Why is Tezos (XTZ) Enjoying a Rush of Green Amidst the Bloodbath on Crypto Street
- XTZ up 70% against the USD and 82% against BTC in the past month
- The basic supply and demand driven by staking are pushing the prices up
In the past 2 days, Bitcoin lost about 21% of its value. Altcoins followed the leading cryptocurrency and dropped 20 to 30%. This resulted in wiping out $50 billion from the total market cap.
However, Tezos is one cryptocurrency that is not following this trend. On Nov. 22, XTZ registered a loss of 14% but soon after it jumped over 27% to $1.40, last seen in early August.
At the time of writing, XTZ was trading at $1.33, as per Coincodex. Tezos is up 70% against the USD and 82% against BTC in the past month and 175% YTD in the USD market. But despite these gains, it is still down 88% from all-time high of $10.7.
What’s Driving XTZ Prices Up?
So, what’s behind this surge?
Recently, Tezos partnered with Tribe, a Singapore government-backed blockchain platform to launch a trading program for developers in the Tezos blockchain.
But there is more than this. It is actually, the basic supply and demand driven by staking.
Staking or called baking in Tezos is the process of holding funds in a cryptocurrency wallet to support the operations of a blockchain network that adopt the Proof of Stake (PoS) consensus mechanism or its variants. In the process, the crypto is locked to receive rewards.
Most of the users delegate this to a baking service for a percentage of its rewards as a fee.
A few months back, Coinbase Custody announced staking for Tezos, offering rewards of about 6%. In the first two months of the baking, the US-based crypto exchange platform generated an estimated revenue of $7,580-$8,324 from Tezos rewards.
Initially, it was only available for institutional clients only to be extended to all of Coinbase Custody’s US customers. This week, it expanded its XTZ staking services to all of its global clients as well.
Last week, Amun AG launched Amun Tezos exchange-traded product (ETP) with staking rewards where the underlying asset is held by Coinbase Custody.
Over 70% of XTZ Supply is Locked in Baking
With Coinbase already stepped up XTZ staking, Binance, Kraken, and others are expected to follow up soon. Already, over 71% of the Tezos circulating supply has been staked, as per Messari which could be expected to rise further as “On-chain data shows demand for baking is steadily increasing.”
Jack Miller, a partner at Cosimo.fund shared that Coinbase is one of the reasons for the increasing demand by making staking extremely simple. The exchange automatically starts baking for XTZ holders if they have more than 500 XTZ in their wallet for a fee of 25% of rewards. He stated,
“Coinbase Custody is over-subscribed by 15,557,014 XTZ. They need about ~2 million tezzies ASAP to be able to pay out all delegated users. They will also have an insufficient security deposit for their existing users in 4 cycles (12 days).”
Thread about Tezos $XTZ and upcoming supply crunch relative to increasing demand.
This could be a big deal.
— jack miller (@john_iller) November 22, 2019
With 70% of XTZ already stored in baking, the supply of Tezos is shrinking while demand for XTZ is growing because of an increase in demand in baking and need to buy and hold a lot of XTZ to earn revenue via staking, as such pushing the price of Tezos up.