Crypto Scoop: Bitcoin and Ether take a hit, Coinbase to go public

Crypto scoop for this week:

• Bitcoin and Ether take a hit

• JP Morgan backs 1% allocation of Bitcoin as hedge

• Coinbase to go public on US Stock Exchange

• Cryptocurrency users grow to 106 Million

Bitcoin and Ether take a hit

Following record-breaking heights in the past few weeks, bitcoin took a turn and has since Sunday plummeted by 20%. The crash has significantly reduced the cryptocurrency’s market value which had only recently reached $1 trillion. With its price set around $47K, bitcoin’s current value stands at about $900 billion.

Ether, the second-largest cryptocurrency by market cap after bitcoin equally fell to $1,557. The fall in prices may have to do with CEO of Tesla, Elon Musk yet again wielding his influence and tweeting on Saturday that the prices of bitcoin and ether “seem high” as well as Bill Gates’ comment on how he thinks that cryptocurrency is a technology the world can do without. However, despite the price slip, bitcoin’s value has been up by over 60% so far in the year.

JP Morgan supports Bitcoin as a hedge

Popular bank JP Morgan has suggested that investors set aside 1% of their portfolio for bitcoin. The bank stated that this allocation would serve as a hedge that would cushion fluctuations in other traditional assets. 1% was the suggested percentage for allocation to help investors minimise the risks of reduction in the currency’s value.

According to strategists from the bank:

“ In a multi-assets portfolio, investors can likely add up to 1% of their allocation to cryptocurrencies in order to achieve any efficiency gain in the overall risk-adjusted returns of the portfolio…”

The endorsement comes as a surprise as earlier in the month, analysts from JP Morgan had referred to bitcoin as an “economic side show” and “a poor hedge”. It would seem that the bank has changed its view. This decision and advice to investors follows closely behind many other institutions backing, supporting and purchasing the cryptocurrency, including Tesla, Mastercard, Visa, BNY Mellon.

Coinbase files for direct listing

On Thursday, Coinbase, the largest cryptocurrency exchange in the U.S, filed with the SEC to be directly listed on NASDAQ. The company claims to have surpassed 41 billion in revenue in 2020 which is double its revenue from the previous year 2019. Coinbase supports over 90 different crypto assets, records about 43 million users from 100 different countries and 3 million monthly transactions. 

The company’s filing records that it has handled transactions worth $456 billion all through its years as a company and goes forward to acknowledge the volatility of cryptocurrency as a risk to it. According to the filing: 

“There is no assurance that any supported crypto asset will maintain its value or that there will be meaningful levels of trading activities. In the event that the price of crypto assets or the demand for trading crypto assets decline, our business, operating results, and financial condition would be adversely affected.”

In the place of an IPO, the company has opted for a direct listing in which it will not involve underwriters and will not create new shares.

106 Million people using cryptocurrency worldwide

According to a report from crypto.com, there are now 106 million people who are using cryptocurrency. This number is up from 66 million in May 2020 and 92 million in December 2020 representing a 15.7% increase. This figure from crypto.com was reached by examining on-chain data, survey analysis and other variables in determining the growth of Bitcoin and Ethereum. This data was then used to trace the growth of users around the globe.

The report states that the increase in the prices of bitcoin and other digital currencies was the main factor behind the heightened interest in cryptocurrencies; “what we noticed is that periods of strong growth come after periods of strong price performance in bitcoin.” June and August 2020 as well as January 2021 had the strongest user growth and align with the timeframe of bitcoin’s increase in price.