First Mover: Bitcoin Hits Record as ‘Blue Wave’ and ‘Kimchi Premium’ Look Bullish

Bitcoin (BTC) rose for a second day, surging to a new all-time high price of $35,751, according to CoinDesk’s Bitcoin Price Index. 

A Democratic win in the other Senate runoff election, which is where the votes were leaning early Wednesday, would usher in the “Blue Wave” scenario that cryptocurrency traders have been speculating over for months. Biden has pledged to increase government spending, which could lead to higher inflation as well as additional bond purchases (money printing) from the Federal Reserve. 

Bitcoin is viewed as a potential hedge against currency debasement by a growing number of investors in both digital-asset markets and on Wall Street. 

“We have to expect fiscal policy to be looser than if Republicans had kept their majority,” Ian Shepherdson, chief economist with the forecasting firm Pantheon, wrote early Wednesday in a note to clients. 

In traditional markets, Asian and European shares rose and U.S. stock futures pointed to a higher open. 

U.S. 10-year Treasury bond yields have climbed above 1% for the first time since March, potentially on expectation of increased borrowing by the American government. U.S. crude oil futures rose above $50 a barrel as Saudi Arabia agreed to a unilateral production cut of 1 million barrels a day.   

Market moves

First Mover has written extensively about bitcoin’s embrace by U.S. institutional investors, beginning in earnest last year, as a hedge against currency debasement in the face of trillions of dollars of fiscal and monetary stimulus from governments and central banks around the world. 

According to Shen, what’s known in cryptocurrency circles as the “kimchi premium” has returned – seen as a sign of surging interest in bitcoin from retail buyers in South Korea.

The kimchi premium is the extra price margin over global bitcoin prices that is sometimes witnessed on Korean cryptocurrency exchanges. It’s named for the popular Korean pickled side dish.

And the premium has hit a two-year high, as quantified by the difference in prices on South Korean’s Upbit exchange and Binance, the world’s largest cryptocurrency exchange. The kimchi premium recently hit 4.15%, according to real-time exchange data-tracking site scolkg.com, the biggest mark-up since early 2018.

The kimchi premium first appeared in early 2016, according to researchers at the University of Calgary. Between January 2016 and February 2018, it averaged at 4.73% and reached its highest at 54.48% in January 2018.

Jason Kim, chief investment officer of the Tokyo-headquartered investment firm Anchor Value, says there’s a lack of institutional traders in South Korea’s crypto market, which elevates the prominence of retail customers in the country who use exchanges more frequently and tend to follow “fear of missing out” trends during bull runs.

“Korean retailers are entering the market after seeing a strong price increase of bitcoin,” Sinhae Lee, partner of Shanghai-based blockchain consulting firm Block72, told CoinDesk. 

With bitcoin prices up 20% already in 2021, after quadrupling in 2020 and doubling in 2019, the kimchi premium shows that the fear of missing out, often known by the acronym FOMO, might be global and broad-based. 

Bitcoin watch

Bitcoin, often touted as digital gold, jumped to fresh record highs early Wednesday alongside an uptick in longer-duration U.S. Treasury-bond yields, potentially a sign of looming inflation, according to one expert.

The cryptocurrency printed a new all-time high of $35,751 and the yield on 10-year Treasurys crossed above 1% for the first time since March 2020, according to data provider TradingView. While there is no direct correlation between the two assets, they’re both increasingly linked to investor views on inflation, according to Chris Thomas, head of digital assets at Swissquote Bank.

Bond markets are often the first to price in expectations of inflation and interest rates. 

“The latest rise in yields could be an indication that interest rates may need to rise slightly in the future because the economy is in better shape, and to help control inflation,” Thomas told CoinDesk. “Naturally, if we think there is inflation, then the U.S. dollar will weaken, and all assets priced in USD will naturally strengthen.”

The dollar index, which tracks the greenback’s value against majors, has declined to a fresh 33-month low of 89.25. However, the oversold currency could draw bids if the ascent in Treasury yields gathers pace, since investors might begin to see value in the higher income stream. In that case, bitcoin may have a tough time maintaining its bullish momentum.

Token watch

Stellar (XLM): Payments-focused blockchain’s native cryptocurrency surges to 2-year high, reportedly due to rival XRP’s recent woes and its potential role in the development of central-bank digital currencies.  

What’s hot

Legendary investor Bill Miller trolls billionaire Warren Buffett over “rat poison” bitcoin remark (CoinDesk) 

Coinbase says institutional trading arm worked with money manager One River to “invest an undisclosed amount in digital assets, resulting in one of the largest digital asset trades in history (Coinbase)

CoinDesk acquires cryptocurrency analysis firm TradeBlock for undisclosed sum in bid to capitalize on investor demand for price indexes, data-driven products (WSJ) 

U.K. ban on retail trading of cryptocurrency derivatives takes effect Wednesday (CoinDesk)

Origin brings back interest-earning OUSD stablecoin following $7M hack (CoinDesk)

Digital-asset manager CoinShares says XBT Provider line of exchange-traded products reached record trading volumes on Monday (Coinshares) 

Swedish bankers worry proposed central-bank digital currency “e-krona” could siphon away deposits (Reuters)  

Ethereum ecosystem investment yields range from 4.6% to 16%, versus 0.9% on 10-year U.S. Treasury bonds, Bankless co-founder David Hoffman writes in op-ed (CoinDesk Opinion) 

Analogs

The latest on the economy and traditional finance

COVID-19 aftermath could spell a “lost decade” for global economy, World Bank says (WSJ)

Second round of U.S. stimulus checks, some $112B out of total estimated cost of $165B, have already reached household bank accounts (WSJ)

World’s biggest economies shouldering record debt burdens have $13T debt bill coming due (Bloomberg) 

U.S. business Chapter 11 bankruptcy filings rose 29% last year as the coronavirus pandemic and related lockdowns crimped revenue; individual filings could increase with expiration of mortgage-forbearance programs and coronavirus relief (WSJ)

“If interest payments on the debt are themselves broadly determined by policy makers, they can’t be a good canary in the coal mine.” (WSJ)

Washington Post columnist Katrina vanden Heuvel argues that incoming U.S. presidential administration could push for government to play a role in resolving American households’ $4.1T in non-housing debt (Washington Post) 

Nearly one-quarter of units in Frank Gehry-designed high-rise apartment building in Lower Manhattan became vacant during COVID pandemic, leading to rent concessions (WSJ)

Tweet of the day