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Distributed Ledger: Government bonds are eroding crypto’s appeal for investors seeking rich yields. But some are staying.

Hello, welcome back to Distributed Ledger, our weekly crypto newsletter that reaches your inbox every Thursday. I’m Frances Yue, crypto reporter at MarketWatch. I’ll walk you through the latest and greatest in the digital asset world this week.

Find me on Twitter at @FrancesYue_ to send feedback, or tell us what you think we should cover. You can also reach me through email to share your personal stories with crypto.

Crypto in a snap

Bitcoin
BTCUSD,
-1.12%

advanced about 1.3% during the past seven days, and was trading at around $19,087 on Thursday, according to CoinDesk data. Ether
ETHUSD,
-1.47%

gained 3% over the seven-day stretch to around $1,289. Meme token Dogecoin
DOGEUSD,
-0.44%

gained 2.6% while another dog-themed token, Shiba Inu
SHIBUSD,
-2.37
,
went up 3.5% from seven days ago.

Crypto Metrics

Biggest Gainers

Price

%7-day return

Frax Share

$6.13

27.4%

WhiteBIT Token

$13.61

21.8%

Trust Wallet

$1.12

16.8%

Casper Network

$0.04

16.6%

Lido DAO

$1.48

16.6%

Source: CoinGecko as of Oct. 20

Biggest Decliners

Price

%7-day return

EthereumPoW

$6.32

-19.8%

Klaytn

$0.14

-18.3%

Axie Infinity

$10

-13.4%

Terra Luna Classic

$0.0002

-13.2%

Radix

$0.05

-9.9%

Source: CoinGecko as of Oct. 20

Should you stake your ETH?

Last month, Ethereum completed its historical transition to proof-of-stake from proof-of-work, meaning that the network is now secured by stakers, or ether holders who lock up their crypto, instead of miners. 

Read: The Ethereum Merge is completed. What’s next? Here are three things you should watch

Through staking, ether holders could help secure the network while receiving rewards, currently with a 4% yield annually, according to the Ethereum Foundation. The amount of ether staked has been growing, up to over 14 million on Wednesday from 8 million at the start of the year, according to data from Ethscan. Ether’s staking rate, or the amount of staked ether to that of ethers’ total supply, went up to about 11.5% from 7.4% at the beginning of this year, according to CryptoQuant.com. 

However, with the 10-year Treasury
TMUBMUSD10Y,
4.239%

bills yielding more than 4% annually, higher than ether’s current staking rewards, why are some investors still staking their coins? 

As the crypto bear market continues, most ether holders are investing in the potential of blockchain technology, instead of drawn by the near-term yields, analysts said. Ether has lost more than 65% of its value year-to-date, according to CoinDesk data.

“Ether holders are long the ‘platform’ and are framing the investment as a venture-like bet or thesis trade and want to capture the yield along the way,” said Brian Mosoff, chief executive at Ether Capital. “They have a low time preference by default,” Mosoff noted. Stakers won’t be able to withdraw their ether until the completion of the Shanghai upgrade, which is expected to happen at some point in 2023.

“A U.S 10-year Treasury is more suited for investors that prefer minimum risk,” said Konstantin Boyko-Romanovsky, chief executive and founder of validator node hosting platform Allnodes.

“But for investors that invest in crypto for blockchain technology, nothing can be compared to hosting their own node, supporting the Ethereum network, and decentralization while receiving staking rewards for their contribution,” Boyko-Romanovsky said.

Still, ether holders face several challenges and risks when staking their coins. 

They may lose a large amount of ether and be forced out of the network due to “slashing”, when a staker’s activity is recognized as malicious. “Slashing happens when you accidentally run two instances of your own node in two different places,” noted Boyko-Romanovsky.

Stakers should also be alert for any scams, especially when they are asked for private keys, Boyko-Romanovsky said.

Regulators are also paying increasing attention to crypto staking. In September, Gary Gensler, chairman of the U.S. Securities and Exchange Commission, said that cryptocurrencies or intermediaries that allow holders to stake their coins may pass the Howey test, which is used by courts to determine whether an asset is a security. Gensler said he wasn’t referring to any specific cryptocurrencies, but the comments raised concerns whether the classification of ether would be changed.

Bitcoin’s bottom is in?

Bitcoin may have already reached the bottom, based on a comparison with previous bear markets and on-chain data, according to analysts at Arcane Research. 

In June, the crypto reached a yearly low of $17,601, according to CoinDesk data. Bitcoin is trading at around $19,087 on Thursday, down 0.6% over the past 24 hours.

It has been more than 340 days since bitcoin reached its all-time high of $68,990 in November, as the crypto went down more than 70% from its peak, according to CoinDesk data.  

Looking back at the previous bear markets, bitcoin saw a drawdown in 2018 of up to 84%, and it took 364 days for the crypto to go from cyclical peak to bottom. In 2014, the downturn lasted 407 days, with a maximum drawdown of 85%. 

Meanwhile, several on-chain metrics also showed that the worst for bitcoin may have passed, according to the analysts. 

I’ve written more about it here.

Mastercard’s new crypto offering

Mastercard Inc. on Monday said it’s launching Crypto Source, a program to help financial institutions offer secure crypto trading capabilities and services to their customers. Mastercard’s financial institution partners will be able to engage in buy, hold and sell services for select crypto assets, according to a statement.

The payment-processing company is expanding its partnership with Paxos Trust, which will provide crypto-asset trading and custody services on behalf of the banks, according to the statement.

Crypto companies, funds

Shares of Coinbase Global Inc.
COIN,
+0.63%

was flat Thursday at around $63.21 on Thursday, and were down 8.8% over the past five trading sessions. Michael Saylor’s MicroStrategy Inc.
MSTR,
-2.24%

shares lost 2.2% Thursday to $221.09, while they are up 0.3% over the past five days.

Mining company Riot Blockchain Inc.
RIOT,
-1.59%

shares lowered 1% to $5.62 Thursday, and they were down 12.1% over the past five days. Shares of Marathon Digital Holdings Inc.
MARA,
-1.36%

dipped 0.5% to $11.03, while down 1.8% over the past five days. Another miner, Ebang International Holdings Inc.
EBON,
-1.31%

tanked 5.5% to $0.30 on Thursday, while down 16% over the past five days.

Overstock.com Inc.
OSTK,
+0.51%
’s
shares were mostly unchanged at $23.58. The shares traded 0.3% lower over the five-session period.

Shares of Block Inc.
SQ,
+2.30%
,
formerly known as Square, added 2% to $55 and were down 2.2% for the week. Tesla Inc.
TSLA,
-6.65%

shares dropped 7% to 206.55%, down 6.9% over the past five days.

PayPal Holdings Inc.
PYPL,
+0.37%

edged up 0.1% to $84.53, up 0.6% over the five-session stretch. Nvidia Corp.
NVDA,
+1.19%

shares went up 1.2% to $121.92, looking at a 1.9% gain for the past week.

Advanced Micro Devices Inc.
AMD,
+0.94%

shares picked up 0.7% to $57.61 on Thursday, down 2.1% from five trading days ago.

Among crypto funds, ProShares Bitcoin Strategy ETF
BITO,
-0.84%

slipped 1% to $11.74 Thursday, while its Short Bitcoin Strategy ETF
BITI,
+0.95%

rose 1% to $38.91. Valkyrie Bitcoin Strategy ETF
BTF,
-0.88%

went down 0.8% to $7.3, while VanEck Bitcoin Strategy ETF
XBTF,
-0.78%

edged up 0.4% to $18.84.

Grayscale Bitcoin Trust
GBTC,
+0.18%

added 0.2% to $11.27.

Must Reads

Cracks At Kraken: Crypto’s Near Empty C-Suite (Forbes)

Retail investors become vigilantes in hunt for crypto’s most wanted man (Financial Times)

A Crypto Alchemist Made Me an Accidental Billionaire (Wired)

Texas regulator probes crypto platform FTX and CEO Sam Bankman-Fried (The Washington Post)

Fidelity’s Crypto Platform to Add Ether Trading for Institutional Clients (CoinDesk)

JPMorgan Adds Crypto Policy Head After Dimon’s ‘Ponzi’ Quip (Bloomberg Law)

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