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Bitcoin and Economic Uncertainty: Patience Is the Name of the Game

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As whispers of Bitcoin’s (BTC) promised financial breakthrough failing to materialize over the last few months have continued to garner steam, the price of the premier crypto asset recently surged above the all-important $12,000 psychological threshold, only to once again slip right under. 

However, as part of this development, the total cap of the crypto market reached an impressive $386.4 billion, a level only attained back in 2018. That being said, a multitude of factors, such as poor investor perception and lack of regulatory direction, seems to be preventing the market from flowering as previously envisioned by many experts. 

In this regard, Sam Tabar, co-founder of decentralized P2P token trading network Airswap and ex-managing director for Bank of America in the APAC region, believes that while there is a long term structural upside for Bitcoin, there will be cyclical ups and downs like with any nascent asset class. However, the primary issue holding traditional capital market participants from entering this market is information asymmetry: “Certain players aka ‘whales’ control most of the market and have created massive market spikes or collapse. Market gyrations are ok, but massive information asymmetry is not.”

Expounding his views on the matter, Ariel Zetlin-Jones, associate professor of economics at Carnegie Mellon University’s Tepper School of Business, told Cointelegraph that a primary headwind against cryptocurrency demand continues to be the COVID-19 pandemic, especially as more people start to face the economic uncertainty. He further added that it’s only natural that during uncertain times, not many casual investors would be willing to invest their life savings in a highly volatile asset class such as Bitcoin.

Facts around the U.S. dollar

Amid the pandemic, the United States dollar has thus far maintained its strength, in part, due to being the world’s reserve currency, and as long as countries continue to see the U.S. as a global powerhouse, its monetary value will continue to remain strong regardless of the recent stimulus packages

However, in terms of the dollar’s recent performance, there have been some hiccups. For starters, the U.S. dollar index is currently at 93.2, down nearly 10% from its peak in March. Also, due to being a global reserve currency, the dollar tends to increase in value during downturns, complicating assessments of its performance at such times. 

Furthermore, increasing social and political tensions along with incessant printing of dollars are creating conditions that can potentially form a bubble of hyperinflation in the foreseeable future. The situation has pushed some major investors like Warren Buffett, the CEO of Berkshire Hathaway, to trim his company’s position in banking and investing heavily in stable stores of value such as gold.

Buffett’s decision to completely close Berkshire’s position on Goldman Sachs also comes at a time when the financial institution recorded its second-ever highest quarterly trading revenue of $13.3 billion, thereby suggesting that Buffett and his associates are not comfortable with the idea of betting big on the long-term prospects of the banking industry. Ryan Taylor, CEO of the Dash cryptocurrency, told Cointelegraph:

“The U.S. is not the only country to undergo massive stimulus in 2020. Also, in times of crisis demand for USD tends to spike globally. These two considerations give the U.S. a lot of leeway to inflate supply without immediately devaluing the dollar. However, we are starting to witness signs that inflation is a risk. Certainly the massive stimulus started by inflating asset prices, including equity and debt. And just last week the U.S. CPI for July registered the highest monthly growth rate since 1991.”

Crypto’s performance has been deceptively strong

Even though many naysayers have repeatedly pointed out the fact that BTC has failed to surge exponentially and reach new all-time highs despite the economic conditions being ripe for it, the cryptocurrency market as a whole seems to be having a stellar year.

For example, Ether (ETH) has quadrupled in value, rising from $105 to $440 since hitting relative lows earlier this year in March. Similarly, currencies like Bitcoin, Ripple (XRP) and Dash are up by 72%, 50%, 124%, respectively, while many other smaller cryptocurrencies, especially in the decentralized finance sector, are seeing triple-digit growth as well.

Tabar believes that crypto’s strong performance can be gauged in terms of the fact that some family offices have started to include BTC in their portfolio holdings. Not only that, certain neo-banks like Revolut and easy access investment apps such as Robinhood have also enabled easier access to crypto. This suggests that the next generation of young investors may eventually help spur the adoption of this asset class. In comparison to traditional commodities, Taylor has pointed out that crypto has outpaced most precious metals, like silver, which is up about 54% year-to-date:

“Other precious metals are generally below 40% returns, especially if they have industrial uses. I suspect the attention of the general public continues to be fixated on the performance of stocks and bonds that makes up their retirement portfolios.”

Also, Bitcoin has fared much better in comparison to oil than many fiat currencies, as oil prices have dropped due to negative growth in the economy influenced by the ongoing COVID-19 pandemic. Statistically speaking, the year-to-date price of oil is down 32%. Furthermore, when compared with the S&P 500 (which is up +5.8%), Bitcoin’s year-to-date return currently sits at around 71.2%. Peter Goodrich, tax manager at U.S. accounting firm Prager Metis, told Cointelegraph:

“When comparing the top market cap cryptocurrencies like Bitcoin, Ethereum, XRP to precious metals like gold and silver, there are increasingly positive correlations being witnessed between both markets that were accompanied by delayed market impulses.”

Zetlin-Jones also pointed out that leading cryptocurrencies are appreciating relative to USD, gaining almost 0.3% per day on average over the past 90 days in comparison to May 2020, beating out the S&P 500 that has posted an average daily gain of 0.05%. However, Denis Vinokourov, head of research for digital asset exchange and brokerage firm Bequant, believes that since gold does not really compete directly with oil, Bitcoin too should not be related directly with traditional commodities: “It has properties that others do not and that is its strength, putting Bitcoin against the rest of the market is like comparing apples to oranges.”

The future of crypto economy

While it’s still far too early to judge, Taylor believes that with each passing month, expectations of inflation will continue to increase, leading many investors to seek out inflation-resistant commodities like top-tier digital assets. “I personally believe that we’re in the early stages of a bull run that’s actually moving along quite steadily,” he said. Also worth remembering is that the last major crypto bull run started in about mid-2015 and built up gradually to explode in the second half of 2017, suggesting that an overnight surge is unrealistic.

Lastly, despite increasing adoption, there are still a lot of challenges for the masses when it comes to owning cryptocurrencies. For example, opening a digital wallet or even a crypto trading account is still not as easy as many would like to think. Commenting on the subject, Mike Onghai, serial entrepreneur and seed investor for Coinbase and TZero, told Cointelegraph:

“If you look at history, it took about 20 years for cell phone web browsing to become as easy as it is now today. It took web browsing several years to go from Netscape to where it is now. Ease of owning cryptocurrencies will take some time. […] The digital assets age still feels early — it feels like 1995 in the web browser era (after Netscape’s crash).”

A somewhat similar opinion is shared by Vinokourov who believes that most people tend to forget the relatively young age of Bitcoin as well the rest of the market. Not only that, while Bitcoin and other digital assets have shown their worth during times of geopolitical and economic uncertainties, these assets are still considered to be much riskier by most:

“There has only really been one cycle of initial coin offerings that did attract substantial interest from traditional firms. The core market may not be as ‘hot’ at the moment, but another area of the market that has attracted VC money recently is decentralised finance (DeFi). It’s always helpful to remember that this is a marathon, not a sprint.”

Source: https://cointelegraph.com/news/bitcoin-and-economic-uncertainty-patience-is-the-name-of-the-game

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Coinbase CEO Fears Rumored Regulations Proposed By The Trump Administration

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Coinbase’s CEO Brian Armstrong has sent a letter to the US Treasury Secretary Steven Mnuchin regarding new rumored regulations on self-hosted cryptocurrency wallets. Armstrong believes that if implemented, the new legislation could harm users and, ultimately, the role of the US in the cryptocurrency financial field.

New Regulations On Self-Hosted Crypto Wallets?

The CEO of the largest US-based digital asset exchange took it to Twitter to outline the potential importance of these regulations if indeed implemented. The rumors indicate that the current Treasury Secretary Mnuchin plans to make them official before the end of his term.

Armstrong explained that self-hosted cryptocurrency wallets (also referred to as non-custodial or self-custody wallets) are “a type of software that lets individuals store and use their own cryptocurrency, instead of needing to rely on a third-party financial institution.”

They enable users to access basic financial services through this technology – “just like anyone can use a computer or smartphone to access the open market.”

Should the proposed regulations become official, they would require financial institutions, including Coinbase, to verify the recipient (owner) of the self-hosted wallet. Meaning, it would collect identifying information on that party before completing the transaction.

According to Armstrong, such requirements would lead to several potential issues because “it is often impractical to collect identifying information on a recipient in the crypto-economy.”

Some of those issues could affect users that send cryptocurrencies to various merchants online or to other people in emerging markets, where “it is difficult or impossible to collect meaningful know-your-customer information.”

Even simpler transactions like upvoting some content on Reddit or transferring an item in a game would also require the verification of the recipient, which makes the process prolonged and complicated.

The US Will Suffer The Most

Armstrong believes that the impact of these “barriers” would prompt US-based users to initiate fewer transactions. This would “effectively create a walled garden for crypto financial services in the US, cutting us from innovation happening in the rest of the world.”

US customers would turn to foreign cryptocurrency companies to access such services, which could put the country’s status as a financial hub at risk in the long-run.

“If this crypto regulation comes out, it would be a terrible legacy and have long-standing negative impacts for the US. In the early days of the internet, there were people who called for it to be regulated like to phone companies. Thank goodness they didn’t.” – added Armstrong.

He also asserted that Coinbase and other cryptocurrency companies have sent a letter to the Treasury last week to articulate these concerns. However, he hasn’t specified if the Treasury has responded in any way yet.

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Source: https://cryptopotato.com/coinbase-ceo-fears-rumored-regulations-proposed-by-the-trump-administration/

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Bitcoin Expects to Fall by Another $3,000, Asserts Veteran Trader

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A flurry of historical Bitcoin fractals suggests that Bitcoin will continue its decline by another $3,000.

Veteran trader Peter Brandt made the bearish call in a tweet published Thursday, hours after Bitcoin fell by up to 16.31 percent from its local high of $19,500. He added that the cryptocurrency might extend its downside correction until it hits the lower $14,000 levels, citing similar bearish moves during the 2015-2017 bull run. Excerpts:

“During the 2015-2017 bull market in Bitcoin (BTC), there were 9 significant corrections with the following averages: 37% decline from high to low [followed by] 14 weeks from one [all-time high] to the next [one].”

Bitcoin Fractals

Bitcoin rallied by almost 100 percent six weeks in a row, hitting its yearly high at $19,500 just this Monday. Prospects of growing institutional investments, followed by a favorable macroeconomic outlook led by a depreciating US dollar and negative-yielding debt, allowed the cryptocurrency to grow as an alternative hedging asset.

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Bitcoin correction fractals in the 2015-17 bull run, as presented by Peter Brandt. Source: Trade Navigator

But the rally also made Bitcoin an overbought asset, as Bitcoinist covered earlier. That increased risks of a blowoff top, i.e., profit-taking by traders, which led its price lower by more than $3,000 in the first half of this week. Only Mr. Brandt thinks that the selling action is far from over, going by how Bitcoin behaves historically after exponential bull runs.

“A 37 percent correction from the local top would bring the Bitcoin price to as low as $14,235,” he noted. “Many traders who swore they would buy a big dip when [the] price was above $19,000 will actually become sellers under $15,000.”

Supportive Technicals

Mr. Brandt’s bearish target near $14,000 has two strong technical backers.

First, the level coincides with Bitcoin’s previous resistance areas. For instance, in January 2018, the cryptocurrency briefly tested $$14,253 as a price ceiling before turning lower for the rest of the year. In June 2019, BTC/USD’s bull move topped out at $13,868, also very near to Mr. Brandt’s downside target.

Bitcoin, cryptocurrency, BTCUSD, BTCUSDT

Bitcoin 20-weekly exponential moving average. Source: BTCUSD on TradingView.com

Second, Bitcoin’s 20-weekly moving average (20-WMA) sits at $12,928, expecting to close above $13,500 should the price consolidates following the latest dip. That further brings BTC/USD within the range of Mr. Brandt’s bearish target near $14,000. Meanwhile, the 20-WMA also holds a record of maintaining Bitcoin’s bullish bias.

“A 20 weeks MA serves as support [level] in a bear market [and] as a resistance in a bull market,” said a pseudonymous analyst. “The price of Bitcoin returns to it over and over again. Maybe, “This-Time-It-Is^Different,” but I personally don’t think so, and I will wait for that MA test.”

In case the price flips bearish on the 50-WMA support, it would risk undergoing an extended downside correction towards the 50-WMA. It sits near $10,000.

Source: https://bitcoinist.com/bitcoin-expects-to-fall-by-another-3000-asserts-veteran-trader/?utm_source=rss&utm_medium=rss&utm_campaign=bitcoin-expects-to-fall-by-another-3000-asserts-veteran-trader

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Five Reasons Ethereum Has Entered a New Bull Market

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Ethereum is currently retracting sharply from its previous and 30-month peak of $620. Even with a decline of around $100 to today’s prices of $525, ETH is still up over 300% since the beginning of the year.

The confirmed genesis of the long-awaited Beacon Chain, which is Phase 0 of the even longer awaited Serenity ETH 2.0 upgrade, has no doubt driven momentum but it is not the only strong point for Ethereum.

Over 5 Reasons to be Bullish on Ethereum

DTC Capital’s Spencer Noon has pulled out a few key charts to back up the notion that we are definitely in a bull run for Ethereum.

Active addresses on the network are the first metric as it now has just under 500,000 per day. This is almost double what it was at the same time last year.

In terms of fees paid, Ethereum dwarfs everything else in the crypto space with 80 billion gas now being used on a daily basis. The analyst exclaimed that this is;

“A clear sign that it is the most useful network in the world.”

Over $16 billion in stablecoins have now been issued on Ethereum, a figure that has gone parabolic since the start of this year which is a sign that there is a major demand for digital dollars.

The DeFi effect has been huge as, despite a number of rivals and ‘killers’ emerging this year, Ethereum remains the foundation of the entire ecosystem. Ethereum’s largest use case has gone parabolic as there are now ten times more DeFi users than there were a year ago.

Total value locked across the DeFi space has surged almost 2000% since the beginning of 2020 to reach $14 billion with five billion dollar plus protocols which is a sign that the space is maturing.

And There’s More …

The amount of Bitcoin tokenized on Ethereum is also at record highs with 152,000 BTC, or $2.7 billion worth at today’s prices wrapped on the Ethereum network.

The DEX effect cannot be overlooked either as decentralized exchanges on Ethereum have done $20 billion in volume over the last 30 days. This has brought their combined total to $86 billion this year;

“A sign that DEXs can compete with the top centralized exchanges.”

As reported by CryptoPotato, Ethereum social sentiment and searches are also at their highest levels since early 2018 as the mainstream media and the masses start paying attention.

This latest pullback may settle below $500, but there is little doubt it will provide a buying zone for ETH which still has a long way to go.

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Source: https://cryptopotato.com/five-reasons-ethereum-has-entered-a-new-bull-market/

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