Fed Promises to Keep Monetary Policy Loose; Interest Rate Near Zero & Inflation Above 2%

Fed Promises to Keep Monetary Policy Loose; Interest Rate Near Zero & Inflation Above 2%

The dovish tone from the Fed is pushing the USD down, which has been falling throughout this month while the risk-on environment is good for both stocks and bitcoin.

“The economy is beginning to move ahead with real momentum,” Jerome Powell, Federal Reserve chair, told reporters Wednesday after the central bank held interest rates near zero and kept bond purchases at $120 billion a month.

Powell reiterated that it is not the time to discuss scaling back asset purchase. “When the time comes for us to talk about talking about it, we’ll do that. But that time is not now,” not until there is more than one great job report, he said.

As for the concerns around inflation due to the Fed’s aggressive support, Powell said though prices are likely to rise amidst surging demand, it is just,

“An episode of one-time price increases as the economy re-opens is not the same thing as, and is not likely to lead to, persistently higher year-over-year inflation.”

The central bank is interested in keeping the inflation above the 2% target and only when it was to move “persistently and materially above 2%” that threatens to move longer-term inflation materially above 2% that the Fed will use its tools to bring it down to mandate consistent levels, he said.

“Markets are having a hard time digesting this.”

“The Fed is saying, ‘I hear you. Inflation is going to be above 2% for a while, but I am trying to tell you we are not going to do anything about it.”

Michael Gapen Chief U.S. Economist at Barclays Plc

President Joe Biden, meanwhile, is all set to unveil a $1.8 trillion plan after a $2.25 trillion infrastructure proposal and the $1.9 trillion pandemic relief package was signed into law last month. This time to expand educational opportunities and child care.

“I took away that not even any preliminary discussion of a change in policy is imminent.”

“He gave a spirited defense of the Fed’s view on inflation and employment. They are very happy with the course they are on and not likely to change it soon.”

Carl Tannenbaum Chief Economist at Northern Trust in Chicago

How’s the Market Feeling…

This opens the doors for the continuation of a risk-on environment, which means investors are willing to enter into higher-risk investments like Bitcoin and stocks, wrote Deutsche Bank in a report published this week.

S&P 500 jumped to a record high in part bolstered by Fed’s same dovish tone and in part the ongoing tech earnings report. However, the promise of keeping the monetary policy loose is not turning out good for the dollar.

The USD index has been going down throughout this month and is currently near 90.6, while gold is still around $1,780 per ounce.

As for Bitcoin, it is hovering around $54k, which is giving altcoins a perfect chance to run higher.

Amidst this, the White House released a slew of tax increases in its “The American Families Plan,” as per which top personal income tax rate is raised from 37% to 39.6% for all taxable income north of about $550,000 for individuals and about $650,000 for married couples.

The top individual tax gain rate on long-term capital gains and dividends would be increased from 23.4% to 43.4%.

It is also proposing to give the IRS the authority to regulate paid tax preparers. They would get an annual report on the money deposited and withdrawn from every bank account in America.

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Author: AnTy

Uber CEO: We Won’t Invest in Bitcoin, Would Rather Keep the Non Existent Cash Safe

Uber CEO: We Won’t Invest in Bitcoin, Would Rather Keep the Non Existent Cash Safe

PepsiCo also doesn’t have any interest in investing in Bitcoin either, due to the digital asset being “speculative” and just like UBER share prices fell, PEP’s also took a hit, that too in spite of better-than-expected earnings and revenue.

Uber chief executive officer Dara Khosrowshahi says the company has discussed the idea of buying Bitcoin with corporate cash but “quickly dismissed” it.

After Tesla announced a $1.5 billion purchase of BTC and Twitter is also considering the option of adding Bitcoin to its balance sheet, Uber took the route that General Motors (GM) is taking, no investing in the cryptocurrency.

“It’s a conversation that’s happened that has been quickly dismissed,” Khosrowshahi said in an interview on CNBC’s “Squawk Box.” “We’re going to keep our cash safe. We’re not in the speculation business.”

However, unlike GM, Uber doesn’t have any cash to spare with their free cash flow running in the negative.

The company’s decision not to invest in Bitcoin saw the share prices of Uber taking a hit initially only to rise to $63.53 but still just 0.5% up from Wednesday’s close. Khosrowshahi said,

“The upside in our company is in the business that we’ve built, not the investments that we invest in.”

Like Uber, PepsiCo CFO, Huge Johnston, said the beverage giant has “had the conversation” but is not going to follow in Tesla, MicroStrategy, and Square’s footsteps. Johnston said,

“The conclusion we came to pretty quickly was bitcoin is too speculative for the way we manage our cash portfolio.”

Just like Uber, PepsiCo’s shares also dropped by 1.22%; they have actually been falling ever since the beginning of 2021, despite the company’s better-than-expected earnings and revenue.

The ride-hailing and food-delivery provider, Uber, however, is interested in considering the option of accepting cryptocurrencies as payment, something GM is also evaluating. Khosrowshahi said,

“Just like we accept all kinds of local currency, we are going to look at cryptocurrency and/or bitcoin in terms of currency to transact.”

“That’s good for business. That’s good for our riders and our eaters. That we’ll certainly look at and if there’s a benefit there, if there’s a need there, we’ll do it. We’re just not going to do it as part of a promotion.”

The company reported mixed fourth-quarter earnings with revenue of $3.17 billion, below what Wall Street expected. The company’s overall loss for 4Q20 was $968 million, down from a $1.1 billion loss in the same period last year.

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Author: AnTy

Top US Financial Regulators Call for On-Chain Stablecoin KYC

US regulators’ parting shots keep on coming, which has “zero chance” of becoming an “enforceable rule of law any time soon.”

Top US financial regulators issued a statement calling for on-chain stablecoin KYC.

The latest statement came just a few days after the fiasco of FinCEN’s proposal to extend anti-money laundering (AML) regulation to non-custodial wallets, for which the regulator is now accepting public comments with a deadline of January 4.

Now, regulators are back with their AML rules which now target stablecoins. In a statement on Wednesday, the Treasury Department and other agencies said,

“[Stablecoins] should have the capability to obtain & verify the identity of all transacting parties, including for . . . unhosted wallets.”

The regulators want the stablecoin to be used in a way that manages risk and maintains the stability of the financial and monetary systems. Jake Chervinksy, General Counsel at Compound Finance said,

“There’s exactly zero chance this becomes an enforceable rule of law any time soon. This is just more of Secretary Mnuchin’s personal views coming out on pretty-looking stationery before his tenure ends.”

The statement is released by the President’s Working Group on Financial Markets, whose members include the Federal Reserve, the heads of Treasury, the Securities and Exchange Commission (SEC), and the Commodity Futures Trading Commission (CFTC).

In its comprehensive statement, the group says that stablecoins may be securities, commodities, or derivatives, depending on the specific qualities of a particular asset.

And when these fiat-backed cryptos are used for retail payments and at a “significant scale” in the US, “the associated risks may require additional safeguards,” the regulators said.

The group further said that the backers of stablecoins should obtain and verify the identities of all parties involved in a transaction. Also, they need to have “strong reserve management” to handle large-scale redemption.

The members also acknowledged that stablecoins have the potential to enhance efficiency, lower costs, increase competition, and foster broader financial inclusion. Treasury Deputy Secretary Justin Muzinich said,

“The statement reflects a commitment to both promote the important benefits of innovation and to achieve critical objectives related to national security and financial stability. Regulators will continue to look closely at stablecoin arrangements, and look forward to a future dialogue on these issues.”

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Author: AnTy

ETH Gas & Bitcoin Fees Insanity Rear its Ugly Head Again Amidst Market Uptrend

As the price of cryptocurrencies keep its gains and, in some cases, rally, it is becoming costly, yet again, to use the two largest blockchains.

First things first, the fees are nowhere near the levels recorded during the bull market’s height, but still, it is getting pretty ramped up.

The average transaction fees on the Bitcoin network surged to about $12 on Friday. Interestingly, the fees didn’t record a considerable uptick on the two days that the price of Bitcoin breached multiple levels to reach a new all-time high at $24,195.

However, the fees started spiking just a week back, when it was under $3, and the BTC price was only around $18,000.

Today, Bitcoin’s average fees are back around $9. In late October, fees had gone even higher, above $13. During this time, BTC price fluctuated $1,000 up and down. Of course, we have a long way to reach the 2017 high of $60 in average fees.

The latest jump in fees came after the transaction count in mempool surged to nearly 132.5k yesterday. But today, the pending transaction is clearing up, falling to the 34.24k level. The hashrate is also 10% off of its all-time high record in mid-October.

Bitcoin price, meanwhile, is keeping around $23,560 ever since breaking it on Thursday.

Much like Bitcoin, the fees on Ethereum also spiked thanks to the bullishness in the market. For Ethereum, not just its price, which is only around $650, still 58% away from its peak but DeFi tokens also play a part.

And yesterday, DeFi tokens jumped with notable gainers, including UNI, AAVE, SUSHI, SRM, CRV, and SNX that pumped 7% to 12%.

A spike in ETH gas fees was expected. On Dec. 17, average gas fees on the network jumped to 138 ETH, up from 35 ETH earlier this month.

For ETH, the explosion of the DeFi market resulted in several such jumps in fees in 2020. In June, the average gas fees climbed to 704 ETH, as per Blockchair.

Although Ethereum has successfully launched the first phase of ETH 2.0 and already 1.57 million ETH are deposited in it, cheaper fees are still not in the picture and may take a long time to become a reality.

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Author: AnTy

Historically, Bitcoin Really Hates September; What Should Traders Expect?

Bitcoin has started September on a bad note.

The digital currency failed to keep above $12,000 and went down to almost $10,000 level on Wednesday.

This resulted in the market sentiments getting overturned fast, from “extreme greed” to “fear.”

Up 38% YTD, bitcoin is down about 50% from its all-time high of $20,000.

Yesterday, the market had relief as BTC stepped up to $10,645, which led investors to expect the weekend to bring good news for the market.

But the market is moving back down today.

At the time of writing, BTC/USD has been hovering around the key psychological level $10,000.

For a brief moment, the digital asset dropped under $10k to $9,975 on Bitstamp.

This isn’t a surprise for two reasons, one – dring the last bull market, bitcoin saw several, as much as nine, pullbacks of 30% to 40% on its way to the peak.

Second – this month isn’t good for bitcoin.

After March and January, September is the worst month for the leading cryptocurrency in terms of average log returns. Five out of seven times, this month has been a red one for Bitcoin and the other two times, it was barely in the green.

So, expectations for greens should be low in September while being prepared to grab the buy the dip opportunities.

The quarter fourth could bring the much-needed reprieve, filled with more green than red.

Historically, September isn’t bad just for bitcoin but also for the stock market.

As a matter of fact, the three leading indexes of the stock market have performed the poorest during the month of September, which got it dubbed as the “September Effect.”

It first happened in the late 1800s when the Dow Jones Industrial Average fell an average of 0.8%. And the S&P 500 has been dropping about 1% on average this month since 1950.

There is no plausible theory for this other than that these corrections are caused by tax-loss selling from mutual funds or pent-up suffering from investors who just returned from their summer vacations.

This time, however, lockdown due to coronavirus has people working and vacationing right at their home.

For stock markets, the fear doubles because of the election-related uncertainty. Reportedly, S&P 500 sheds 0.2% on average in the election year.

So, with bitcoin still being a risk-on asset, the stock market expecting more losses, and the month not being bullish for the digital assets either, pains could be ahead for the digital asset.

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Author: AnTy

Swiss Govt. Rejects Crypto Valley’s $103M COVID-19 Relief Loan for Blockchain Startups

Switzerland’s own crypto valley located in the Canton of Zug known for its business-oriented regulations is struggling to keep businesses afloat.

Its request of 100 million francs, which is around $103 million USD, as a COVID-19 relief package has been rejected by the Swiss government. The request for the relief package was initiated back in April by the finance director Heinz Taennle, reported a local daily.

The crypto valley would now have to depend on the 15 million Swiss Francs loan announced by the canton of Zug. The application for 100 million francs relief package was the only one rejected by the federal government among 24 similar COVID-19 related relief packages.

Almost two-thirds of the crypto valley blockchain firms which applied for the Federal loans failed to receive any assistance from the government.

The capital crunch in the crypto valley mainly occurred due to the ongoing coronavirus pandemic. Forcing many private equity investors into offering capital support in the fintech valley.

The New Loan Scheme Would be a Joint Effort by Federal and State Government

The newly announced 15 million swiss francs loan scheme would require fintech firms in the valley to submit their loan application by May 27th, 2020, and the loan can be applied to any bank in Switzerland. The loan amount would be covered by both the Federal government and the canton of Zug, where the federal government would offer 65% of the amount and the Zug would offer 35% of the loaned amount.

The situation in the crypto valley is getting worse with each passing day, as 80% of the operating companies in the valley report that they won’t be able to make it through the end of the year.

The main reason behind such outcry is the reluctance of equity investors to invest their money amid financial uncertainty which has been looming even before the pandemic struck which made the situation even worse. Almost 57% of the firms in the crypto valley have laid off a significant portions of their workforce, turning the crypto valley into death valley.

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Author: James W

Bitcoin Market in Backwardation Supports A ‘Cautious Tone’ for BTC Price Short Term

  • Bitcoin price certainly go down but wouldn’t be “surprising if they keep melting up”
  • June Bitcoin futures contracts on BitMEX trading as low as $6,665 while $6,725 on CME
  • A break below $5,000 zone will be particularly painful

The price of Bitcoin on spot exchanges is currently trading around $6,750 after sliding below $7,000 over the weekend. Some extremely bearish predictions are even calling for fresh lows.

However, the good thing is Bitcoin has found a “higher floor” and given that currently, the cash on exchanges is at all-time highs and sentiments are still near their all-time lows, and leverage at two-year lows, “it is VERY hard to short risk assets into a wall of cash right now, including Bitcoin. Prices can certainly go down, but it would not be surprising if they keep melting up,” said Jeff Dorman of Arca.

The stock market is also recording losses amidst the report of the largest drop of 8.7% on record going as far as 1967 in the US retail sales for March. This has been because of the majority of people staying home to slow the spread of coronavirus amidst the news of companies furloughing employees.

Treasury yield also fell to a 7-year low on the back of this data. The two-year-old hit the lowest level of 0.199% since July 2012.

The relief came in the form of stimulus checks that the government started sending late last week that Americans are largely spending on food and gas.

Lower prices in the future

This week, we started seeing the open interest on Bitcoin futures slowly rebounding.

However, bitcoin futures are in backwardation which means the price of an underlying asset currently is higher than prices trading in the futures market.

On CME, June 2020 contracts are trading at $6,725 while Bakkt’s June contracts are at $6,755.

Bitcoin perpetual swaps meanwhile are at a much lower price.

The June Bitcoin futures contracts on Kraken are trading at $6,721, $6,707 on FTX, $6,690 on Deribit, $6,683 on Huobi, $6,668 on OKEx, and the lowest on BitMEX at $6,665, as per Skew Markets.

Futures data suggests speculators are expecting to see lower prices in the near future.

According to Denis Vinokourov, head of research at Bequant, a crypto investment brokerage, “a break below $6,500 level will likely lead to another round of liquidations and send the price towards the $6,100/ $6,200 area.”

With not much support until the $5,000 zone, “a break below will be particularly painful,” for bulls, as such calling for a cautious tone which is supported by the shift in the futures curve into backwardation.

Over-the-counter (OTC) bitcoin liquidity provider B2C2 also warns of caution with the weekly BTC chart “tapped the trendline and formed a shooting star. Unfortunately no follow-through in a negative funding environment (leveraged shorts outweigh longs).”

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Author: AnTy

Japan ‘Must Be Prepared’ To Launch A CBDC If Public Demand Increases: BoJ Official

According to a Bank of Japan’s (BoJ) deputy governor, the country needs to keep on doing research on what issuing a central bank digital currency (CBDC) would mean, even if a launch is not yet in the cards.

As reported by Reuters on January 30, Masayoshi Amamiya said at a seminar held in Tokyo that if the payments technology continues to advance so fast, the demand for a CBDC may increase, so the bank needs to know everything about the groundwork of owning a digital currency. Here are Amamiya’s exact words:

“The speed of technical innovation is very fast. Depending on how things unfold in the world of settlement systems, public demand for CBDCs could soar in Japan.”

BoJ Is Not Yet Planning to Issue a CBDC

The governor continued his speech by saying BoJ doesn’t have any plans to issue a CBDC just yet, as potential problems still need to be researched, the monetary ramifications and security for the digital yen being mentioned among such problems. Even so, BoJ must be prepared, he added. Amamiya’s comments arrived a few days after members of the ruling Liberal Democratic Party in Japan said they would make the proposition for the BoJ to issue a digital currency.

70 Japanese Lawmakers in Liberal Democratic Party Say the Digital Yen Is a Must

There are about 70 lawmakers in the Liberal Democratic Party who think that issuing a digital yen is a must, especially when it comes to competing with Facebook’s Libra and China’s own CBDC, which are both scheduled to launch this year.

In the past, Amamiya has addressed the idea that central banks, by issuing their own digital currencies, would bring more effectiveness to the negative interest rate policies. He said in July that if the digital yen is issued by BoJ and the interest rate set is to be negative, businesses and individuals would be charged if they’d hold the CBDC, which would lead to them to drop the digital currency and to hold cash instead, moment in which banks would have to make an effort to get rid of cash.

As for the time being, Amamiya thinks that BoJ issuing a CBDC would not influence the bank’s control over asset prices, bank lending, and interest rates, yet the monetary policy may turn out to be very complex as a result of “the transmission mechanism” changing.

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Author: Oana Ularu

Vitalik Buterin Back on Dumping his Ethereum? It Could Crash ETH into Double-Digits

  • Ethereum co-founder Vitalik Buterin keep on dumping his Ethereum
  • Chances of ETH even crashing to double digits
  • Etherem 2.0 puts its under regulators’ scrutiny

A total of 214,953 Ether worth about $26.8 million has been sent to cryptocurrency exchanges on Dec. 25.

ViewBase, blockchain analysis company reported 99,987 of these Ether has been sent to Huobi, 89,058 ETH to Kraken, and 25,908 ETH to Binance.

The 90k of Ether sent to Kraken particular originated from a single whale which received most of its Ether from Ethereum co-founder Vitalik Buterin’s wallet address. This wallet still has a balance of 350,000 Ether left.

The firm deduced that the whale is likely to be an Ethereum developer or Buterin himself.

Is Buterin dumping his Ethereum?

According to the Reddit post, Buterin previously revealed that he received a total of 630,000 ETH, 553,000 out of which has been from the genesis pre-mine and 150,000 from the developer purchase program.

In April 2016, he sold 25% of his ETH position as he divulged, “I’ve sold about a quarter of my ETH. Meh, I am not going to apologize for sound financial planning.” As per this, he sold about $1.1 million’s worth.

Just like other founders, such as Charlie Lee of Litecoin who sold all of his LTC during the last bull run, Buterin than sold another of his 30,000 ETH around the top in December 2017.

As we reported, Buterin also persuaded Ethereum Foundation to sell 70,000 of their ETH at its peak.

Now, 90k ETH has been moved by Buterin again.

Chances of crashing to double digits

Eth currently is trading at $125, down 8% on a year-to-date basis and down 92% from its all-time high of $1,570.

But such a huge amount of ETH, if dumped in the market, would put selling pressure on the second-largest cryptocurrency that could see its price sliding even more.

Currently, analysts and traders aren’t feeling very bullish about it either.

Ethereum price chart, Analyst CryptoDude says, “looks like utter shit.”

“Don’t get your hopes up until it reclaims $365 – if it does so then we can talk about 1k+ targets. Until then this is a short every bounce setup,” explained the analyst.

However, until we move back to $160, there are even chances for crashing to double digits.

However, not everyone is bearish…

Ethereum 2.0 Puts It Under Regulators’ Scrutiny

But Ethereum’s pain isn’t limited to just price. Its much-anticipated 2.0 Proof-of-Stake (PoS) transition will also put it under SEC’s scrutiny.

Last month, US CFTC Chairman Heath Tarbert indicated that the agency and US SEC is undertaking a careful analysis of Ethereum 2.0 that fintech attorney Grant Gulovsen says could have

“significant negative implications for the Ethereum Network’s planned upgrade as well as the wider cryptocurrency market.”

Gulvosen says he isn’t trying to create FUD, but encourage those who develop digital asset-based technology to accept that laws apply to their products and developments and they need to proactively engage with regulators, so as not to “run afoul of applicable legal and regulatory frameworks.”

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Author: AnTy

Here’s Why Big Fund Managers Won’t Be Buying Bitcoin Until it Passes Trillions

Quick Look:

  • Institutions don’t come until it gets big enough
  • Just keep on HODling and you get to rake in huge gains

The best way to weather the crypto market and earn serious gains on Bitcoin is HODLling.

All that an individual Bitcoin investor can do is HODL and they know it well and they do it well. As we reported, 11,580,000 Bitcoin hasn’t been moved in more than a year. This has been despite an 85% increase in BTC price during that time.

As Bitcoin enthusiast Rhythm Trader said, “Hodlers of last resort are insane.”

But this insanity can pay off extremely well because “Professional fund managers literally can’t hodl,” points out analyst Ceteris Paribus.

This deduction was highlighted in the Wall Street article “How You Can Get Big Gains That Wall Street Can’t.”

It reveals the “dirty secret” of the investment business that fund managers just don’t hold stocks and not because they don’t want to but because they simply can’t.

It has been found that small investors actually ave a “big edge” over the giants of Wall Street when it comes to capturing the gains. The reason is,

“to earn such superior long-term results, you have to withstand bone-cracking short-term downdrafts along the way—something most fund managers can’t do.”

It’s all about HODLing

The insight emerged from the analysis between a little known Jack Henry & Associates company and Warren Buffett’s Berkshire Hathaway.

If you’d invested $1,000 in Jack Henry stock at its closing price on Sept. 1989, you would have had a whopping $2,763,000 on Sept. 30, 2019.

Now, the same $1,000 invested in Berkshire Hathaway would have only grown to $36,000 and $16,000 in the S&P 500.

However, this would have only been the result of the determination, in other words, HODLing.

Because HODLing means weathering through the brutal winter of price drops and crashes. In the case of Jack Henry, it was in June 2001 through Oct. 2002 when the company’s shares fell 67% and then the stock underperformed the S&P by 72% points between Oct. 1996 and August 1999.

Also Read: Bank of America Merrill Lynch Calls Bitcoin (BTC) The Best Asset Class In The Last 10 Years

But why can’t professional investors withstand this kind of pain?

David Salem, co-chairman of New Providence Asset Management, who has been behind this analysis says,

“It’s potentially career-ending for a manager to hold such big interim losers.”

As for small managers, they have to sell if the position gets too large and dominate their portfolios.

Small stocks actually earn their highest return when they migrate to large.

Institutions don’t Come Until it gets Big Enough

As we saw in Jack Henry’s case, the company first sold its shares to the public in 1985, 9 years after it was founded. But as of 1996, 41% of the stocks were owned by insiders and it wasn’t until 2006 did about 5% of the shares were owned by institutional investors.

It was in Nov. 2018 that the company grew to a size large enough to join S&P 500, where it currently ranks at 402nd. Now, 94% of its stocks are held by institutions.

This is yet another best-case scenario for buying and HODL.

As such, professional fund managers will “buy Bitcoin once it passes a couple Trillion” says Paribus. This means individual investors are in the best position to rake in gains by just keep on HODLing.

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Author: AnTy