PayPal Customers Bought the Dip on Bitcoin & Crypto

The losses that came late Thursday night was the biggest decline since the March sell-off. However, the largest cryptocurrency is still up 135% YTD with its investor base widening who are turning to it in search of a hedge against dollar weakness amidst loose monetary policy.

As we reported, just this week, VanEck launched a physically-backed Bitcoin ETP on the Deutsche Boerse Xetra exchange.

With PayPal diving in, the retail investors are piling in to chase the momentum. The volume on ItBit, the exchange service of Paxos, exploded on Nov. 26. BTC/USD accounts for over $50 million in volume.

ItBit Trading Volume

“It continues to attract both institutional and retail attention as a 21st-century substitute to the gold play,” said Byron Goldberg, who runs the Australian operations for crypto exchange Luno.

Just Noise Against the Larger Bullish Trend

The decline in prices, which has the market in distress even today, as BTC/USD trades under $17k, was exacerbated by unsustainably high leverage. Trader and economist Alex Kruger noted,

“Too many greedy longs bought the top on leverage, and made the price very vulnerable.”

This started soon after the market made a new 2020 high at nearly $19,500. The choppiness in the market is in part due to the Thanksgiving holiday in the US. Another reason could be the expiry of 78k Bitcoin options today. Shane Oliver, Head of Investment Strategy at AMP Capital Investors Ltd. in Sydney said,

“After big rallies in shares and various other assets, they are all vulnerable to a bit of a pause.”

“But Bitcoin more than most, as it surged higher far more and had become far more frothy with speculative interest.”

However, the market is showing resilience as any dips were almost immediately absorbed, making it a bullish dumping. Kruger said,

“I’m bullish. This correction represents noise against the larger bullish trend.”

“The steep contango structure that prevailed up until now finally narrowed,” said Denis Vinokourov of Bequant.

“Only time will tell whether this is the beginning of a longer and more extensive correction, but the overall market structure is very different to the last time Bitcoin traded near these levels. As such, the base scenario remains intact for now.”

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Author: AnTy

Traders Unwinding Positions and HODLers Withdrawing Bitcoin from Exchanges

Ever since the March sell-off, the amount of Bitcoin sitting on the centralized cryptocurrency exchanges has declined. This has now fallen to the levels last seen in November 2018.

In mid-February, the crypto exchange’s BTC balance was at its peak at 2.97 million BTC, which dropped 13% to 2.57 million, as per Glassnode.

image2

Given that, just last week, another crypto exchange KuCoin lost $281 million of user funds in a theft, makes sense why the BTC in custodial exchange wallets continues to decline. It could be said that bitcoin holders have been going with ‘not your keys, not your bitcoin’ and have taken to self-custody.

Unlike the BTC balance on centralized exchanges going down, decentralized finance (DeFi) sees strong growth in the use of Bitcoin. While 1.116k BTC is locked up in the Lightning Network, a whopping 126,325 BTC in total is on Ethereum.

Wrapped Bitcoin (WBTC) is the dominating force behind this whose contribution exploded from 1,180 BTC in early May to the current 93,283 BTC.

Meanwhile, on BitMEX

Now, criminal charges on BitMEX are contributing to this drainage. The exchange that held almost 1% of Bitcoins’ circulating supply, nearly~$2b worth of Bitcoin in their vaults, saw nearly 50,000 BTC (over 25%) withdrawn over the past couple of days.

After the March sell-off, BitMEX’s BTC balance crashed by over 36% by Sept. 1st, at 188,343 BTC. Then, CFTC’s announcement saw it further declining, much of which was captured by Binance and Gemini.

While the volume on the exchange is keeping above $1 billion, traders have been closing their positions as reflected in the declining open interest. OI has dropped over 20%, from 54,000 BTC ($582 in USD terms) to about 43k BTC ($452 million).

image1

Long futures positions are actually unwinding with more urgency, as seen in the BitMEX basis decoupling from other exchanges.

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Author: AnTy

PayPal’s Letter to European Commission Confirms Its Plans to Develop Crypto Capabilities

In a letter to the European Commission published in March this year, the global payment service, PayPal, stated they are in works to enable cryptocurrency capabilities on the platform. The company has yet to disclose plans in the digital assets arena completely, but the addition of Bitcoin (BTC) to the platform could be on hand.

PayPal’s ambition in the cryptocurrency space has been clear since its entanglement with the Libra stablecoin project. In the letter to the European Commission responding to the consultation by the regulators on building an EU framework for markets in crypto assets, PayPal confirmed its interests in the digital asset space. The report reads,

“Since the project’s [joining the Libra Foundation] inception, PayPal has taken unilateral and tangible steps to further develop its capabilities in this area,” the report reads. “And to continue to focus on advancing our existing mission and business priorities to democratize access to financial services.”

PayPal’s entry into the cryptocurrency asset space will open up the crypto market to over 300 million global customers (95 million in the EU). In June, BEG reported the global online payment giant had started researching into integrating buying and selling crypto.

Read More: PayPal CEO Dan Schulman Reveals He Only Owns One Cryptocurrency, Bitcoin

A clear developmental EU framework

PayPal recommends a developmental framework that enables a well-regulated industry, promoting clarity to enable innovation and evolution of the industry. The letter recommends three fundamental principles that the EU could follow to ensure a stable developmental structure in crypto regulation.

First, the EU should subject cryptocurrency service providers to the same scope of applicable KYC/AML compliance rules as other financial institutions to prevent money laundering and other illicit online trading activities.

The EU should also set clear definitions and rules on licensing and regulation to avoid loopholes and uncertainty. Finally, the EU regulators should take a step back not to stifle innovation in the rapidly changing world of cryptocurrency. The letter reads,

“Any regulatory framework in Europe should strive to be technology-neutral to support innovation and competition in this fast-evolving space.”

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Author: Lujan Odera

Here’s Why Despite Sluggish Price Movement, Bitcoin is Immensely Bullish

Since recovering from the March lows, bitcoin has been struggling to make its way upwards. We tested $10,000 — the important psychological level numerous times only to fail and get stuck in a range.

Bitcoin refuses to attain five-digit value despite the central bank pumping money into the market. This time, investors are putting all the cash either into their bank deposits or pumping the stock prices, even of the bankrupted companies.

However, the bitcoin market is busy hodling; as such, Rafael Schultze-Kraft, CTO at crypto data firm Glassnode, is “extremely long-term bullish” on the world’s leading digital currency who advises not to get distracted by short-term price action and to look at the bigger picture.

Schultze-Kraft also shared a series of charts that depict this increased hodling behavior and investor confidence, starting with the record amount of bitcoin supply, 61% that hasn’t moved in over a year. This all-time high is a clear indication that investors are anticipating higher value in the future.

Also, 44% of BTC supply hasn’t moved in over two years, which is again approaching ATH, and almost 30% supply hasn’t moved in more than three years.

The average Coin Days Destroyed has been decreasing since the 2017 bull run and is currently at its lowest levels since 2016 — the lower the CDD, the more the long-term hodlers.

Image

In a similar manner, Bitcoin Binary Coin Days destroyed, which are the number of days per year in which coins were destroyed compared to the historic average, has never been this low as in 2020.

Another factor showing high confidence of long-term bitcoin investors is the Reserve Risk, which at the current level indicates an attractive risk/reward ratio to invest.

Long-term holder MVRV is also “looking strong” which usually drops below 1 after prolonged bear markets. MVRV long/short diff. crossovers indicate moments when average short-term and long-term traders move into profit territory. It tends to be a psychological barrier for many traders, which often kick FOMO and greed, as per Santiment.

Liveliness indicator that increases as long-term holders liquidate positions and decreases as long-term investors accumulate to HODL has been on a downward trend since 2019.

In fact, the number of hodled and lost bitcoins increased by 8% since the beginning of 2019 and is currently at over 7.3 million — 40% of bitcoin’s circulating supply.

HODLers are heavily accumulating this year, with only 16 days being the ones in which BTC Hodler Net Position Change has been negative.

glassnode hodl
Source: Glassnode

Amidst this, the average age of bitcoins moved on-chain is constantly decreasing since 2018, as per the Median Spent Output Lifespan (MSOL) indicator.

The amount of bitcoin transferred on-chain meanwhile has stagnated since 2016 despite the growth of the network which Schultze-Kraft says “is a clear indication of Bitcoin’s SoV narrative,” because investors aren’t willing to spend their BTC.

Adding to this narrative is bitcoin velocity, which measures how quickly units are circulating in the network. It has dropped to the lowest point in ten years.

As we have reported, bitcoin balance on exchange has been declining since March, which in part could be investors’ choosing to take custody of their own BTC.

So, overall, the market is long-term bullish and stacking sats waiting for the next big bull run.

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Author: AnTy

Bitcoin Price Ranging But Retail Interest High with Central Banks Vowing to Do More

After the sell-off in March, the Bitcoin price grew in the next two months only to struggle in June. The price movement is slow right now, making its way downwards. Starting the month at about $10,000, we are currently trading under $9,250, with 1.24% losses with just over $1 million “real” volume.

The price might be ranging with not much going on in the market, but retail interest is hitting new highs with now more than 3 million addresses holding at least 0.1 BTC.

Moreover, BTC’s daily active addresses are once again reaching 1 million; this level was only seen twice before in the leading digital currency’s history. The current level was seen back in December when BTC was approaching $20,000 and in July last year when BTC price climbed from around $5,000 to $13,900.

On top of this, 60.8% of bitcoin circulating supply hasn’t moved in over a year while 42.9% in over 2 years. In over 3 years, 28.5% of bitcoin circulating supply hasn’t moved either.

Glassnode-BTC-Supply
Source: Glassnode

Bitcoin’s market cap is still stuck around $170 billion, but the realized cap has hit a new all-time high at $106.63. Realized cap values each UTXO by the price when it was last moved.

This new peak has broken the previous record set just before the Block Thursday crash three months ago.

Support and Resistance

Bitcoin could soon see volatility yet again given that its sentiments on Twitter are still a net negative on prospects of its future price, which, according to Santiment, is generally “a bottom forming signal.”

Not to forget that 60% of all bitcoin options closing at $1 billion are also expiring next week.

Currently, bitcoin is consolidating with buyers expected to create support near the $9,000 range and sellers to provide resistance around $9,500.

A critical resistance level is present at $9,307 and $9,578, where more than 2.1 million addresses previously purchased 1.42 million BTC. As for the support levels, nearly 1 million addresses purchased a total of 559k BTC between $9,018 and $9,288 which is “expected to act as a strong support as holders in this range will attempt to remain profitable on their positions and push prices above this level,” said IntoThe Block.

In the meantime, this consolidation in a bullish configuration in the bull market could bring back a mini alt-season.

Central Banks are here to support

Moving forward, the US Federal Reserve’s dovishness that is helping the US stocks market could further fuel bitcoin. Just this Friday, Fed vice chair Richard Clarida said there is more the central bank can do to support the US economy and more they will do. He said,

“We’ve taken very aggressive, proactive actions. There’s more that we can do, I think there’s more that we will do.”

Meanwhile, Bank of Engal pumped another £100 billion into the UK economy as it believes the country could face its worst recession in 300 years. So far, it has printed up to £745 billion (nearly $920 billion).

“Debt records being shattered. UK is just the latest to report. Bank of England printing presses running full speed turning this new debt into currency to make UK gov’t appear solvent,” said James Turk, founder of GoldMoney who advised to buy physical gold to protect savings after the UK’s public debt exceeded 100% of its GDP for the first time since 1963.

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Author: AnTy

Despite the Selloff, Bitcoin Generated Far ‘Superior Returns’ than Traditional Assets During COVID-19

In March, as COVID-19 spread throughout the world, every asset, be it US equities, bitcoin, gold, or bonds, they all accelerated declines. Initially, bitcoin experienced significant losses but only to stage a strong rally of 155%.

Just like bitcoin recovered its losses, gold initially declined as investors fled to cash only to rebound and reclaim its safe-haven status.

Source: TradeBlock

Now, if we compare the performance of three investment portfolios, the one with 60% equity and 40% bonds, the second one comprising 55% equities, 45% bonds, and 10% gold; and the one with the same composition as the previous one but bitcoin replacing gold, the portfolio with the digital asset is the best choice.

With an investment of $1000, even a modest allocation to hard assets provided better returns, and in the case of bitcoin, it triumphed over the other two.

Source: TradeBlock

Moreover, a modest bitcoin allocation would also have generated greater risk-adjusted returns as measured by the Sharpie ratio found TradeBlock. Risk-adjusted returns analyze the attractiveness of returns based on the unit of risk undertaken to generate those returns.

As such, the Sharpe ratio of the three portfolios is calculated at 0.259, 0.276, and the one with the bitcoin having the highest one at 0.608. But still, bitcoin generated more returns than the other two portfolios during the coronavirus pandemic.

During this period, the US Federal Reserve expanded its balance sheet to a new high at over $7 trillion. Fed has been ramping up its asset purchasing programs since 2008 only to reduce it in 2017 but it accelerated dramatically in recent months to prevent the economic fallout triggered by the pandemic.

Meanwhile, the economic downturns saw several large money managers that have been staying away from digital currencies jumping into bitcoin. Just last month, Paul Tudor Jones announced that his firm’s BVI fund has a 1 to 2% allocation to bitcoin through the purchase of cash-settled futures contracts.

The motivation behind this was the implications of unprecedented bond-buying and fiscal spending by global central banks in recent months.

“As central banks ramp up asset purchasing efforts, ‘hard-money’ inflation hedges are seeing renewed interest.”

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Author: AnTy

Bitcoin Flash Crashes to $8,600 with BitMEX Shenanigans at Play Again

Bitcoin doing bitcoin things!

Today, Bitcoin had yet another moment like March 12, although the price didn’t crash that low.

Yesterday, Bitcoin jumped as high as $10,430 and was trading above $10,100 when in a sudden move BTC went down hard to as low as $9,150 on Bitstamp, $9,300 on Coinbase, and $9,400 on Binance.

On BitMEX, which is notorious for offering 100x leverage on bitcoin contracts, BTC dropped 15% in a single candle, at a lower level of $8,600 just like it did on Black Thursday when Bitcoin tanked to $3,600 compared to $3,800 on other exchanges.

“The reason bitmex wicked so hard is because bitmex has the most OI, and it seemed the most highly leveraged OI,” said trader Loomdart.

In the past 24 hours, the amount liquidated was $992.68 million and 39,924 people. The largest single liquidation order occurred on BitMEX with a value of $10 million, as per CryptoDiffer.

The expensive lesson for noobs here was, “don’t naked short or long bitcoin, or you will get burned on your stop losses.”

“That sort of rigorous selloff makes me think there are some big fish trapped in shorts or largely on the sidelines. Nevertheless they successfully trapped a lot of smaller fish in longs,” said trader Ledger Status.

As BTC price fell below $10,000, the buyer-taker volume was only 46 BTC while the seller-taker volume surpassed 1,500 BTC in just one minute, as per IntoTheBlock data.

“Trades Per Side measures buyer volume crossing the spread vs the seller volume crossing the spread.”

With this latest drop in price, now a “triple top” is in play with $7,900, $6,900-$7,500, and $5,100-$5,300 as the attractive areas to buy the dip.

Interestingly, bitcoin’s drop has us retesting the curve chart the flagship cryptocurrency has been following and touched during the March sell-off. Now, we are carrying higher.

Source: @JonnyMoeTrades

However, according to trader and investor Josh Rager, to be flat out bullish, bitcoin needs to print a weekly close above $10,400s. From there, we can make our move to new highs but until then this is just another lower-high.

Despite this 15% drop on BitMEX, bitcoin is at a level we were at yesterday, just having another failed attempt to break above $10,000 successfully. The losses in bitcoin also mean, “there’s a CHANCE we see a real alt season” given that they are holding well.

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Author: AnTy

After The Stock Market, Now Oil ETF Volatility Eclipses That of Bitcoin

At the end of March, the stock market volatility surpassed that of Bitcoin as Wall Street saw more turbulence than the digital asset’s average volatility. The realized volatility of bitcoin took a big jump in March but it has already reverted.

Now, with the oil prices in free fall, the volatility of oil ETF has exceeded Bitcoin’s. Crypto data tracker, TradeBlock reported,

“USO Oil ETF volatility has surpassed that of bitcoin, as oil prices declined sharply in recent days. In the figure below we diagram price volatility over the past one year period between USO and TradeBlock’s XBX Bitcoin Index.”

Source: TradeBlock

US crude oil prices plunged this week that has renewed worries over the troubled shale oil industry. The price of Brent crude, the international oil benchmark, fell under $16 a barrel for the first time since 1999 as markets continue to struggle with oversupply while demand remains low due to coronavirus lockdown.

The market panic caused US oil prices to tumble into negative territory for the first time as with a lack of storage space, oil producers are paying customers to take their barrels from next month.

Restrictions on travel and the broader economy due to lockdown have caused demand to fall at its fastest rate in 25 years. Now, unless there was a “massive shock” such as oil well shutdowns, cutting millions of barrels from global production, the oil may even get cheaper.

“It’s not a panic. The move is completely rational,” said Howard Marks, co-founder of Oaktree Capital Management.

“The ultimate complication is that storing oil costs money, and storage facilities aren’t unlimited. Right now storage is scarce and thus expensive, so it’s not worth it to buy oil today and store it. The cost of storing exceeds the value today; thus the price is negative.”

These losses came despite the OPEC and its oil producing allies finalizing a historic agreement earlier this month to cut production.

US President Donald Trump said earlier this week that he would consider preventing incoming Saudi Arabian oil shipments and top up the country’s emergency fuel storage of petroleum.

Now that the storage tankers are full, May won’t be any different. “Yes, eventually demand will gradually pick up again. However, until that happens, watching producers continue to pump oil out of the ground is ludicrous,” said analyst Mati Greenspan in his daily newsletter Quantum Economics.

However, if oil producers start shutting down wells, it can physically damage reservoirs and threaten the future prospect of reviving the output.

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Author: AnTy

Renaissance’s $10 Billion Medallion Hedge Fund Permitted to Enter into Bitcoin Futures Market

As per regulatory form filled on March 30, 2020, Renaissance Technologies is permitted to enter the Bitcoin Futures market for cash-settled contracts.

The company’s Medallion hedge fund is currently in the news for having its best years ever. Up 24% year to date it recorded impressive 9.9% gains in March, one of the worst months in modern financial history.

They are well ahead of the broader stock market, which is down over 11% since the rapid spread of the coronavirus pandemic. March’s gains came even after charging hefty investor fees including a cut of 36% of all trading gains and 5% of all money invested.

Cash-settled Bitcoin Futures contracts

Now, Jim Simons founded company has been permitted to enter into bitcoin future transactions, “which Renaissance will limit to cash-settled futures contracts traded on the CME.”

The Form ADV mentions that the underlying commodity, bitcoin is a relatively new and “highly speculative” asset and is extremely volatile, as such “investment results may vary substantially over time.”

It further cautions that these instruments involve much larger risk and potential for loss compared to conventional financial instruments.

“Investments of this type should be considered substantially more speculative and significantly more likely to result in a total loss of capital than many other investments.”

Significant Risk

Renaissance further lays down a list of risks associated with bitcoin including its limited history, the absence of any recognition of bitcoin as legal tender by any government.

Bitcoin’s substantial price volatility, its susceptibility to forking, and possible correlation to the price volatility of other distributed ledger assets are other risks.

What the crypto community hails as the biggest strength of Bitcoin, no central authority to issue or control the world’s leading digital asset is also taken by the company as one of the risks.

Bitcoin’s susceptibility to manipulation by malicious actors or botnets, spot exchanges to fraud, manipulation, and other malfeasance, and the enhanced basis risk in futures compared to other types of investment vehicles are also mentioned.

Moreover, it mentions the undeveloped and evolving nature of regulation amidst the increased regulatory scrutiny of participants in the crypto space.

There is also the possibility of exchanges or FCMs’ imposing other requirements or limitations on bitcoin futures trading.

And any of these factors could “materially and adversely” affect the value of the Fund’s investments, reads the form.

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Author: AnTy

BTC Miners Shrug Off Difficulty Drop But RSI Has Never Been this Weak Before the Halving

Since its sell-off in March, the price of bitcoin has been making a recovery. This positive movement has the miners’ profitability turning positive after being negative following the price crash.

As such, the hash rate of the network has increased by 18% since hitting bottom in late March. As miners have started powering on their machines yet again, it resulted in a positive difficulty adjustment after more than 15% of negative adjustment following the drop in hash power. Crypto data tracker Coin Metrics noted,

Bitcoin-implied-hash-rate-coinmetrics

Source: CoinmetricsThe network started seeing positive growth only for the BTC price to fall back below $6,800. Today, we went down as low as $6,542.

Increasing hash rate and rising mining difficulty combined with falling prices and upcoming halving, however, is not good for miners. Their profitability can yet again take a hit which could push them to sell their BTC. Coin Metrics founder, Nic carter said,

“Now the difficulty can consistently increase and the rewards halve, a pretty expense operation this mining business, how much do we need to sell these coins for now whilst remaining competitive.”

The halving is now less than a month away that would cut down the block rewards in half. And “RSI … never been this oversold before the halving.”

A momentum indicator, the relative strength index (RSI) measures the magnitude of recent price changes to evaluate the overbought or overvalued conditions in the price of an asset. The oscillator with a reading from 0 to 100.

If the RSI has a value at or above 70, the asset is overbought or overvalued while a reading of 30 or below indicates the oversold or undervalued conditions.

Bitcoin’s RSI is currently less than 50 just before the halving and it has never been this undervalued before the event.

Also, unlike the losses we are seeing right now, such a pullback pre-halving wasn’t seen on previous events. After the 2016 halving, there was a “little blip” because of the DAO hack on Ethereum and Bitfinex exchange hack but after the 2012 halving, BTC went “straight up.”

However, we are currently undergoing a coronavirus crisis that didn’t happen in the past decade. This is also BTC’s first time experiencing government slashing interest rates to zero and printing money like crazy.

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Author: AnTy