January by the Charts

“We’re so done with 2020!” Heard that one before? Just when everyone’s recovering from all that 2020 madness, 2021 appears all set to up the ante. In January alone, we’ve seen BTC and many altcoins breaking their respective all-time highs, wrapping up the most volatile month since the infamous “Black Thursday” correction in March last year. On the bright side, along with volatility comes drama — lots of drama. Both crypto and traditional markets have been more entertaining than ever before. Who’s got popcorn? 

1. Public market “shenanigans” spill into crypto

In an ironic twist to the Global Financial Crisis (GFC) of 2008, 2021’s “Big Long” on GME’s stock symbolized the eruption of retail’s decade-long pent-up anger in an attempt to fight back against incumbent financial institutions. Dogecoin saw 10x gains in the 24 hours that followed. We see two emergent narratives going forward: 

  • The “decentralization” theme has stronger ground to stand on, with public perception now growing around TradFi institutions’ alleged rigging of the game 
  • Outsized cross-asset volatility is set to become frequent occurrences, with the longer-term ramifications of last year’s massive Fed stimulus trickling in
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2. BTC’s January performance was lackluster 

Despite the $3.2 billion options notional heading into Jan. 29 expiry, price action was muted and pinned around the $30k region. Towards end-January however, Elon Musk once again showed the world his reach as the top influencer of public markets. From a simple addition of “#Bitcoin” in his Twitter bio, BTC spiked to $38k with implied volumes and futures basis in tow. 

The Musk-inspired spike fading in a matter of days proved that BTC has been clearly maturing as an asset class — now becoming less prone to short-term shilling (vis-à-vis memecoins like Dogecoin). However, from the current standpoint, the Elon Effect clearly knows no bounds. 

3. BTC on-chain metrics/price models still look healthy

With on-chain metrics like SOPR reverting to more normal levels, and others like addresses and exchange outflows showcasing blatant bullishness, even the most bearish traders would be hard-pressed to be net short at current levels. 

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Let’s not forget the PlanB’s infamous S2F model — signaling the final euphoric bullish phase is underway. While on-chain metrics are backward-looking, these optimistic data points are closely watched by the market and could be self-fulfilling in nature.  

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4. ETH Flipping?

From transaction fee and DeFi growth standpoints, ETH has already flipped BTC as the dominant cryptocurrency. Yet ETH market cap still stands at less than half of BTC. 

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The growing question on everyone’s minds remains: Why hasn’t any of this resulted in massive market cap gains for ETH — with miners being public enemy number one, earning fat fees while keeping price discovery under a tight lid. The narrative now revolves around EIP-1559, a proposal that, if implemented, would transform ETH’s issuance schedule into a deflationary one. Whether this happens or not is yet to be seen, with miners still clearly opposed; this could be a game-changer if it does get implemented later this year. 

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5. Grayscale tipping the scales 

Grayscale’s influence on markets was on full display in 2020, which has incentivized a plethora of competitors to show up in non-U.S. jurisdictions. Alongside that was a record number of private placement unlocks carried over from last year into 1Q2021, which depressed GBTC premiums to lows of par to NAV. On the other hand, the recent re-opening of its ETHE trust and subsequent buying of ETH has diverted the market’s focus to ETH upside. Not one to stay away from the spotlight, MicroStrategy has also organized a conference for U.S. corporate entities, whose primary interest would be to replicate MSTR stock outperformance. 

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