technology SD: Blockchain Bites: Sustainability and Uncertainty as Crypto Crosses $1T Benchmark

One bitcoin is now worth more than $39,000 as the value of all cryptos passes $1 trillion.

Top shelf

Institutions are buying
The Chicago Mercantile Exchange (CME) is now the largest bitcoin futures trading platform, with some $2.1 billion in outstanding contracts, according to data site Skew. CME is frequently cited as a harbinger of institutional involvement due to its long-standing pedigree in traditional markets.

Crypto malware
Researchers have detailed the inner workings of a pernicious and vicious malware targeting crypto wallet users called ElectroRAT, which may have compromised 6.5 thousand people already. The complex operation spins up fake domains, websites, apps and social media accounts to work its way onto a victim’s computer – where its operators will then be able to hunt for information related to a user’s crypto wallets. With bitcoin mooning, crypto-jacking operations are only likely to step up.

Tax play
PayPal and Coinbase have both invested in crypto tax startup TaxBit, which offers “tailored software solutions” to automate filing requirements for consumers, businesses and exchanges. In years past, the U.S. Internal Revenue Service (IRS) has sent conflicting messages regarding how to declare crypto holdings.

Quick bites

VACCINATION AUTHORITY: A hospital on the mediterrrean island of Cyprus is using the VeChain blockchain to certify COVID-19 immunizations. (CoinDesk)

LIGHTNING ROUND: U.K.-based CoinCorner is the third exchange to add Lightning Network support, following Bitfinex and River Financial. (CoinDesk)

$1B MARKET CAP: Nasdaq-listed cryptocurrency mining firm Marathon Patent Group’s shares surged Wednesday. (CoinDesk)

ROADBLOCK: ShapeShift’s pledge to decentralize and strip away KYC requirements faces regulatory hurdles. (Decrypt)

REALIZED VALUE? Bitcoin’s realized price, the average price at which every coin last moved, crossed the $10,000 mark. (Decrypt)

EXCHANGE ACQUISITION? South Korean gaming giant Nexon is reportedly preparing to acquire crypto exchange Bithumb for about $460 million, though the sourcing is dodgy. (Maekyung)

Market intel

Alt season
Analysts are forecasting increased volatility for alternative cryptocurrencies (altcoins). The spread between the six-month implied volatility for ether and bitcoin – a measure of the expected relative price volatility between the two – has risen to a record high of 46%. In English? “The market expects ether and other alternative coins [primarily based on Ethereum, and thus likely to trade alongside it] to chart bigger percentage moves than bitcoin in the near term,” according to CoinDesk’s Omkar Godbole.

Making MKR
MKR, an Ethereum-based governance token, surged to its highest price level in two years on Wednesday. MKR was trading at $1,251.14 yesterday, short of its Jan. 21, 2018, record of $1,798.70. Analysts point to a resurgence of activity in the decentralized finance (DeFi) sector, as well as a supply surge of the MakerDAO-tied stablecoin dai, as the cause.

At stake

New top
Amid political mayhem in Washington, D.C., where supporters of U.S. President Donald Trump stormed and briefly occupied the Capitol building during the congressional certification of President-elect Joe Biden on Wednesday, crypto markets continued to rise.

The total market capitalization for crypto assets has passed $1 trillion in dollar-denominated value, according to CoinGecko’s index of 6,124 assets. This high water mark comes amid an ongoing market rally, which is showing little signs of abating.

This time last year, the total value of all crypto assets stood at $200 billion, according to Coin Metrics data. And in 2017, during the last prolonged crypto bull run, the market’s total capitalization hovered around $760 billion before collapsing.

“[A]ll I can think about is how sustainable it all feels,” Messari founder Ryan Selkis wrote in a newsletter yesterday, preceding the milestone metric. Selkis cited the increasing use and exposure of stablecoins, the imminent improvements to Ethereum’s blockchain and the strengthening foundation for a crypto-based Web 3.0 as particular reasons for the sustainability of this rally.

Oh, and “BTC is at the beginning of its institutional supercycle,” he wrote. Indeed, bitcoin is soaring, having set a new high above $39,000 today after several days of remaining in the green. Bitcoin’s $726.5 billion market cap accounts for just under three-quarters of the entire crypto market cap.

In fact, “bitcoin is more valuable than all but seven publicly traded companies, sitting between Tesla at $758.8 billion and Tencent at $723.0 billion,” CoinDesk news editor Kevin Reynolds wrote. The crypto’s next closest rival, Ethereum, is valued at $140 billion, according to the CoinDesk 20.

In 2020, bitcoin became an attractive investment for hedge funds, corporations and high-net worth investors seeking to hedge their bets against forecasted inflation. A spout of coronavirus relief and a loosening of monetary policy by the Federal Reserve has many analysts concerned about a coming devaluation of the U.S. dollar.

To be sure, inflation has failed to meet the Fed’s target of 2%. Though bitcoin, and other cryptocurrencies, still represent an intriguing investment in a world beset by uncertainty. Cryptographic assurances and public ledgers have value for certain types of monies or assets.

“The $1 trillion mark cements cryptocurrency as a investable asset class that no longer sits on the fringes of Traditional Finance as a toy for retail investors,” Jack Purdy, a Messari analyst told CoinDesk’s Zack Voell. “It demonstrates that this asset class is large enough to absorb large orders like we’ve seen recently with the slew of institutions entering over the last few months.”