CoinLoan Weekly: Mixed signals, wild weekends, soaring MicroStrategy stock
Bitcoin had a rollercoaster ride. After a steep plunge from over $23,750 to $22,704.73 on Tuesday, January 31, it languished below $23,200 for more than a day. Then Thursday, February 2, catapulted the coin to a new high — $24,182.86 — and the price headed downward. It held above $23,250 for the rest of the week before falling deeper late on Sunday, February 5. The following evening, BTC rose above $23,000 again.
The rally followed Jerome Powell's statement about the start of the "disinflationary process" after the FOMC added 25 basis points to the interest rate. Yet the next day, Bitcoin dipped on data from the Bureau of Labor Statistics. The US economy added over half a million jobs in January — nearly twice as many as in December and well above the forecasted 185,000. According to Fitch Ratings' chief economist Brian Coulton, "This will give the [Fed] absolutely no reassurance that labor market imbalances — which have been adding to wage pressures — are easing," so the hikes are likely to continue. However, The Crypto Fear & Greed Index reflected greed until the end of the week.
As of this writing, BTC is changing hands at $22,998.43, with a 24-hour climb of +0.4% and a 7-day loss of -3.3%.
Ether was slightly more buoyant through the week, following a rapid descent from around $1,650. It sank to $1,552.64 late on Monday, January 30, remained stuck below $1,600 for two days, and soared on Thursday, February 2, peaking out at $1,701.92. The weekend was relatively vibrant: ETH traded above $1,650 on Saturday and Sunday before slipping to around $1,620. On Monday, February 6, it gained a little ground, returning to $1,650.
Several on-chain trends may help support the ETH price. The number of addresses added over the past month is at a historic peak, along with the number of non-zero addresses. In the mid-to-long term, ETH's deflationary status may also prop it up — the total burn rate should grow along with smart contract activity spurred by new upgrades like the Shanghai hard fork. However, the futures market provides cautionary signals with more bets on a dip in the coming weeks. The network activity also declined in the first days of February.
As of now, ETH is worth $1,646.46, with a 24-hour gain of +1.5% and no 7-day change.
After the initial spike to $0.421021, the Ripple token slipped to a 7-day low of $0.390910 on Tuesday, January 31, and rose above $0.41 the same day, rebounding more quickly than the market leaders. On Thursday, February 2, the price approached $0.42. It fluctuated around $0.41 afterward and plunged to $0.397827 late on Sunday, February 5. The following day, XRP revisited the zone above $0.40 and dropped.
The 24-hour XRP trading volume remained slightly above $1 billion last week — much higher than in early January, when it occasionally dipped to $400 million. The heightened activity could indicate further gains ahead, while the Q4 2022 XRP Markets report shows consistently high demand for the On-Demand Liquidity (ODL) product. Meanwhile, a US judge has limited the Securities and Exchange Commission's oversight in secondary cryptocurrency markets. As the SEC uses the term "secondary market" in its case against Ripple Labs, the summary judgment could set a precedent that will seal the outcome of this legal battle.
At press time, XRP is trading at $0.402758, with a 24-hour gain of +0.8% and a 7-day loss of -2.9%.
Wild weekends return as BTC sentiment hits a 14-month high
Bitcoin seems to have returned to the habit of wild weekends, "an intriguing characteristic of the cryptocurrency market", according to Bloomberg. The market cap leader has posted significant weekend moves over the past 30 days.
BTC has already shown high weekend activity before — both upward and downward — as trading continues 24/7. This trend has now resurfaced. Saturday, January 14, pushed the coin up by 5.5%. On Saturday, January 21, and Sunday, January 29, it gained over 3%.
Higher volatility expected
According to experts, the reason may lie with liquidity — it gets thinner on weekends, making price swings on large orders appear more dramatic. Rising volatility should prompt traders and investors to return, making the phenomenon more pronounced. While crypto has been increasingly volatile year-to-date, it is still below "normal" levels, as noted by Noelle Acheson, author of the Crypto Is Macro Now newsletter.
So far this year, Bitcoin has gained around 38%, making up for its post-FTX losses. However, it is still roughly 60% below the all-time high in November 2021. Last week, the coin gained 2.5% between Monday and Friday, reaching over $23,500 at 8 p.m. Hong Kong time. Ether, the second-biggest cryptocurrency, has shown a similar result: 4.47% growth within the same timeframe and a 36.32% climb year-to-date.
January 2023 has been the best month for crypto since October 2021, when BTC rose by over 39%. Yet Dinesh Goel, founder of play-to-earn ecosystem One World Nation, has called $23,000 a "wait-and-watch" level, citing recession fears. Given the favorable change in the Fed's strategy, "Bitcoin will advance upwards, slowly and steadily," he said.
According to CoinDesk, the current funding rates reported by Glassnode indicate a 14-month peak in BTC market sentiment. On Thursday, February 2, the annualized Bitcoin perpetual funding rates across major exchanges stood at 8.491%, the highest since December 3, 2021.
Funding rates ensure the prices of perpetual futures are in line with the spot market. They turn positive when BTC futures contracts are trading above spot and vice versa. The higher the rate, the more optimistic the leverage traders with upside bets, as they become more willing to pay a premium to keep their trades open.
Why the latest interest hike could be the last
The last FOMC meeting raised the interest rate by 0.25 percentage points to tame inflation. However, this might be the last increase of this kind. In his latest report, economist George Brown mentioned "tentative signs of turning" in the labor market combined with convincing moderation of inflation. "Economic activity is beginning to soften as rate rises have gained traction. And forward-looking measures such as the Conference Board's leading indicator are flashing red."
MicroStrategy stock doubles as Saylor remains bullish on BTC
Despite another quarterly loss — the eighth in a row — MicroStrategy has seen its stock double in value since the beginning of the year. The software giant, which is also one of the biggest corporate BTC hoarders, is helping to trigger a bull run.
Last week, MicroStrategy unveiled a quarterly net loss of $249.7 million, or $21.93 a share, in Q4 2022. This impairment loss stems from the company's loyalty to Bitcoin — it has gradually accumulated the coin since 2020, propping its price. At the same time, long-term shareholders can rejoice, as the stock price, currently $282.05, is up 65.64% over the past 30 days.
MicroStrategy's current holdings are estimated to total 132,500 BTC — an amount currently worth over $3.1 billion. According to the document, the company led by Michael Saylor has paid $30,137 per coin on average. Since the first $250 million purchase in August 2020, its stock price has more than doubled.
In an interview for CNBC, MicroStrategy's co-founder and executive chairman said it would stick to its buy-and-hold approach, striving "to be consistent, transparent, and responsible in the pursuit of that strategy." Chief Financial Officer Andrew Kangand emphasized the same principles in the company's SEC filing, saying the "conviction in acquiring, holding, and growing our bitcoin position for the long term remains unchanged."
According to Saylor, MicroStrategy is working on an enterprise application of the Lightning Network. This layer 2 network makes Bitcoin transactions faster and cheaper, and the project will enable businesses to move funds "at the speed of light." As for Bitcoin itself, the executive has called it a "safe haven" asset and "digital gold."
Saylor has also responded to Charlie Munger's criticism of Bitcoin. Last week, Warren Buffett's right-hand man, the vice chairman of Berkshire Hathaway, urged the United States government to outlaw digital assets, calling crypto a "gambling contract with a nearly 100% edge for the house."
Saylor suggested that Munger needed to conduct more research on cryptocurrencies. He said, "If he were a business leader in South America or Africa or Asia and he spent 100 hours studying the problem, he would be more bullish on bitcoin than I am." He also mentioned the recent depreciation of local currencies in countries like Argentina and Venezuela as a better illustration of the "plight of the common man."