Between Friday night and Monday afternoon the crypto market jumped from $233 billion to $276 billion.
This led more than a few people to text me and ask what is going on.
If you have followed crypto for a while, you’ll know that a jump like this (or a drop of the same amount) isn’t at all unusual. And the people texting me knew this too. So why did this jump catch everyone’s interest?
The main reason is probably because the crypto market has been steadily bleeding for months now. Every rise has been inevitably dragged down lower a few days later.
For some reason this rise felt different. It almost felt like the ridiculous rallies we saw last summer. The fact this happened over a weekend – as most of those did – added to this feeling.
And this comes just as many people have been stating there will be no end to the bear market soon, and that we have a lot lower to go yet.
Perhaps that’s because although we’ve also seen myriad good news coming out of crypto over the last few months (check out my summary of June’s biggest crypto stories here) the price has kept rolling down.
People have become numb to good news. “If it doesn’t move the price, who cares? We’re stuck in this down trend for at least the next four weeks… months… years…” they say.
So a jump in price on Friday night, followed by not a drop but another jump on Monday afternoon, shook people out of their stupors.
And they really were jumps.
The first jump from $233 billion to $276 billion happened in just under four hours. It was between 11pm and 3am UK time.
So basically people went to sleep with stagnating prices and woke up to green across the board.
Like I said, these price rises happen all the time. So although this one was faster than usual, no one really cared that much. “It’ll be back below where it was by Monday,” many were saying.
But then on Monday, something unusual happened. The price jumped again. This time in the space of only 47 minutes.
Between 2pm and 2.47pm Monday afternoon the crypto market gained $24 billion. The entire top 100 was double digits up.
This was the move that got people interested. Instead of the usual rise and then slump, we had a jump and then an even bigger jump.
But the question is: why?
Institutional money is coming to crypto much faster than people predicted
As usual when something unusual happens in crypto, there are many theories as to why it happened.
Transactions in crypto may be transparent, but the reasons for those transactions are not.
I think this combination of everyone being able to see exactly what’s happening, but not being able to see the reasons as to why, is one of the most intriguing things about the world of crypto.
It’s like a puzzle that gives you endless clues but no concrete answers. Never before have we known so much and so little at the same time.
However, for once, this jump may have clear reason. And that reason is Coinbase.
Yesterday, Coinbase Custody officially opened for business.
This is Coinbase’s solution for letting big money institutions invest in crypto. And I do mean big money.
In order to use it you need to invest at least $10 million. There’s a $100,000 setup fee and an ongoing 0.1% fee per month.
As Coinbase says:
Coinbase Custody’s mission is to make digital currency investment accessible to every eligible financial institution and hedge fund in the world. We’ll achieve this by striving to become the most trusted and easiest-to-use crypto custody service available.
You can read its full blog post here.
At the moment Coinbase Custody only supports bitcoin, Bitcoin Cash, Ethereum and Litecoin. But it will be adding more cryptos in the coming months.
As a private investor it would be insane to pay $100,000 to have Coinbase hold your bitcoin when you can do it yourself for free. But as an institution, it makes total sense. And it means Coinbase deals with a lot of the regulatory trouble.
Here’s what Coinbase revealed in June:
Coinbase is on track to operate a regulated broker-dealer, pending approval by federal authorities. If approved, Coinbase will soon be capable of offering blockchain-based securities, under the oversight of the US Securities and Exchange Commission (SEC) and the Financial Industry Regulatory Authority (FINRA). This step forward is being made possible by our acquisition of a broker-dealer license (B-D), an alternative trading system license (ATS), and a registered investment advisor (RIA) license.
So it would seem that approval went through last week.
People have been talking about “institutional money” entering crypto for as long as I can remember and this could well be the way it gets started.
This morning, Coinbase’s founder Brian Armstrong stated that “deposits are rolling in”.
And don’t forget, each one of those deposits is at least $10 million.
According to Bloomberg, Coinbase already has ten customers:
Coinbase Inc., one of the world’s largest cryptocurrency exchanges, said 10 hedge funds and family offices have begun using the custody service it debuted last week that seeks to safeguard digital tokens in a manner similar to traditional securities.
The company aims to have 100 large institutional customers by the end of the year with as much as $5 billion in assets under management
Coinbase first announced its Custody program a few months ago, but most seemed to think it wouldn’t be up and running until the end of the year. So this all took many people by surprise.
It also timed perfectly with crypto pump on Monday. Although you can’t see what time the blog was posted, you can see that the author tweeted about it at 2.29pm. Right in the middle of Monday’s pump.
The Bloomberg article I quoted was posted at 10am on Monday. So the news was already floating around. But given Coinbase’s Bitcoin Cash insider trading issue, perhaps people (or employees) were waiting for the official announcement before putting money in.
As I write this, the crypto market cap is holding steady at around $270 billion. There hasn’t been a drop back yet.
It really feels like this could be the start of something, but we won’t know for sure for a few more days.
Even if it does drop, this shows just how fast people’s belief in crypto can turn. All the forums and message boards I read have turned much more positive on this small pump.
If Ethereum futures are soon announced, and if the bitcoin ETF ever gets approved, we could see a massive, sustained breakout in prices.
But even that could just be the beginning. Over the next few years, we are likely to see whole financial operations move on to the blockchain.
I’ve written before about the successful “smart bonds” trials (read it here), and there is a lot of talk about moving whole stockmarkets on to blockchain.
This would be akin to the shift from trading with paper records to trading with computers. And it would open up the wider investment markets to a massive new audience. It would also, obviously, push crypto adoption, and thus prices, through the roof.
How would it all work, and how far along are we with these developments? That’s what I’m writing this month’s Frontier Tech Investor: Crypto Wire on, which will be out in a couple of weeks. If you’re not yet a subscriber, you can join here and make sure you don’t miss out.
Until next time,
Editor, Exponential Investor