First Mover Asia: Bitcoin Returns to Its Winning Ways

Good morning. Here’s what’s happening:

Prices: After dipping early Thursday, bitcoin returned to the green; other major cryptos also rose.

Insights: Cobo, the asset management platform, is adopting a key tenet of traditional finance – a distinct custodian and settlement network for trading.

Prices

Bitcoin Returns to Its Winning Ways

By James Rubin

After dipping early Thursday, bitcoin surged back to its most recent foothold comfortably above $21,000.

The largest cryptocurrency by market capitalization was recently trading at about $21,190, up 1.6% over the past 24 hours, as investors shrugged off the latest fallout from disgraced crypto exchange FTX and conflicting economic data. BTC continued on the more upbeat path throughout 2023.

"Bitcoin is finding support ahead of the $20,000 level," Edward Moya, senior market analyst for foreign exchange market maker Oanda, wrote in an email. "The crypto space is getting cleaned up and as long as we don’t see a major reputable exchange go under, traders may mostly shrug off news of the demise of smaller crypto companies."

Ether followed a similar trajectory, falling early before landing in the green. The second largest crypto in market value was recently changing hands above $1,550, a 1.9% gain from Wednesday, same time. Other major cryptos also pointed largely upward with CRO, the token of exchange Crypto.com, jumping more than 4%, and ATOM, the native crypto of decentralized network Cosmos rising over 3%. The CoinDesk Market Index (CDI), an index measuring cryptos' performance, recently increased by 2%.

Cryptos veered from equity markets, which continued their losing streak this week, with the tech-heavy Nasdaq dropping 1% and the S&P 500 and Dow Jones Industrial Average (DJIA) each falling the better part of a percentage point. Investors tried to reconcile the release of jobs data indicating that the hot job market had not cooled – a 15,000 weekly decrease in Americans filing for unemployment – with declines in housing starts and building permits. The former suggested the economy is not cooling enough to satisfy central bankers and bodes poorly for crypto, while the latter indicated the reverse.

"Crypto markets still appear to be operating within a “good economic news equals bad news for asset prices” landscape," CoinDesk analyst Glenn Williams wrote.

Meanwhile, the new head of FTX raised the previously unlikely prospect of FTX exchange reviving, according to an interview he gave to The Wall Street Journal, his first since taking over at FTX in November.

John J. Ray III said that despite the accusations of criminal misconduct against former CEO Sam Bankman-Fried and other executives, customers have lauded FTX's technology and said it could be worth reviving the exchange. “Everything is on the table,” Ray told the Journal. “If there is a path forward on that, then we will not only explore that, we’ll do it.”

Insights

Asset Management Firm Cobo Looks to CeFi for Inspiration

Cobo, a Singapore-based crypto asset management and custodian platform, is trying to change a key feature of the crypto industry by adopting core tenets of traditional markets – the use of separate custodian, clearing and settlement services for trading.

The separation is a longstanding model in the traditional financial industry. These functions, typically handled by different independent entities, help increase transparency and reduce the risk of fraud and misconduct. This in turn helps to build trust among market participants and contributes to the overall integrity and stability of the financial system.

In the crypto world, however, these functions are combined under one roof by centralized exchanges (CEXs). Unlike traditional stock exchanges, crypto CEXs do more than just match buyers and sellers.

They custody and control client funds, act as a counterparty to trades and also provide lending/borrowing services, all with little regulatory oversight. Instead of being a neutral party to transactions, this multifaceted role of CEXs raises major conflict-of-interest issues.

FTX’s dramatic demise offered powerful evidence that CEXs should not dominate all these functions and hold that much power over other market participants.

Investors turn to custodians

With all the uncertainties in CEXs, investors turn to custodians. In November 2019, Cobo was the first custodian to introduce the Loop network – an off-chain settlement network that allows all parties in the Loop to transfer and settle instantly, without fees.

Cobo has now upgraded the Loop network, and this week, launched Superloop, an off-exchange custodian and settlement network that allows traders to trade directly on supported exchanges, with credit secured by collateral held under Cobo’s custody, locked only before the trade.

“In this time of uncertainty, it is extremely important for custodians and exchanges to provide a sense of security and trust towards traders,” Jiang Changhao, CTO and co-founder of Cobo, told CoinDesk.

“SuperLoop provides this trust by ensuring that traders have full control over their assets while trading among exchanges,” he added.

Investors and organizations can make use of Multi-Party Computation (MPC) custody solutions to co-manage their funds with an independent custody platform, and at the same time, trade these funds on crypto exchanges that are integrated with clearing and settlement networks hosted by that custody platform.

Cobo’s SuperLoop minimizes counterparty risk by removing the need to pre-fund on exchanges before trading and maximizes capital efficiency by enabling funds to be deployed without the delays and risks of on-chain transfers, providing users with full control over their assets.

Important events.

World Economic Forum

12:30 p.m. HKT/SGT(4:30 UTC) Canada Retail Sales (MoM/Nov)

5:00 p.m. HKT/SGT(9:00 UTC) Fed's Waller speech

CoinDesk TV

In case you missed it, here is the most recent episode of "First Mover" on CoinDesk TV:

Binance Named as Counterparty in FinCEN Order Against Bitzlato; Circle CEO on the Future of Money

"First Mover" was live in Davos, Switzerland at the World Economic Forum with the latest news moving crypto markets, including Binance being named as a counterparty in an order against the little-known cryptocurrency exchange, Bitzlato, accused of laundering $700 million by U.S. authorities on Wednesday. Plus, Ukraine Ministry of Digital Transformation's Yulia Parkhomenko and KUNA exchange founder Michael Chobanian discussed the state of crypto donations to Ukraine to aid its defense in the war against Russia. And, Circle CEO Jeremy Allaire shared his thoughts on the future of stablecoin regulation.

Headlines

Gemini’s Bitcoin Inflows From Other Exchanges Dropped to Roughly Six-Year Low, CryptoQuant Data Shows: The data suggests traders may be finding Gemini to be less desirable than other exchanges.

New FTX Head Says Crypto Exchange Could Be Revived, Wall Street Journal: John J. Ray III made the comment in his first interview since taking over FTX in November.

China Launches Smart Contract Functionality on Digital Yuan Through E-Commerce App Meituan: Through the smart contract, users can win part of a daily prize of $1,312 for using the digital yuan.

Alameda Research-Connected Bank Exits Crypto Business: Farmington State Bank, a small community bank in the state of Washington, is also changing its name.

Circle CEO: US Stablecoin Legislation Is ‘Lowest-Hanging Fruit’: Jeremy Allaire believes Congress will concentrate on stablecoin regulation because of its straightforward nature and significant growth potential.