Category: Bitcoin

Categories
Bitcoin Crypto News Market Analysis Markets

Bitcoin Up 20% Over Past Week – Is a Supply Squeeze Underway?

Bitcoin bull runs have historically been triggered by supply squeezes. A number of indicators suggest that a bullish move may be in progress.

Indications of a Supply Squeeze

During Q3 2020, long-term holders (LTHs) controlled 80 percent of the supply. Today, that figure is 75 percent and growing, according to on-chain analytics.

Bitcoin’s supply shock is currently equivalent to levels it was at earlier this year, between US$50K – US$60K a coin. The two charts that follow illustrate the shift in coins towards LTHs:

Bitcoin moving from weak hands to strong hands. Source: Will Clemente III
Coin circulation to strong hands over cycles. Source: Will Clemente III

Another bullish indicator to be aware of is the relative strength index (RSI), a momentum tool used to identify overbought and oversold levels. Generally:

  • values of 70 or above indicate that an asset is becoming overbought
  • values of 30 or below indicate that an asset is oversold or undervalued

The RSI has been in a downtrend for seven months but may be turning a corner, as illustrated below:

Relative strength index. Source: Will Clemente III

On-chain analyst Willy Woo also has his eyes on the RSI:

Another interesting metric showing evidence of a potential short squeeze is the the perpetual funding rate. This is the mechanism that pegs the perpetual contract to the index (weighted average price of all major exchanges). When funding is positive, longs are paying shorts to keep their positions open; when negative, vice versa.

Generally, prolonged positive funding is bearish, whereas prolonged negative funding rates is bullish. We’ve seen mostly negative funding rates since late May. The last time we had prolonged negative funding like this was following the March 2020 Covid-19 capitulation, after which the price dramatically rose to an all-time high in December.

Bitcoin futures perpetual funding rate. Source: William Clemente III

Supply Squeeze in Action?

After months of sideways action and a drop below US$30,000 amid market fear, Bitcoin seems to be turning a corner. Last week, Crypto News Australia reported that there was evidence of Bitcoin bears retreating, and perhaps this is coming to fruition.

At the time of writing, Bitcoin has been making sharp bullish moves suggesting that a supply squeeze may in fact be underway. Consider Bitcoin’s recent performance:

  • 1 Month: +24.67%
  • 1 Week: +20.67%
  • 24-Hours: 12.96%

Evidently, things tend to move fast in crypto. At the time of publication, Bitcoin was trading at US$38,228.

Categories
Bitcoin Crypto News Investing Markets

Survey says 60% of Goldman Sachs Uber-Rich Clients Could Buy Crypto Soon

American banking giant Goldman Sachs has reported that 60 percent of family offices are interested in purchasing cryptocurrency and other digital assets. Fears about high inflation and currency devaluation seem to be encouraging this interest.

This revelation comes soon after the multinational investment bank alleged that cryptocurrency is “not a viable investment“.

The survey was conducted among 150 family offices of which 15 percent reported that they already owned digital assets, while a further 45 percent indicated they were interested in buying crypto in the future. Family offices refer to private wealth firms that manage the money of the world’s wealthiest individuals.

Fear of Monetary Debasement the Driving Force Behind Buying Crypto

Many firms are looking to crypto as an investment solution, citing it as a hedge against inflation, prolonged low interest rates and concerns about monetary debasement following a year of global fiscal stimulus.

While some are interested in acquiring crypto, 39 percent of global family offices have raised concerns regarding the long-term staying power of digital assets. Additionally, market volatility and issues with infrastructure surrounding crypto are also holding many back from entering the cryptosphere.

Goldman Sachs has found that interest in bitcoin and other cryptocurrencies varies geographically. The survey results concluded that 24 percent of family offices in the Americas have already invested money in digital assets, while only eight percent in both Asia and Europe, the Middle East and Africa (EMEA) have.

Goldman Sachs Operating in the Cryptosphere

Goldman Sachs (GS) acknowledges that many investors continue to invest in real estate and equities, but a great deal also invest in special purpose acquisition companies (SPACs). GS does, however, state that family offices have been interested in cryptocurrencies since the 2017 bull run.

The company has itself started to move into the world of crypto. Earlier this year, GS filed a BTC ETF application with the US Securities and Exchange Commission, joining the likes of Morgan Stanley. Along with the all-important ETF filing, GS has begun facilitating BTC derivatives trading for clients, bridging the gap between BTC and Wall Street.

Meena Flynn, a Goldman Sachs private wealth management executive, has highlighted the significance of blockchain technology:

This technology is going to be as impactful as the internet has been from an efficiency and productivity perspective.

Meena Flynn, GS

Categories
Banking Bitcoin Crypto News Institutions

Banking Giant JPMorgan Announces Crypto Support For Clients

On July 16, JPMorgan announced it had granted its wealth management clients access to cryptocurrency funds, becoming the first major US bank to support crypto.

Daniel Pinto, co-president of JPMorgan, hinted in discussions earlier in the year that he was interested in expansion into the crypto space.

In a humorous thought, rewind back to 2017 when CEO Jamie Dimon said “Bitcoin is a fraud”, and if he found out any JPMorgan employees were trading cryptos, “I would fire them in a second, for two reasons: It is against our rules and they are stupid, and both are dangerous.”

Five Crypto Funds Offered

With total assets worth US$3.4 trillion, JPMorgan is targeting the wealth management business with five new cryptocurrency products launched on July 19.

The funds initially offered are:

JPMorgan’s advisers can buy and sell crypto on behalf of their clients; they cannot recommend any cryptos, but can only execute the crypto trades as instructed.

We are excited to be onboarded to the JPMorgan wealth platform. OBTC remains the lowest-priced publicly traded bitcoin fund in the US, and we believe JPMorgan’s clients will see value in the product.

Greg King, founder and CEO, Osprey Funds

A recent report estimated that US$43 billion is already held in global Bitcoin investment funds, and this new offering by JPMorgan follows other giants such as Goldman Sachs, Blockrock, Citigroup and Deutsche Bank.

JPM Coin

Depiction of JPM Coin

JPMorgan is also heavily investing in blockchain technology to facilitate instantaneous payments, including launching a coin called “JPM Coin” to be used for business-to-business money movement.

JPM Coin is a permissioned, shared ledger system that serves as a payment rail and deposit account ledger, enabling participating JPMorgan clients to transfer US dollars held on deposit with JPMorgan. JPM Coin facilitates real-time value movement, helping to solve common hurdles of traditional cross-border payments.

jpmorgan.com

JPMorgan Investing Heavily into Blockchain

It also launched a new service called “Liink” through Onyx by JPMorgan, which is a platform accelerator for businesses wanting to adopt Blockchain with a payments network infrastructure:

Over 25 of the world’s largest banks have already signed up to join in helping to improve transaction and information flows around the world powered by a peer-to-peer network and smart contracts.

Categories
Bitcoin Crypto News Market Analysis Markets Trading

Bitcoin Slides Below $30,000 Amid Market Fear

Bitcoin dropped below $30,000 on July 20, breaking below a trading range that had held for the previous four weeks. Analysts fear that a deeper price decline may be on the cards.

Bitcoin had appeared somewhat rangebound between US$30,000 and US$40,000 since mid-May. Analysts noted that this mimicked a pattern last witnessed in 2018 when Bitcoin went sideways between US$5,900 and US$7,400.

Source: Tradingview

What Could Be Driving the Fear?

From an investment perspective, crypto doesn’t exist in a vacuum. Data, trends and sentiment experienced in traditional markets will necessarily impact what happens in crypto. Therefore, one argument has been that the digital asset space is currently facing strong macro and regulatory headwinds.

At present, investors in traditional markets are pulling away from risky assets (such as Bitcoin) on the back of weaker monetary and fiscal stimulus, in addition to rising Covid-19 cases, including those caused by the Delta variant. As US government stimulus declines, Wall Street is “seeing too much froth” and “selling the best performing assets such as Bitcoin” according to Edward Moya, a senior market analyst at Oanda.

On the regulatory side, central banks have keyed in on crypto and, more specifically, stablecoins. The US Federal Reserve is currently putting stablecoins under regulatory scrutiny and just days ago, the People’s Bank of China called cryptocurrencies “mostly speculative instruments” that “pose potential risks to financial security and social stability”.

Other Factors Feeding the FUD

These concerns are in addition to ongoing environmental, regulatory and “crypto is for criminals” FUD, not to mention the persistent cries from mainstream investors that Bitcoin will never be a store of value and will eventually be worth zero.

For the moment, institutional and retail interest has cooled off, at least according to “Bitcoin” Google searches.

Google Trends data vs. the price of bitcoin – Coin Metrics’ State of the Network report, issue 112.

While most investors have a strong sense of where Bitcoin is going over the next five to 10 years, the near term is far less certain. In April, Bitcoin easily supported prices over US$50,000 but at present appears to be struggling at US$30,000.

For now at least, it isn’t clear whether a breakout is more likely than a breakdown. Only time will tell.

Categories
Australia Bitcoin Crypto News

“Bitcoin Will Go to Zero,” Claims Australian $113 Billion Fund Manager

Australian fund manager Hamish Douglass is not so keen on Bitcoin and the crypto market. He says investors are exposed to its high volatility and uncertainty, and most crypto enthusiasts are simply believing an “illusion” that will ultimately end up at zero.

Douglass, chairman and chief investment officer of the US$113 billion fund manager Magellan Finance, believes cryptocurrencies will have a broader role within investors’ portfolios, but they will “either be asset-backed or they will be central government-backed. So maybe there is some truth in gold coin after all.”

I predict all these forms of cryptocurrencies that are not backed by central banks or backed by assets will ultimately go to zero. I can’t tell you when it will happen, but it’s inevitable that it will go to zero.

Hamish Douglass

Bitcoin Will Bottom Out, Again

Douglass’s comments, as reported in The Australian newspaper, sound like another headline that would prompt FUD in the market once again, like those from other investment banks and hedge fund managers who claim bitcoin and the crypto market are worthless in the long run.

Financial institutions have changed their tunes over time

Yet there are investors and fund managers who have highlighted the benefits of cryptocurrencies, especially in times of financial crisis such as 2020’s Covid-19 outbreak. A week ago, Crypto News Australia reported that New Zealand’s KiwiSaver fund purchased BTC when it was trading at around US$10,000 in October 2020, achieving substantial gains on its holding despite the market correction after BTC hit its all-time high of A$79,800 in April 2021. 

On the other hand, Douglass’s portfolio didn’t do so well during November/December 2020 as most of its equity assets were going downhill. He says he doesn’t regret it, and while the crypto market flourished during those months and institutional capital came in, he reaffirms that investors should go to “sleep at night not worrying that if something blows up, so will our portfolio”.

Am I worried that we have this defensive side? No. I could’ve done a bit better in September and October and could’ve weighted the portfolio to some more cyclicals and put a bit more risk on.

Hamish Douglass

“I Regret Not Buying Enough Bitcoin”

In contrast to Douglass, there is a hedge fund manager who did regret not buying enough bitcoin in recent years and it’s Avenue CEO Marc Lasry, also co-owner of the NBA’s Milwaukee Bucks. “As more people keep using BTC, it’s going to keep moving up,” Lasry said in June. “It just happened a little bit quicker than I thought it would.”

Categories
Bitcoin Trading

Is the Drop in Bitcoin Shorts Evidence of Bears Retreating?

Sitting below 55 percent from its peak, Bitcoin has been stuck tracking sideways for the past three months but is managing to maintain a crucial psychological resistance level above US$30,000 as bulls and bears squabble over whether or not the bull market is over.

While short-sellers have been having all the fun recently, it is savvy long-term retail investors who have been accumulating BTC at prices that can only be seen by Bitcoin believers as bargain-basement specials.

On-chain analyst Willy Woo predicts that Bitcoin could soon resume its bullishness: 

I’m expecting price to break from its bearish sideways band in the coming week followed by a recovery to the $50k-$60k zone before some further consolidation.

Willy Woo

As Woo explains, “Coins are moving away from speculators to long-term investors (strong hands) now at a rate unseen since February when price propelled from $30k to $56k.”

Spot exchange net flows on a two-week moving average. Source: Willy Woo Newsletter

On July 17, Woo tweeted: “It’s retail that drives Bitcoin bull markets. When they stop buying, that’s a bear market warning. They haven’t stopped buying.” From his survey, it seems that bull sentiment has the majority, albeit not by much.

Others Expecting a Bitcoin Spike

Scott Melker, a popular trader and Bitcoin analyst, says that each time the BTCUSDSHORTS positions on trading exchange Bitfinex drop, it leads to an increase in Bitcoin spot prices. He too predicts this pattern will soon see a bullish reaction, and in that he’s not alone.

As Crypto News Australia reported earlier this month, much of Bitcoin’s 2020 gains were erased in the three-month period to July as its price slid 43 percent amid FUD relating to China and environmental concerns.

Also earlier this month, HODLers enjoyed gains for the first time in weeks as BTC surged more than 5 percent overnight. This was largely attributed to whales accumulating over 60,000 coins in a single day, worth US$2.7 billion.

Categories
Bitcoin Crypto News Crypto Wallets

640 Bitcoins Just Moved From Dormant Satoshi Era Wallet

After nearly a decade, a wallet containing 791 bitcoin (BTC) has become active. The Satoshi era wallet drew the attention of Whale Alert by making a transaction worth over US$21 million.

A transaction was recently spotted by Whale Alert, an analytics system that reports on “large and interesting” transactions across various blockchains. The activity from a dormant wallet such as this, moving over US$21 million worth of bitcoin, isn’t something we see every day.

Whale Alert’s attention was caught by the 640 BTC transaction coming from a dormant Satoshi era wallet. Further investigation found that the wallet was used to store bitcoin mined back in 2011 and 2012. At that time bitcoin was trading at around US$5 and is currently around US$31,000, making a nice little retirement fund for someone today.

Could It Be One of Satoshi’s Wallets?

Some suspect that the wallet may be one of many owned by Satoshi Nakamoto, the pseudonym for the founder of the Bitcoin network, who was estimated to have mined 1,125,150 bitcoin up to block 54,316.

According to FXStreet, it’s likely that the wallet belongs to Satoshi since it was created around the same time as many others that belong to the mysterious creator. Some have tried to claim this title, among them Australian programmer Dr Craig Wright, who was recently part of a lawsuit regarding the Bitcoin whitepaper.

It’s nearly impossible to know who the real owner of the wallet is, especially if they don’t want to be known, and there’s a good chance we never will. Some Twitter users made jokes about the wallet owner who finally remembered the passwords after nine years.

Categories
Bitcoin Crypto News Markets

Is Bitcoin a Hedge Against the US’ Highest CPI in 13 Years?

US inflation is running hot at 5.4 percent for the year ending June 30, a level last seen in 2008. Bitcoin is often touted as the solution, but is that necessarily the case?

Source: NY Post

Inflation is controversial since not everyone agrees about its constituents. Many consider CPI little more than a tool used to steer policy since it often excludes food, energy, housing and investment assets – all things the average person would typically want.

There is also a raging debate in the US about whether the current inflation levels are “transitory” as reflected in this recent tweet:

Bitcoiners and Inflation

Transitory or not, Bitcoin advocates argue that Bitcoin is a hedge against inflation. In making their argument, they lean on principles of Austrian economics and sound money. In short the argument is:

  • There are two forms of money – hard/sound money and soft/unsound money.
  • Hard/sound money is money that tends to retain its purchasing power over time and whose supply is difficult to increase.
  • By contrast, easy/soft money is money that tends to depreciate over time and whose supply is generally easy to increase.
  • Historically, human beings tend to flourish during times of sound money, whereas the opposite is true of unsound money which tends to result in inequality, civil unrest and socioeconomic turmoil – hyperinflation in Venezuela would be an extreme example.
  • Hard money tends to be deflationary whereas soft money tends to be inflationary (ie, you can buy less goods/services with it over time).
  • Fiat currency is unsound money and leads to long-term currency devaluation.
  • Bitcoin by contrast is the opposite – it is the soundest money we’ve seen since it has a fixed supply with a predictable and immutable deflationary monetary policy.

This line of thinking is broadly shared throughout the Bitcoin community, including US Senators.

Value of US$1 measured in Satoshis. Source: Documenting Bitcoin

Detractors are often quick to point out that Bitcoin isn’t a good hedge against inflation, particularly in light of its recent price movements.

While that may be true, the same argument could also be made against gold, which is traditionally considered an inflation hedge. In the past 12 months, it is down 0.26 percent.

With that being said, if you are going to be comparing the relative strength of inflation hedges, a longer timeframe is critical. Short-term volatility in the market is to be expected and can’t viably be used as an argument against Bitcoin, gold, real estate or any other traditional inflation hedge.

When faced with strongly held beliefs on both sides of the debate, it is often best to consult balanced analysts such as Lyn Alden. For a comprehensive overview of how Bitcoin could play a role as an inflation hedge within a portfolio, this fascinating video is well worth a watch.

Bitcoin Could Be an Inflation Hedge … in the Long Run

Since Bitcoin’s inception, it has proven to be a long-term store of value whose purchasing power has increased dramatically, notwithstanding its volatility in the short term.

By contrast, the US dollar has lost purchasing power, accelerated even more over the past 18 months. Note the sudden increase in money supply since March 2020 described by some as the greatest monetary expansion in history.

US money supply increase since 2020. Source: US Fed

Compared to the US dollar, Bitcoin is deflationary and its supply is entirely predictable and slowing down over time due to the inbuilt four-year halvings as seen below:

Bitcoin inflation and supply curve. Source: Inbitcoinwetrust.net

Based on historical patterns and Bitcoin’s intrinsic scarcity, it looks like it has a good chance of being an effective inflation hedge in the long run. If, however, your goal is to protect against short-term currency devaluation, less volatile assets may be more suitable. One thing is for sure – we’ve never seen this much liquidity injected into the market within such a short space of time. How this plays out over the long term remains to be seen.

Categories
Bitcoin Bitcoin Mining Crypto News

Nuclear Powered Bitcoin Mining Might Soon Be a Reality in Ohio

As the green Bitcoin trend continues, the spotlight now shines on nuclear power as a means of generating sustainable, carbon-free energy for bitcoin mining.

Energy Harbor Corp, an independent power producer, stated earlier this week that it had entered into a five-year partnership with Standard Power. The deal is to provide carbon-free electricity from its nuclear fleet to Standard Power’s Bitcoin (BTC) mining centre, which is set to begin at the end of this year, according to a press release.

We are happy to partner with customers who are focused on minimising their impact on the environment while driving a new clean energy future in our local Ohio economy.

John Judge, Energy Harbor President and CEO

The collaboration will allow Standard Power, a hosting provider for bitcoin miners and other data-processing companies, to turn an abandoned paper mill in Coshocton, Ohio, into a mining facility.

We selected Ohio because of its low electricity costs with availability of carbon-free sources of energy.  By partnering with Energy Harbor, we have proactively structured our hosting capabilities to ensure that 100 percent of the power associated with this facility is carbon-free.

Maxim Serezhin, Standard Power CEO

Not the Only Nuclear Game in Town

Oklo, a nuclear fission startup, also has plans to provide clean power to its new bitcoin mining partner, Compass. With a 20-year contract, Oklo plans to supply Compass with 150 megawatts of clean power in the first phase of the partnership.

Compass operates hosting facilities where individual miners can have their miners set up and operated for them, and it is working to be 100 percent carbon free.

Oklo is part of a wave of companies developing smaller reactors that it claims would be faster and cheaper to build than conventional nuclear plants. Such reactors could be relatively small and would generate a lot of power without harmful emissions.

The company is still in the process of being approved by the Nuclear Regulatory Commission (NRC) for its small reactors, which could run on radioactive waste. The first Oklo reactors will be deployed in 2023 or 2024 and the costs will be “considerably” less than the energy sources Compass plugs into now, according to Compass founder and CEO Whit Gibbs.

Assuming it receives approval, Oklo will be looking at sites in Idaho, as well as in Alaska.

Bitcoin Energy Concerns Spurring Green Partnerships

During the past few months, the Bitcoin network’s contentious power consumption has received a lot of attention from mainstream media. In turn, this has sparked numerous green partnerships such as those mentioned above, as well as last month’s news of Square investing in solar bitcoin mining.

Bitcoin miners are constantly trying to find ways to decrease their operational costs. By directing themselves toward the cheapest energy sources available, they can ensure lower operating costs, increase longevity, and add security to the Bitcoin network.

The incentives that Bitcoin offers in return, by just running a program on a machine, have caught the attention of both power producers and tech companies alike.

Categories
Bitcoin Crypto News Dogecoin Ethereum Ethereum Classic Market Analysis

Q2 2021 Crypto Returns Analysis: BTC -38%, ETH +13%, DOGE +391%

The cryptocurrency market took a big hit in the second quarter of the year, to the extent that almost US$1 trillion was wiped off the entire crypto market capitalisation from the all-time high (ATH) in May. 

Comparison of crypto returns. Source: Coin Metrics

In Q2 2021, Bitcoin (BTC) registered its worst quarterly performance for the past three years. However, Dogecoin (DOGE), Ether (ETH), and a few other major altcoins made positive returns within the same period. 

BTC Returned -38%, Worst Record Since 2018

Bitcoin had been in an uptrend during the first three months of this year. However, it began tumbling in value shortly after reaching an all-time high of over US$63,000 on April 14. Based on data from Coin Metrics, BTC closed Q2 with a negative return of -38 percent. 

Besides the bear market, some developments may have contributed to the significant drop in BTC. These include Tesla’s suspension of Bitcoin payments and the recent crackdown on Bitcoin mining in China. 

Dogecoin Led Q2 With +391% Return

Despite the fact that the largest crypto tanked heavily in Q2, a few major altcoins came out with positive returns, including Ethereum (ETH).

At today’s price of US$2,000, ETH has lost about 54 percent value from its ATH of US$4,362 on May 12. However, it still pulled through the second quarter with about 13 percent gain.

It’s worth noting that the meme cryptocurrency Dogecoin (DOGE) was the best-performing major crypto in Q2, based on the data from Coin Metrics. Dogecoin posted a return of 391 percent in Q2, although it has lost over 70 percent of its value from the ATH. 

Ethereum Classic (ETC) and MATIC follow on the list with about 297 and 226 percent gains, respectively.