Bitcoin (BTC) witnessed a remarkable surge in its price, nearing the $36,000 mark, sending ripples across the cryptocurrency market. While multiple factors contributed to this price rally, one significant driver appears to be the decision by the US Federal Reserve to halt interest rate hikes, albeit with the potential for future increases. 

Additionally, the overall sentiment in the crypto market remains bullish, with a collective market cap of approximately $1.36 trillion, bolstered by the expectation of positive regulatory developments.

Institutional Focus

The recent listing of exchange-traded funds (ETFs) by prominent financial giants such as ARK Invest, BlackRock, and Invesco on the Depository Trust & Clearing Corporation (DTCC) site has ignited speculation about their strategic intentions. These ETF listings are a clear indicator that these financial powerhouses are aiming at capturing the attention of money-loaded investors and institutional players.

Such ETFs are designed to cater to the needs of larger investors who prefer a more regulated and mainstream entry into the crypto market. They offer exposure to Bitcoin without the need for direct ownership, making it an attractive proposition for institutions seeking to diversify their portfolios.

The move to list these ETFs on the DTCC, a crucial infrastructure provider for the financial industry, signals a growing acceptance and integration of cryptocurrencies within the traditional financial ecosystem.

Federal Reserve’s Influence On Bitcoin Price

The current BTC price, as reported by CoinGecko, stands at $35,365, reflecting a notable 24-hour gain of 2.5% and a seven-day increase of 2.0%. 

The decision made by the US Federal Reserve to maintain interest rates without further increases plays a pivotal role in the current state of the crypto market.

Federal Reserve Chairman Jerome Powell kept the possibility of future rate hikes on the table, dependent on macroeconomic conditions. While this move has provided temporary relief to crypto enthusiasts, the uncertainty about future rate increases still looms.

Bitcoin (BTC) is currently trading at $35,365. Chart: TradingView.com

Historically, raising interest rates has been perceived as a bearish signal for risk-on assets, including cryptocurrencies. Investors often seek safer options when interest rates rise, as these assets are considered more stable and provide a better return on investment.

Therefore, the Federal Reserve’s decision to pause interest rate hikes has provided a favorable environment for BTC and the broader crypto market to flourish.

Can you spot the outlier? pic.twitter.com/y5IIY1fVyx

— ecoinometrics (@ecoinometrics) November 1, 2023

BTC’s Phenomenal Year-To-Date Growth

BTC’s meteoric rise since the beginning of the year cannot be understated, with a staggering 108% increase in value to date. This remarkable growth significantly outpaces other major investment options in the financial world. The implications of this metric are profound, as it highlights Bitcoin’s growing prominence as an investment asset, even surpassing traditional options like stocks and bonds.

Investors are drawn to BTC not only for its potential for substantial returns but also as a hedge against inflation and economic uncertainty. The year-to-date performance underscores the sustained interest in Bitcoin, driven by both retail and institutional investors, who recognize its long-term value and potential to reshape the financial landscape.

(This site’s content should not be construed as investment advice. Investing involves risk. When you invest, your capital is subject to risk).

Featured image from iStock

Now that the dust has settled from the spectacular Terra collapse, I thought it would be interesting to dive into the DeFi space and see how the shake-up has affected other protocols. DeFi surged to prominence in 2020, or if you want to get down with the lingo, during a period known as “DeFi Summer”.

Since then, it has cooled a little bit – yields dropped across the space as the market became a little more efficient, which makes sense. Well, there was still a pretty juicy yield available on the Anchor protocol, actually – a salivating 20% – but I heard on the grapevine that it didn’t end so well.

As the above graph from DefiLllama shows, Anchor total value locked (TVL) plummeted from $18 billion to within a rounding error of zero. If you hit “Play Timeline” in the top left corner of the graph below, you will see the TVL for the entire Terra blockchain, which until a couple of weeks ago had a comfortable hold on second, second to only Ethereum. How the mighty have fallen.

Guess Whose Back, Back, Back, Back Again

So how have the rankings shaken up? Well to answer Eminem’s question, it’s the suddenly-rather-smug looking DAI stablecoin that is back, back, back, back again. MakerDAO is King of the Hill once more, with $9.5 billion in TVL placing it as the number 1 protocol, following the curious case of Anchor’s vanishing $18 billion.  

It’s a cruel but logical twist of irony, of course, as MakerDAO had launched the first decentralised stablecoin to achieve genuine prominence– DAI. While my Editor Joe KB suggested on our newly-launched CoinJournal podcast last week that Americans don’t do irony, I’m sure this wasn’t lost on anyone.

For the uninitiated, DAI shares that seductive quality of decentralisation with the befallen TerraUSD. DAI advocates will be screaming as loud as they can, however, that there is also one very important distinction – DAI is collateralised.

To give a snappy explanation, DAI is created when users borrow against locked collateral. Conversely, it is destroyed when that loan is repaid, when the user simultaneously regains access to the locked collateral.  It’s almost nauseating how much sense it makes when compared to TerraUSD, but nonetheless, it was losing significant market share to all things Terra, with founder Do Kwon not pulling any punches in his war against this logical stablecoin.

By my hand $DAI will die.

— Do Kwon (@stablekwon) March 23, 2022

Curve and Aave are the two protocols behind MakerDAO in this new-look top three. Similarly, they also present as old-timers, perhaps “less sexy” protocols than the admittedly dazzling, if inherently flawed, Anchor protocol was. The TVL on both is similar at $8.9 billion and $8.5 billion respectively. I thought the CEO and founder of Yield App, Tim Frost, had interesting thoughts here when he said the below:

 “It’s heartening to see Maker DAO, the original decentralised stablecoin project, return to the top spot in terms of total value locked (TVL) this week. According to data from Defi Llama, Maker DAO – the home of US dollar-pegged stablecoin DAI – is posting a TVL of nearly $10 billion as of Wednesday. While 30% down from where it was last month, this marks a grand achievement for one of DeFi’s oldest projects and a heartening signal for the entire industry. 

He went on to say that “these top-three DeFi survivors (MakerDAO, Curve and Aave) really do represent the cream of the crop, providing a snapshot of the industry’s evolution from its earliest days in 2014 to today. It also shows how important solid development, track record, and reputation are in this industry. These projects were developed during the bear markets of 2018”

Final Thoughts

Frost is right on the money with his comments. And while overall DeFi TVL has plummeted in line with the recent market downturn, that was always going to be the case. It remains a highly experimental area in what is suddenly an aggressively risk-off market. But these three big dogs, if I can use that scientific language, do boast the closest thing to a reputable track record that one can find in the industry of DeFi, which has only been around since 2018.

There’s a parable here, really, and it’s seen time and time again across all asset classes and markets. We’ve been through a period of intoxicating expansion, where everyone and their grandmother has been able to make cash. I’m pretty sure my grandmother’s monkey even 3Xd his crypto portfolio during the bull run.

But with the money printer slowing, rates hiking and a laundry list of other bull factors that I quite simply do not have the energy to type right now, the demand has been sucked out of the economy. A natural flush of all the froth was badly needed, and we are smack bang in the middle of a correction across the space. 

Flash in the pans like Anchor just become the latest tale of bubble hysteria gone wrong. If this is the dot-com bubble bursting, the established names like MakerDAO, Curve and Aave are best placed to be the Amazons and rise from the ashes,  whenever we do get back on track. Sometimes less sexy is a good thing. At least that what I tell my mirror in the morning after a late night spent staring at red candles on my computer screen.