Markets

GameStop Meme Stock Craze Prompted Market ‘Plumbing’ Changes, Says SEC Chair Gensler

Published

1 month ago

October 22, 2024

GameStop’s short squeeze in 2021 taught the Securities and Exchange Commission (SEC) several key lessons. Among those highlighted in a Monday speech by SEC Chair Gary Gensler was the need to modernize equity markets, in part by embracing shorter settlement times.

A retail-led movement to bet big against Wall Street short sellers caused GameStop’s stock price to spike nearly four years ago amid the “meme stock” craze. Forced to hold or sell shares skyrocketing in price, restrictions imposed by several brokerage firms blunted the rally that was later enshrined in stock market history and recounted in books and films.

Gensler, an unwavering critic of the digital assets industry, partly pinned the restrictions on a lack of market efficiency. Ultimately, a shift toward shorter settlement times—that experts say blockchains benefit from—improved upon mechanics that stifled some GameStop investors.

“Many everyday investors lost access to the market at a critical time,” Gensler said. “The longer it takes for a trade to settle—the slower the plumbing—the more risk our markets assume.”

When purchasing or selling a stock on a venue like the New York Stock Exchange, there is a delay between when the transaction is made and when it becomes fully processed across a series of intermediaries, including a broker-dealer, clearing agency, and exchange.

Notably, the SEC has accused crypto exchanges like Binance and Coinbase of fulfilling several of these roles at once, without proper registration, while facilitating securities transactions. Both companies have denied the regulator’s claims amid ongoing battles in federal courts.

Once conducted through paper checks and physical certificates, the settlement window for securities has been shortened with SEC rule changes over time. Commonly referred to as T+2, a two-day settlement window was reduced in May, making what Gensler said was “a real difference” for everyday investors.

At the same time, the shift to T+1 influenced the relationship between brokers, which match buyers and sellers, and clearinghouses that facilitate the exchange of securities and payments.

Margin calls from clearinghouses led some brokers to restrict purchases of GameStop stock during its famed short squeeze in 2021. But the “amount of margin, or collateral, that must be placed with the clearinghouse” was reduced significantly with T+1’s adoption, Gensler said.

Gensler’s GameStop reflection followed crypto-focused remarks from Federal Reserve Governor Christopher Waller last week. Discussing the merits of decentralized finance (DeFi), he described how intermediaries have historically provided value—but now face competition.

As reflected in the popularity of centralized crypto exchanges, Waller posited that DeFi could play a complementary role to existing financial markets, rather than replace legacy systems. Along those lines, he said distributed ledger technology (DLT) like blockchain could be an “efficient and faster way to do recordkeeping,” while smart contracts flatten trade structures.

“Smart contracts can effectively combine multiple legs of a transaction into a single unified act,” Waller said. “This can provide value, as it can mitigate risks associated with settlement.”

Companies like tZERO are building blockchain-based marketplaces for private securities. The Utah-based firm gained approval from the SEC and Financial Industry Regulatory Authority (FINRA) to operate as a custodian for digital assets sold as securities last month.

In early 2025, the firm plans to launch with a “full digitization” of its Series-A preferred equity. But Wall Street tastemakers have visions for a crypto-based market extending far beyond that.

BlackRock CEO Larry Fink hailed tokenization as the “next generation for securities” in 2022. Using a digital representation of an asset to conduct trades on a blockchain, he said the process would provide market participants with “instantaneous settlement” and “reduced fees.”

Alongside the crypto’s rise, financial firms have looked at other qualities inherent to blockchains, such as the 24/7 schedule that they operate under within the context of trading. Crypto markets don’t close, which can provide both opportunities and risks alike.

In April, the Financial Times reported that the New York Stock Exchange was exploring round-the-clock trading. The development would be a significant break from the exchange’s regular six-and-a-half hour trading window, extended as recently as 1985.

Edited by Andrew Hayward

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Dogecoin

Dogecoin Jumps to 3-Year High Price—Before Bitcoin Cools and Meme Coins Plunge

Published

13 hours ago

November 24, 2024

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Dogecoin got another leg up late Friday and into early Saturday, climbing to a price point not seen in over three years. But it has since fallen, with DOGE and other top meme coins among the biggest losers of the last 24 hours.

DOGE popped above the $0.475 mark on Saturday morning—the first time that the meme coin had risen that high since May 2021. Dogecoin has been on a torrid surge in recent weeks, starting before the election and becoming substantially more explosive in the days after.

Previously, in terms of recent moves, DOGE had previously popped as high as nearly $0.43 on November 13; at the time, it was a three-year high mark, but that local peak has since been topped. DOGE is now up 195% over the last 30 days, and 430% over the past year, per data from CoinGecko.

It was a short-lived peak, however, as is typical for such a volatile coin. DOGE is now down to about $0.41 as of this writing as the broader crypto market cools after last week’s surge. Bitcoin, for example, has now dipped to a price of $96,725 after setting a new all-time high price of $99,645 on Friday and coming close to the $100,000 milestone mark.

Dogecoin is now down 12% over the past 24 hours, though it’s not the biggest loser from the top 10 cryptocurrencies by market cap: XRP has dipped by 14% during the same span after pushing to its own three-year-high mark on Friday.

Zooming out, however, it is mostly meme coins that have fallen the hardest out of the top 100 coins over the past 24 hours. Brett (BRETT), Bonk (BONK), Popcat (POPCAT), Dogwifhat (WIF), Pepe (PEPE), and Floki (FLOKI) have all fallen by 10% or more during that span, alongside Dogecoin. Broadly, the crypto market is down by nearly 5% over the past day.

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Dogecoin

Elon Musk Tweet of Joe Rogan Profile Sends DOGE Price Higher

Published

17 hours ago

November 24, 2024

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Some crypto enthusiasts speculate that the service, once live, might include transactions with some digital assets such as DOGE, given Musk’s long-standing affection for the token. Musk’s electric car company, Tesla, already accepts DOGE payments for some merchandise purchases in its online store.

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Bitcoin Magazine Pro

On-Chain Data Shows The Bitcoin Price Bull Run is Far From Over

Published

2 days ago

November 23, 2024

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Bitcoin’s recent price action has been nothing short of exhilarating, but beyond the market buzz lies a wealth of on-chain data offering deeper insights. By analyzing metrics that gauge network activity, investor sentiment, and the BTC market cycles, we can gain a clearer picture of Bitcoin’s current position and potential trajectory.

Plenty Of Upside Remaining

The MVRV Z-Score compares Bitcoin’s market cap, or price multiplied by circulating supply, with its realized cap, which is the average price at which all BTC were last transacted. Historically, this metric signals overheated markets when it enters the red zone, while the green zone suggests widespread losses and potential undervaluation.

*Figure 1: MVRV Z-Score still at comparatively low values.*

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Currently, despite Bitcoin’s rise to new all-time highs, the Z-score remains in neutral territory. Previous bull runs saw Z-scores reach highs of 7 to 10, far beyond the current level of around 3. If history repeats, this indicates significant room for further price growth.

Miner Profitability

The Puell Multiple evaluates miner profitability by comparing their daily USD-denominated revenue to their previous one-year moving average. Post-halving, miners’ earnings dropped by 50%, which led to a multi-month period of decreased earnings as the BTC price consolidated for most of 2024.

*Figure 2: Puell Multiple reclaiming 1.00 has previously signified the start of bullish price action.*

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Yet even now, as Bitcoin has skyrocketed to new highs, the multiple indicates only a 30% increase in profitability relative to historical averages. This suggests that we are still in the early to middle stages of the bull market, and when comparing the patterns in the data we look like we have the potential for explosive growth akin to 2016 and 2020. With a post-halving reset, consolidation, and a finally a reclaim of the 1.00 multiple level signifying the exponential phase of price action.

Measuring Market Sentiment

The Net Unrealized Profit and Loss (NUPL) metric quantifies the network’s overall profitability, mapping sentiment across phases like optimism, belief, and euphoria. Similar to the MVRV Z-Score as it is derived from realized value or investor cost-basis, it looks at the current estimated profit or losses for all holders.

*Figure 3: NUPL is still at lower values than our previous ATH set in March 2024.*

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Presently, Bitcoin remains in the ‘Belief’ zone, far from ‘Euphoria’ or ‘Greed’. This aligns with other data suggesting there is ample room for price appreciation before reaching market saturation. Especially considering this metric is still at lower levels than this metric reached earlier this year in March when we set out previous all-time high.

Long-Term Holder Trends

The percentage of Bitcoin held for over a year, represented by the 1+ Year HODL Wave, remains exceptionally high at around 64%, which is still higher than at any other point in Bitcoin history prior to this cycle. Prior price peaks in 2017 and 2021 saw these values fall to 40% and 53%, respectively as long-term holders began to realize profits. If something similar were to occur during this cycle, then we still have millions of bitcoin to be transferred to new market participants.

*Figure 4: 1+ Year HODL Wave is still higher than any previous cycle highs.*

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So far, only around 800,000 BTC has been transferred from the Long Term Holder Supply to newer market participants during this cycle. In past cycles, up to 2–4 million BTC changed hands, highlighting that long-term holders have yet to cash out fully. This indicates a relatively nascent phase of the current bull run.

*Figure 5: Long Term Holder Supply is still considerably higher than previous cycles.*

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Tracking “Smart Money”

The Coin Days Destroyed metric weighs transactions by the holding duration of coins, emphasizing whale activity. We can then multiply that value by the BTC price at that point in time to see the Value Days Destroyed (VDD) Multiple. This gives us a clear insight into whether the largest and smartest BTC holders are beginning to realize profits in their positions.

*Figure 6: The VDD metric indicates the largest and most experienced holders aren’t selling.*

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Current levels remain far from the red zones typically seen during market tops. This means whales and “smart money” are not yet offloading significant portions of their holdings and are still awaiting higher prices before beginning to realize substantial profits.

Conclusion

Despite the rally, on-chain metrics overwhelmingly suggest that Bitcoin is far from overheated. Long-term holders remain largely steadfast, and indicators like the MVRV Z-score, NUPL, and Puell Multiple all highlight room for growth. That said, some profit-taking and new market participants signal a transition into the mid to late-cycle phase, which could potentially be sustained for most of 2025.

For investors, the key takeaway is to remain data-driven. Emotional decisions fueled by FOMO and euphoria can be costly. Instead, follow the underlying data fueling Bitcoin and use tools like the metrics discussed above to guide your own investing and analysis.

For a more in-depth look into this topic, check out a recent YouTube video here: What’s Happening On-chain: Bitcoin Update

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