forward-thinker, wrote an op-ed piece for a recent Coindesk feature series. Draper, whose investor son also believes cryptocurrencies are also tantalizing, noted that it was fifteen years ago when he saw value in digital currencies

However, a viable digital medium of value didn’t appear in Draper’s scope until 2011, when Peter Vincennes, chief executive at Coinlab, met with the investor to introduce him to Bitcoin. Vincennes and Draper hit it off near immediately, with the latter asking for the former to purchase $250,000 worth of BTC on Mt. Gox.

Draper was satisfied with his investment, keeping the coins on the now-defunct exchange in a likely state of naivety. But of course, Mt. Gox collapsed, with Draper losing his thousands of BTC, which he never really got his digital hands on, as it were.

Yet, later, Draper was given an opportunity to purchase cryptocurrency again, when the U.S. Marshall’s office auctioned nearly 30,000 BTC. The entranced venture capitalist, still reeling from the Mt. Gox collapse, decided to attend the auction, purchasing 29,656 coins at $632 apiece — $14 above the going rate on spot exchanges. In all, he spent $18.74 million on Bitcoin.

And since that day, he’s been overly optimistic about cryptocurrency and related technologies. This shouldn’t be much of a surprise, especially considering his beefy vested interest. Regardless, many have seen his perpetual, seemingly undying support of this asset class as a positive sign.

Even during 2017’s market run-up, which sent Bitcoin to $20,000, he didn’t sell his stack for fiat. And while many common Joes chirp at Draper for this, claiming that he’s an irresponsible investor, the venture capitalist is doing just fine financially.
 

Draper’s Bitcoin Outlook

At current rates, Draper would be left unscathed if he liquidated his Bitcoin stash, as he would still be able to secure $107 million if sufficient liquidity/demand is present. However, Draper, seemingly not willing to sell his BTC, sees even higher highs for this industry in the future.

The zealot, now emotionally involved in this industry, noted that there’s still “great potential” in Bitcoin. He noted that not only could BTC become a global, decentralized, frictionless store of value and digital cash, but blockchain could get implemented in some of society’s most important facets. Summarizing his points into a short and sweet quip, he wrote, “[blockchain] is honest, incorruptible, secure, and fair.”
 

NICK CHONG | JANUARY 13, 2019 | 12:00 AM

Alan Zibluk Markethive Founding Member

Bitcoin: After this breakdown 3k is in sight again

Bitcoin: After this breakdown, $3k is in sight again

Bitcoin: After this breakdown, $3k is in sight again

  • Bitcoin breaks key levels again after breaching $4k.

  • Long term bottom is not in place yet.

Bitcoin, the poster boy of cryptocurrencies, has broken down of some key levels after breaking below $4,000 and is now at the risk of breaching $3,000 too as long term bottom is not yet in place for the largest crypto.

BTC/USD trading flat on day at $3,633 and in less than one percent range for the day – typical low volume and even lower volatility weekend trading that is. Earlier this week, Bitcoin and all the other major coins saw massive sell-off all over again, resulting in BTC breaking $4,000 again and as a result also broke some key levels on the short term (180-minute) as well as long term (daily) chart.

On the 180-minute chart, BTC broke off a key ascending trendline support that was forming after it made a temporary bottom around $3,100 and bounced quite a bit. In this bounce it did attempt to break past the descending trendline resistance on the daily chart – once in late Novemeber, then again around Christmas and last attempt on Tuesday this week. Failing all the time and finally bears got control of the battleground. There is every chance that bulls' resolve to hold on to November lows and $3,000 would be ferociously tested in the coming days.

BTC/USD 180-minute chart:

BTC/USD daily chart:

Manoj B Rawal

FXStreet

 

Alan Zibluk Markethive Founding Member

Bitcoin Flash Crash – Fear And Panic Spread Through Crypto Currency Markets On 10 Losses

 

Bitcoin Flash Crash – Fear And Panic Spread Through Crypto Currency Markets On 10% Losses

  • There is a call of fear and panic again as the crypto market faces another big daily drop.

  • A large number of top tier cryptocurrencies have experienced major bull runs, a pullback was expected and warranted.

Cryptocurrency move lower is par for the course

Above: Bitcoin down over 10% during Thursday session.

Bitcoin, Ethereum and the broader cryptocurrency market experienced a significant flash crash during Thursday’s trading. Prices had been trading in a very congested range ever since Sunday’s jump. The move today, while certainly painful for any ‘hodling’ crypto investor/speculator, is certainly par for the course – and the behaviour and nature of the move is extremely common. Just as we saw a massive jump in price on Sunday, that same move happened today, except down. What was the distinguishing feature? A single entity pushing price in an extremely short period of time. If we look at the chart above, we see the initial push lower from 4001.73 to 3813.98 in a 5-minute span. Prices then consolidated – volume was almost non-existent. Price sat, literally, right on top of the upper trendline before it’s next drop. The next major dive lasted for a total of 10 minutes and dropped from 3777.14 to 3560. Price halted exactly on the 61.8% Fibonacci retracement level from the most recent swing high of 4239.39 to the most recent swing low of 3185.17. Note that I did draw the retracement all the way to the extreme swing low – that is the incorrect way to draw an accurate Fibonacci retracement.

It’s profit, not panic

Above: Cardano sheds almost 20% of its value in one day.

 

While the moves today do seem ugly – well, they are – it’s also not a surprise and shouldn’t be a surprise. A significant number of high market cap cryptocurrencies have moved up significantly in the past 30 days. Cardano, which has lost over -18% at one point during the day, is a perfect example of this. Cardano has been in an uptrend since December 15th, 2018 – nearly 30 days straight of a bull move. During that rise, Cardano has gained 101.72%. So a pullback of even 30% is warranted. Litecoin has also experienced a significant rise in both time and price. For over 25 days, Litecoin has rallied from 22.17 to the swing high of 41.27 – an 86.15 gain against the days -13.56% move lower. In any other major market, these moves would be scary – but for cryptocurrencies these moves are normal. It’s not surprising that some people may want to take some of their positions off the table during this most recent bull run. And the move today doesn’t mean that we will continue to sell off to create lower lows (or lows below the December 2018 low). It will be very interesting to see if traders buy this dip – or any dip lower. If that does happen, then we can assume we are in a new buyers market and a market where we can buy the dips instead of shorting the rallies.

 

Posted by Jonathan Morgan in Bitcoin, and modified 11 Jan 2019 05:05

Bitcoin Flash Crash -  Fear And Panic Spread Through Crypto Currency Markets On 10% Losses

Alan Zibluk Markethive Founding Member

Bitcoin is on the verge of a breakthrough Spartans and Winklevoss brothers hold no matter what

Bitcoin is on the verge of a breakthrough; Spartans and Winklevoss brothers hold no matter what!

Bitcoin is on the verge of a breakthrough; Spartans and Winklevoss brothers hold no matter what!

  • TI VERA Band Indicator implies a strong movement in either direction.

  • Winklevoss brothers stick to long-term positive views.

According to technical analysts who base their forecasts on historical patterns, Bitcoin is on the verge of a strong move. However, the direction of that move remains unclear at this stage. Considering that the GTI VERA Band is narrowing, one might suggest that Bitcoin is getting ready for a forceful break out from its current range.

While the coin has been moving within a strongest bullish trend since September and regained over 27% of its value from the recent low touched at $3,128, experts remain cautious about short-term Bitcoins perspectives.

More pain before gain

“It’s unlikely that the bottom is in for Bitcoin. I am certainly willing to change my mind, but the preponderance of evidence leads us to believe that we’ll see more lows before we head higher," Travis Kling, founder of the crypto hedge fund Ikigai commented, as cited by Bloomberg.

Cameron and Tyler Winklevoss also stick to their long term forecasts and urge crypto enthusiasts to ignore short-term developments.

"We believe in the long game. Spartans hold!" Tyler Winklevoss said in the chat during Reddit's AMA (Ask Me Anything) session.

He is sure that Bitcoin will resume the upside as it is a true digital gold that is even better store of value than gold itself.

"We believe Bitcoin is better at being gold than gold. If we’re right, then over time the market cap of Bitcoin will surpass the ~7 trillion dollar market cap of gold," he explained.

Meanwhile, Bitcoin is changing hands at $4,000, while the critical support is seen at $3,800, which is a confluence of SMA100 and SMA50 (4-chart). However, the coin needs to recover above $4,110 (the highest level of 2019) to improve its short-term technical setup and resume the recovery process towards $4,234 (pre-Christmas high).

TREND INDEX

Bearish

OB/OS INDEX

Neutral

VOLATILITY INDEX

Shrinking

Updated at Jan 10, 05:30 GMT

FORECAST BIAS

Sideways

 

Tanya Abrosimova

FXStreet

 

Alan Zibluk Markethive Founding Member

The Case for a 2020 Bitcoin Bull Run

The Case for a 2020 Bitcoin Bull Run

The Case for a 2020 Bitcoin Bull Run

Since the end of 2018, price action has been demonstrably negative, which surprised many expecting the end of Q4 historical “pump” in prices.

The price plummet appears largely driven by negative sentiment and swathes of selling pressure after the 2018 support level of $6,000 finally broke (dashed black line). This selling pressure kept prices well into the oversold range (using RSI and SWTO) for several weeks.

Only recently, has price begun to rebound. Even so, RSI and SWTO are still trending downward (black arrows), which may point to further price weakness at the beginning of Q1 2019 while bitcoin searches for a sustainable bottom.

Volatility ≠ Price Growth

As mentioned prior, many market commentators and participants assumed, incorrectly, that Q4 was always a strong period for market price growth, specifically from mid-November to the end of December. However, what many viewed as historically consistent price growth during this period, was in fact historically consistent volatility growth.

The graphic below shows historical daily volatility trends of bitcoin on a yearly basis since 2013. Thus, the supposition that many bulls were wrongly betting on was that higher volatility always equates to higher prices.

*Gdax/Coinbase Pro

As the volatility chart illustrates, the volatility trends of BTC, since 2013, do follow predictable patterns, culminating in higher volatility during Q4. This dynamic unfolded again in 2018 as price volatility compressed from October to mid-November (black lines), which typically precedes a breakout in price action. However, this time, volatility broke out to the downside for bitcoin.

After analysing the overall trend in 2018 (demonstrably bearish), price volatility compression, historical volatility patterns, and fundamental indicators, it should have been more clear to market participants that the probability of a negative price breakout was far higher than to the upside.

Fundamental Indicators

Fundamental indicators can be quite useful for ascertaining a “narrative” of price movements and patterns, as long as the narrative is rooted in non-subjective data exploration. However, given the small sample size of bitcoin market cycles (n=10), each indicators output and predictive ability should be taken with a “grain of salt”.

Nic Carter from Castle Island Ventures / CoinMetrics and Antoine Le Calvez from Blockchain.info recently pioneered a new concept called realized cap (capitalization). The differentiation between realized cap and market cap being “instead of counting all of the mined coins at equal, current price, the UTXOs are aggregated and assigned a price based on the BTC/USD market price at the time when said UTXOs last moved.”

David Puell and Murad Mahmudov do an excellent job explaining these terms and significance further in their article.

Using data from CoinMetrics, the significance of realized cap compared to market cap can be visualized quite dramatically, albeit via a small sample size. The crossover points between market cap and realized cap can be viewed almost similar to golden crosses, whereby market cap breaching above realized cap is a re-ignition of a bull cycle, while a cross beneath may indicate the final stretch of a bear cycle. Beyond the aforementioned, this comparison offers lessons which may bear out or “repeat” in 2019.

Looking at the graphic, market cap went beneath realized cap on December 28, 2014, and stayed beneath realized cap until October 28, 2015, which coincides with the data-validated, high volatility period for bitcoin.

In this case, volatility coincided with price growth for bitcoin and kicked off the start of an amazing two-year bull run for bitcoin. This time around, market cap fell beneath realized cap on November 20, 2018. So, if history repeats itself (which is a tepid assertion), an investor might expect further price declines in 2019 followed by sideways trading, until a reignition of a new bull cycle at the end of Q4 2019 (November to December 2019).

Correlation to Δprice of 0.19

Additionally, using realized cap, an additional ratio or oscillator can be created that further explains bitcoin’s market cycles, market cap to realized cap (MVRM). The MVRM provides a useful indicator that visualizes the above dynamic via one ratio.

For example, historically, a value beneath 1.0 is undervalued while a value above 3.0 is overvalued; and above 4.0 is a negative inflection for prices. Currently, MVRM is 0.82 and the all-time low is 0.56. So, despite bitcoin being in undervalued territory, MVRM still possibly has further room to fall, which is consistent with the end of Q4 2019 narrative.

Further support of the significance of MVRM for price movements can be seen by the correlation between price and MVRM of 0.19, and correlation between price and MVRM of 0.98, which is extraordinarily high.

*coinmetrics.io

Network transaction volume to active addresses ratio (TAAR)

This ratio acts as an “equilibrium” gauge of bitcoin’s price to fundamentals valuation, where transaction volume and active addresses both represent “quantity and quality” growth of the bitcoin network; validated by 0.15 and 0.07 correlation between price, respectively.

For example, when TAAR and price are closely distributed, price (valuation) and fundamentals are aligned in equilibrium; and when either TAAR or price deviate substantially from each other, price is out of equilibrium which has historically resulted in price devaluation (albeit small sample size). The market’s recent selloff has helped reduce the gap between price and TAAR, which has persisted since Q4 2017.

Correlation to Δprice of 0.13

The 30 day moving average of TAAR is ~$2500 while TAAR daily is ~$2000, thus an “equilibrium” range for price appears between $2,000 and $3,000. *Note: prices seldom mean revert directly to their equilibrium level, they typically over-correct, which makes further price depreciation beyond the stated levels possible. Additionally, as can be seen on the logarithmic chart, price has bounced off TAAR’s 30-day MA twice in 2018 (black boxes), and has most recently rebounded momentarily.

The final price flush before finding a stable bottom will likely coincide with price falling beneath the TAAR 30 day MA, price recovering that level, and then TAAR beginning to trend upward once more.

*coinmetrics.io

Similar to MVRM, the TAAR to price ratio is an oscillator that visualizes the same dynamic via one ratio. Historically, a ratio of 1.5 and above is undervalued, 1.0 to 2.0 is “safe”, and beneath 1.0 (“equilibrium”) is overvalued. Currently, the oscillator is ~0.70 which still indicates overvaluation, but the overall trend back towards 1.0 is positive.

Conclusion

While the recent price action for bitcoin has been harshly negative, these market clearing events have begun the normalization process for bitcoin’s price valuation, which can be seen in several indicators. Per the MVRM analysis above, if history repeats itself, price will likely fall further, then trade sideways until the end of Q4, then reignite a new bull market.

An additional verification of this narrative will be if the TAAR to price oscillator enters undervalued territory above 1.50 in 2019, especially, prior to Q4.
 

Sam Ouimet

Jan 9, 2019 at 05:25 UTC

Alan Zibluk Markethive Founding Member

Bitcoin Bears Fight Back to Push the Market into Reverse

Bitcoin – Bears Fight Back to Push the Market into Reverse

Bitcoin – Bears Fight Back to Push the Market into Reverse

The bears hit back, though much will depend on whether Bitcoin can hold onto $4,000 levels through the day…

It was a day in the red for the cryptomarket on Monday, with investors taking some froth off the top, following some solid gains from the previous week, a pullback in Litecoin likely to have contributed to the broad based crypto reversal on the day.

There’s been plenty of chatter on Litecoin’s new found support, with the bears talking of an imminent reversal, though even following a 3.01% fall on Monday, support continues to hold Litecoin back from a full retracement to sub-$30 levels struck at the start of the year.

For Bitcoin, Monday’s losses were relatively minor, with Bitcoin falling by 1.33%, partially reversing Sunday’s 6.56% rally, to end the day at $4,113.9.

A late morning intraday low $4,044.9 was the only real test of the day, Bitcoin steering clear of the first major support level at $3,964.6 and more importantly, holding onto the $4,000 handle through the day for the first time since 24th December.

For the Bitcoin bulls, coming up well short of the day’s first major resistance level at $4,295.1, with an intraday high $4,197, would have been less of an issue, though we can expect the lack of momentum at the start of the week to test investor resolve through the middle of the week.

Across the top 10 cryptos, Stella's Lumen bucked the trend on the day along with Tron (TRX) which has been sitting alongside Litecoin as one of the trailblazers at the start of the year, rallying 25.8% with 6 days in the green out of the first 7 days of the year, to pass Bitcoin Cash SV into the number 9 spot by market cap.

While Ethereum has found strong support since its 14th December swing lo $80.60, rallying by 95% to the end of Monday, the start of the year has been less impressive, Ethereum trailing Tron with a 20.27% gain through the first week of the year.

Tron’s advancement comes as news hits the wires of one of the more popular Ethereum gaming DApps switches from Ethereum to Tron, suggesting that more could follow. The news has had the Tron bulls out in force, leading to price forecasts of as high as $12 by the end of the year.

As we have seen with Litecoin and even Ethereum’s recovery, product differentiation has begun to influence investor appetite in recent weeks, with the anticipated approval of the Token Taxonomy Bill a positive for the ICO market and Ethereum, while adoption begins to also play a bigger hand in direction for the majors going into the New Year.

At the time of writing, Bitcoin was down 0.53% to $4,092.2, with a bearish start to the day seeing Bitcoin fall from a morning high $4,133.7 to a morning low $4,056 before steadying, the day’s major support and resistance levels left untested early on.

The early pull back was seen across most of the top 10, with only Litecoin and Tron bucking the trend through the early morning (Tether excluded).

While the Bitcoin whales will continue to prop up Bitcoin alongside hopes of an inflow of institutional money later on in the quarter, of interest will be how Ethereum and Tron battle it out

over the coming weeks, the upside potential of Tron certainly more appetising than that of Ethereum while the ICO market remains in its deep sleep.

 

 

Bob Mason

57 minutes ago (Jan 08, 2019 5:23 AM GMT)

Alan Zibluk Markethive Founding Member

Bitcoin Surges 5 in Minutes – Can it Lead to Bigger Rallies This Month?

 

Bitcoin Surges 5% in Minutes – Can it Lead to Bigger Rallies This Month?

The Bitcoin price has surged by six percent on the day to $4,070, breaking out of the $4,000 mark comfortably for the first time since Christmas Eve.

Bitcoin’s strength does not convince many traders of a big short-term bull rally.

Could Bitcoin Engage in Bigger Rallies in January?

With a 20 percent increase in its daily trading volume, Bitcoin has been able to show some momentum above $4,000. But, as DonAlt, a cryptocurrency technical analyst said, the slight increase in the price of Bitcoin is not sufficient to declare a trend reversal even in the short-term.

The analyst said:

Finally an impulse. If today closes above resistance (4000) I’ll be looking for buy opportunities/close my hedge short. If it closes below resistance I’ll be looking for shorts. Dangerous to trade in any direction with the Finex maintenance coming up tomorrow.

Both BitFinex and BitMEX, two of the largest margin trading platforms for Bitcoin, are set to run maintenance on January 7, suspending trades.

If Bitcoin closes the day at $4,000 and shows some positivity in the short-term, it may allow the asset to prepare for upward price movements in tight ranges.

But, generally, traders saw the price movement of Bitcoin as a lackluster move following poor several days subsequent to Christmas Eve

“Another day, another lacklustre move. Is this the top? I’m looking for $180B if we can turn $140B into support, otherwise not much too get excited about just yet,” a cryptocurrency trader with the online alias “The Crypto Dog” wrote.

Bitcoin could engage in bigger rallies throughout January, potentially eyeing a breakout above $4,500. Still, without a breakout above $6,000 and resistance levels above it, it is challenging to justify a bottom.

One trader said that Bitcoin is likely to see a boring first two quarters in 2019. With volatility in a low price range, it will be unable to recover to key levels.

“The good news is that the low is likely in. The bad news is that we go sideways here for another 6+ months before moon mission starts again for new ATH’s. The good news about the bad news is that with BTC going sideways for 6+ months (If this Forecast Map is in anyway accurate) then we’re having a nice long [alternative digital asset] season,” one trader said.

Volume is Key

The short-term trend of Bitcoin is uncertain due to the scheduled maintenance of two major exchanges.

A key element in the dominant cryptocurrency’s performance over the next few weeks will be its daily volume. Throughout the past two weeks, Bitcoin has maintained a volume of over $4 billion. This is lower than its average volume at around $4.5 billion.

Currently, volume hovers at nearly $6 billion. If it can sustain such a high volume, BTC will be able to sustain its momentum.
 

AUTHOR

Joseph Young

Hong Kong-Based Finance and Cryptocurrency Analyst / Writer. Contributing regularly to CCN and Hacked. Offering cryptocurrency news and Insights Into Asian Market (South Korea, Japan, and more

Alan Zibluk Markethive Founding Member

Bitcoin Price Weekly Analysis – BTC Approaching Significant Break

Bitcoin Price Weekly Analysis - BTC Approaching Significant Break

Bitcoin Price Weekly Analysis – BTC Approaching Significant Break

Key Points

Bitcoin price failed to gain momentum above $3,900 and declined recently against the US Dollar.

  • There is a major contracting triangle formed with support at $3,765 on the 4-hours chart of the BTC/USD pair (data feed from Kraken).

  • The pair is approaching the next significant break either above $3,850 or below $3,750.

Bitcoin price is trading near important support levels against the US Dollar. BTC/USD may soon make the next move either above $4,000 or below $3,500.

Bitcoin Price Analysis

This past week, bitcoin price moved higher above the $3,800 resistance against the US Dollar. However, the BTC/USD pair struggled a lot to clear the $3,900 resistance level. To start with, a swing low was formed near $3,720 and later the price started an upward move. It broke the $3,800 resistance and the 100 simple moving average (4-hours). The price even traded above the 50% Fib retracement level of the last decline from the $3,920 high to $3,722 low.

However, the price faced a strong resistance near the $3,850 and $3,870 levels. Besides, the 76.4% Fib retracement level of the last decline from the $3,920 high to $3,722 low also prevented gains. Buyers failed to push the price above $3,900 and later the price declined. It traded below $3,800 and the 100 SMA. Having said that, the price is now approaching the key support area near $3,765. More importantly, there is a major contracting triangle formed with support at $3,765 on the 4-hours chart of the BTC/USD pair.

Looking at the chart, BTC price seems to approaching the next significant break either above $3,850 or below $3,765. An upside break above $3,850 may push the price towards $4,000 and $4,200. On the other hand, a break below $3,765 could spark bearish moves towards $3,500 or $3,300.

Looking at the technical indicators:

4-hours MACD – The MACD for BTC/USD is placed in the bearish zone.

4-hours RSI (Relative Strength Index) – The RSI is currently well below the 50 level.

Major Support Level – $3,765

Major Resistance Level – $3,850

 

AAYUSH JINDAL | JANUARY 6, 2019 | 5:00 AM

Alan Zibluk Markethive Founding Member

Bitcoin BTC Long Term Price Forecast- January 5

Bitcoin (BTC) Long Term Price Forecast- January 5

Bitcoin (BTC) Long Term Price Forecast- January 5

BTC/USD Long-term Trend: Bearish

Resistance levels: $7,200, $7,300, $7,400

Support levels: $3,800, $3,700, $3,600

The BTCUSD pair had been ranging in the last ten days. In the short time frame, Bitcoin was ranging at the $3,900 price level. The crypto’s price also faces resistance at the $4,000 price level. However, the BTC price has an opening balance of $3,862.60 in the month of January . From the weekly chart, the price of Bitcoin is in the bearish trend zone.

In other words, the crypto’s price is below the 12-day EMA and the 26-day EMA which indicates that Bitcoin is likely to fall. Meanwhile, the MACD line and the signal line are below the zero line which indicates a sell signal.

In addition, the stochastic is in the oversold region but above the 20% range. This indicates that the price of Bitcoin is in a bullish momentum and a buy signal. In the meantime, the blue band of the stochastic is above the red band indicating the reversal of the previous trend.

By Azeez M – January 5, 2019

Alan Zibluk Markethive Founding Member

Thriving on bitcoin’s bust

Thriving on bitcoin's bust

Thriving on bitcoin’s bust

As a growing number of cryptocurrency ventures struggle for funding, cut staff or shut down, all is well in one small corner of the industry: lending.

Creditors focusing on the crypto arena say they’re finding strong demand from borrowers who don’t want to sell their virtual coins at depressed prices, as well as from big investors eager to borrow coins for short selling. It’s putting lenders on both sides of bitcoin’s bust – helping believers pay their bills while awaiting a rebound, and also enabling bets by people who think the drop has further to go.

New York-based BlockFi says its revenues and customer base have grown 10-fold since June, when Michael Novogratz’s Galaxy Digital Ventures invested $52.5 million. Aave, which owns online crypto-lending marketplace ETHLend, just opened an office in London, plans to enter the US soon, and is nearing profitability. And Salt Lending, which already employs 80 people, said it’s hiring more every month as its revenue ticks higher.

Most lenders in the crypto industry set up shop in 2017, initially offering enthusiasts a way to borrow cash without having to sell down their stockpiles of bitcoin or other crypto assets they believed would soar even higher. But when prices crashed in 2018, lenders pivoted into new roles and continued to flourish. The lending niche, it seems, may fare even better in bad times than good.

Bear market fuelling growth

“The bear market has certainly helped – at least has fuelled the growth,” says Genesis Capital CEO Michael Moro.

Genesis, which launched in March to let institutional investors borrow virtual coins by depositing US dollars, has already issued $700 million of loans. It now has about $140 million in loans outstanding with an average duration of six weeks, according to Moro. Genesis plans to more than double its staff in the coming year to as many as 12 people, and is looking at growing in regions such as Asia.

“We’ve been profitable from day one,” says Moro. “We’ve certainly proven that there is market demand, that there’s product fit and that it’s time to invest even more in this side of the business.”

The company typically requires customers to deposit around $1.2 million in fiat to take out $1 million of crypto. It charges an annual rate of between 10% and 12% to borrow bitcoin, for example.

Companies that accept cryptocurrencies as collateral for cash loans usually demand much larger buffers to ensure they don’t get burned by falling prices. BlockFi typically requires customers deposit $10 000 of digital coins to take out $5 000 in fiat, according to CEO Zac Prince.

Low-risk lending

When collateral drops in value, customers face margin calls, often starting with a warning that their holdings may be sold off soon. At BlockFi, margin calls are triggered if the price of the crypto collateral falls by 35 to 60% from the time the loan was granted. Price says about 20% of the start-ups’ loans faced margin calls last year. Many more borrowers added collateral when warned.

“We’ve never had a loss of principal,” he says. “It’s a low-risk type of lending, assuming you are able to manage that liquidity and track the volatility.” The company’s interest rates start at 7.9%.

Lenders aren’t entirely immune to the turmoil so common in the crypto world. The Securities and Exchange Commission has been scrutinising Salt’s initial coin offering – a fundraising in which start-ups sell virtual coins to investors – and whether the sale amounted to an unregistered securities offering, the Wall Street Journal reported in November, citing unidentified people familiar with the matter. The company declined to comment.

Magic’ in bust

“From a consumer perspective, we will start to look like a diversified fintech company – that started with loans,” says Prince. “Similar to a company like SoFi, who started as just a student lender and expanded to mortgages, wealth management, and now deposit accounts.”

BlockFi is, in fact, planning to offer more credit products, including a bitcoin interest-bearing savings account and a loyalty card earning crypto. ETHLend is working to provide its technology to other lenders in Switzerland and Australia, so they can also accept crypto collateral.

“Everything flies in the bull market, but true magic happens when it does well in a bear market,” Aave CEO Stani Kulechov said in a phone interview. “The crypto-backed lending model is one of the rarest.”

 

© 2019 Bloomberg L.P

Alan Zibluk Markethive Founding Member