Bitcoin tops $21.3k as cryptos’ 2023 feel-good story continues

ALSO: Sam Reynolds writes that the surge of FTX’s FTT Token is part of a trend in which investors send prices of certain tokens higher even as their projects fail or flounder.

Good morning. Here’s what’s happening:

Prices: Bitcoin soared past $21.3K for the first time since early November before retreating slightly. But BTC remained in the green in Monday trading.

Insights: The surge in FTX’s FTT token defies reason, but is part of a trend of cryptos whose prices rise even as their projects fail and flounder.

Prices

BTC/ETH prices per CoinDesk Indices; gold is COMEX spot price. Prices as of about 4 p.m. ET


Bitcoin Soars Past $21.3K to Continue Its 2023 Momentum

By James Rubin

Bitcoin’s 2023 feel-good story continued as the largest cryptocurrency by market capitalization held firm above the $21,000 heights it last reached in the fall.

BTC was recently trading at about $21,190, a more than 1.6% gain over the past 24 hours amid light trading typical of long, holiday weekends. U.S. equity markets were closed in observance of the Martin Luther King holiday honoring the late civil rights leader. Bitcoin was trading below $17,000 little over a week ago before a rush of favorable economic data, most notably a decline in the U.S. Consumer Price Index (CPI), catapulted crypto and stock prices prices upward.

Bitcoin’s surge has also come as debate over the U.S. debt ceiling intensifies. In a letter to party leaders on Friday, U.S. Treasury Secretary Janet Yellen called on Congress to raise the ceiling as soon as possible, warning that the government would reach a more than $30 trillion borrowing limit on Jan. 19 when the agency would have to take special actions to manage the government’s cash flow, possibly into June. On Sunday, freshly minted Speaker of the House of Representatives Kevin McCarthy (R-Calif.) reiterated his party’s call for spending cuts as a precursor to increasing the debt ceiling.

Ether was recently approaching $1,600, up roughly 1.5% from Sunday, same time. The second largest crypto in market value has jumped more than 32% this year.

Most other major cryptos spent much of Monday in the green with CRO, the token of exchange Crypto.com recently rising more than 7% and SOL, the token of the Solana blockchain up more than 1.4% to continue its momentum of the last three weeks. FTT, the token of embattled crypto exchange FTX, also added to its recent unlikely gains, rising more than 24% at one point.

As CoinDesk’s Shaurya Malwa reported, crypto markets’ total capitalization surpassed $1 trillion over the weekend, and investors liquidated almost $500 million in shorts, or bets against higher prices, since Friday to mark the highest such levels since October 2022. Meanwhile, the Crypto Fear & Greed Index has hit 45, still in fear territory, but more than six times higher where it stood in June.

“We see the main driver behind this 20% BTC hike over the past week key as the fact that some macro fears are subsiding with positive economic data in the US, including lower inflation stats and strong job growth numbers, in Europe, the EU released unemployment stats which were the lowest in 23 years and, China lifted many of the border restrictions,” Bradley Duke, co-CEO at crypto ETP provider ETC Group, wrote in an email. “This shift in sentiment was reflected in the BTC futures market, with traders betting long four days in a row based on the Long-Short ratio.”

Bitcoin’s surge has also come as debate over the U.S. debt ceiling intensifies. In a letter to party leaders on Friday, U.S. Treasury Secretary Janet Yellen called on Congress to raise the ceiling as soon as possible, warning that the government would reach a more than $30 trillion borrowing limit on Jan. 19 when the agency would have to take special actions to manage the government’s cash flow, possibly into June. On Sunday, freshly minted Speaker of the House of Representatives Kevin McCarthy (R-Calif.) reiterated his party’s call for spending cuts as a precursor to increasing the debt ceiling.

“Looming large in our three part thesis on digital asset adoption is the juxtaposition of a growing U.S. debt load set against a declining work force that is ‘aging out,'” wrote Mark Connors, head of research at Canadian digital asset manager 3iQ, in an email to CoinDesk. “If we don’t let inflation cut our debt in real terms and we can not grow out it, expect more of it.”

Connors added: “BTC is more correlated to debasement than inflation, so not surprised to see BTC lift with the prospects of more debt.

Will the current favorable winds for risk-on assets endure? In an email, Craig Erlam, senior market analyst for foreign exchange market maker Oanda, noted investors’ current optimism but also questioned whether this tone would endure as companies report earnings in the weeks ahead.

“The question now is whether earnings season will enhance that new sense of hope or spoil the party before it really gets going,” Earlam wrote. “Companies have until now been reluctant to let staff go which has kept the labour market tight even as certain economic indicators weaken and inflation dampens the outlook for demand and costs. A bad earnings season could undermine hopes of a soft landing that looks more possible now than it has for many months.”

Erlam added that whether bitcoin’s rise represented “a resurgence or just a brief rebound” wasn’t clear, “but there are clearly still some very bullish traders out there. It should make for an interesting few weeks.”

Biggest Gainers

Asset Ticker Returns DACS Sector
Loopring LRC +5.4% Smart Contract Platform
Polygon MATIC +4.4% Smart Contract Platform
Terra LUNA +3.5% Smart Contract Platform

Biggest Losers

Asset Ticker Returns DACS Sector
Gala GALA −3.1% Entertainment
Cosmos ATOM −2.9% Smart Contract Platform
Dogecoin DOGE −2.6% Currency

Insights

Why Is FTX’s FTT Token Rising?

By Sam Reynolds

FTT token is up, spectacularly, in the last 24 hours, climbing 24.5% according to CoinDesk data. Over the last two weeks, it’s up nearly 200%, with many puzzled why the token of a failed exchange is doing so well.

There is no material reason why FTT should be doing anything but staying dormant. The exchange is gone and not being revived. Worse, the SEC has taken the opinion – and it’s not being contested – that FTT (and other exchange tokens) are securities. Creditors have a long road ahead to get anything back from the courts.

Of course, most reputable exchanges have long delisted FTT. It’s only on KuCoin and a handful of others.

But the market is in the mood for meme token degeneracy. Traders like pushing up and down a corpse, which is why Luna’s Classic (Terra’s token) rose and fell like a roller coaster even as the whole project was effectively declared dead earlier this year.

You can also see this in the success of Solana-based BONK, which is driving the recovery of Solana, on the backs of Shiba Inu memes and a dislike for Alameda tokens (Sam coins).

Decentraland’s MANA token is also defying gravity, up over 80% in the last week. A minor update pushed out by the team upgraded some parts of the UI/UX but didn’t do anything for the virtual world’s small player base.

Sometimes the market just does what its worst critics accuse it of being, nothing more than a casino.

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