First Mover Asia: ConsenSys Chief Cryptoeconomist Sees Little Drama Ahead for Bitcoin
Good morning. Here’s what’s happening:
Prices: Bitcoin has been trading in the low $20,000s for weeks. ConsenSys Chief Cryptoeconomist Lex Sokolin doesn't see crypto prices shifting much in the near future.
Insights: Tron founder Justin Sun indicates that Hong Kong's developing strategy for digital asset licensing could lead to a change in attitude in mainland China.
Bitcoin's Undramatic Fate
Is bitcoin fated to the same narrow range they've occupied for much of this year, bobbing and weaving in the low $20,000s?
Lex Sokolin, chief cryptoeconomics officer for blockchain software technology firm ConsenSys thinks so with stickily high inflation at the root of its entrenchment. The largest cryptocurrency by market capitalization was recently trading at $23,508, up 1% over the past 24 hours. BTC has risen about 40% this year and ether, the second largest crypto in market value, nearly as much, but their momentum has also stalled recently amid jobs and price data that have failed to head in the right direction.
"I don't see any dramatic shift in market regime," Sokolin, who has contributed columns to CoinDesk, wrote in an email. "We still have stubborn inflation and central banks are committed to raising rates until inflation cools further. That means that tech equities and crypto assets will continue trading at suppressed multiples, and the housing market is in danger. Consumers fewer assets for discretionary spending also limits participation in Web3 commerce, which can be looked at as fashion or luxury consumption."
He added that "institutions are waiting for further regulatory clarity, and the enforcement actions add to the uncertainty, although he also noted "good news that many of the poorly structured actors of 2022 have been revealed and (that) the market" was "processing the consequences."
Ether was recently changing hands 15 $1,650, up 2.1% from Tuesday, same time. Sokolin was upbeat about the upcoming Shanghai upgrade's longer-range impact. "Withdrawals should significantly derisk staking activity in the Ethereum network," he said. "Short-term we may see some investors moving their positions, but longer term I would expect to see a higher portion of Ether staked to secure the network."
Other major cryptos were largely in the green, despite ongoing inflation- and economy-related angst, even as major equity indexes performed sluggishly. The CoinDesk Market Index, a measure of crypto market performance, was up 1.8% for the day. The CMI gained just 0.8% in February, well off its January levels, according to its latest monthly report, although the Computing and DeFi sectors remained vibrant, gaining 17.5% and 11.1%, respectively. Computing has risen about 80% in 2023.
In an interview on CoinDeskTV, CoinDesk Indices Managing Director Jodie Gunzberg said interest in AI tokens had helped fuel Computingr's surge. "I don't know that they're all AI tokens, but some of them certainly line up with the AI hype, the ChatGPT that's been dominating the conversation, we are seeing some pretty spectacular performance in Computing. So we are seeing a lot of those tokens dominate. And while computing doesn't make up a large portion of the market, in terms of market cap, there's still a ton of opportunity there."
|Cosmos||ATOM||+2.0%||Smart Contract Platform|
|Ethereum||ETH||+2.0%||Smart Contract Platform|
|Stellar||XLM||−0.2%||Smart Contract Platform|
Tron Founder Justin Sun Sees Potential in Hong Kong
The city of Hong Kong is looking to become a virtual asset hub as soon as this summer.
Justin Sun, founder of the Tron blockchain and the man who runs the Huobi crypto exchange, is ready for that change. He said in a tweet Monday that Huobi would apply for a virtual asset service provider (VASP) license in Hong Kong under new requirements to operate that go into effect in June. If approved, the exchange would then launch Huobi Hong Kong. "Eventually, since Huobi is one of the leading blockchain exchanges in the region … I definitely [have] confidence Huobi will secure the license," he told CoinDesk TV's "First Mover" on Wednesday.
Huobi, which ranks 15th in overall trading volume according to CoinMarketCap data, is one of the exchanges seeking a license to operate in Hong Kong's crypto market. Seychelles-based crypto exchange OKX, which ranks eighth in overall trading volume, has also applied to be licensed in the city. And then there's the looming presence of China.
"Beijing sees Hong Kong as one of the experiment zones for cryptocurrency," Sun said.
The Chinese government's relationship with crypto has been tumultuous. Two years ago, regulators cracked down on crypto trading and mining.
Sun thinks China is looking at Hong Kong as a kind of experiment, to see if crypto can be regulated on the mainland. If Hong Kong suceeds it could create a change of attitude in Beijing. "So that's why they want to see Hong Kong do it first," he said. "And then you see the result. If it has positive feedback, they might change the policy in mainland China as well."
The new requirements don't necessarily mean crypto will be available to Hong Kong retail traders, but at least for now Hong Kong's securities regulator, the Securities and Futures Commission (SFC), has extended a lifeline to crypto companies.
6:00 p.m. HKT/SGT(10:00 UTC) Eurozone Harmonized Index of Consumer Prices (YoY/Feb)
Bitcoin (BTC) was holding firm above $23,000 as crypto traders look ahead to a new month, following minimal gains for the largest cryptocurrency by market capitalization in February. CoinDesk Indices Managing Director Jodie Gunzberg shared her crypto markets analysis. Plus, TRON Founder, Huobi Global Advisor, and Ambassador of Grenada to the WTO Justin Sun joined "First Mover" to discuss Huobi's plans to apply for a crypto exchange license in Hong Kong. And, Former SEC Enforcement Branch Chief and Bragança Law Attorney Lisa Bragança weighed in on the latest FTX developments.
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