The GameStop-galvanized "bear raid" by retail stock traders appears to have terrified Wall Street, but crypto-industry marketeers are salivating over the prospect of new customer leads, and more demand.

Jan 29, 2021 at 2:45 p.m. UTCUpdated Jan 29, 2021 at 2:46 p.m. UTC

First Mover: Elon Musk #Bitcoin Moment Adds to Dogecoin, GameStop Wackiness

Bitcoin (BTC) which seemed uncannily listless for most of this wild week, suddenly found energy after Elon Musk, the electric-vehicle and private-spaceflight entrepreneur who’s also reportedly the world’s richest man, changed his Twitter bio to mention the cryptocurrency. (See screen grab below, in Omkar Godbole’s Bitcoin Watch column.) 

The price of bitcoin, the oldest and largest cryptocurrency, surged 12% to about $37,400, around the highest in two weeks. According to Decrypt, the sudden surge higher caused some $420 million of trader positions to be liquidated – a delicious bit of irony given Musk’s very public aversion to short-sellers, or traders who bet on price declines.  

Ether (ETH), the Ethereum blockchain’s native cryptocurrency, was also higher, pushing back toward a new all-time high price above $1,400.

Dogecoin (DOGE), a digital token with little utility beyond the meme-iness of its doggie-faced image, has climbed eight-fold in the past two days. (Read more about that here and here and in the Market Moves column, below.)     

In traditional markets, European share indexes slid and U.S. stock futures pointed to a lower open amid lingering concerns about a cash squeeze in China and the volatile retail-trader speculation highlighted by this week’s GameStop saga.

Market Moves

A new narrative is coursing through digital markets that could soon make its way to the crypto industry’s marketing departments: That a lot of individual investors, furious at Wall Street and turned off by stock markets following the GameStop episode, might find redemption by turning to cryptocurrencies. 

Crypto twitterati including Alex Kruger, Balaji Srinivasan, Erik Vorhees and the Winklevoss twins jumped on the bandwagon Thursday, hammering the message that Wall Street serves its own self-interests before those of customers. And that crypto fixes this. 

The industry’s opportunistic spirit is already appearing in the form of pitches and new products. Non-U.S.-based cryptocurrency exchange FTX, famous for last year’s TRUMP tokens, rushed to list GameStop’s stock for tokenized futures and spot trading, as reported by CoinDesk’s Sebastian Sinclair. Bermuda-based Bittrex Global listed tokenized GameStop (GME) shares along with other stocks delisted by the retail trading platform Robinhood, including AMC Entertainment.  

Here’s a quick sampling of the commentary:

Mati Greenspan, founder of the foreign-exchange and cryptocurrency analysis firm Quantum Economics, told his newsletter subscribers on Thursday: "To many involved in bitcoin and cryptocurrencies, the answer is very clear. Luckily for us, an alternative market has been under construction for the last few years, the decentralized marketplace. It's a place where transparency is enforced by code and not by men."Paulo Ardoino, CTO of the cryptocurrency exchange Bitfinex and a spokesman for the stablecoin tether: "As advocates for retail investors rail against the current structure and practices of financial markets, it is important to note that much of the work being done in the blockchain space has been inspired by these barriers. Removing obstacles to normal, everyday working people that are building and seeking wealth growing opportunities has always been part of the ethos of crypto."Nicholas Pelecanos, head of trading at NEM, a blockchain company: "The case for cryptocurrencies only grows stronger. I believe we will witness a new wave of investors come over to bitcoin and other major crypto assets as a result of this debacle." Camila Russo, founder of The Defiant newsletter: "Decentralized finance will win. It's simply better. Freer."

One big question, of course, is what it all might mean for cryptocurrency prices. Prices for the digital token dogecoin (DOGE), which is basically just a doggie-faced meme, have shot up in value as rumors swirled that it might be the next to draw the attention of buck-the-system (or even just fun-seeking) retail traders.

As reported by CoinDesk’s Kevin Reynolds and Zack Voell, dogecoin’s price surged eight-fold Thursday. The token now has a market capitalization of about $6 billion – for something that is basically an elaborate joke. Dogecoin has overtaken bitcoin, which has a market value of almost $700 billion, to become the most-mentioned cryptocurrency on Twitter. 

(For the DOGE-curious readers out ther, the breed typically associated with dogecoin is shina inu, which according to the American Kennel Club’s website typically only weighs about 20 pounds but is “a well-muscled,” “spirited,” and “good-natured.” Pretty cute, too!) 

Dogecoin is often associated with the Shina Inu dog breed.

Source: American Kennel Club

As discussed by First Mover on Thursday, there are already a lot of similarities between loosely regulated crypto markets, whose international reach has put large portions of the players and activity beyond the scope of usually-coordinated authorities, and the type of anything-goes, let’s-roll spirit that invaded Wall Street this week.     

But it’s the mere existence of an alternative to the traditional financial system that might ultimately prove to be the biggest selling point for the crypto industry, which can also accurately claim to have the newest technology, broadly speaking.     

Mohamed El-Erian, the former Pimco and Harvard money manager who now serves as chief economic adviser for the German financial conglomerate Allianz, wrote this week in a column for Bloomberg Opinion that the GameStop-inspired masses might represent a “new investor force” that “raises several interesting questions for market structure and future financial stability.” 

“The dual possibility of large-scale financial volatility and market dysfunction would pose yet another challenge to an economic recovery,” El-Erian wrote. 

That new investor force might represent the crypto-industry’s new hottest new lead – for motivated customers.  

– Bradley Keoun

Bitcoin Watch

Screen grab of Elon Musk's twitter profile, updated to include the hashtag #bitcoin. (Twitter)

Bitcoin witnessed a sudden double-digit spike to 10-day highs on Friday.

The top cryptocurrency picked up a bid near $32,000 at around 08:30 coordinated universal time (3:30 a.m. in New York) and jumped to $37,050, the highest since Jan. 19, according to CoinDesk 20 data. The 15.7% rise happened in less than 15 minutes and more than reversed the early dip from $34,400 to $32,000.

While the exact reason for the bullish move is hard to define, prices surged after Tesla and SpaceX CEO Elon Musk changed his Twitter bio to mention the cryptocurrency. While the bitcoin community is keen for Musk to come out as a supporter, he seemingly enjoys dropping crypto mentions as something of a tease.

Around the time he changed the bio, Musk also cryptically tweeted: “In retrospect, it was inevitable.” 

Whether bitcoin’s rise will continue isn’t certain. Blockchain analytics firm CryptoQuant’s “Exchange Whale Ratio,” calculated by dividing the top 10 bitcoin inflow transactions in an hour by total exchange inflows, jumped to an eight-month high of 0.88 early Friday, warning of a possible price drop.

However, “Elon’s tweet overrides all other bearish signals,” Ki-Young Ju, CEO of blockchain analytics firm CryptoQuant tweeted. 

– Omkar Godbole

Token Watch

Algorand (ALGO): Proof-of-stake network Algorand inks partnership with Curv, a digital-custody technology provider, for “trusted DeFi” (CoinDesk)

Dogecoin (DOGE): Meme coin nearly triples, with market capitalization now at record $2.5B, after social-media attention (CoinDesk)  

Cosmos (ATOM): Cosmos set to take lead in blockchain interoperability with February’s Stargate release (CoinDesk) 

Bitcoin (BTC): It’s the demand, stupid. Bitcoin advocates confuse “scarce” with “finite,” Frances Coppola writes in column (CoinDesk Opinion) 

What's Hot

Coinbase says in Web post it plans to become publicly traded company via a direct listing (CoinDesk) 

Iran tightens grip on crypto miners while looking to them as a potential source of revenue as international sanctions crimp economy (CoinDesk) 

Cathie Wood’s ARK estimates bitcoin could climb to $400K if the cryptocurrency were to replace 10% of the cash on corporate balance sheets: 

Hypothetical price increase if bitcoin were to replace cash on S&P 500 corporate balance sheets.

Source: ARK

Analogs

The latest on the economy and traditional finance

Silver surges as GameStop day traders move into other assets (WSJ) 

Retail traders sue Robinhood over restrictions on meme stocks GameStop, AMC Theaters and Blackberry (CoinDesk) 

Robinhood said to draw on bank credit lines amid tumult (Bloomberg) 

Private-equity firm Silver Lake converts $600M of AMC convertible notes into equity after retail-fueled stock-price pump (WSJ)

U.S. Congress plans hearings on GameStop market pumps (CoinDesk) 

American Airlines, Southwest Airlines post record losses for 2020 after coronavirus-related travel downturn (WSJ) 

Emerging-market borrowing boom – $847B in 2020, with another $100B of bonds sold so far in January – sparks concerns over debt loads (WSJ)

European Central Bank’s head of banking supervision worries that lenders in the region might not be setting aside enough money for loan-loss reserves (WSJ)

“Investors have been continuously conditioned to buy the dip, regardless of its cause. FOMO (fear of missing out) and TINA (there is no alternative to risk assets) have turbocharged this behavior,” Allianz Chief Economic Adviser Mohamed el-Erian writes in column (Bloomberg Opinion)  

Although the U.S. economy shrank last year by the most since 1946, consumers have increased their spending on goods faster than before the coronavirus hit, as “resilient wages, buoyant stocks, low interest rates and stimulus gave most households ample spending power” while the pandemic limited payments for services, the U.S. Commerce Department reported Thursday (WSJ) :

Consumer spending on goods is increasing at a faster pace than before the coronavirus hit early last year.

Source: U.S. Commerce Department/WSJ

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