‘It’s going to be very obvious that every bank needs to become a crypto bank,’ says CEO of bank to nab 1st federal charter for digital assets

Crypto in a snap

Bitcoin
BTCUSD,
-0.27%
tumbled this week amid omicron, the coronavirus variant first identified in the southern parts of Africa and has now been detected in the U.S. The cryptocurrency dropped about 2.8% over the past seven days, recently trading above $57,000 according to CoinDesk data. Ether
ETHUSD,
+0.10%
rose about 3.1% for the past seven days, recently trading above $4,500.

Dogecoin
DOGEUSD,
-0.42%
logged a 4.3% loss for the past seven days, while Shiba Inu, the coin created based on the dogecoin meme, notched a roughly 11% gain over the past seven days.

Crypto Metrics

Crypto banks? 

Nathan McCauley, co-founder and CEO of Anchorage Digital, a digital asset platform that provides crypto custody, trading and staking for financial institutions, said he expects to see more banks providing crypto-related services in the coming years. In January, Anchorage Digital Bank became the first federally chartered bank for digital assets. 

“I think by the end of 2022, it’s going to be very obvious that every bank needs to become a crypto bank, because enough will have adopted” crypto, McCauley said.

“Your local bank branch, whether it’s a credit union or a large conglomerate bank, will very likely be offering some sort of crypto investment product,” according to McCauley. Such offerings will be driven by increasing retail demand, McCauley said. 

“And that’ll be regulatory clarity coming from Washington and from the States. It’s gonna be more obvious that banks are allowed to do that,” McCauley said. “And as long as they put in the right controls, work with the right partners, they’ll be able to build services of that nature.”

Meanwhile, Anchorage has seen growing institutional demand for blockchain gaming tokens such as Decentraland
MANAUSD,
-1.11%,
decentralized finance, or DeFi, tokens like Maker
MKRUSD,
-0.62%,
Uniswap
UNIUSD,
-0.76%,
and Sushiswap, and also non-fungible token, or NFT-related coins, such as NFTX. 

“The demand for those kinds of coins comes from buy-side investors who have a particular thesis on how web 3.0 will grow,” McCauley said. Web 3.0 refers to the next stage of Internet evolution. 

“Broadly, the way that we think about Web 3.0 now is that it’s going to be this kind of infinite game, where an infinite amount of advancement in technology happens across a broad range of different industries, and we’re just seeing the very beginning of that,” McCauley said.

Risky asset or inflation hedge? 

As bitcoin tends to move in the same direction as the stock market recently, the cryptocurrency has been trading more like a  risk-on asset, instead of a hedge against inflation, according to some analysts.

“I have never bought into the inflation hedge narrative.” Craig Erlam, senior market analyst at [currency] trading platform OANDA, told MarketWatch in a phone interview. “I just don’t see enough evidence. And I think having limited coins isn’t enough [for bitcoin] to be an inflation hedge and certainly not enough to be a safe haven.” 

“When we did see markets pricing a lot more inflation, especially because central banks are pushing back against raising rates, gold surged, and bitcoin jumped and then dropped again,” Erlam said. “I think that was a sign that in times of real need, the inflation hedge narrative starts to look a little bit misguided.”

Over the next month or so, omicron’s influence on global investors’ risk appetites and the governments’ reactions will likely have the greatest impact on bitcoin price, according to Erlam.  “If we see that omicron is vaccine-resistant, it’s far more violent and it’s far more transmissible, then I think we’re gonna see significant risk aversion in the markets.” In that scenario, bitcoin’s price “could be hit quite hard,” Erlam said. 

Miner stocks 

Arcane Research’s mining index, which is composed of 15 of the largest publicly listed mining companies and weighted by market cap, has gained 197% so far in 2021, surpassing the 95% gain of bitcoin, according to a Tuesday report. 

Bitcoin mining company Marathon Digital is so far the best performer in 2021 among all crypto miner stocks, with a gain of more than 350% year-to-date, the report noted. 

However, “an investment in mining companies carries a much higher risk than an investment in bitcoin itself,” according to Arcane’s report. Bitcoin miner Bit Digital saw its shares decline 70% so far in 2021, as the company relocated its operations from China to North America after China started cracking down on crypto mining.

Similar trends play out in physical assets too, as shares of gold miners
GDX,
+0.76%
tend to see amplified moves, compared against underlying spot gold or gold futures
GC00,
+1.20%.

The crypto token called omicron? 

As the coronavirus variant omicron caught the world’s attention, a namesake cryptocurrency surged more than 900% from about $65 on Nov.27 to $692 on Nov. 29. The token Omicron is recently trading at around $322, according to CoinMarketCap.

The cryptocurrency isn’t related to the COVID variant, which also uses the 15th letter of the Greek alphabet. Digital omicron, which is a fork of Olympus, is a decentralized yield farming project launched in early November. Its token OMIC can only be traded at decentralized crypto exchange Sushiswap. 

“I think that’s kind of the whole meme stock economy that we’re in,” Daniel Polotsky, founder and chief adviser of CoinFlip, told MarketWatch. “This project is still a very small project, despite its surge. There could be a lot of manipulation based on sentiment,” said Polotsky. 

Crypto executives to testify before Congress

On Dec. 8, CEOs of several major cryptocurrency companies will testify before the House Financial Services Committee starting at 10 a.m. ET, MarketWatch’s Chris Matthews reports.

The hearing is titled “Digital Assets and the Future of Finance” and will explore the “challenges and benefits” of financial innovations.

Witnesses will include Jeremy Allaire, CEO of Circle, Sam Bankman-Fried, CEO of crypto exchange FTX, Brian Brooks, former acting Comptroller of the Currency and CEO of Bitfury, Chad Cascarilla, CEO of Paxos, Danelle Dixon, CEO of Stellar Development Foundation and Alesia Haas, CFO of Coinbase Global Inc.
COIN,
-6.69%.
 

Crypto companies, funds

In crypto-related company news, shares of Coinbase traded down 2.5% to $287 Thursday afternoon. It was down 8.1% for the past five trading days. Michael Saylor’s MicroStrategy Inc. 
MSTR,
-7.66%
 dropped 3.1% to $683.9. It was down 2.4% over the past five days.

Mining company Riot Blockchain Inc. 
RIOT,
-13.13%
 shares fell 7.4% to $33, contributing to an 11% loss over the past five days. Shares of Marathon Digital Holdings Inc.
MARA,
-15.14%
 plunged 3.4% to $49, contributing to a 5.4% loss over the past five days. Another miner Ebang International Holdings Inc. 
EBON,
-9.72%
went up 1.4% to $1.5, with a 13% loss over the past five days.

Overstock.com Inc. 
OSTK,
-4.63%
 went down 0.7% to $84.1. The shares went down 9.4% over the past five days.

Square Inc. 
SQ,
-5.64%’s
shares fell 2.5% to $189.5, with a 12.1% loss for the past five days. Tesla Inc.’s
TSLA,
-6.42%
shares traded down 0.75% to $1,087, with a 2.6% loss over the past five days.

PayPal Holdings Inc. 
PYPL,
-1.72%
 rose 4.4% to $187, while it recorded a 0.8% loss over the past five days, while NVIDIA Corp.
NVDA,
-4.46%
 went up 2.4% to $321, with a 1.7% loss over the past five days.

Advanced Micro Devices Inc. 
AMD,
-4.43%
went up 0.86% to $150.4 and logged a 4.9% loss over the past five trading days.

In the fund space, ProShares Bitcoin Strategy ETF 
BITO,
-6.61%
 went up 0.5% to $36.3 Thursday, while Valkyrie Bitcoin Strategy ETF 
BTF,
-6.45%
 rose 0.3% to $22.4. VanEck Bitcoin Strategy ETF
XBTF,
-6.36%
inched up 0.6% to $56.6.

Grayscale Bitcoin Trust
GBTC,
-7.80%
 went up 0.1% to $44.9, with a 2.7% loss over the past five days.

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