First Mover: Bitcoin Rally Stalls as ‘DeFi Summer’ Proves Endless

Bitcoin (BTC) was little changed after climbing for six straight days, though prices appeared unable to hold fresh highs above $23,000.

“The market has paused for a bit to consolidate,” Joe DiPasquale, CEO of the cryptocurrency hedge fund BitBull Capital, told First Mover in an email. “This is normal behavior after major surges as market participants take profits and await the next big move up or down.”

In traditional markets, European stocks fluctuated as Brexit talks stalled. U.S. stock futures were steady as lawmakers worked to complete a pandemic-relief deal. Gold weakened 0.3% to $1,880 an ounce.

Market Moves

(Editor’s note: This is the fifth installment of First Mover’s recap of how the bitcoin market evolved over the course of 2020 and what it means for the future. Today we cover the period from June through September, when an explosion in innovation in the fast-growing cryptocurrency subsector of decentralized finance, or DeFi, diverted eyeballs – and capital – away from bitcoin.) 

At the end of May, bitcoin prices were sitting on a 35% year-to-date gain, following a series of wild market gyrations during an undeniably tumultuous and horrific year. With the coronavirus-racked U.S. economy suffering its worst contraction since the Great Depression, not even the bulls were in a mind to complain; the Standard & Poor’s 500 Index of U.S. stocks was down more than 6%.

But then, suddenly, the bitcoin market went cold. And that’s when the summer of DeFi began.

Decentralized finance (“DeFi”) is a subsector of the digital-asset industry where entrepreneurs are building semi-autonomous lending and trading systems atop decentralized networks, primarily the Ethereum blockchain. The goal is to create alternatives to the big banks and trading firms that are centrally managed by human executives and boards of directors in places like New York, London and Tokyo. The idea is that the distributed, computer-based versions of crucial…

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