Crypto bulls’ comeback? Here are factors driving up institutional interest

Crypto in a snap

Bitcoin BTCUSD lost 3.9% over the past seven days, and was trading at around $23,297 on Thursday, according to CoinDesk data. Ether ETHUSD declined 2.6% over the seven-day stretch to around $1,865. Meme token Dogecoin DOGEUSD gained 10.9% while another dog-themed token, Shiba Inu SHIBUSD, advanced 19.7% from seven days ago.

Crypto Metrics

Crypto bulls’ comeback?

After months of muted activity in the crypto market, there have been some signs that institutional and retail interests are picking up, prompting some investors to ask if the worst is already behind. Bitcoin is up 24% from its June low, but still down 50% year to date, according to CoinDesk data.

Blackrock BLK, the world’s largest asset manager, last week launched a spot bitcoin private trust, available to U.S. institutional investors. 

“Despite the steep downturn in the digital asset market, we are still seeing substantial interest from some institutional clients in how to efficiently and cost-effectively access these assets using our technology and product capabilities,” the company said in a blog post. 

Meanwhile, the lending activity in the crypto space has seen a bounce, Luke Farrell, crypto trader at GSR, said in an interview. Starting June, lending activities were almost “shut down to zero,” as the digital asset industry battled with contagion when crypto hedge fund Three Arrows and lender Celsius went into bankruptcy, according to Farrell. “Lenders across the spectrum, from DeFi pools to big lenders like Genesis really had no appetite to lend.” 

“During the last two weeks, we’ve seen a pickup of that rate. They have gone up naturally because of the halt in credit but you’re seeing new money being willing to be deployed,” Farrell said. Still, the interest rates are “not that high relative to where they could be,” according to Farrell. 

“To me that shows a lot of a lot of capital on the sideline wanting to deploy into yield type strategies or things that can generate a yield or income that was a little bit more market neutral bias, rather than just buying tokens,” Farrell noted. 

In fact, with the Ethereum “Merge” coming up, “there’s clear institutional and whale interest and accumulation,” according to Tom Dunleavy, senior research analyst at Messari. The “Merge” is a highly-anticipated upgrade that will transition Ethereum from proof-of-work to proof-of-stake, a consensus mechanism that is much more energy efficient, and will pave the way for the blockchain to be cheaper and more productive. 

According to blockchain data, the number of addresses holding over 100 ether, 1000 ether and more than 10,000 ether have seen a sharp rise, Dunleavy noted. 

Some traders have been borrowing ether with anticipation of a Ethereum hard fork. In late July, Ethereum miner Chandler Guo proposed to fork, or split the chain, with one that continues to be based on the proof-of-work consensus mechanism. If it happens, all ether holders will receive an equal amount of the new tokens on the forked chain. 

“Presumably there will be some sort of value in that,” Dunleavy said. “So holding native ether going into the Merge, if you assume there’ll be some value from the fork, is a strategy I think a lot of people are pursuing through these lending protocols.”

On the retail side, investors are not as active in the Ethereum “Merge” trades. The amount of addresses holding between 0.1 ETH and 1 ETH have remained flat for July and August, Dunleavy noted.  

Still, meme coins rallied, which some attributed in part to the comeback of retail interests. I’ve written more about it here. 

Hear from Mike Novogratz at the Best New Ideas in Money Festival on Sept. 21 and Sept. 22 in New York. The Galaxy Digital CEO has ideas about navigating the crypto winter.

Genesis cuts 20% workforce

The contagion from some major crypto companies’ collapse is not over. Genesis, one of the largest crypto lenders, said it has laid off 20% of its workforce. The company’s chief executive Michael Moro is also stepping down, while the company’s chief operating officer Derar Islim will assume the role as interim CEO, according to a statement.

Genesis earlier filed a $1.2 billion claim against Three Arrows, which is being liquidated, while Genesis’s parent company Digital Currency Group assured the entire claim. 

Crypto companies, funds

Shares of Coinbase Global Inc. COIN went down 3.6% to $82.37 on Thursday, and they were down 2.06% over the past five trading sessions. Michael Saylor’s MicroStrategy Inc. MSTR declined 1% Thursday to $321.95, while the shares went down 4.6% over the past five days.

Mining company Riot Blockchain Inc. RIOT shares dropped 1.4% to $8.23 Thursday, and lost 13.5% over the past five days. Shares of Marathon Digital Holdings Inc. MARA edged up 0.5% to $15.53, with a 9.7% loss over the past five days. Another miner, Ebang International Holdings Inc. EBON saw shares down 4.5% to $0.53 on Thursday, for a 6.4% decrease over the past five days.

Overstock.com Inc. OSTK’s shares tanked 4.8% to $30.55. The shares traded 1.6% lower over the five-session period.

Shares of Block Inc. SQ, formerly known as Square, declined 0.9% to $79.66 and were down 7.3% for the week. Tesla Inc. TSLA shares edged lower 0.1% to $910.65, up 5.9% over the past five days.

PayPal Holdings Inc. PYPL picked up 1.2% to $100.57, up 1.5% over the five-session stretch. Nvidia Corp. NVDA shares added 2.3% to $187.53, looking at a 4.5% gain for the past week.

Advanced Micro Devices Inc. AMD shares advanced 2.4% to $100.60 on Thursday, 2.5% higher from five trading days ago.

Among crypto funds, ProShares Bitcoin Strategy ETF BITO rose 0.5% to $14.38 Thursday, while its Short Bitcoin Strategy ETF BITI dipped 0.4% to $33.50. Valkyrie Bitcoin Strategy ETF BTF added 0.2% to $8.94, while VanEck Bitcoin Strategy ETF XBTF traded 0.2% higher to $22.60.

Grayscale Bitcoin Trust GBTC advanced 1.8% to $15.23.

Must Reads

• They Lost Crypto in the Crash. They’re Trying to Get It Back. (The New York Times)
• Canadian Pension Giant Caisse Writes Off $150M Bet on Bankrupt Crypto Lender Celsius (CoinDesk)
• Crypto.com laid off 260 employees — then quietly let go of hundreds more (The Verge)
• A Crypto Winter King Wants to Reanimate the Industry (Bloomberg)
• Inside the Crash of Three Arrows Capital (New York Magazine)