What Intellectuals Miss About Crypto

What a corporate power critic doesn't understand about web 3
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Off the Charts

Bitcoin's Domination on the Wane

This past week wasn't a happy one for crypto investors. Bitcoin (BTC) got hit by a wave of selling on Friday and early Saturday that saw it lose 27% in less than a day. As is often the case, other assets, including Ethereum's ether (ETH), sold off sharply in tandem with bitcoin. 

 

But the more interesting aspect is that ether, as well as other tokens suchs as Binance chain's BNB, did not perform as badly as bitcoin – to the point where the losses seem relatively pedestrian. The result: a much-followed measure of the makeup of the total crypto market capitalization known as "bitcoin dominance" has dropped to rarely seen levels. On Friday morning, following a renewed sell-off in bitcoin, bitcoin's weight in the total crypto market cap was hovering just above 39%, according to CoinGecko. That put it on the cusp of breaching a low posted on May 19, which would bring it into three-and-a-half-year-low territory. The next target would be the all-time low of 32.4%, posted on Jan. 14 , 2018.

 

Why does this matter? Because the circumstances behind the collapsing BTC dominance measure feel quite different from those of the 2017-2018 initial coin offering (ICO) bubble, when those historical lows were hit. 

 

Then, the initial drop was fueled by demand for ETH, as the token frenzy around ERC-20 tokens issued as ICOs on top of Ethereum forced investors in those offerings to buy the underlying platform's currency, generating a brief conversation around the prospect of a "flippening," where ETH's market cap would one day exceed that of BTC. 

 

That frenzy fed a wider retail demand for all tokens, which in turn drove up bitcoin, albeit at a slower pace than ether. But when doubts began to rise about the sustainability of token prices, compounded by fears that the U.S. Securities and Exchange Commission would take actions against ERC-20 issuers, big investors rushed to take profits on the entire crypto ecosystem. At first, that led them to bitcoin, the indisputably most liquid cryptocurrency. As a result, a declining BTC dominance metric went from low to lower. 

 

It wasn't until the dust settled and steady-minded investors took stock of the situation, that they realized that bitcoin was a safety bet. 


Fast forward to 2021, a year of phenomenal growth in the Ethereum ecosystem, one this time driven by decentralized finance (DeFi) and non-fungible tokens. And as we enter December, when the broad market capitalization is dropping, it doesn't appear these new market areas are a factor in the correction. Rather, the sell-off is driven by macro concerns about the outlook for interest rates, due to more hawkish commentary from the Federal Reserve. That has hurt all risk assets, including the most popular one among institutional investors, bitcoin, which is bearing the brunt of Wall Street's exits. The sell-off really has nothing to do with DeFi or NFTs, which is why ether is holding up so well, relative to bitcoin.

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The Conversation

Mongoose Coin vs Hamster Coin

Illustration: Rachel Sun/CoinDesk

I want to believe that Rep. Brad Sherman (D-Calif.) knew all along he was going to create a meme coin. 

 

Check out the video of the unrelenting crypto critic during this week's hearings before the House Financial Service Committee, where he says the "number one threat to cryptocurrency is crypto," because "bitcoin could be displaced by ether, which could be displaced by doge, which could be displaced by hamster coin, and then there's cobra coin and what could mongoose coin do to crypto coin?"

Sherman is captured by the flawed notion that X coin is worthless because at any day someone can quickly deploy Y coin to displace it. It's an argument that betrays zero understanding of the massive commitment from developers, miners, investors and general believers that's needed to turn a coin into the kind of lasting success that bitcoin and ether have become. 

 

Still, the fact that it's impossible to magically conjure up those qualities in a way that is lasting and meaningful is irrelevant now. What matters is that – of course, who didn't see this one coming? – Sherman's comments were treated as a call to action by crypto pranksters. 

 

Arise, Mongoose coin.

There's an expression of support. 

And, voila!

Inspired by a crypto-hating Congressman from California, Mongoose coin now exists, proving his point that anything can be spun up immediately in this space - but not much else in his statements.

 

Still, the new creators of Mongoose coin wouldn't have it any other way. They offer credit where credit is due:

Relevant Reads

Market Meltdown

As we said: Not a good week for bitcoin. 

  • Here's Nikhilesh De and Omkar Godbole recounting how the most dominant cryptocurrency dropped a whopping $9,000 in the early hours of Saturday morning and how, of all players, the government of El Salvador saw fit at that time to buy in. 
  • Here's Daminick Dantes and Tracy Wang describing how other "dip-buying" traders gave bitcoin a bit of a reprieve midweek.  
  • Things worsened again toward the end of last week, which made Lawrence Lewitinn's take on things more important. In it, he argued that all the warning signs were there in the market early on to signal a bitcoin sell-off. 

Money Reimagined

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