Market Wrap: Ethereum Classic Steals Show From Bitcoin, Ether, Even DOGE

In a reminder that easy money prevails, cryptocurrencies rallied on Wednesday with bitcoin (BTC) up about 5% over the last 24-hours. It was trading at $57,133 at the time of writing.

Ether (ETH), the second-largest cryptocurrency, bounced back from Tuesday's sell-off, pushing toward the all-time high of around $3,500.

News that Fidelity National has teamed up with NYDIG, a crypto custody firm, to allow U.S. banks to offer customers the ability to buy, sell and hold bitcoin contributed to bullish trading activity on Wednesday.

“Bitcoin could see continued momentum back above $60,000 just on the Fidelity news,” Edward Moya, senior market analyst at Oanda, a foreign exchange broker, wrote, describing the news as a “game-changer.”

Additionally, news that Galaxy Digital, a crypto-focused financial services firm, agreed to buy BitGo, the U.S. regulated crypto custody specialist, was another positive development for cryptocurrencies.

But the big story of the day was a 53% jump over the past 24 hours in price for ethereum classic (ETC), born of a contentious split a few years ago from the dominant Ethereum blockchain.

• Bitcoin trading around $57,133 as of 21:00 UTC (4 p.m. ET). Gaining 5% over the previous 24 hours.
• Bitcoin’s 24-hour range: $53,633-$57,356 (CoinDesk 20)
• Ether trading around $3,476 as of 21:00 UTC (4 p.m. ET). Gaining 2.6% over the previous 24 hours.
• Ether’s 24-hour range: $3,237-$3,530 (CoinDesk 20)

Ethereum classic's rally might be a sign of cryptocurrency froth

Cryptocurrency markets are witnessing such a bull frenzy that some also-ran tokens like ethereum classic that were left behind during last year’s rallies in bitcoin and ether are getting a fresh look from speculative traders and surging to previously unthinkable levels.

The Ethereum Classic blockchain split from better-known Ethereum as part of a contentious “hard fork” in 2017. Last year, as enthusiasm mounted over the potential growth of decentralized finance, or DeFi, prices for ether, Ethereum’s native cryptocurrency, quadrupled. Bitcoin, the largest cryptocurrency, doubled, while Ethereum Classic’s token, ETC, gained just 26%.

Now, in 2021, cryptocurrency prices are surging across the board: The doggie-themed joke token dogecoin (DOGE) has increased a laughable-if-it-weren’t-true 117-fold. And ETC is joining the hunt, jumping 13-fold in digital-asset markets this year to a value of roughly $13 billion.

ETC hit a record high of $87 early Wednesday and was changing hands over $100 at press time, representing a 59% gain on a 24-hour basis, according to the data provider Messari.

That’s despite few major cryptocurrency investors or analysts regularly mentioning the network as one of several potential “Ethereum killers” – upstart blockchains like Cardano, Polkadot, Solana and Binance Smart Chain that might provide alternatives to Ethereum for DeFi applications.

“It appears to be dominated by ‘cheaper’ ethereum play and retail flow that has pushed DOGE to sky-high levels,” Denis Vinokourov, head of research at Synergia Capital, told CoinDesk.

Read More: Also-Ran Ethereum Classic Catches Up Amid Crypto Market Frenzy, Hits Record

Bitcoin jumps along with traditional markets

Bitcoin was in full recovery mode Wednesday as traders brushed off concerns about rising U.S. interest rates, which had rattled cryptocurrency markets a day earlier.

The rebound came as U.S. stocks gained on strong economic data and after U.S. Treasury Secretary Janet Yellen backtracked on her warning about the eventual end of loose monetary policy.

Bitcoin, the largest cryptocurrency, often trades in sync with traditional markets because it's increasingly viewed by big institutional investors as a hedge against future inflation.

“Yellen had to clarify her comments and basically retracted everything,” Moya wrote in an email.

Some analysts described Yellen’s comments as a mere side note in financial media.

“Federal Reserve Chair Jerome Powell is now in charge and he remains dovish, ready to support the economy,” wrote Mati Greenspan, founder of Quantum Economics. “The party will continue for as long as the fundamentals stay the same.”

Price charts show bitcoin faces resistance at $58K

Bitcoin is approaching initial resistance at around $58,000, a level where traders have taken profits during the past few months. The cryptocurrency is recovering from the mid-April sell-off, although technical analysts remain cautious.

“Short-term overbought conditions have returned below resistance of $62,000-$65,000, which presents a near-term hurdle,” Katie Stockton of Fairlead Strategies wrote in an email.

“Any move below $50K in BTC will lead to sharp increase in market volatility and all crypto assets including BTC and ETH should move lower. Traders would keenly watch $60K level as a major resistance in case of any bull trap rally,” Pankaj Balani, CEO of Delta, a crypto derivatives exchange, wrote in an email.

Less concerns about leverage in bitcoin futures

In the bitcoin futures market, traders continue to deleverage after the April 14 sell-off. In the past few days, the cost to fund long positions in the market for bitcoin perpetual swaps, a type of derivative in the cryptocurrency markets similar to futures contracts in traditional markets, declined to just above 0% – a level that typically precedes price recoveries.

“One of the key explanations behind the declining funding rates could be the ongoing altseason, attracting the risk seekers to move onto other coins in the spot market,” Arcane Research wrote in a report published Tuesday.

“With less leverage, fewer positions will risk becoming liquidated, setting the stage for less dramatic price movements.”

Bitcoin’s correlation with the S&P 500 declines

In traditional markets, equities recovered after Tuesday’s slump with both the S&P 500 and Nasdaq ending Wednesday in the green.

Over the past eight months, bitcoin’s correlation with the S&P 500 has declined, which could point to the cryptocurrency’s diversification benefits. Bitcoin has largely decoupled from traditional equities since the March 2020 correction across risk assets. And since then, unprecedented stimulus has encouraged a reach for yield beyond traditional assets.

Ether cools off as bitcoin takes the lead

Ether is up about 2.6% in the past 24-hours, compared with a roughly 5% gain in BTC.

Ether broke a 10-day winning streak on Tuesday and has since stabilized, benefitting from the broader crypto recovery.

“Ether has been skyrocketing and today’s weakness is just modest profit-taking,” Oanda's Moya wrote.

The amount of ether held on exchanges has fallen to a 2.5-year low, suggesting few traders are queuing up to take profits and institutions are warming up to the crypto asset, according to Pete Humiston, manager of Kraken Intelligence.

Market participants have "locked up more than 4 million ETH – 600K on Kraken’s on-chain staking service alone,” Humiston wrote. “The stars are aligning for another significant leg up for the ETH price.”

Other markets

Digital assets on the CoinDesk 20 are all green on Wednesday. Notable winners as of 21:00 UTC (4:00 p.m. ET):

• bitcoin cash (BCH) + 36.9%
• eos (EOS) + 25.9%
• litecoin (LTC) + 15.2%

Commodities:

• Oil was down 1.3%. Price per barrel of West Texas Intermediate crude: $65.26.
• Gold was in the green, up 0.44% at $1,786 as of press time.
• Silver is flat, up just 0.04%, changing hands at $26.47.

Treasurys:

• The 10-year U.S. Treasury bond yield fell Wednesday to 1.575 and was in the red at 1.22%.