Market Wrap: Bitcoin Trudges Past $11.7K as DeFi Lending Rates Gyrate

Bitcoin gained Wednesday while DeFi interest rate volatility is causing concern over its long-term viability.

• Bitcoin BTC$87,667.29 trading around $11,670 as of 20:00 UTC (4 p.m. ET). Gaining 4% over the previous 24 hours.
• Bitcoin’s 24-hour range: $11,072-$11,735
• BTC above 10-day and 50-day moving averages, a bullish signal for market technicians.

Traders are mostly buying bitcoin Wednesday, with the world’s oldest cryptocurrency going as high as $11,735 on spot exchanges such as Coinbase.

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“I think we’ll hit $12,000 by Friday. There’s a lot of momentum in the market just now,” said Chris Thomas, head of digital assets for broker Swissquote. “Tuesday was a pause for breath, but we didn’t react negatively.”

Thomas noted bitcoin spot volumes have been rising this past week after a month of relative feebleness.

“Flows are definitely picking up and more people are feeling the excitement, which naturally helps the markets move higher still,” added Thomas.

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While bitcoin’s pace is picking up, gold, the original hedge against economic uncertainty, has been on an absolute tear. The yellow metal was up 1.1% and at $2,041 as of press time, hitting a fresh intraday high at $2,056. However, while gold has rallied 14% over the past month, bitcoin has done twice as well, up 28% during that same period.

Bitcoin bugs continue to believe its price can keep making outsized gains in unsettled economic times. “I'm bullish on bitcoin,” said George Clayton, managing partner of Cryptanalysis Capital. “I do not have a strong view on timing, but I'm expecting a move higher.”

Volatile DeFi lending rates

The second-largest cryptocurrency by market capitalization, ether ETH$2,967.31, was up Wednesday, trading around $399 after climbing 3% in 24 hours as of 20:00 UTC (4:00 p.m. ET).

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Interest rates in Ethereum-powered decentralized finance, or DeFi, have see-sawed wildly over the past few months. Composite Lend Rate, a metric calculated by DeFi Pulse, determines how much profit an investor would return lending out crypto. It has fluctuated mostly due to the volatility of lender Compound’s rates, which have been as low as 0.122% on June 17 and as high as 18.6% on June 26. Compound dominates the DeFi lending market and had 3% rates for lenders as of Wednesday.

“A number of new applications are adjusting their protocol and token incentives, which can trigger extreme volatility,” said Jean-Marc Bonnefous, managing partner for Tellurian Capital, which has been investing in crypto projects since 2014. “There is also a lot of shuffling of short-term liquidity among the DeFI protocols, which is not very conducive to longer-term sustainability and adoption,” he added.

Other markets

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

• zcash ZEC$419.10 + 14%
• dash DASH$37.95 + 6%
• bitcoin gold (BTG) 5.5%

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Notable losers as of 20:00 UTC (4:00 p.m. ET):

• tezos (XTZ) - 0.66%
• qtum (QTUM) - 0.56%
• stellar (XLM) - 0.53%

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Equities:

• In Asia, the Nikkei 225 ended the day in the red 0.26% as poor corporate earnings for Softbank and Yamaha led stocks lower.
• In Europe, the FTSE 100 closed higher, gaining 1.1% as better-than-expected earnings reports boosted stocks like Commerzbank, up 5% on the day.
• In the United States, the S&P 500 gained 0.60% on shares of Disney jumping 8.8% on positive earnings and optimism for a coronavirus vaccine.

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Commodities:

• Oil is up 1.6%. Price per barrel of West Texas Intermediate crude: $42.14

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Treasurys:

• U.S. Treasury bonds were mixed Wednesday. Yields, which move in the opposite direction as price, were up most on the 10-year, in the green 7.5%.

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