First Mover: Bitcoin Needs No Vaccine as Druckenmiller Lays Down 'Better Bet'

ALSO: Ether options hit open-interest record, Binance U.S. unit joins Silvergate SEN

November 10, 2020 Sponsored By: By the CoinDesk Markets Team Edited by Bradley Keoun If you were forwarded this newsletter and would like to receive it, sign up here.  Bitcoin (BTC) +0.3% $15,306 Ether (ETH)  +1.2% $447 (Price data as of Nov. 10 @12:13 UTC) TODAY: Price Point: Bitcoin was lower, staying in a range between $14.8K and $15.6K.  Market Moves: Price reaction to vaccine breakthrough renews dialogue over whether bitcoin trades like a risk-on asset, inflation hedge or neither.  Bitcoin Watch: Last month's price breakout above $12.5K proved crucial – among other reasons – in establishing a bullish market tone, CoinDesk's Omkar Godbole writes.  What's Hot: Hedge-fund legend Stanley Druckenmiller buys into bitcoin bet, ether options climb to open-interest record, Binance's U.S. unit joins Silvergate SEN network.  Price Point Bitcoin was higher, though barely, appearing to settle into a new range over the past several days between roughly $14,800 and $15,600.    "Should bitcoin prices consolidate this week," wrote Matt Blom, head of sales and trading for the digital-asset firm Diginex, "it would set us up for the next leg up towards $17,000."   In traditional markets, European and Asian shares inched up while U.S. stock futures pointed to a lower open. Gold rose 0.7% to $1,876 an ounce.  Market Moves Bitcoin's price slide Monday amid a vaccine-powered surge in U.S. stocks sent cryptocurrency analysts scrambling to explain the investment logic, while highlighting the on-again, off-again synchronicity between digital-asset and traditional markets.    The progress reported by Pfizer toward developing a vaccine could portend a faster-than-expected recovery in the global economy. A rebound in consumer demand would bring about faster growth in corporate earnings and thus improve prospects for stocks.   An economic acceleration also theoretically could speed up inflation and by extension boost bitcoin, seen by a growing number of investors as an inflation hedge, similar to gold. The investing legend Stanley Druckenmiller told CNBC on Monday that he owned "many many more times gold than I own bitcoin, but frankly if the gold bet works, the bitcoin bet will probably work better."   But nothing is simple in the art of pinpointing fickle and topsy-turvy market narratives, especially during a year when the hand of governments and central banks has been particularly heavy, in the form of trillions of dollars of fiscal and monetary stimulus they've pumped into the financial system.     According to Bloomberg, economists immediately began to speculate that any improvement brought by a vaccine might simply relieve pressure on the U.S. lawmakers to rush out a new coronavirus stimulus bill, or on the Federal Reserve to accelerate its $120 billion-a-month of asset purchases. All things being equal, less stimulus might mean less inflation.    "Assuming the Pfizer vaccine is as effective as currently indicated, it will take several months to manufacture and inoculate large segments of the population," wrote Thomas Perfumo, strategy director at Kraken Intelligence, an analysis unit of the similarly named cryptocurrency exchange. "The key question is whether additional fiscal stimulus is on the horizon and how asset values, including bitcoin, continue to digest the swell in unprecedented fiscal and monetary response."   Of course the 11-year-old bitcoin has defied market prognosticators for most of its history, and some cryptocurrency traders say the daily price movements represent little more than a statistical random walk, or maybe correlation without causation. Bitcoin has blown away every other major asset class in 2020, with a 113% year-to-date gain versus 10% for stocks and 24% for gold.    Bitcoin's price correlation over the past 90 days with both stocks and gold stands at a positive but weak level of 0.35, where 1 represents perfect synchronicity, -1 a perfectly inverse relationship, and 0 no connection at all.   It might also be weak to draw too many inferences beyond just: The bitcoin bet appears to be winning.  - Bradley Keoun  SPONSORED BY GRAYSCALE® Grayscale Investments is the world's largest digital currency asset manager, with more than $9.1B in assets under management as of November 6, 2020. Grayscale offers the investment community industry-leading insights, expertise, and exposure to digital assets.  Insights - Grayscale produces bold, differentiated research and reports that shed light on digital currency investing. Whether you're a crypto newbie or an industry pro, Grayscale's growing resource library is invaluable. Expertise - Founded in 2013, few can claim to be involved in the industry as long as Grayscale. The firm understands what investors need to know about digital currencies and is dedicated to expanding interest in this rapidly expanding asset class. Exposure - Through its family of 10 investment products, Grayscale provides access and exposure to the digital currency asset class in the form of a security without the challenges of buying, storing, and safekeeping digital currencies directly.  Connect with Grayscale today Bitcoin Watch Bitcoin's weekly price chart shows breakout above $12,500 late last month. (TradingView) Bitcoin (BTC) has chalked up a stellar price rally in the past two months, reaching 33-month highs close to $16,000. The uptrend began in early September after buyers bought a dip below $10,000, and gathered pace in the second half of October. Last week, prices reached a high of $15,971, a level last seen in January 2018. That's a 63% price gain in eight weeks, according to CoinDesk's Bitcoin Price Index.   Over 2018 and 2019, bitcoin often languished below $10,000, struggling to recover from a crash that followed the late 2017 surge to record highs near $20,000. So what's behind the rapid gains in recent weeks? Here are three of the primary factors driving the bull market: Increased institutional participation: "Over the past eight weeks, we have seen various notable public companies and hedge funds enter the cryptocurrency market with sizable deployment of capital," Matthew Dibb, co-founder, and COO of Singapore-based Stack Funds said. Supply crunch: "Between Grayscale's GBTC trust, MicroStrategy and the influx of other large spot buyers, the supply of bitcoin is beginning to look more scarce," Dibb said. Grayscale is owned by CoinDesk's parent firm, Digital Currency Group. Technical breakout: Bitcoin's bullish bias strengthened following the cryptocurrency's convincing break above $12,500 in the third week of October.  - Omkar Godbole   Read More: 3 Reasons Bitcoin Has Rallied Over 60% in Just Two Months  Token Watch Bitcoin SV (BSV): Flaw in bitcoin SV multisig wallet puts funds at risk.   Ether (ETH): Options open interest climbs to record $570M, according to Skew, a provider of crypto-derivatives data: What's Hot Beijing municipal government conference notes plans to pilot central-bank digital currency in China's capital (CoinDesk)    U.S. government's tendency to move at slower pace than private sector when it comes to innovation isn't a bad thing says SEC Commission Hester "Crypto Mom" Peirce (CoinDesk)   Binance.US joins Gemini, Kraken and ErisX on Silvergate Bank's SEN Network, which allows companies to move U.S. dollars instantly between cryptocurrency exchanges (CoinDesk)   Analogs The U.S. continues to stare at a mountain of potential debt defaults and decline in asset prices due to coronavirus, Fed says in semiannual report (Reuters)   New Zealand central bank proves "kiwi whale" as ownership of country's government bonds shoots to 37% from 6% in seven months (Bloomberg)    U.S. banks tighten loan standards to households even as demand increases for mortgages and auto loans (Federal Reserve): CoinDesk Research's latest Monthly Review covers asset performance in October, Bitcoin's congestion problem and Ethereum's shifting metrics as the launch of Ethereum 2.0 looms. Download the free report.   Tweet of the Day CoinDesk's upcoming virtual event Bitcoin for Advisors, on two half days Nov. 9-10, showcases a program tailored to the financial advisor community that covers investment theses for bitcoin, why younger demographics are turning to this asset and how it fits into the current global macroeconomic picture.   We will also walk through the practicalities: how to answer client questions about bitcoin, how to talk to your compliance department about bitcoin, how can bitcoin can help grow your book. Apply for Bitcoin for Advisors, Nov. 9-10. Webinar: How to Value Ethereum   In this 30-minute webinar, the first of the four-part series How to Value Ethereum, CoinDesk Research looks at accounts - a concept that sounds familiar to blockchain addresses, but involves novelties and complexities that are critical to understanding how Ethereum works.   Register to join How to Value Ethereum on Nov. 11. Disclaimer: The information presented in this message is intended as a news item that provides a brief summary of various events and developments that affect, or that might in the future affect, the value of one or more of the cryptocurrencies described above. The information contained in this message, and any information liked through the items contained herein, is not intended to provide sufficient information to form the basis for an investment decision. The information presented herein is accurate only as of its date, and it was not prepared by a research analyst or other investment professional. You should seek additional information regarding the merits and risks of investing in any cryptocurrency before deciding to purchase or sell any such instruments.  ATTENTION: Scammers have been sending fraudulent emails with links to sites disguised to look like coindesk.com. If you are in doubt about a link, type https://www.coindesk.com directly into your browser; do not copy and paste. 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