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First Mover: PayPal Rushes In and Bitcoin Breaches $12K, While USDC Gains on Tether

Bitcoin blew past $12,000 to its highest price in two months, bringing into view the prospect of a fresh 2020 high.

The largest cryptocurrency was changing hands Wednesday around $12,200, within striking distance of the year’s high around $12,500. And that was even before the news emerged that electronic consumer payments giant PayPal had been granted a conditional New York state license for a partnership to buy and sell cryptocurrencies.

“Coupled with a seemingly constant flow of reports of traditional funds and companies investing or allocating some of their balance sheet to Bitcoin, we were due for a move up,” Matt Blom, head of sales and trading for the publicly traded digital-asset firm Diginex, told subscribers in his daily newsletter.

In traditional markets, European equity indexes were lower, U.S. stock futures fluctuated and 10-year Treasury yields rose on renewed speculation that lawmakers in Washington might still be moving toward a stimulus package. Gold rose 0.6% to $1,919 an ounce.

Market moves

While tether (USDT), with a market cap surpassing $16 billion, continues to hold the lion’s share of stablecoins in circulation, two smaller rivals are trouncing it in crypto’s hottest market this year, decentralized finance (DeFi).

Measured by the total value locked in six of the most popular DeFi protocols – Compound, Maker, Uniswap, Curve, Aave and Balancer – USD coin (USDC) is in the lead among stablecoins followed by dai (DAI), the native stablecoin to MakerDAO. That’s according to data compiled by Flipside Crypto as of Oct. 19.

USDC and DAI have market caps of $2.74 billion and $608 million, respectively. Yet, unlike on centralized exchanges, where tether is the go-to stablecoin in dollar-based crypto trades, USDC and DAI seem to have found their niche as the preferred stablecoins in decentralized trades.

In an interview with CoinDesk, Jeremy Allaire, peer-to-peer payments company Circle’s co-founder, attributed USDC’s success in DeFi to his company’s early efforts in building relationships with the DeFi communities. The fact the two companies that co-founded USDC’s governing Centre consortium, Circle and crypto exchange Coinbase, are both registered financial entities in the United States may also have something to do with USDC’s recent upturn. According to Allaire, USDC is preferred by institutional investors for being “safe, trusted and regulated.”

Authorities around the globe are giving more direction on how cryptocurrencies should be used and regulated. In late September, for instance, the U.S. Office of the Comptroller of the Currency (OCC) published its first regulatory guidance for stablecoins, clarifying that national banks can provide services to stablecoin issuers in the U.S.

“Having guidelines creates more certainty, which makes mainstream market participants ready and willing to engage in it,” Allaire told CoinDesk.

Read More: Tether Still Dominates Stablecoins, but USDC and Dai Are Winning DeFi

Total value locked by day aggregated across Compound, Maker, Uniswap, Curve, Aave and Balancer for DAI, PAX, USDC and USDT.
Source: Flipside Crypto

Bitcoin watch

Bitcoin daily price chart.
Source: TradingView

Bitcoin’s price has jumped to two-month highs, and data from the options market shows traders are positioning for a continued rally.

The top cryptocurrency by market value rose to $12,303 early today – the highest level since Aug. 18 – and was last seen trading near $12,250, representing a 2% gain on the day.

The market sentiment has turned quite bullish, with firms like Square, Microstrategy and Stone Ridge disclosing their bitcoin holdings and bolstering the digital asset’s popularity as a store of value.

“The momentum is certainly picking up with support from large corporations buying into the market,” Wayne Chen, CEO, and director of Interlapse Technologies, told CoinDesk in a LinkedIn chat.

The move above $12,000 has exposed the August high of $12,476, above which significant resistance is seen directly at $13,880 (June 2019 high).

Options market data shows investors are expecting a continued price rally. “Bitcoin is breaking out, and the options market is preparing for a bigger rally,” Skew’s CEO Emmanuel Goh told CoinDesk in a Telegram chat.

The bullish mood is evident from the negative one-, three-, and six-month put-call skews, which measure the cost of puts relative to calls.

In other words, calls or bullish bets are drawing higher prices than puts or bearish bets – a sign of investors positioning for a price rally.

Token watch

Ether (ETH): Validators of Ethereum blockchain’s drop off of test network as more developers say they’re ready for first phase of 2.0 upgrade.

Compound (COMP): DeFi lender’s governance token falls below $100 in sign that sector might be cooling.

B​​​​​itcoin (BTC): In a case of the new economics, largest cryptocurrency’s demand should increase as price goes up, while supply stays fixed, Bloomberg Intelligence analyst Mike McGlone writes:

Bitcoin’s price and supply curve, charted versus total assets on central bank balance sheets.
Source: Bloomberg Intelligence

What’s hot

PayPal granted New York’s first “conditional BitLicense” to offer crypto services. (CoinDesk)

Bahamas officially launches “sand dollar” central bank digital currency, first of its kind in the world to have been fully deployed. (CoinDesk)

BitMEX exchange accelerates mandatory ID verification after charges of lax anti-money-laundering controls. (CoinDesk)

Funding rates for bitcoin perpetual futures have stayed flat or turned negative as spot prices shot past $12K, suggesting futures traders aren’t as bullish in latest rally. (CoinDesk)

U.S. demurral on digital dollar deprives officials of crucial “ability to rapidly and precisely disseminate stimulus funds directly to citizens during a recurring pandemic or lingering depression,” attorneys argue. (CoinDesk)

Digital assets could become “the next realm of shadow banking.” (Roll Call)

In Q3, Binance’s spot trading hit an all time high a sign retail traders are prefering the exchange to its competitors. (The Block)

MicroStrategy CEO Michael Saylor says bitcoin markets data are “garbage” and that liquidity is far more limited than reported, based on his own experience; he says it’s tough to buy more than $35M of bitcoin “without people knowing.” (CoinDesk)

Mode Global, a London Stock Exchange-listed fintech company, plans to convert 10% of cash reserves into bitcoin “to protect investors’ assets from currency debasement.” (CoinDesk)

Crypto-friendly Signature Bank raked In $4B in deposits in Q3 2020. (CoinDesk)

Peer-to-peer bitcoin trading in North America now exceeds volumes during bull run of 2017. (Arcane Research)

North American weekly peer-to-peer trading volumes in bitcoin.
Source: Arcane Research


The latest on the economy and traditional finance

As European Central Bank floods zone with stimulus, yields on 10-year government bonds from Greece, Italy are now under 1%, just like Germany’s. (WSJ)

Commodities traders increasing bets that U.S. dollar will weaken versus euro. (WSJ)

China initial stock offerings booming as economy recovers, markets surge. (WSJ)

Global trade recovered somewhat in third quarter but remains about 4.5% lower than a year earlier, United Nations report shows. (Reuters)

Japanese equities rise on U.S. stimulus deal being reached before Presidential elections. (Reuters)

U.S. economy has lost 3.9M jobs since President Donald Trump took office. (Yahoo Finance)

Chart comparing U.S. presidents on jobs growth.
Source: Yahoo Finance

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