Hello, welcome back to Distributed Ledger, our weekly crypto newsletter that reaches your inbox every Thursday. I’m Frances Yue, crypto reporter at MarketWatch. I’ll walk you through the latest and greatest in the digital asset world this week.
Crypto in a snap
advanced about 1.3% during the past seven days, and was trading at around $19,087 on Thursday, according to CoinDesk data. Ether
gained 3% over the seven-day stretch to around $1,289. Meme token Dogecoin
gained 2.6% while another dog-themed token, Shiba Inu
went up 3.5% from seven days ago.
Source: CoinGecko as of Oct. 20
Terra Luna Classic
Source: CoinGecko as of Oct. 20
Should you stake your ETH?
Last month, Ethereum completed its historical transition to proof-of-stake from proof-of-work, meaning that the network is now secured by stakers, or ether holders who lock up their crypto, instead of miners.
Through staking, ether holders could help secure the network while receiving rewards, currently with a 4% yield annually, according to the Ethereum Foundation. The amount of ether staked has been growing, up to over 14 million on Wednesday from 8 million at the start of the year, according to data from Ethscan. Ether’s staking rate, or the amount of staked ether to that of ethers’ total supply, went up to about 11.5% from 7.4% at the beginning of this year, according to CryptoQuant.com.
However, with the 10-year Treasury
bills yielding more than 4% annually, higher than ether’s current staking rewards, why are some investors still staking their coins?
As the crypto bear market continues, most ether holders are investing in the potential of blockchain technology, instead of drawn by the near-term yields, analysts said. Ether has lost more than 65% of its value year-to-date, according to CoinDesk data.
“Ether holders are long the ‘platform’ and are framing the investment as a venture-like bet or thesis trade and want to capture the yield along the way,” said Brian Mosoff, chief executive at Ether Capital. “They have a low time preference by default,” Mosoff noted. Stakers won’t be able to withdraw their ether until the completion of the Shanghai upgrade, which is expected to happen at some point in 2023.
“A U.S 10-year Treasury is more suited for investors that prefer minimum risk,” said Konstantin Boyko-Romanovsky, chief executive and founder of validator node hosting platform Allnodes.
“But for investors that invest in crypto for blockchain technology, nothing can be compared to hosting their own node, supporting the Ethereum network, and decentralization while receiving staking rewards for their contribution,” Boyko-Romanovsky said.
Still, ether holders face several challenges and risks when staking their coins.
They may lose a large amount of ether and be forced out of the network due to “slashing”, when a staker’s activity is recognized as malicious. “Slashing happens when you accidentally run two instances of your own node in two different places,” noted Boyko-Romanovsky.
Stakers should also be alert for any scams, especially when they are asked for private keys, Boyko-Romanovsky said.
Regulators are also paying increasing attention to crypto staking. In September, Gary Gensler, chairman of the U.S. Securities and Exchange Commission, said that cryptocurrencies or intermediaries that allow holders to stake their coins may pass the Howey test, which is used by courts to determine whether an asset is a security. Gensler said he wasn’t referring to any specific cryptocurrencies, but the comments raised concerns whether the classification of ether would be changed.
Bitcoin’s bottom is in?
Bitcoin may have already reached the bottom, based on a comparison with previous bear markets and on-chain data, according to analysts at Arcane Research.
In June, the crypto reached a yearly low of $17,601, according to CoinDesk data. Bitcoin is trading at around $19,087 on Thursday, down 0.6% over the past 24 hours.
It has been more than 340 days since bitcoin reached its all-time high of $68,990 in November, as the crypto went down more than 70% from its peak, according to CoinDesk data.
Looking back at the previous bear markets, bitcoin saw a drawdown in 2018 of up to 84%, and it took 364 days for the crypto to go from cyclical peak to bottom. In 2014, the downturn lasted 407 days, with a maximum drawdown of 85%.
Meanwhile, several on-chain metrics also showed that the worst for bitcoin may have passed, according to the analysts.
I’ve written more about it here.
Mastercard’s new crypto offering
Mastercard Inc. on Monday said it’s launching Crypto Source, a program to help financial institutions offer secure crypto trading capabilities and services to their customers. Mastercard’s financial institution partners will be able to engage in buy, hold and sell services for select crypto assets, according to a statement.
The payment-processing company is expanding its partnership with Paxos Trust, which will provide crypto-asset trading and custody services on behalf of the banks, according to the statement.
Crypto companies, funds
Shares of Coinbase Global Inc.
was flat Thursday at around $63.21 on Thursday, and were down 8.8% over the past five trading sessions. Michael Saylor’s MicroStrategy Inc.
shares lost 2.2% Thursday to $221.09, while they are up 0.3% over the past five days.
Mining company Riot Blockchain Inc.
shares lowered 1% to $5.62 Thursday, and they were down 12.1% over the past five days. Shares of Marathon Digital Holdings Inc.
dipped 0.5% to $11.03, while down 1.8% over the past five days. Another miner, Ebang International Holdings Inc.
tanked 5.5% to $0.30 on Thursday, while down 16% over the past five days.
shares were mostly unchanged at $23.58. The shares traded 0.3% lower over the five-session period.
Advanced Micro Devices Inc.
shares picked up 0.7% to $57.61 on Thursday, down 2.1% from five trading days ago.
Among crypto funds, ProShares Bitcoin Strategy ETF
slipped 1% to $11.74 Thursday, while its Short Bitcoin Strategy ETF
rose 1% to $38.91. Valkyrie Bitcoin Strategy ETF
went down 0.8% to $7.3, while VanEck Bitcoin Strategy ETF
edged up 0.4% to $18.84.
Grayscale Bitcoin Trust
added 0.2% to $11.27.
Retail investors become vigilantes in hunt for crypto’s most wanted man (Financial Times)
Texas regulator probes crypto platform FTX and CEO Sam Bankman-Fried (The Washington Post)
JPMorgan Adds Crypto Policy Head After Dimon’s ‘Ponzi’ Quip (Bloomberg Law)