Bitcoin tends to fall in September.
Dreamstime
Cryptocurrencies’ hot summer shows no signs of cooling off.
Bitcoin (BTC) was trading around $50,500 on Friday, up 1.7% in 24 hours for a gain of more than 30% over the past month. Ethereum (ETH) was hitting record highs with a gain of 5%, topping $4,000 for the first time. Other cryptos are rallying too: Solana (SOL), Litecoin (LTC), and Avalanche (AVAX) had all gained more than 10% over the last 24 hours.
The rally is lifting crypto-related stocks even as regulatory pressure mounts on both the state and federal levels. Coinbase Global (ticker; COIN) was up 2% on Friday. The Global X Blockchain ETF (BKCH), a basket of crypto-related companies, was ahead 4.3%.
Bitcoin appears to have broken through technical resistance at $50,000. Its next level of resistance is at $58,000, according to Fundstrat Global Advisors.
Some large investors appear to be buying more Bitcoin. Bill Miller, the veteran value-fund manager, had amassed 1.5 million shares of the Grayscale Bitcoin Trust (GBTC) in his Miller Opportunity Trust mutual fund (LGOAX), according to securities filings. That equates to roughly 1,400 underlying Bitcoin tokens, worth about $70 million at recent prices. Still, the fund hasn’t been a strong performer this year, gaining 10% and trailing behind 98% of its peers, according to Morningstar.
Ethereum, meanwhile, is benefiting from a technical upgrade to its underlying network a month ago. According to Fundstrat, over 180,000 ETH tokens—about $720 million at recent market prices—have been “burned,” or taken out of supply since then, resulting in pressures that may be lifting the price.
Crypto apostles like Jack Dorsey, CEO of Twitter (TWTR) and Square (SQ), are expanding their investments, aiming to build out crypo-related revenue streams. Dorsey said on Twitter last week that Square is building an “open-platform decentralized exchange” for Bitcoin. The platform, dubbed TBD, will make it easier to fund a noncustodial Bitcoin wallet anywhere in the world, expanding access from current crypto on-ramps like Square’s Cash App or Coinbase, according to a tweet by Mike Brock, who is leading the project for Square.
Some small banks are also getting into cyrpto. Vast Bank, based in Oklahoma, has become the first federally chartered lender, backed by the Federal Deposit Insurance Corp., to offer crypto banking, according to Vast CEO Brad Scrivner. The bank offers crypto trading on a mobile app, acts as a custodian, and offers insurance on crypto assets through Coinbase.
Yet the financial investments are occurring in the face of a tougher regulatory climate. The top U.S. securities regulator, Gary Gensler, chairman of the Securities and Exchange Commission, is warning crypto companies not to launch products or services without registering first with regulators, saying they shouldn’t come “begging for forgiveness” after launching without doing so.
The SEC has launched an investigation of Uniswap Labs, developer of one of the largest decentralized finance, or DeFi, exchanges, according to a report in The Wall Street Journal. The SEC’s enforcement attorneys are seeking information about how investors use Uniswap and its marketing practices, according to the Journal. Uniswap said it is “committed to complying with the laws and regulations governing our industry and to providing information to regulators that will assist them with any inquiry.”
Gensler also appears concerned about DeFi—decentralized computer networks that may be used for a variety of financial transactions and trading—indicating they may be in for more regulatory actions, according to his recent public comments.
State securities regulators are also circling, looking at crypto-lending platforms like BlockFi, where investors can earn high yields on their digital assets. Regulators in New Jersey have ordered BlockFi to stop offering new interest-bearing accounts, though the effective date has been postponed to Sept. 30.
BlockFi said in a statement it believes its accounts are “lawful and appropriate for crypto market participants.”
Prices for Bitcoin may be due for a pause. September has been the only month with a negative average return since 2011, according to Fundstrat. The crypto has fallen an average 7% in the month. Prices have historically rebounded after that, averaging 13% gains in October, 53% in November, and 14% in December.
The pattern is one reason Fundstrat is urging investors to view any pullbacks as buying opportunities.
“We continue to maintain a bullish stance through the remainder of the year,” its analysts wrote in a note this week. The Fed’s more dovish stance lately should support ample liquidity for crypto assets as investors leverage up, Fundstrat says. While the data trends can quickly change, “we think the setup for a prolonged bull run remains intact,” it said.
Write to Daren Fonda at daren.fonda@barrons.com
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