Categories
Bitcoin Crypto News

Bitcoin Users Explode: 1.2 Million Added in the Past Month

On the back of positive sentiment and growing evidence that bitcoin may have turned a corner, user growth data is painting an even more bullish picture.

Bitcoin v user growth. Source: Willy Woo

User Growth Equivalent to Adding Mauritius in a Month

According to on-chain specialist Willy Woo, the chart above illustrates that the number of users (purple line) is growing at its fastest rate ever.

In fact, over the past 30 days, 1.2 million users have been added to the network. This, according to Woo, doesn’t include off-chain users on exchanges which typically see up to three times that number.

Bitcoin – Still So Early

The S-curve of technology adoption is a useful way of considering where we are in the adoption of Bitcoin. It has five main phases:

  1. Innovators – adoption is slow as only a small group make a bet on a new technology before it is proven or widely accepted.
  2. Early Adopters – they accelerate the technology’s growth and evangelise its value and are often seen as representing the tipping point towards broader adoption.
  3. Early Majority – this is where the slope is steepest, and hence the rate of adoption is at its fastest.
  4. Late Majority – adoption continues growing at a solid pace as more are convinced to participate, and the technology appears almost everywhere.
  5. Laggards – these are holdouts, those who are last to accept/adopt a technology.

Bitcoin Archive is one of many commentators to suggest we have likely shifted into the Early Majority phase of the technology adoption S-curve, the phase at which growth is fastest.

Along similar lines, Willy Woo tweeted earlier this year that in terms of Bitcoin adoption, we are more or less where the internet was in 1997.

Price and Fundamentals Don’t Always Align

While most investors are often focused solely on bitcoin’s price, it is worth taking heed of Mark Yusko’s advice:

Price is a liar.

Chief investment officer and managing director, Morgan Creek Capital Management

Yusko often advises new investors to focus on Bitcoin’s fundamentals over price. This includes metrics such as user growth, hash rate and growth in the number of nodes. These cumulatively tend to provide a better overall picture of the health of the network.

The foundation appears set for bitcoin to push beyond US$50,000 in the near term, though if one were to take Yusko’s advice on board, it really shouldn’t make all that much difference to the average investor.

Categories
Bitcoin Crypto News Market Analysis Markets Trading

Bitcoin Bulls Say Golden Cross is ‘Imminent’

The bitcoin golden cross is a highly anticipated technical indicator that typical foreshadows bullish price action. Bitcoin analysts, investors and traders are looking closely at current price movements which at present suggest a strong push is imminent in the coming weeks.

What is the Golden Cross?

According to Binance Academy, a golden cross is a chart pattern where a shorter-term moving average (MA) crosses above a longer-term moving average. This is typically considered to be a bullish signal.

A golden cross occurs in three phases:

  1. There’s a downtrend where the shorter-term MA is below the longer-term MA.
  2. The market reverses and the shorter-term MA crosses over the longer-term MA.
  3. A continued uptrend starts and the shorter-term MA stays above the longer-term MA.

When considering a golden cross, the most commonly used moving averages are the 50- and 200-day periods. Once the crossover happens, the longer-term moving average is typically considered to be a strong area of support.

Golden cross example. Source: Binance Academy

The opposite of a golden cross is a death cross, where a shorter-term moving average crosses below a longer-term moving average. This is typically considered to be a bearish signal.

Potential Signs of Bitcoin Golden Cross

The chart below illustrates the potential intersection between the blue line (50-day MA) and black line (200-day MA), signalling a potential golden cross. Notice the inverse (death cross) that occurred towards the end of June highlighting a market crippled by fear.

Signs of golden cross. Source: Rekt Capital

Analysts suggest that a golden cross so soon after a death cross would create a “face-melting pump” reminiscent of the 2013 and 2017 bull cycles.

Rekt Capital, one of the more active technical analysts on Twitter, suggests it may well happen within days.

Will US$50,000 Prove to Be a Strong Resistance Level?

Despite the bullish talk of golden crosses and positive on-chain metrics, others have been more circumspect suggesting that bitcoin first needs to overcome the psychological barrier of US$50,000.

At this point, momentum appears to have shifted towards the bulls. Well-known podcaster Scott Melker seems to think so too and offers some interesting insights into the current market dynamics.

Categories
Bitcoin Crypto News Market Analysis Markets Trading

BTC Breaks Over $60,000 AUD Triggering Key Bullish Indicator

The evidence is mounting that bitcoin is likely to continue its recent upwards price momentum. In what is widely regarded as a bullish market signal for the asset, bitcoin has now risen above the 200-day simple moving average (MA), an indicator watched closely by investors to determine whether the asset is trending either bullish or bearish.

Bitcoin moves above 200 day moving average. Source: Happy Lisaa (Twitter)

Bitcoin Reclaims 200 MA – What Next?

In advance, analysts were broadly in agreement that a daily close above bitcoin’s 200 MA was bullish.

Once the 200 day MA was surpassed, analysts began offering suggestions as to what sort of resistance might be on the horizon.

Katie Stockton of Fairlead Strategies argued that if the price continued upwards as she expected, it was likely to encounter resistance close to US$51,000. William Noble, chief technical analyst of research platform Token Metrics, offered similar input:

$43,700 is an important resistance point for bitcoin … if bitcoin moves above that level, and successfully retests it, the uptrend can accelerate. $49,000 could be the next stop and I would not rule out a gap move back to the highs at $64,000.

William Noble, chief technical analyst, Token Metrics

Others, such as Jake Wujastyk of TrendSpider, put the resistance level for bitcoin around US$45,000. According to him, the next level to watch above this would be the US$50,000 psychological level.

This sentiment was shared by John Iadeluca, founder and CEO of Banz Capital:

The price of $50,000 stands as a key psychological, as well as technical, level that holds immense selling pressure.

John Iadeluca, founder/CEO, Banz Capital

Focusing on on-chain analytics, Will Clemente suggested that bitcoin still had some way to go to address the current supply shock under way:

Bitcoin Gains Despite Regulatory Uncertainty

Remarkably, bitcoin’s current upwards trend is happening at a time of great regulatory uncertainty in the US, where a bill looks set to be passed that will have deleterious consequences for the entire crypto industry. For some reason or another, bitcoin doesn’t seem to care.

Honey badger doesn’t care. Source: Marek_BTC
Categories
Bitcoin Crypto News Gold Market Analysis Markets

Gold Tanks as Bitcoin’s Price Soars

One of the most popular narratives surrounding bitcoin is that it is “digital gold”. At a time of unprecedented global fiscal and monetary expansion, one would have expected bitcoin’s physical counterpart to shine. Instead, it’s endured a rather torrid time that has left investors wondering whether it still has value in a diversified portfolio.

Switching the Physical for Digital

It’s well-documented by now that younger generations around the world are showing a distinct preference for all things digital. From India to Australia, millennials are choosing to invest in bitcoin over gold.

Gold has traditionally been considered a hedge against inflation, but over the past 18 months, gold bugs have had difficulty explaining its underperformance relative to almost all other assets, especially against bitcoin.

Gold price. Source: Goldprice.org

Bitcoin Priced in Gold

In considering the relative performance of bitcoin and gold, it is also useful to consider the performance of bitcoin priced in gold. Unfortunately for gold enthusiasts, this metric doesn’t paint a pretty picture either.

Bitcoin priced in gold. Source: Buybitcoinworldwide

Will Bitcoin Flip Gold?

With a current bitcoin price of US$43,121, bitcoin’s market cap is around US$809 billion. This is dwarfed by physical gold’s market cap, estimated to be around US$10 trillion. Commentators have long opined about when bitcoin would overtake gold’s market cap – the so-called “flippening”.

When will bitcoin flip gold? Source: Ecoinometrics

Based on the chart above, that may be out of reach for the foreseeable future, however given the surprises we’ve seen over the past 18 months, anything is possible.

Categories
Bitcoin Crypto News Markets

Bitcoin Bulls Are Loving Latest On-Chain Metrics

While Bitcoin’s price action is determined by multiple variables, on-chain data provides useful clues of the direction in which the market may be heading. The latest data from leading on-chain analysts suggests that some sharp upwards price action may be just around the corner.

Bullish Signals

Despite bitcoin being up 263 percent over the past 12 months, bitcoin bulls have undoubtedly had their conviction tested in 2021. From China banning bitcoin mining to seemingly endless sideways movement to persistent fear gripping the market, it hasn’t been smooth sailing for the king of crypto. However, on-chain analytics are offering some positive signs for the coming months.

For starters, the last week of July saw 100,000 bitcoins leaving exchanges, as well as hitting a 2021 low of 13.2 percent of circulating supply left on exchanges. As a reminder, outflows typically indicate a shift towards long-term holders.

Exchange inflows and outflows. Source: Glassnode
Balances on exchanges. Source: Glassnode

In addition, compared to the US$260 million in losses from the previous week, gains were almost 10 times higher.

Realised profit compared. Source: Glassnode.

Lastly, a useful lagging indicator highlighted by on-chain analyst Will Clemente is the supply shock ratio. Note how the price below lags materially behind the purple line. This indicates that bitcoin may well be under-valued at current prices with a potential price rise on the horizon.

Price lagging behind supply shock. Source: Glassnode

Where is Bitcoin Going?

While bitcoin has previously trended within the parameters of the four-year halving cycles, in a recent episode of the Wolf of All Streets podcast, analyst Willy Woo suggested this may no longer be the case and that we may be in the “last cycle”.

He argues that as the market has matured, miners have increasingly less influence on sell pressure and therefore prices. Going forward, it is possible that the market price will be more a function of macro supply and demand, than the four-year halvings.

While price predictions abound and are likely to be inaccurate, it does appear as if the market is slowly moving in a bullish direction.

At the time of publication, Bitcoin is up almost 6 percent on the week and trading at US$43,465.83.

Categories
Crypto News Regulation Stablecoins

SEC Chairman Breaks Silence Saying ‘Nakamoto’s Innovation is Real’

Earlier this year, the crypto industry celebrated Gary Gensler’s appointment as US Securities and Exchange Commission (SEC) chairman on the back of his pro-blockchain and bitcoin stance. From a crypto perspective, Gensler has remained largely out of the limelight, until now.


Gary Gensler. Source: MIT

‘Nakamoto is Real

After working on Hillary Clinton’s failed 2016 presidential campaign, Gensler soon migrated to MIT to teach fintech, with a special focus on blockchain and money where his lectures have received millions of views.

Crypto advocates could therefore be forgiven for expecting a lot more out of his appointment than has been experienced to date. With over a dozen crypto ETFs awaiting approval, a definitive statement from the chairman has been a long time coming.

In remarks made before the Aspen Security Forum, Gensler spoke of the intersection between crypto and national security by outlining the history of Bitcoin and the problem it sought to rectify.

Nakamoto had solved two riddles that had dogged these cryptographers and other technology experts for a couple of decades: first, how to move something of value on the internet without a central intermediary; and relatedly, how to prevent the “double-spending” of that valuable digital token … Subsequently, his innovation spurred the development of crypto assets and the underlying blockchain technology.

Gary Gensler

After noting his time spent researching, writing and teaching about fintech, he viewed the crypto field as being filled with “a lot of hype masquerading as reality”, however he continued to say that “Nakamoto’s innovation is real”.

Welcome to the Wild West

Speaking of the broader crypto ecosystem, Gensler commented: “Frankly, at this time, it’s more like the Wild West.” Specifically, he noted that, going forward, there would be a focus on tokens that are classified as securities, trading and DeFi platforms, stablecoins, and financial products tied to crypto such as exchange-traded funds.

I believe we have a crypto market now where many tokens may be unregistered securities, without required disclosures or market oversight.

He also homed in on so-called stock tokens, which have drawn the attention of regulators around the world in recent months.

Make no mistake: It doesn’t matter whether it’s a stock token, a stable value token backed by securities, or any other virtual product that provides synthetic exposure to underlying securities. These products are subject to the securities laws and must work within our securities regime.

Gary Gensler

Speaking of stablecoins, he commented that they “may facilitate those seeking to sidestep a host of public policy goals connected to our traditional banking and financial system: anti-money laundering, tax compliance, sanctions, and the like”. He highlighted the impact this could have on national security.

Gensler went on to note that large parts of crypto were presently operating outside of regulatory parameters intended to protect investors and consumers, guard against illicit activity, ensure financial stability, and protect national security.

Regulation Good or Bad?

Much like other regulators, the SEC has demonstrated that it is willing to take action, as it did earlier this year against BitConnect relating to the sale of some US$2 billion in unregistered securities. Since 2013, it has collected US$1.7 billion in penalties against crypto-related entities. This must of course be seen in the bigger context of the traditional financial sector.

While some crypto investors decry any form of regulation as antithetical to the crypto ethos, others are bound to welcome greater regulatory clarity.  From blatant scams and rug-pulls to outright fraud and 125x leverage, it may be argued that these negative aspects of the industry have the effect of undermining any positive gains made by the sector.

Like most things, a delicate balance should be sought – in this case between investor protection and the free market. Naturally, crypto enthusiasts would prefer a lighter regulatory touch.

Categories
Crypto News Regulation

New Crypto Tax Bill Rattles US Crypto Companies

Lawmakers in the US and President Joe Biden have finalised the details for a US$1.2 trillion bipartisan package for infrastructure. Curiously, a number of provisions were included at the last minute, aiming to raise an estimated US$28 billion in tax revenue from crypto companies and digital assets.

US Vice-President Kamala Harris with President Joe Biden at the White House.
Source: Forbes

“Once in a Generation” Investment in US Infrastructure

The bill is ostensibly intended to modernise the nation’s ailing infrastructure – from bridges, roads and shipping ports to high-speed internet and electric vehicles. And up until last week, the bill appeared to be on track to be passed with bipartisan support. That was until new provisions were inserted for crypto trading firms and brokers.

Crypto Regulation Provisions

As regulators around the world, from Australia through to South Korea, grapple with the world of crypto, the US’s position has thus far been largely accommodative, particularly in states such as Wyoming.

This particular federal bill, however, includes measures to increase tax enforcement, such as reporting requirements on exchanges and crypto brokerages. According to the bill, exchanges and crypto brokerages will be required to provide all details about cryptocurrency transactions equal to or more than US$10,000 to the IRS.

Critics Warn of Unintended Consequences

Critics say that the bill is rushed, impractical and bound to have numerous unintended consequences.

In an open letter by the Blockchain Association, the bill was described as “an imminent threat to the budding crypto industry here in America”.

What Congress is considering with this measure is not a new tax on the cryptocurrency industry. Instead, it puts new reporting requirements on individual players in the industry who have no way to comply.

Kristin Smith, executive director, the Blockchain Association

Smith went on to say market participants would be faced with impossible-to-fulfill reporting requirements that could thwart innovation in the sector and push these companies offshore. For that reason, she also expressed doubt that the bill would ultimately achieve its objective of collecting US$28 billion.

Instead of rushing through an untested provision with vast unintended consequences, we encourage Congress to work with our industry to find language that works for all stakeholders, keeping America at the forefront of crypto innovation.

Kristin Smith, the Blockchain Association

Jerry Brito, of Coin Center, said the draft language was “so broad” that it would add new reporting for many organisations that “have no visibility into users’ transactions”:

In a lengthy Twitter thread, Jake Chervinksy of Compound Finance offered a scathing breakdown of the bill and called it misguided. In it, he highlighted the excessively broad definitions, impact on DeFi, offshoring of innovation, the impossibility of compliance on some companies, and the potential impact on civil rights:

Aside from the practical issues highlighted above, venture capitalist Nic Carter took issue with the bill in principle. Commenting on the current administration’s apparent embrace of modern monetary theory (MMT), he said the notion of having to raise taxes to fund infrastructure made no sense:

Categories
Bitcoin Crypto News Market Analysis

Bullish Signal as 57,000 Bitcoin Leave Exchanges, a One-Year Record

Bitcoin exchange outflows, a key market indicator, have reached a one-year high providing an additional signal that bodes well for the apex predator of digital assets.

Exchange Outflows

Bybt and CryptoQuant shared data that showed the highest one-day outflow in at least a year. In 24 hours, 57,000 BTC – worth over US$2 billion – left exchanges.

Bitcoin Exchange Flows. Source: CryptoQuant

Bitcoin Archive was quick to chime in on the bullish news:

While no single market indicator should be considered as definitive evidence of a trend, the latest data reflecting massive Bitcoin outflows from exchanges has provided much cause for optimism.

Generally, large exchange outflows are indicative of investors taking their bitcoins “off market” and into cold storage. The reverse is true when exchange inflows are high. Note the precipitous drop in net transfer volume in Glassnode’s dataset below:

Bitcoin Exchange Outflows. Source: Glassnode

Bull Market Continues?

Bitcoin went sideways for months on end, leaving many investors questioning whether the bull run was over. Of late, however, the market sentiment appears to have shifted, at least as measured by the Bitcoin Fear and Greed Index:

There have been a number of promising market indicators in the past month suggesting that a sharp rise may be around the corner. From the reduction in leveraged shorts to growing evidence of a supply squeeze, Bitcoin bears appear to be on the back foot, at least for now.

Categories
Australia Bitcoin Crypto News Markets

Australian Inflation Rises to 3.8% As Bitcoin Bounces Back

Over the 12 months to the June 2021 quarter, the official Australian Bureau of Statistics (ABS) inflation metric, the consumer price index (CPI), rose 3.8 percent year-on-year. This news comes as Bitcoin, which is argued to be a hedge against inflation, has bounced back from its 2021 lows.

Australian Inflation. Source: Australian Bureau of Statistics

Should We Be Worried?

The latest ABS CPI figures are materially higher than the 12 months to the March 2021 quarter, which measured 1.1 percent.

“Not to worry”, according to John Hawkins, senior lecturer in Politics, Economics and Society at the University of Canberra. He argues that the jump is only temporary as a result of several one-offs.

As the Reserve Bank told us back in May, a main cause is that in the depths of Covid lockdowns last year, the government heavily subsidised childcare, pushing the effective price to near zero. With removal of those subsidies the price has bounced back. This is a one-off – it can’t be repeated.

John Hawkins, School of Politics, Economics and Society, University of Canberra

Reasons Not To Worry

Hawkins cites a number of reasons not to be concerned:

  • Petrol prices collapsed as cities locked down last year, and have since returned to pre-Covid levels – a one-off that won’t be repeated.
  • Big jumps in the prices of some fruit and some vegetables due to a shortage of pickers and heavy rainfall are also viewed as one-offs.
  • The “trimmed mean” measure of so-called underlying inflation used by the Reserve Bank of Australia (RBA) to see through transient influences was only 1.6 percent and is “a better guide to what is going on”.

The RBA has echoed the sentiments of other countries that the increase in inflation is likely temporary, and it expects inflation to be below 2 percent by the end of the year, reducing to 1.5 percent by 2022. In addition, most economists and traders forecast inflation to average around 2 percent.

Too Much Money Printing?

Hawkins downplayed concerns of “too much money printing” and criticised cryptocurrencies for pushing the narrative in the form of memes such as “Money printer go brrr”.

Further, he argued that the same was said after the 2008 crisis, yet nothing happened.

Hawkins doesn’t mention that the scale of the latest quantitative easing (QE) programs around the globe dwarf those of 2008. In addition, most developed countries around the world have reached record levels of debt-to-GDP as central bank balance sheets have piled the debt on over the past 18 months. And when you have unprecedented levels of debt, there are only a few ways out:

Default is rarely a possibility, so currency debasement in the form of increased money supply and consequent inflation is typically the route chosen to reduce national debt.

Bitcoin Bounces Back

While Hawkins recommends inflation-adjusted bonds as an inflation hedge, those in the crypto community would say Bitcoin:

After a lacklustre quarter, Bitcoin has bounced back over the past week, up close to 20 percent over the month.

BTC performance over the past month. Source: Coinbase

Most in developed nations have no experience of hyper-inflation, unlike those in developing nations. In countries such as Argentina, for example, the case for Bitcoin is self-evident for large swathes of the population.

The US just recorded its highest inflation levels in 13 years, but the Federal Reserve, much like Hawkins, maintains that it is “transitory”. Time will tell if this is indeed the case.

Categories
Bitcoin Crypto News Markets

54.1% of Bitcoin in Circulation Has Not Moved in Over a Year

In a year of ups, downs and unprecedented levels of fear, uncertainty and doubt (FUD), more than half of bitcoins in circulation haven’t moved. Bitcoiners have once again proved their conviction in a year full of challenges.

Illustration showing percentage of BTC that hasn’t moved in a year.
Source: Pete Humiston

What is the Significance?

The fact that more than half of HODLers haven’t shifted their coins in a year offers a few possible interpretations:

  • high levels of conviction in the asset (ie diamond hands)
  • growing levels of long-term investment, rather than trading of the asset
  • belief that a bull market is under way and the top is not yet in
  • bitcoins being taken off exchanges and put into cold storage in growing numbers

On-chain analytics and, more specifically, HODL waves highlighted by such data provide useful indications of market trends such as those identified above. Crypto News Australia reported earlier this year on the relationship between HODL waves and bull markets and is certainly worth a read for those keen to learn more.

While Bitcoin sceptics often highlight the asset’s volatility as a weakness, history has shown that those who have the stomach to withstand the ups and downs tend to be rewarded in the long run with exponential returns.

A Year of Challenges

It’s thus far been a bumpy ride for Bitcoin HODLers. After a strong start to 2021, Q2 posted the worst returns in over eight years. Regulatory and environmental concerns have provided the greatest headwinds, in addition to the after-effects of China banning bitcoin mining.

However, following a significant reduction in leveraged shorts and growing accumulation from long-term holders, there are signs that Bitcoin may have turned a corner. In the last week alone, BTC is up 34 percent and at the time of publication was trading at US$40,139.