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Dec. 4, 2021, 10:08 a.m. EST

‘It’s going to be very obvious that every bank needs to become a crypto bank,’ says CEO of bank to nab 1st federal charter for digital assets

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By Frances Yue

Happy Thursday! Welcome to Distributed Ledger, our weekly crypto newsletter. I’m Frances Yue, crypto reporter at MarketWatch, and I’ll walk you through the latest and greatest in digital assets this week so far, as December gets into fuller swing. Find me on Twitter at @FrancesYue_ to send feedback or chat about crypto.

Subscribe here to the DL newsletter!

Crypto in a snap

Bitcoin /zigman2/quotes/31322028/realtime BTCUSD -1.91% tumbled this week amid omicron, the coronavirus variant first identified in the southern parts of Africa and has now been detected in the U.S . The cryptocurrency dropped about 2.8% over the past seven days, recently trading above $57,000 according to CoinDesk data. Ether /zigman2/quotes/108573964/realtime ETHUSD -3.29% rose about 3.1% for the past seven days, recently trading above $4,500.

Dogecoin /zigman2/quotes/226077044/realtime DOGEUSD -3.53% logged a 4.3% loss for the past seven days, while Shiba Inu, the coin created based on the dogecoin meme, notched a roughly 11% gain over the past seven days.

Crypto Metrics

Biggest Gainers Price % 7-day return
Terra $64.8 53.1%
Stacks $2.62 24.7%
Ankr $0.14 16.7%
Siacoin $0.023 10.8%
UNUS SED LEO $3.35 8.04%
Source: CoinMarketCap.com as of Dec.2
Biggest Decliners Price % 7-day return
WAX $0.62 -24.2%
Harmony $0.24 -23.6%
Enjin Coin $3.38 -20.74%
Loopring $2.66 -19.7%
loTeX $0.15 -18.1%
Source: CoinMarketCap.com as of Dec.2

Crypto banks? 

Nathan McCauley, co-founder and CEO of Anchorage Digital, a digital asset platform that provides crypto custody, trading and staking for financial institutions, said he expects to see more banks providing crypto-related services in the coming years. In January, Anchorage Digital Bank became the first federally chartered bank for digital assets. 

“I think by the end of 2022, it’s going to be very obvious that every bank needs to become a crypto bank, because enough will have adopted” crypto, McCauley said.

“Your local bank branch, whether it’s a credit union or a large conglomerate bank, will very likely be offering some sort of crypto investment product,” according to McCauley. Such offerings will be driven by increasing retail demand, McCauley said. 

“And that’ll be regulatory clarity coming from Washington and from the States. It’s gonna be more obvious that banks are allowed to do that,” McCauley said. “And as long as they put in the right controls, work with the right partners, they’ll be able to build services of that nature.”

Meanwhile, Anchorage has seen growing institutional demand for blockchain gaming tokens such as Decentraland /zigman2/quotes/226547733/realtime MANAUSD -3.59% , decentralized finance, or DeFi, tokens like Maker /zigman2/quotes/229898341/realtime MKRUSD -1.14% , Uniswap /zigman2/quotes/226259541/realtime UNIUSD -4.56% , and Sushiswap, and also non-fungible token, or NFT-related coins, such as NFTX. 

“The demand for those kinds of coins comes from buy-side investors who have a particular thesis on how web 3.0 will grow,” McCauley said. Web 3.0 refers to the next stage of Internet evolution. 

“Broadly, the way that we think about Web 3.0 now is that it’s going to be this kind of infinite game, where an infinite amount of advancement in technology happens across a broad range of different industries, and we’re just seeing the very beginning of that,” McCauley said.

Risky asset or inflation hedge? 

As bitcoin tends to move in the same direction as the stock market recently, the cryptocurrency has been trading more like a  risk-on asset, instead of a hedge against inflation, according to some analysts.

“I have never bought into the inflation hedge narrative.” Craig Erlam, senior market analyst at [currency] trading platform OANDA, told MarketWatch in a phone interview. “I just don’t see enough evidence. And I think having limited coins isn’t enough [for bitcoin] to be an inflation hedge and certainly not enough to be a safe haven.” 

“When we did see markets pricing a lot more inflation, especially because central banks are pushing back against raising rates, gold surged, and bitcoin jumped and then dropped again,” Erlam said. “I think that was a sign that in times of real need, the inflation hedge narrative starts to look a little bit misguided.”

Over the next month or so, omicron’s influence on global investors’ risk appetites and the governments’ reactions will likely have the greatest impact on bitcoin price, according to Erlam.  “If we see that omicron is vaccine-resistant, it’s far more violent and it’s far more transmissible, then I think we’re gonna see significant risk aversion in the markets.” In that scenario, bitcoin’s price “could be hit quite hard,” Erlam said. 

M iner stocks 

Arcane Research’s mining index , which is composed of 15 of the largest publicly listed mining companies and weighted by market cap, has gained 197% so far in 2021, surpassing the 95% gain of bitcoin, according to a Tuesday report. 

US : CoinDesk
-540.07 -1.91%
Volume: 0.00
March 24, 2023 2:59p
US : Kraken
-59.84 -3.29%
Volume: 82.77M
March 24, 2023 2:59p
US : Kraken
-0.0027 -3.53%
Volume: 4.66M
March 24, 2023 2:58p
US : Kraken
-0.02 -3.59%
Volume: 257,831
March 24, 2023 2:55p
US : Kraken
-7.70 -1.14%
Volume: 266,914
March 24, 2023 2:55p
US : Kraken
-0.28 -4.56%
Volume: 491,297
March 24, 2023 2:55p
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