In this issue

  1. Crypto markets: Is another bull run coming?
  2. NFTs: Punks rocking out
  3. China: Costs of a crackdown

From the Editor’s Desk

Dear Reader,

Vacation season may be winding down, but the action on digital asset markets seems to be ramping up.

Cryptocurrency investors who elected to follow the old market adage “Sell in May and go away” might have been spluttering into their last poolside cocktails of the summer during this past week as Bitcoin chalked up impressive gains.

They’ll of course recall the crypto market rout in spring, when over the space of just six weeks, the original digital currency lost around 42% of its value.

And they may be enviously eyeing investors who held their nerve amid the plunge and emerged better for it.

Investors are also eyeing up NFTs. Last week, an auction saw 10,000 ape character NFTs sell out in just eight minutes. No monkeying about there. This week, a collection of pixelated CryptoPunks pulled plenty of punters in, including Visa, which paid US$150,000 for one. The success of these and other NFTs demonstrates their continued appeal, although we have yet to witness a test of their value of the magnitude that’s proven the staying power of cryptocurrencies.

In China, it’s no state secret that it has no love for crypto. In yet another blow to the country’s beleaguered crypto industry, a court has made clear that crypto trading and investing are not afforded the protection of the law.

Beijing’s anti-crypto moves may eventually have unintended consequences, but it serves to underline the lingering vulnerability of the industry to capricious regulation. That should prompt redoubled efforts by policymakers in less illiberal jurisdictions to ensure the sector enjoys more than just a successful summer as the nights begin to draw in.

Until the next time,

Angie Lau,
Founder and Editor-in-Chief

1. Bitcoin’s rise corrals other coins

Bitcoin’s rise corrals other coins
Bitcoin’s return to pre-plunge highs has fueled speculation among crypto bulls.
Image: Sam Valadi, CC BY-NC-ND 2.0, via Flickr

By the numbers: Cardano — over 5,000% increase in Google search volume.

Bitcoin’s price soared above US$50,000 on Aug. 23, marking the first time it had broken that ceiling since May 15. Crypto’s market cap reached US$2.1 trillion, led by Ethereum rivals Cardano and Solana. ADA’s price hit a new all-time high of US$2.97 on the day, and SOL rose to a record of US$81.81 on Aug. 21, although the price of each has since eased.

  • Bitcoin’s hit a 24-hour high of US$50,482.08 on Aug. 23.
  • As retail investors panicked following May’s crypto market crash and fled the scene, institutions and professional investors began to accumulate Bitcoin, and the crypto market’s resurgence came as no surprise to most exchange analysts in Asia.
  • ADA’s market cap has more than doubled in the past month, hitting an all time high of US$93 billion on Aug. 23. Unlike Solana’s blockchain ecosystem, which has started to cater to decentralized finance and non-fungible tokens, Cardano still has no real utility, even though ADA’s market cap is four times that of Solana.
  • In the past week alone, cryptocurrency funds saw net inflows of around US$21 million, bringing total assets under management to $57.3 billion. Ethereum brought in around US$3.2 million last week, while Cardano attracted US$6.4 million. Solana generated the biggest inflows of any other cryptocurrency, pulling in some US$7.1 million. 
  • BTC was trading at US$47,540, ADA at US$2.67 and SOL at $US67.88 at press time.

Forkast.Insights | What does it mean?

The current rally in Bitcoin, and crypto more broadly, is a good reminder of just how quickly the market narrative can change. However, one constant is that Bitcoin leads the pack, and for retail market players, the original cryptocurrency’s value is the main indicator of whether or not investing in digital assets makes sense.

The recent lull on crypto markets is instructive, and indicative of just how shallow and ill-informed retail investors can be when it comes to cryptocurrency. Elon Musk’s tweet that Tesla wouldn’t accept Bitcoin as payment due to environmental concerns may appear to have been a step backwards for Bitcoin, but Musk’s fears have since been debunked ad nauseam. China is cracking down on cryptocurrency mining and trading. But does that mean crypto is dying? Or could it mean simply that the Communist Party is issuing its own digital currency as a means of tightening its vice-like grip on all aspects of people’s lives, and that fears the potential of technologies such as Bitcoin to undermine that goal? The unfortunate truth is probably that most retail investors in the crypto space are driven by fear and greed rather than fundamentals and good judgment.

When small investors panicked following May’s crypto market crash, fleeing in terror, institutional and professional players began to accumulate Bitcoin, and the crypto market’s resurgence did not take exchange analysts in Asia by surprise. Since the crypto crash in May, which sent Bitcoin down from over US$60,000 to the lower US$30,000 range, on-chain metrics have shown that investors who had gone long on the token were accumulating it, buying the dips as weaker players buckled. Bitcoin also showed incredible resilience, never falling below US$30,000 during the entire period — a price that itself seemed unattainable only a year ago.

With Bitcoin having secured its position as the closest thing the crypto space has to a reserve currency, the battle is now beginning for the smart contracts market, currently dominated by Ethereum, with rivals Solana and Cardano hitting new highs over the past week.

Cardano is once again the third-biggest cryptocurrency, with a market cap exceeding US$85 billion, just below those of Bitcoin and Ethereum. Meanwhile, Solana has cemented its top 10 status with a market cap of more than US$21 billion. Both Solana and Cardano have been marketed as potential rivals to Ethereum, which currently hosts the vast majority of DeFi projects.

Solana and Cardano show much potential, and have strong communities backing them, especially Cardano, which still lacks real-world utility and is rising on speculation over what will happen once its Alonzo upgrade, targeted for Sept.12, ushers in smart-contract functionality and allows ADA to be used in DeFi.

And it’s not too late to get in on these projects. If Bitcoin continues to rise and a bull market re-emerges, fickle retail investors are all but certain to jump straight back in and drive prices even higher. 

2. Punks rock NFTs

Visa’s CryptoPunk purchase sparked a wave of buying that drove trading volume to a record high.
Image: Larvalabs, CC BY-SA 4.0, via Wikimedia

By the numbers: CryptoPunk 7610 — over 5,000% increase in Google search volume.

CryptoPunk NFT trading volume has reached US$276 million in the past 7 days, skyrocketing 282%, with 648 sales in secondary marketplaces, an increase of 315%, according to DappRadar data.

  • The surge followed news on Monday morning that Visa had bought a CryptoPunk NFT for nearly 50 ETH, (US$150,000 at the time). The piece, CryptoPunk 7610, is part of an algorithmically generated collection of 10,000 unique pixel images.
  • “We think NFTs will play an important role in the future of retail, social media, entertainment and commerce,” said Cuy Sheffield, head of crypto at Visa, in a blog post about the purchase. “To help our clients and partners participate, we need a firsthand understanding of the infrastructure requirements for a global brand to purchase, store and leverage an NFT.”
  • Visa wrote on Twitter that it was an avid collector of “historic commerce artifacts,” and now CryptoPunk 7610 joins its collection. Sheffield said the company was using the collection as a sign that it was “jumping in feet first,” and that it represented the beginning of the company’s work in the space.
  • This month has been the best to date for CryptoPunk sales, with trading volume of more than US$314 million so far. 
  • VisaNews this week switched its Twitter profile picture to CryptoPunk 7610.

Forkast.Insights | What does it mean?

The creation of, and demand for, NFTS has exploded since digital artist Beeple sold a collage for US$69 million in March, the third most expensive piece sold by a living artist. Since then there has also been an increase in the variety of uses of NFTs for the storage of digital content, and an exponential rise in trading volume.  

The trade in NFT collectables on exchanges such as OpenSea and Rarible has surged, with financial heavyweights and celebrities getting in on the action.

NFTs are drawing both attention and criticism, and investors may be asking themselves whether it’s time to move into the market or to start collecting. Here are a few things they should know.

NFTs derive their value from being non-fungible, which basically means each one is unique. Fungible assets, by contrast, are interchangeable, like money. NFTs cannot be exchanged like for like with one another unless there is an agreement between their holders that they represent the same value.

Content sold via an NFT can represent a huge range of items, from computer-generated collectibles such as CryptoPunks to art like Beeple’s “EVERYDAYS: the First 5000 Days” to K-pop fan merchandise.  

NFTs are described as digital certificates of ownership representing purchases of digital assets that can be traced on a blockchain. If an investor buys an NFT from its creator, they obtain ownership.

However, NFT holders have no other rights to works they own under copyright law, such as rights to control their display to the public or even rights to prohibit adaptations or reproductions of the work.

Buyers therefore ought to view NFTs as speculative investments, and get accustomed to the simple pleasure of having something unique from its creator, whether that’s a sports team, an artist or a pop star. There is no guarantee that a piece will appreciate in value, and often unless transaction terms say otherwise, buyers may even find themselves limited in their ability to share works on public platforms and prohibited from reproducing them or making them available to others.

Buyers should also be aware that a blockchain cannot tell you whether a work is authentic or original. There have been many cases of sellers having taken another person’s work and tokenized it as an NFT, infringing the rights of the copyright owner.

It’s wise to proceed with caution, as the NFT space is still very much the Wild West of the digital asset space, and the inherent value of NFTs remains uncertain.

3. China’s crypto crackdown has costs

China’s crypto crackdown has costs
A Chinese court says crypto investing and trading fall outside the protection of the law.
Image: V.T. Polywoda, CC BY-NC-ND 2.0, via Flickr

As China continues cracking down on cryptocurrency speculation, the way in which the country’s legal system will treat crypto-related disputes is becoming clearer, with more local courts publicly commenting on cases.

  • The High Court in the eastern province of Shandong reiterated on Sunday in a social media post that “the behavior of investing or trading cryptocurrency is not protected by law.” 
  • The court cited a case in Jinan, Shandong’s capital city, in which the judge, Li Xiaoli, said in a statement that purchases of virtual currencies were not protected by Chinese law, and neither were contracts related to such transactions. “Regular investors should protect their personal property and stay away from virtual currencies,” the judge said.
  • However, nuance has emerged in other crypto-related cases heard in the country’s courts. A district court in Shanghai stated last week that although Bitcoin was not a currency, it had the attributes of a virtual commodity, given its exchangeability, excludability and availability. In 2019, the Hangzhou Internet Court also recognized Bitcoin as legal virtual internet property that deserved to be treated in the same way as other assets.

Forkast.Insights | What does it mean?

China has been busily preparing the launch of its digital yuan, known as e-CNY, and its ambition to let nothing stand in the way of that plan has led to an all-out attack on crypto mining and trading, alongside stringent legislation regulating cryptocurrency.

The digital yuan appears to be part of a push to challenge the hegemony of the U.S. dollar, a challenge that may have blinded Beijing to the potential benefits of cryptocurrency to its own economy and the future of finance

China’s distrust of cryptocurrency is also reflective of its current turn toward economic policies designed to clip the wings of private enterprise. Beijing is cracking down on the country’s big tech firms, tanking Chinese stocks in the process. Major shifts in how the state and the private sector interact could have consequences for China’s position in the global economy. 

Beijing’s clampdown on cryptocurrency is not comparable to any other. Chinese authorities have imposed bans on banks and financial institutions providing crypto services, and have shut down all crypto mining in the country. Authorities in other countries have tried to ban crypto, such as India’s central bank, which attempted to prohibit finance industry businesses from dealing with crypto, only to be overturned by the nation’s top court.

Beijing’s cudgeling of the crypto sector may cut the country off from the rapidly growing digital asset sector, and its crackdown on Big Tech could hinder innovation and entrepreneurship. Chinese investors would also be locked out of a paradigm shift in wealth creation. But Beijing may take comfort in the fact that they will have e-CNY, which offers a new means by which it can exert control over the economy and track more closely its people’s transactions, spending and financial movements.