Get Ready for Some Action as Bitcoin Volatility Hits Historical Lows

Markets are boring right now, with not much going on.

Bitcoin is stuck around $10,700, while altcoins are oscillating between red and greens.

Basically, “all markets, including our beloved digital asset space, seem to be going nowhere fast,” said analyst Mati Greenspan.

After having a blast for about half of the year, even stocks are uncertain thanks to the upcoming elections next month.

September was actually marred with worst monthly performance since March as the broader digital assets market and equities all closed in losses. But according to Greenspan,

“Stocks remain overvalued because there’s too much money in the system that needs a home, and the lower-risk alternatives are no longer attractive.”

While the leading digital asset ended Sept. and opened October both on a negative note, at least for the S&P 500, there were some gains.

While the risk-asset rally may have legs still in this last quarter of 2020, for bitcoin, it might be time to make up for all the losses and move towards beating the 2019 high of $14,000.

“Q4 is where BTC typically makes most if its gains during bull markets. I don’t think this year will be an exception,” stated one crypto trader.

On a Downtrend

While the price isn’t doing anything, for some time now, trading volume has been the one that’s been really disappointing. Bitcoin volume, which is on a downwards trend actually hit the lowest since late February on Saturday.

“The volatility in the market is back at historical lows, and it is not unlikely that we get some more action in the market soon,” noted Arcane Research.

The 180-day volatility has fallen to a two-year low, but according to on-chain analyst Willy Woo it actually spells “bullish.”

“When volatility is at a minimum, it means trade volumes are at a low, which means exchange fees revenue are at lows, which means exchanges sell less BTC profits to fiat, which mean investor buy pressure dominates the next move,” he explained.

Volatility reaching low also means buyers have laid down a floor on spot markets as they continue to accumulate, which ultimately leads to accumulation bottoms as “this stops downward moves and lowers volatility,” added Woo.

However, what’s worth noting is that when BVOL (30-day realized volatility) hit its lowest in 2018, it was followed by the start of the 50% November crash.

Volatility will be coming if not in the near term, then the less than a month away US Presidential elections will surely get the ball rolling.

On an Uptrend

Several indicators, meanwhile, are painting a bullish picture.

To start with, “The Market Cap to Thermocap Ratio suggests that Bitcoin has massive room to grow from here. It has not even started to show the sharp increase that is typical in bull markets. Current levels are a whole order of magnitude away from previous BTC tops,” as per Glassnode.

Thermo cap is the aggregate amount of bitcoins paid to miners, which serve as a proxy metric to the true capital flow into the Bitcoin network.

Bitcoin addresses are also telling a bullish story, moving away from the usual norm of 5-10k new BTC addresses per day; last week, it grew to its highest level in over two years, peaking above 22k.

Not to mention, Tether’s market cap is ready to burst through $16 billion as well, just three and a half months after hitting $10 billion.

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Author: AnTy

EU’s Draft Regulation to Fragment the Crypto Market with Special Focus on ‘Subset’ Stablecoins

The 168-page long leaked version of the draft legislation of “Markets in Crypto Assets (MiCA)” by the European Commission provides legal certainty about digital currencies.

To be issued later this month, the set of regulations will be covering the issuance and trading of digital assets across the bloc.

Europe is basically planning to regulate crypto-like other financial instruments with the purpose to “further enable and support the potential of digital finance in terms of innovation and competition while mitigating the risks.”

However, the European Commission is putting a particular focus on stablecoins, a “subset of crypto-assets” leading to market fragmentation.

This is no surprise given the calls for regulating them for some time now. As we reported, this month, first, Bank of England governor and then five of the European countries supported regulatory oversight for asset-backed coins like Facebook’s Libra.

Additionally, regulators believe stablecoins have the potential to become widely accepted and potentially systemic, and of course, the plans for CBDC are behind the decision.

The new regulation will establish specific rules for ‘stablecoins,’ including when these are e-money.

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Author: AnTy

Bitcoin’s Role as a Hedge Against the Global Financial System Back in Question

As markets go through a rough time, along with the bitcoin, people are back to questioning the largest cryptocurrency’s role as a hedge against the macro disorder.

The same was said in March when bitcoin crashed along with the rest of the stocks, oil, gold, and other assets.

That time, the coronavirus pandemic rattled the markets that pushed oil futures into negative for the first time ever and bitcoin to $3,800.

Unlike the traditional markets, crypto markets don’t have any plunge protection, no circuit breakers to prevent the asset from plunging further.

However, crypto derivatives exchange BitMEX did prevent BTC from going to zero by shutting the exchange down because of a DDoS attack, and the digital asset only plummeted to $3,600 level on the platform.

This time again, as markets make a U-turn after flying high since the March crash, bitcoin followed suit.

According to on-chain analyst Willy Woo, this is because bitcoin is still finding its foot and isn’t big enough yet.

Additionally, the asset that has replaced cash as a reserve asset in the balance sheet of three companies in the past month wasn’t the only one to plunge.

Traditional safe-haven asset gold is down just the same. This week, the precious metal lost 3.8% of its value.

Does it mean the bullion is no more a store of value? Not at all!

As a matter of fact, Warren Buffett, for the first time ever, invested in gold after ditching his bank shares.

This move from the billionaire came after the yellow metal crashed hard during the March sell-off, just like it did in 2008 before surging upwards.

The same could be said for the digital gold, which is still a nascent asset class with a growing adoption rate and still down 50% from its all-time high, which means a lot more potential for a new peak.

Why the Pullback?

The flagship cryptocurrency briefly breached $12,000 on Tuesday only to drop to about $10,000 level on Wednesday. The asset has fallen 16% since Tuesday that puts in on pace for its worst two-day stretch since the second week of May.

“Part of the reason for the sell-off is technical in nature; its price broke below key support, confirming a head and shoulders pattern, which accelerated the decline,” noted research firm Delphi Digital.

The short-term pain in the crypto market has come amid the worst daily decline for the S&P 500 since early June and the largest one-day spike for the VIX Index in almost three months.

This sell-off, besides being technical in nature and mirroring the broader sell-off in traditional markets, is also because of the DeFi craze that was “overdue for a pullback.”

According to some like trader Crypto Whale, the digital asset can still go down to $3,500 and fill the CME gap, which has happened 99% of the time.

“I believe there’s still a likely chance Bitcoin drops below $3,500 and fill the lowest CME gap before we see a real bull market,” he said.

Could this happen, sure, but will this happen, that’s to be seen. The market already saw it in March, and after falling momentarily to this level, it went back to $6,000 level the next day.

For now, bitcoin is struggling at the key psychological level of $10,000, having fallen under it today.

The fall in price had the open interest in CME bitcoin futures continuing its correction that started last week, shedding another 1000 contracts this week. While Leveraged Funds increased their shorts positioning noticeably this week as did the asset managers long.

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Author: AnTy

Ethereum Suffers from Fundamentals Flaws — Is it the New Normal?

  • Markets remain bullish, especially Ethereum, despite the second-largest network continuing to suffer from the fundamental flaws — insanely high fees and clogged up the network.
  • Despite the rising fees, hitting ATH in both USD and ETH terms, ETH price is uptrending, reflecting people’s preference for Ether.

The fees on Ethereum had reached the highest since 2015 when it launched, surging past $7. More than 17,500, $6.8 million are currently being spent on fees daily on the network. Spencer Bogart, general partner at Blockchain Capital,

“Mempools are getting more competitive as value at stake for pending crypto tax increases. This increased competitiveness is a byproduct of increasing adoption and utility and likely part of a new normal.”

Soaring transaction fees means the daily profit of Ethereum miners is now at its highest point in 27 months. As per Bitinfocharts, the daily profitability of Ethereum miner operators is at $5.8 per 100 megahashes second (MH/s) of computing power — a level last seen in early May 2018.

Who Exactly is Responsible for Soaring Ethereum’s Fees?

No doubt, this spike in fees is caused by a high demand for space on-chain, with the median gas price at its all-time high of 217 Gwei and mean gas price even higher at 224 Gwei.

But users need to pay far more than the media gas to use the network effectively, and Etherscan is recommending gas price of over 350 Gwei for a 20 second wait time.

The reason is simple, “the anticipation of a bull market has created massive demand in all niches – large and small, familiar and arcane, dated and nascent,” notes Glassnode.

One reason for this massive demand for transactions on Ethereum is stablecoins, especially USDT, which is the second biggest gas guzzler, as per Etherscan.

In August, USDT transfers accounted for 14% of all fees spent, while other stablecoins account for just 1.2% of fees spent.

But the most significant gas guzzler belongs to the “other contracts” category, which accounts for more than 65% of all gas spent this month. This category covers DeFi, DEXs, and arbitrage bots.

Uniswap is the most significant contributor to Ethereum’s gas price spike, which is responsible for 39% of fees spent by the top 20 contracts this month.

Among these 20 contracts, arbitrage bots make up for almost 20% of fees, spending $2.5 million worth of ETH in gas.

Ponzi schemes also continue to be high fee payers, which takes the place of 2nd (Forsage.io) and 19th (Lionsshare.io) in most gas-intensive contracts this month so far, stated Glassnode in its report.

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Author: AnTy

Big US Banks Set Aside Billions in Downturn Warning; Stocks Continue to Tumble

The markets started to see red as investors grew worried about an uptick in coronavirus infections slowing the economic recovery when they kicked higher later in the day yesterday after the banks earning season kicked off.

The Dow Jones Industrial Average raced higher with its biggest percentage advance of the month. S&P 500 also spiked 1.7%, which can be further driven by a good performance by the banks’ stocks.

Bitcoin meanwhile continues to hover around $9,215 as it has been doing for about a month now. The volume remains extremely low while Tether is recording more than double the bitcoin’s ‘real’ trading volume, as per Messari.

The first earnings report showed that Wells Fargo took a $2.4 billion loss, the first quarterly loss since 2008. The earnings declined due to low-interest rates, uncertainty associated with COVID-19, and a worse-than-expected macro environment.

The surprise came in the form of JPMorgan, which topped its revenue estimated at $33 billion, up from 15% from the same quarter last year while profits dropped over 50%. Citigroup also reported revenue of $19.8 billion but a drop of 73% in profits from last year.

This was because of trading revenue driven by massive volatility in the market and the Fed injecting liquidity while purchasing corporate bonds as such, not sustainable.

Banks stocks are currently down with Wells Fargo losing as much as 45% in yearly returns. The shares of Wells Fargo and Citigroup fell 5.4% and 2.8%, respectively, yesterday with little changes in JPMorgan’s.

While both Citibank and JPMorgan Chase beat their estimated earnings, they didn’t put out an optimistic outlook.

JPMorgan CEO Jamie Dimon warned that the bank still “faces much uncertainty regarding the future path of the economy.”

All three of the banks meanwhile continue to stockpile billions; Citibank added $5.6 billion in the Q2 2020 while Wells Fargo and JPMorgan added $8.4 billion and $11 billion respectively to prepare for things to get worse.

Although government aid cushioned the economic fallout from the pandemic so far, bank executives said as the programs begin to expire in the coming months, the banks expect their losses to mount as defaults will rise.

“The banks are pessimistic about the course of the recovery,” said Gabriel Chodorow-Reich, associate professor of economics at Harvard University. “The banks don’t see a rapid recovery over the next six months — they see a protracted recession.”

Amidst this, Lael Brainard, a Federal Reserve governor, warned that “a broad second wave could reignite financial market volatility and market disruptions at a time of greater vulnerability.”

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Author: AnTy

Bitcoin’s Correlation with Stocks Still Elevated, Most Likely to Increase Further

Bitcoin is up over 31% YTD while trading around $9,650 but its correlation with the stock markets is still elevated.

The correlation first climbed to new highs during the March sell-off. But while the US stocks and bitcoin are still correlated, the percentage of movement is not.

Bitcoin’s correlation to the S&P 500 is currently reading just under 0.5. Despite being an extremely high figure for the bitcoin market, “it still does not indicate a particularly significant relationship,” wrote analyst Mati Greenspan in his Quantum Economics newsletter.

For starters, it is nowhere near the level it was at the start of the crisis. The Bitcoin market has also seen increasing involvement from institutional players as seen in the volume and the introduction of new structured products hedge funds can use to access the market.

As such, “the more big money is involved, the more managers of large portfolios will see it within the context of the traditional markets and use it as a tool to hedge their investments, which seems most likely to only increase the correlation from here,” he said.

Moreover, when it comes to ROI which unlike price is adjusted by risk the asset is exposed to, Bitcoin is leading among stocks and gold. The higher the ROI the better and Bitcoin wins it with higher returns at all times compared to the others.

Over the last month bitcoin markets have been behaving irregularly. In May, macro investor Paul Tudor Jones jumped in Bitcoin right after the digital currency went through its third halving. The same month Goldman Sachs had a client call where they said bitcoin is not an asset class and they do not recommend it as a suitable investment to its clients.

Despite all this, bitcoin did its own thing and ended the month at $10,000, up from the opening price of $8,800.

“The assessment that bitcoin price remains uncorrelated, even with splashy industry news is mostly accurate,” said Michael Moro, CEO of Genesis Capital.

Interestingly, the month of May also saw the largest amount of US bankruptcy filings since 2009, the Great Recession.

About 27 companies reported at least $50 million in liabilities sought court protection from creditors. Year-to-date is another highest since 2009 with 98 bankruptcies filed by companies.

The turmoil in the global markets and economies may be motivating more people to explore digital currencies, according to Catherine Coley, CEO of Binance.US.

“As we are all stuck at home, more stimulus packages are being sent out through USD while digital currencies, like BTC, untied to the traditional banking system, appear more attractive as Americans look for additional ways to build their financial health and diversify their assets,” she said.

In the coming week, the US Federal Reserve’s two-day meeting is a big event for markets with more details on stimulus and a possible new program expected.

Latest Bitcoin Price News and Crypto Market Updates

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Author: AnTy

Bitcoin’s Intrinsic Value has Effectively Doubled After Halving: JPMorgan Report

Bitcoin “markets effectively priced in a 25% decline in the amount spent on energy per day,” says the “Global Markets Strategy: Flows & Liquidity” report by JPMorgan & Chase Co. published on March 22, 2020.

JPMorgan that treats Bitcoin as a commodity because mining consumes electricity said Bitcoin miners have responded swiftly to the collapse in the revenue following the halving.

After the block rewards were cut in half to 6.25 coins, it has been found that “the intrinsic value estimate effectively doubled,” wrote Nikolaos Panigirtzoglou, Managing Director at the bank.

In principle, if the market price of bitcoin is above its intrinsic cost miners should be induced to increase their resources to mine BTC, bringing the cost of mining higher until the marginal cost approaches the market price.

In contrast, if the price is below the intrinsic cost higher-cost producers must exit the market and lower the overall cost until it again approaches the marginal cost.

bitcoin market price intrinsic value

To find the intrinsic value of BTC, the estimated daily cost of production as a function of the computational power employed, cost of electricity and energy efficiency of hardware is calculated which is then divided by the expected number of bitcoins produced daily.

Since the halving, the hash rate has declined by 20%, such a drop was last seen when the BTC price collapsed 50%. This decline also happened against a backdrop of “an improvement in average efficiency of mining hardware, as energy consumption per GH/s has declined by more than 15%.”

This closed down the gap between the intrinsic value and market price.

Positioning Backdrop

Panigirtzoglou also covered the sharp increase in the open interest on both bitcoin futures and options. For CME contracts, it recovered faster than crypto exchanges and had a “steep” increase in both BTC and USD terms. Although CME’s OI has overtaken that of LedgerX, it’s way behind the nearly $1 bln OI on Deribit.

As for positioning in bitcoin futures, JP Morgan takes on cumulative weekly absolute changes in the open interest multiplied by the sign of the futures price change every week based on the rationale that when price increases so do the net long position of spec investors and magnitude of the increase and vice-a-versa.

bitcoin position proxy based on OI in bitMEX and CME

The trends in both CME and BitMEX futures have been similar this year directionally, “with net longs being cut or net shorts being increased sharply amid the March sell-off, and a significant adding of net longs or decreases in net shorts ahead of the halving event.”

JPMorgan’s report however, doesn’t mention the decline in BitMEX’s market share and more than 40% drop in its web traffic.

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Author: AnTy

BTC’s Inability to Stay Strong in the Time of Crisis Raises Questions About its Safe Haven Status

The past couple of months, amid coronavirus crisis, has seen some of the major markets crash and assets fall to their historic lows including the safe haven assets like Gold, government bonds, and even Bitcoin. Only this week, Crude oil prices registered historical lows and the futures market even went into the negative. While the reason for the failure of traditional financial institutions and assets is understandable, many are mostly shocked as to how Bitcoin has failed to rise to the occasion since many believe this was a perfect time and opportunity for the digital currency to prove its worth.

Bitcoin was created in the aftermath of the 2008 financial recession as a form of an alternate financial system which wouldn’t be controlled by any centralized authorities, thus the issue of inflation won’t arise and while the traditional financial system would be in ruins people could turn towards Bitcoin to save them.

However, that hasn’t happened yet, in fact, Bitcoin saw one of its worst price slumps since its inception when on March 12th, its value fell by almost 50%. And even after more than a month, it has not been able to recover its lost ground.

Bitcoin is also scheduled to undergo the halving of its block reward, which means the number of Bitcoins produced per block will be cut in half, and instead of the current 12.5BTC block, after the halving, each block would produce only 6.25 BTC. Thus the supply of Bitcoin would be less making it a highly bullish event. Therefore, this should have been the best time for Bitcoin, but its price does not reflect the same making many question whether Bitcoin will be able to live up to the hype.

Dan McArdle, co-founder of Messari, a Bitcoin and blockchain analytic firm seems to have an answer. McArdle believes Bitcoin has not failed despite the ongoing struggle to keep its price above the $7,000 mark. He explained that people often believe Bitcoin would act as a hedge at the time of financial crisis or recession, but in reality, Bitcoin is a hedge against inflation and loss of confidence in fiat currencies which he predicted almost two years ago, claiming that against the popular belief Bitcoin won’t be performing in times of liquidity crunch. He explained,

“People have/had this notion that bitcoin is a hedge against a recession, or specifically the S&P. I’ve thought that’s wrong for a while, and indeed we saw a high correlation with the S&P last month as investors everywhere sold everything in the first real global liquidity crunch we’ve seen since 2009. No surprise bitcoin did not outperform.”

Bitcoin Will Flourish Once People Realize the Fiat System is Flawed

The ongoing crisis has brought the whole world to a standstill as the majority of industries have shutdown. The government has decided to offer and maintain the necessary liquidity of the market by printing trillions, which begs the question if the governments can print as they wish to keep the market liquidated why do they need our tax money? And how flawed the fiat system is if it is not backed by anything.

McArdle said that unless the people realize these flaws in the fiat monetary system and how centralized bodies and government control has led them to several recessions, Bitcoin won’t thrive. At present Bitcoin is not even seen as a safe haven and mostly a lucrative form of investment to make profits, so unless Bitcoin reaches the level of a truly parallel financial ecosystem it would be difficult for it to prove its worth.

Whether Bitcoin would reach the levels of 2017 price rise is still debatable given Bitcoin was highly volatile at that point and its price was mostly influenced by rumors news and whales, however, as of today, Bitcoin has come a long way. The volatility even though higher than other asset classes is quite low when compared to the 2017 level. The mining difficulty which directly shows the miner’s density on the platform is also at its all-time high, and many believe even if Bitcoin fails to rally like 2017, it would surely see those highs in the aftermath of halving and the price factor might kick in after a year.

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Author: James W

Tezos (XTZ) Price Analysis (April 21)

Key Highlights

  • A relative number of falls has featured in the market’s valuation of XTZ/USD.
  • A downward breach at the $2 mark, will lead XTZ/USD price trading lower around the i$1.8 major accumulation territory afterward.
  • XTZ/USD market is likely to make rebound northwards a bit above the $2.4 mark.

Tezos (XTZ) Price Analysis

  • Major distribution territories: $2.6, $2.8, $3
  • Major accumulation territories: $1.8, $1.6, $1.4

There have a relative number of falls in the market’s valuation of Tezos as traded against the US dollar’s price worth. On April 18, the crypto surged northbound higher to a closely average $2.4 mark. Price has been trading towards a low value at $2 line.

A further downward breach of the $2 mark, will potentially lead the crypto market’s value to trade lower around the i$1.8 immediate major accumulation territory. Meanwhile, the bulls’ failure at that point will cause more sell-offs through some major accumulation territories afterward.

Tezos (XTZ) Technical Indicators Reading

The 50-day SMA indicator, still to some extent, points to the north direction a bit above the $2 mark. A line of bearish Japanese candlesticks has occurred to touch the SMA trading indicator. That signifies a correction in the crypto’s price earlier upswings. The Lower Bollinger Band lies closer below the SMA trend-line to give strength to it. That showcases the potential of seeing the bulls regaining power from that point The Stochastic Oscillators have moved downward slightly start a consolidation moves around range 20. That signals the necessary need to stay away from placing a position for a while.

Conclusion

As XTZ/USD market now trades around the 50-day SMA trend-line and, the Lower Bollinger Band, the crypto is more likely to make rebound northwards a bit above the $2.4 mark closely averaged earlier on. Any rejections around a low value at $2 line, may signal a good entry of the XTZ/USD bullish market trading zone.

Disclaimer: The presented information is subjected to market condition and may include the very own opinion of the author. Please do your ‘very own’ market research before making any investment in cryptocurrencies. Neither the writer nor the publication (bitcoinexchangeguide.com) holds any responsibility for your financial loss.

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Author: Ben Jordan

Market Turmoil Can Bring Capital Controls Back But They’ll Be Good for Crypto

Last month, the coronavirus outbreak and the collapse of oil prices had stock markets crashing and economies come to a standstill with countries in lockdown. In response, central banks have announced stimulus programs.

The coronavirus crisis also affected the capital flows and raised the question of whether currency control would be back too, especially in emerging markets.

In February and March, about $80 billion got wiped out from emerging stocks and bonds.

“There is some early evidence of an unprecedented collapse in global capital mobility which, if sustained, will make it tempting for countries to conserve their FX resources by imposing restrictions on capital outflows,” said David Lubin, head of emerging markets economics at Citi.

This would certainly be the case if the governments offered full compensation for losses inflicted by lockdowns.

Capital Controls could be back

The Fed and IMF have backed the use of capital controls in certain situations while the US has opposed them since Bretton Woods. Back in December, Bilal Hafeez, the CEO of financial strategy firm Macro Hive said US capital controls could be the grey swan, which is basically significant events that are considered unlikely to happen but are still possible.

China has been implementing capital controls, last year it rolled out a new set of currency controls to curb down on a capital flight from the country.

In emerging markets (EMs), the issue of investment flow is especially important because when capital inflows disappear, those that rely on that capital “suffer big demand collapses.”

Last week’s sell-off in emerging market currencies have been on pace with that during the 2008 global financial crisis, as per JP Morgan. Fiat currencies have fallen 10 to 20%.

As such capital control could be a reality, however, for now, currency pressures have eased following massive cash injections by the Fed to weaken the dollar.

Cryptos ideal conduit to bypass them

Back in 2008 and 2015, Iceland and Greece respectively resorted to them. Emerging markets see capital controls as a measure of the last resort.

Nigeria introduced capital curbs in late 2014 after an oil price shock ravaged its economy.

Last month, Lebanon held meetings to discuss capital control aimed at the regulation and setting exceptional temporary controls on some operations and banking services, as per the National News Agency.

Argentina imposed curbs in September to conserve its diminishing dollar reserves and stop a peso run. This saw the demand for stablecoin DAI explode in the country.

The implementation of capital controls is good for crypto and gold. One can purchase the bullion and store it offshore and legally circumvent the control.

“Capital controls are relevant for crypto, as the imposition of capital controls generates demand to bypass capital controls … and crypto assets can be an ideal conduit for doing so,” said economist and trader Alex Kruger.

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Author: AnTy