First Mover: Bitcoin Acts Like a Tech Stock and Ethereum Classic Traders Shrug Off 51% Attacks

First Mover: Bitcoin Acts Like a Tech Stock and Ethereum Classic Traders Shrug Off 51% Attacks

The Nasdaq is the primary venue for U.S.-listed tech stocks (Shutterstock)

You’re reading First Mover, CoinDesk’s daily markets newsletter. Assembled by the CoinDesk Markets Team and edited by Bradley Keoun, First Mover starts your day with the most up-to-date sentiment around crypto markets, which of course never close, putting in context every wild swing in bitcoin and more. We follow the money so you don’t have to.

was up in crypto markets early Wednesday, bouncing after a 2.4% drop that appeared synced with a sell-off in U.S. tech stocks. Traditional markets also appeared to be  from risky assets. 

The move down in digital assets has provided a “healthy reset after a fast and furious summer rally,” the cryptocurrency-focused investment firm Arca said Wednesday in a . Bitcoin prices are still up about 42% year to date.

“This market still isn’t mature enough to absorb an increase of selling pressure from the market’s biggest investors,” Arca Chief Investment Officer Jeff Dorman wrote. 

Bitcoin is suffering its worst two-week stretch since March, down 15% since the end of August, and anxious investors are once again scrambling to identify the 11-year-old cryptocurrency’s closest analog in traditional markets. 

Is it a hedge against currency debasement, similar to gold? A disruptor of banks and the financial industry? A revolutionary innovation that should trade in line with tech stocks like Facebook, Amazon, Apple, Netflix and Google or even Tesla? 

As the Federal Reserve pumped about $3 trillion of freshly created money into the global financial system this year in an effort to calm uneasy markets, the currency-debasement investment thesis garnered the most attention. Bitcoin outperformed the tech-heavy Nasdaq Composite index while trading broadly in line with the high-flying stocks. 

But as  over the past week, hit by concerns over  and the revelation that the market might be buoyed by the Japanese conglomerate , bitcoin sold off too. 

“If you get a smash in markets then bitcoin’s not going to escape it,” Charlie Morris, chief investment officer of the digital-asset-focused investment firm ByteTree, said in a WhatsApp audio interview. “We’ve seen that time and time again, so why expect that to change?”

Longer term, bitcoin is likely to return to its outperformance, Morris predicts. 

The high-flying tech-stock valuations “make no sense to anyone who’s a rational investor,” said Morris, who spent nearly two decades as a money manager for the giant British bank HSBC. “Bitcoin’s still small and has huge upside from here.”

For a blockchain network’s security, a “51% attack” is pretty much as bad as it gets. That’s when a single entity gains control of a majority of the network’s computing power, allowing it to siphon off extra units of the currency in what’s known as a double-spend.

So it would stand to reason that three successful 51% attacks in a month against the Ethereum Classic blockchain might dent investors’ confidence.

But as , prices for the project’s native token haven’t really taken a hit – a sign traders could be less concerned about security vulnerabilities than a quick profit in fast-moving cryptocurrency markets.

ETC has fallen about 27% in the past 30 days, not a terrible performance given that bitcoin is off by 15%. 

For large networks like Bitcoin, a 51% attack is prohibitively expensive to do given the enormous amount of computational power — and electricity — required to pull it off. Ethereum Classic is much smaller, making it far more vulnerable. “Many people are just sort of sitting on it,” Meltem Demirors, chief strategy officer at the digital-asset money manager CoinShares, told CoinDesk in a phone interview. 

Bitcoin’s 60-day correlation with gold has risen to record highs above 0.5. With fortunes more tied to the yellow metal than ever, the cryptocurrency may now show greater resilience to risk aversion in stock markets. 

– Omkar Godbole

Orchid (): The token, from the decentralized virtual private network developer Orchid Labs, was , replacing basic attention token (). 

Bitcoin (): September is historically the cryptocurrency’s worst-performing month, with an , a new Kraken report shows. 

Yearn.Finance (): “Intuitive interface to all DeFi” aims to be gateway that , with deposit tokens that can be traded. 

Ether (): Hashrate approaches all-time-high as DeFi pushes up transaction fee rates, miner profits, :

 


 

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