The Shocking Endurance of the Crypto Market

The biggest crypto news and ideas of the day

August 30, 2021

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–Daniel Kuhn

Today's must-reads

Top Shelf

COMMUNICATION BREAKDOWN: Ethereum experienced a chain split last week after a number of network validators failed to update their software. The team behind Geth, the most popular client on the most popular blockchain, issued an emergency hotfix to repair a security vulnerability – only not everyone got the message. Some of Ethereum's largest miners were running outdated code, leading to two different versions of the blockchain. The situation resolved once everyone updated their code.

DOUBLE TROUBLE: DeFi lending pool Cream Finance suffered its second flash loan attack of the year, with more than $25 million worth of AMP tokens and ETH drained from its vaults. The attack leveraged a flash loan, a problematic way to borrow from a protocol without posting collateral. Cream lost $37 million in the attack earlier this year.

HOT STREAK: Solana's SOL token crossed the $100 mark on Monday, drawing a three-figure price for the first time. The programmable blockchain's native currency has seen two weeks of growth on the back of growing Solana-native NFT and DeFi ecosystems, pushing it into the "top 10" crypto assets by market cap.

NEW PLATFORMS: Another crypto firm is getting into NFTs. Nasdaq-listed crypto mining firm The9 Limited announced it will launch an NFT "trading and community platform" called NFTSTAR in Q4. Meanwhile, international banking group Standard Chartered (SC) is linking up with supply chain fintech Linklogis in China to create a blockchain-based trade finance platform.

–D.K.

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What others are writing...

Off-Chain Signals

USDC issuer Centre announces new team to create "global network of stablecoins" (The Block)
Bored Ape Yacht Club sold $96 million of Mutant Ape NFTs in an hour, CryptoPunks hit $1 billion in total sales, an abandoned, early version of EtherRock has a bug that lets anyone mint a free NFT
WSJ feature on "influencers" who move markets in crypto and beyond

–D.K.

A Message from BlockBank

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Putting the news in perspective

The Takeaway

Why This Crypto Market Isn't Like the Others

This morning, hedge fund manager John Paulson gifted us with a lovely rendition of a classic tune titled "Crypto Is Fundamentally Worthless." Personally it's hard to top Jamie Dimon's version, but it's nice to be revisit the classics.

They don't play that song much on the radio anymore, though. One reason is that crypto markets have begun to shake off their well-earned reputation for market volatility. The current market – whether you're still a bull or think we're in a trap – certainly hasn't conformed to the historical pattern.

That pattern, basically, has been waves of hype leading to frenzied FOMO buying, then a vicious blowoff top followed by a dormant period. After the bull runs of 2017 and (if you know where to zoom in on the chart) 2013, bitcoin and other cryptos took dives on the order of 50%, then bumbled along a rough bottom. Bitcoin, which for most of its existence has closely mirrored the broader crypto market, traded near or below $10,000 for 32 months after the 2017 crash, from January 2018 to October 2020. It was a cold and loveless winter, I tell you.

Based on that pattern, I confidently predicted back in 2020 the then-new crypto bull market would top out somewhere north of $30,000 and then, as it had several times before, retrace to around the previous 2019 high of around $20,000.

I was wildly wrong on both counts.

First, of course, bitcoin went north of $63,000 back in April, which I think it's fair to say surprised even rigorous short-term bulls.

But the real shock has been the market's behavior since then. The bull run itself ran a robust seven months from October to April, a bit shorter than the run in 2017, which ran from April to January 2018 before collapsing. After the delirious peak in April 2021, it started to look like the script would play out, with BTC crashing nearly 50% in 10 days in May. Things stabilized, but they stabilized various times in 2018 on the way to a long, slow slump.

But then in late July, bitcoin and markets bounced back, climbing 60% through August. That brings us to nearly a year of basically positive crypto markets for the first time ever, minus a couple of dips. That's a first. Obviously, price is not a measure of utility, but this endurance makes it a lot harder to take Paulson's purely dismissive stance.

This could, of course, be a classic "bull trap" or "dead cat bounce." The dramatic crash that history predicts may still be still coming. The likelihood of that depends on the conditions that have led to the current strong run.