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One Year Since the Corona Crash: Bitcoin is Now 15x ROI

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A deeper look in the cryptocurrency industry a year after the entire market plummeted by 50% or more following the COVID-19 outbreak.

It has been precisely a year since one of the worst trading days in the history of all financial markets. On March 12th, 2020, the day that became known as Black Thursday, every market was painted in dark red as the health and financial consequences of the COVID-19 pandemic became real to the entire world.

While the heavily-regulated stock markets activated circuit breakers to ease the pain, no such options were available for the unregulated crypto market. As such, in a day when the S&P 500, the Nasdaq, and the Dow dropped by 10%, bitcoin nosedived by about 50%, ETH by 60%, BNB by 65%, etc.

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A year later, everything seems different. The virus has changed the (financial) game. This is especially valid for the cryptocurrency industry. In fact, looking at what transpired last year on this date now – it seems like the best thing that could have happened for BTC and the entire field.

How Bad Was the Black Thursday?

As mentioned above, the entire crypto market crashed on this day last year. Perhaps “crashed” is not a strong enough word to describe what occurred price-wise. The first-ever cryptocurrency was already feeling the adverse effects of the virus-induced financial crisis and had dropped over $10,000 to $7,500 in a matter of days.

However, no one was prepared for what happened next – in a matter of hours. Bitcoin fell by about 50% from its already declined price tag and bottomed at $3,850 (on Bitstamp).

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Ethereum, the second-largest cryptocurrency by market cap, plummeted by about 60% from roughly $200 to beneath $90. Binance Coin (-65%) nosedived from $17 to $6.5, Litecoin from $50 to $22, etc.

Generally, the smaller the market cap of a coin is, the more pain it felt. Just to put it in the perspective of how bad it was, the cumulative market capitalization of all cryptocurrency assets went from $220 billion to $108 billion.

Naturally, skeptics like Peter Schiff used these developments to lash out. Furthermore, even those on the fence questioned the entire industry and especially bitcoin’s potential to serve as a hedge similar to gold. For comparison – the bullion declined by only 5% on that day.

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The Recovery Phase

Bitcoin, and most altcoins, bounced off from the aforementioned lows rather quickly but still traded well below the previous yearly highs – in fact, they were all still in the red YTD.

However, the recovery process had begun. Slowly but surely, the assets started regaining value. Then, the situation changed entirely.

When most crypto outsiders were still neglecting the industry, the legendary hedge fund manager Paul Tudor Jones III said he bought bitcoin to fight the potentially increasing inflation levels.

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While his statement was passed by some media outlets, it actually had a significantly more profound impact than even he could have imagined. Ever since Jones showed the traditional financial world that BTC is not only for those who are “in for the technology,” numerous more followed.

Stan Druckenmiller and Bill Miller were among the first to declare their support for the first-ever crypto publicly. Then came the institutions and corporations.

While names such as MassMutual, Ruffer Investment, One River Asset Management, and even Tesla bought BTC in the following months, perhaps none has had a bigger impact than the NASDAQ-listed business intelligence giant – MicroStrategy.

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Michael Saylor – the company’s CEO, a former bitcoin skeptic of his own, became arguably the most vocal BTC advocate and uses every opportunity to buy portions of the asset for himself and the firm he founded more than three decades ago. As of now, MicroStrategy owns over 90,000 coins (worth above $5 billion).

A Year Later: What’s Changed?

Whether it was the fast price recovery (will be discussed later) or the number of large names that bought in, or, perhaps, both, the cryptocurrency has been openly praised left and right from representatives of the traditional financial industry.

Former skeptics, such as JPMorgan, have outlined its benefits on multiple occasions and even suggested that bitcoin’s rise could harm gold. Looking at the prices of the two assets a year later, one can find some merit in this stance.

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Even the “bitcoin is the digital gold” narrative has received a significant boost. While that’s still debatable, there’s no argument that bitcoin’s legitimacy has skyrocketed in the past twelve months.

Last but Definitely not Least: The Prices

All of the events described above, and perhaps the effects of the halving, had their impact on bitcoin’s price. If we rewind the calendars a year back, it would be hard to imagine that we would be discussing if BTC would jump over $60,000 today, wouldn’t it?

Ok, $60,000 might not be here yet, but $58,150 was just several hours ago. This meant that the asset had increased its value by 1,410% since its $3,850 low registered on Black Thursday. This is also almost 3x higher than the previous record registered in December 2017.

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Remember all those who claimed that bitcoin would never reach that price tag again? Now, it’s just a distant memory, and the COVID-19 pandemic had its (positive) impact on that.

Other milestones include exceeding $1 trillion in market capitalization. In other words, BTC’s market cap now is about 10x higher than the market cap of all crypto assets during the dip on March 12th, 2020.

Moreover, BTC is the 6th largest asset by this metric – it surpassed giants like Samsung, JPM, Berkshire Hathaway, Tesla, and Facebook, while the next in line are Google and Amazon. Again – can you imagine BTC being bigger than Facebook a year ago?

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But It’s Not Just BTC

Although bitcoin was the primary focus of this article, it’s worth mentioning other notable performers and developments in the industry. Eleven months after dumping to $88, ETH painted a new all-time high at $2,050. Even if we look at today’s price of $1,800, the asset is still nearly 2,000% up.

Litecoin is 720% up, while Binance Coin and Cardano are among the best performers. Both assets recently registered new ATHs at $350 and $1,50, respectively, which meant increases of 5,300% for BNB and 8,200% for ADA.

Lastly, this time for real, 2020 saw the emergence of two new concepts that have taken the world by storm – decentralized finance and non-fungible tokens.

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A year ago, there were less than $1 billion locked in all DeFi projects. Now, twelve months later, the amount has skyrocketed to over $41 billion.

NFT is making a serious mark as well. The craze has garnered the attention of numerous artists, and the prices paid for some digital art collections have gone through the roof – just yesterday, Beeple’s “The First 5,000 Days” artwork was sold for a record amount of $69 million.

While it’s difficult to conclude that all of this transpired solely because of the COVID-19 pandemic, it’s safe to assume that the virus wasn’t that bad for the cryptocurrency industry

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This ransomware gang moved $6.8 million in Bitcoin amid regulatory overhaul

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Ransomware groups, Darkside and BlackMatter recently moved multi-million dollars worth of Bitcoin upon getting the news of REvil’s servers getting hacked by a global coalition of law enforcement agencies. According to the authorities, 107 BTC, which amounts to $6.8 million were moved earlier today by splitting the amount into several different wallets.

Furthermore, officials revealed that the gangs were already aware of regulators’ oversight and therefore had prepared the mentioned balance to be laundered or cashed out. According to The Record, officials noted that the breakdown of funds into smaller portions is usually used for money laundering operations as the regulators directly transfer the entire amount of confiscated funds instead of splitting them up.

“Basically, since 2AM UTC whoever controlled the wallet started to break the BTC into small chunks… At the time of this writing, the attackers split the funds into 7 wallets of 7-8 BTC and the rest (38BTC) is stored in the following wallet: bc1q9jy4pq5su9slh56gryydwkk0qjnqxvfwzm7xl6”, Omri Segev Moyal, CEO and co-founder of security firm Profero shared this data with The Record.

It is obvious that the Darkside and BlackMatter were next on the regulatory hitlist as Darkside was the ransomware strain developed by REvil associates that were used earlier this year in the infamous Colonial Pipeline incident of May. This attack indirectly led to fuel supply outages across the US East Coast.

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REvil ransomware group’s website went offline

Yesterday, the Reuters’ report about REvil’s servers being hijacked by the regulators went viral and threw other ransomware groups in a fit of panic. A multi-nation operation against cybercrime group, REvil was implemented and took down the group’s “Happy Blog” website, which was formerly used to leak victim data and extort companies.

“The FBI, in conjunction with Cyber Command, the Secret Service and like-minded countries, have truly engaged in significant disruptive actions against these groups,” said Tom Kellermann, an adviser to the U.S. Secret Service on cybercrime investigations and VMWare head of cybersecurity strategy. “REvil was top of the list.”, he added.

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First Bitcoin ETF in Immediate Danger of Hitting Cap on Contracts Held

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The first bitcoin (BTC) futures-backed exchange-traded fund (ETF), ProShares’ BITO, is reportedly already in danger of breaching a limit on the number of futures contracts it is allowed to hold under current Chicago Mercantile Exchange (CME) rules.

BITO already owns nearly 1,900 bitcoin futures contracts expiring in October, according to Bloomberg data. The number is close to CME’s current rule that a single entity cannot own more than 2,000 front-month futures contracts, Bloomberg reported on Thursday, when BITO had only been live for two full days. 

To get around the limit, the ETF has reportedly started buying futures contracts expiring in November in addition to the October contracts it holds, with 1,400 November contracts amassed so far. At the current pace, however, the fund could also soon reach CME’s cap on holdings for next-month contracts of 5,000 contracts, per the report.

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And while the CME has already said it will increase the limits to 4,000 front-month contracts starting in November, this is also likely to be reached soon by BITO, which already has more than USD 1bn under management.

A major issue faced by ProShares’ ETF is that futures contracts tend to trade at a higher premium over spot prices the further away their expiry date is – a phenomenon known as contango in the futures market.

As such, choosing to get around the maximum limits by buying longer-dated contracts will mean the ETF has to get its bitcoin exposure at prices that are increasingly higher than spot. This could result in high costs when contracts are rolled over at expiry that will eventually be paid by the ETFs investors in the form of lower returns.

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According to Bloomberg’s own ETF expert, Eric Balchunas, some of the pressure on the first ETF to be launched could be alleviated by competing ETFs coming to the market over the next few days and weeks. However, the first-mover advantage that BITO has gotten will still be difficult to challenge, he said.

“The unprecedented early volume in BITO makes it like a snowball rolling downhill, as liquidity and assets begets more liquidity and assets,” Balchunas said, adding that it will be “nearly impossible” for other ETFs to steal significant volume from BITO in the short or medium-term.

Commenting on the possibility of the ETF running into the ceiling, some speculated that the extreme popularity of the futures ETF could eventually pressure the US Securities and Exchange Commission (SEC) to allow a “physically” backed spot bitcoin to launch. 

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That scenario was suggested by Zhu Su, CEO of crypto hedge fund Three Arrows Capital, saying that it could lead to the ETF rising to a “hilarious premium,” leading the SEC to “approve a spot ETF because of public outrage.” 

In a tweet, he also shared a comment from Max Boonen, Founder of electronic market maker B2C2, saying that it is “doubtful” that clearing houses will be comfortable with a single entity holding more than 4,000 front-month contracts.

“What happens when BITO surpasses 4k [contracts] as it surely will?”, Boonen asked.

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A similar idea was also suggested by Eric Balchunas, saying in the Bloomberg report that BITO hitting the limits on how many futures contracts it is allowed to hold could pressure the SEC to allow a spot-based bitcoin ETF.

“That certainly would do the trick in slowing down BITO and providing a release valve for futures demand,” the senior ETF analyst said.

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Meanwhile, the second bitcoin ETF to be approved by the SEC, the Valkyrie Bitcoin Strategy ETF with the ticker BTF, is scheduled to go live on the market today, October 22. BTF will also be backed by bitcoin futures contracts traded on the CME rather than by “physical” bitcoins.

BTF should go live on the Nasdaq exchange when the market opens at 09:30 ET (13:30 UTC).

Following the launch of Valkyrie’s fund today, a third bitcoin futures ETF, the VanEck Bitcoin Strategy ETF (XBTF), is set to go live on Monday on the Cboe BZX Exchange, according to a recent SEC filing.

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Second US Bitcoin Futures ETF Launching Today – Here Are the Details

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A new Bitcoin (BTC) futures exchange-traded fund (ETFs) rolls out today.

Valkyrie Investments, an alternative asset management firm, is launching the country’s second Bitcoin futures ETF, according to CEO Leah Wald.

The new product is called the Valkyrie Bitcoin Strategy ETF and will trade on the Nasdaq under the ticker symbol BTF.

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The launch comes on the heels of ProShares’ Bitcoin futures exchange-traded fund, which exploded onto the market on Tuesday with the second-biggest ETF launch of all time.

Like ProShares’ Bitcoin Strategy ETF (BITO), the Valkyrie ETF doesn’t invest directly in BTC but provides price exposure to Bitcoin futures contracts.

Per the ETF’s prospectus,

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“Under normal circumstances, the fund will seek to purchase a number of Bitcoin futures contracts so that the total notional value… of the Bitcoin underlying the futures contracts held by the fund is as close to 100% of the net assets of the fund as possible.”

Bitcoin is trading at $62,793, up nearly 10% on the week but down from its Wednesday all-time high of $67,276, according to CoinGecko.

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