The ‘More Expensive’ Bitcoin Is, the ‘More Valuable’ It Is Backed by Strong Fundamentals

Bitcoin had a positive difficulty adjustment of 8.9% yesterday but remained 4.4% from its all-time high, much like its price.

Last week, the BTC price was 2.5% away from the peak when it made nearly 17% pullback to $16,300. It was still one of the tamest bull market retracements, and soon after, just over the weekend, BTC hit $18,700 yet again.

Any dips in the current market are being scooped extremely fast, which makes sense given that above ATH is where the price discovery will start this time. Additionally, as quant trader Qiao Wang notes,

“Buying BTC today at $18k is better risk reward than buying BTC back in March at $4k.”

This is because, in March, a massive fall could have set the store of value narrative back by a few years, and the market had no idea just how much monetary and fiscal intervention was coming.

Today, the inflation narrative is spreading like wildfire, and the household macro traders and corporations are feeling the FOMO and rushing in.

“The more expensive, the more salable, the more valuable,” said Wang.

Bitcoin is winning it

Today, we are back on the move going as high as $19,500, now just about 5% off the ATH on the back of strong fundamentals. Jason Deane, an analyst at Quantum Economics, said,

“Yesterday’s Bitcoin difficulty adjustment was quite chunky at +8.87%, but still well below ATH in late Oct. Surprised actually – price has moved up by 42% since then, reports of large scale mining purchases streaming in, but diff only creeping up at the mo.”

The difficulty has been increased in response to the hash rate of the network is near its peak, set in late October. Computing power devoted to running the largest network has been soaring for the past two years.

According to Samson Mow of Blockstream, there has actually been a shortage of Bitcoin miners. One miner said,

“There’s a shortage of Bitcoin miners right now. Manufacturers are having trouble getting additional chip capacity from foundries, and deliveries are pushed out to late Q2/Q3 2021.  “又开始疯了” which translate to “It’s getting crazy again.”

When it comes to other facets of the network, the backlog is all cleared in the mempool, which collapsed when the price was this high in late 2017.

Just the same as the mempool, the average bitcoin transaction fee remains extremely low at under $3, which was above $55 at the peak of the 2017 bull market.

Amidst this, the number of Bitcoin users continues to grow, with more than 30 million wallet addresses with active balances.

Not to mention all the attention BTC gets from institutional investors, family offices, companies, celebrities, and others. Historian Niall Ferguson tweeted on Sunday,

“We are living through a monetary revolution so multifaceted that few of us comprehend its full extent. And Bitcoin is winning it.”

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Author: AnTy

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

More than Speculation, Bitcoin’s Real-World Usage Booms in Africa

Outsiders claim the sole purpose of bitcoin is speculation. Still, the data presents a much different picture in which these people who have declared the digital currency dead hundreds of times conveniently ignore.

As we reported several times, the use of bitcoin and stablecoins have been gaining a lot of traction in Argentina, Venezuela, Africa, and other parts of the world.

In these regions, cryptocurrencies are being used as a hedge against currency debasement. In Africa, especially, the use of cryptos is booming.

While weaker local currencies and complex bureaucracy are pushing people towards bitcoin, the young and tech-savvy population of Africa is finding it easy to adapt to bitcoin quickly.

While central banks continue to warn that cryptos are not legal tender and investors are unprotected, this is not deterring the users and investors.

South Africa, Nigeria, and Kenya are the hotspots of bitcoin on the continent. In Nigeria, small crypto transfers total at about $56 million in June, which is nearly 50% more than a year before. The number of transactions also jumped over 55% to 120,000 in the country.

According to Chainalysis, which tracks crypto flows for financial firms and US law enforcement, monthly crypto transfers to and from Africa of under $10,000 has jumped over 55% in a year to reach $316 million in June. The number of monthly transfers also doubled, surpassing 600,700.

This is the real deal!

Abolaji Odunjo, a mobile phone seller in Lagos, saw his profits boosted after he started paying his suppliers in bitcoin. His Chinese supplies, from whom he sources the handsets and accessories, ask to be paid in crypto for speed and convenience.

“Bitcoin helped to protect my business against the currency devaluation, and enabled me to grow at the same time,” Odunjo told Reuters. “You don’t have to pay charges, you don’t have to buy dollars,” said the 30-year-old.

Nigeria, the continent’s biggest economy, is oil-dependent whose local currency naira is devalued twice by the central bank this year amidst low crude prices and COVID-19.

Naira’s fall pushed Nigerians towards bitcoin as reflected in the volume of the Lagos exchange BuyCoins, which jumped more than three-fold to $21 million in June following naira’s devaluation in March.

Another exchange Yellow Card also saw its monthly crypto volume spiking five-fold in 2020 to $25 million last month. Bitcoin trading volumes in South Africa and Nigeria combined on Luno jumped by half to $536 million.

Bitcoin is booming in Africa, driven by remittances sent home from migrant workers and payments from small businesses.

“People are very adoptive of any technology that will make their life easier,” said Frankline Kihiu, a crypto broker in Kenya’s capital, Nairobi. “In most African countries, there are lots of government restrictions that bitcoin takes away.”

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Author: AnTy

Green Shots Emerge in DeFi Following the Painful Unwinding of the Crowded Space

During the recent correction, the DeFi market pulled back hard, so much so that the seven days percentage returns are still in the negative by 20% to 40%.

Except for a handful of top DeFi tokens, all of them plunged 70% to 95%.

But the market seems to be gaining momentum yet again. While in the past hour, DeFi tokens are slowly turning red, in the last 24 hours, significant gains have been made.

Notable mentions include Cream (81%), Swerve (81%), Hydro Protocol (44.3%), bZx Protocol (30%), YFI (17%), Loopring (12%), Aave (10%), Bancor (6.3%), Chainlink (5.6%), Serum (5%), Synthetix (3.8%), and CRV (2.5%).

Total Value Locked (TVL) in DeFi has also climbed to $7.95 billion after falling to the $6.78 billion low today from the high of $9.5 billion on Sept. 2nd.

Uniswap, with $1.47 billion in TVL, is now dominating the DeFi space, a position juggling between Aave, Curve Finance, and the long-standing leader Maker.

Another Vicious to Resume

The market correction was actually the domino effect of DeFi positions unwinding after the head chef of SushiSwap decided to call it a day by pulling a Litecoin’s Charlie Lee, or you could say Ethereum’s Vitalik Buterin.

“The uber-crowded trade in US equities is nothing compared to the crowded nature of DeFi space,” said Denis Vinokourov of London-based brokerage service Bequant.

When DeFi tokens started going down, “the spillover effects turned out to be significant,” which makes sense given that almost $10 billion worth of capital was splashing in the ecosystem. Vinokourov said,

“Going back to the recent price action and as demonstrated in the past, crowded trade unwinds are extremely painful and broad-based but eventually green shots emerge.”

And this is what we are seeing in the market currently. Also, with a considerable reduction in Ethereum gas levels and potential interest from China, another vicious circle will soon resume.

An Opportunity for Competitors

During the DeFi craze, network fees being too darn high also came back in the light. Ethereum miners made a killing from transaction fees, pocketing a total of $113 million in profit in August, up over 3,660% from the meager $3 million earned just four months back.

This means the Ethereum network has all to gain from this DeFi craze and to lose as well.

So, what the second-largest network needs, according to Vitalik Buterin, is nothing but “drastic increase in scalability” – which involves only sharding and rollups, and that has been coming for years.

This makes it a big opportunity for Ethereum competitors such as Cardano, Tezos, and EOS. But while Cardano has just released its mainnet, EOS is not seeing much traction, recording $1.74 billion volume compared to Ethereum’s $5.64 billion.

But according to Brendan Blumer, CEO of Block.one, the company behind EOS, “EOS will unleash DeFi… EOS has the performance, liquidity, and developer community to support DeFi applications that aren’t possible anywhere else.”

Polkadot is another one that jumped the ranks thanks to a denomination – crypto’s version of the stock split.

In the meantime, market participants acknowledged Ethereum’s layer2 solutions like the OMG network and Loopring, resulting in these tokens outperforming.

But Vinokourov says, Ether contenders “command significant financial firepower and a competing platform to rival Ethereum’s DeFi is likely a matter of time.”

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Author: AnTy

A Dose of Hopium Amidst the Bitcoin Market Sentiments Turning to ‘Fear’

With so much red across the crypto market, the market sentiment has taken a drastic turn.

Until yesterday, the market sentiments were of “extreme greed” with a reading around 80, on a scale of 1-100, as per Crypto Fear & Greed Index. The crypto market has been in “extreme greed” ever since late July.

But yesterday’s correction resulted in a sudden decline to a reading of 40, which translates to “fear” last seen in early July when bitcoin was around $9,100.

Crypto Fear & Greed Index
Source: Crypto Fear & Greed Index

The sentiment makes sense, given that bitcoin nearly dropped to $10,000 level in over a month. The crash in the prices of the leading digital currency also sent altcoins in a free fall.

Overall, the crypto market cap lost $60 billion but is currently seeing a small rebound as bitcoin trades at $10,450 with altcoins making a recovery as well.

However, analyst Rekt capital notes, “In the bear market, BTC was in a macro downtrend with relief rallies on the way to new yearly lows. In this bull market, BTC is in an overall uptrend with small pullbacks on the way to new highs.”

Given that crypto markets were influenced by the stock market where tech stocks experienced a sharp reversal, we need to pay attention to the last trading day of the week for the US stock market and, of course, the U.S. Dollar Index, which seems to be gaining strength.

Amidst this somber mood, the popular analyst “Nunya Bizniz” shared the hopium that calls for stacking the sats in anticipation of a bullish wave.

Comparing the 2015 market structure, currently, we are retesting the descending trend line on the weekly just like we did at that time. After the successful retesting five years back, the digital asset had a rally of 8,000% into the all-time high of $20,000 in December 2017.

Source: TradingView

Also, it is nothing out of character for bitcoin to fall this much. As a matter of fact, if bitcoin drops to $8,000, even that won’t be out of the ordinary. During the past cycle, the flagship cryptocurrency had about nine such retracements, where it fell 30% to 40%.

If anything, it is a good buy the dip opportunity.

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Author: AnTy

Bitcoin Derivatives Gaining Record Traction from Institutional Investors

Not much has changed in the bitcoin market. Yes, we go up towards $12,000. Yes, we then go down to $11,000. But it is nothing new. August has been all about — BTC price surging and falling but remaining in the range.

The ‘real’ volume in the spot market meanwhile has increased to above $2 billion but it is still not strong. Also, the volume has been on a constant decline since last July when the price went from $9,000 to $12,000. However, in the futures market, activity is picking up.

On CME, the volume has been keeping above $500 million for the most part and this week it made two attempts to reach $1 billion, as per data source Skew. Meanwhile on the Bakkt, as we reported this week, the platform hit a new record and stayed above $110 million in daily volume.

However, open interest is not painting a good picture as on CME it dropped to $600 million, down from the peak of $948 million on August 17th. Open positions on Bakkt were at $27 million on August 3rd but have now declined to $9.8 million. But the drop gained traction in the second half of the month.

According to the latest post by the CME, the number of unique accounts on the platform that traded bitcoin futures since launch now exceeds 5,400. New participants are also entering the market that has the number of LOIH (Large Open Interest Holders) continuing to grow. For the week of August 18th, a record number of 94 holders was established.

The number of LOIH has been rising sharply since Q4 2019, and given that an LOIH is a holder for at least 25 contracts (in CME 1 contract equals 5 BTC), institutional interest has been growing, noted Denis Vinokourov of London-based prime broker Bequant.

Additionally, average daily open interest has been steadily increasing since March and has been actually exceeding average daily volume for the last four months.

On August 17th, OI reached a record at 77,030 BTC and averaged 13,672 contracts for the month, which is a 40% increase from July.

Meanwhile, in the options market, interest in CME’s bitcoin options which were launched in January, the interest sparked after the halving in May.

While pre-halving, average daily volume was less than 30 contracts, it jumped about 9 times to 256 contracts post-halving.

On July 28th, the daily options volume recorded was $60 million which remained below $10 million for the most part of this month, as per Skew. Unlike CME, Bakkt’s bitcoin options, which were launched in the month prior, have been seeing no traction whatsoever — zer0.

Open interest meanwhile, is spread out over a wide strike range, between $1,000 and $100,000 per bitcoin. Currently, the OI on CME bitcoin options is around $200 million.

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Author: AnTy

Another Unaudited ‘Zero Value’ Farming Token is Taking the DeFi World by Storm & Coins Flying

  • The cryptocurrency world has been much faster than the traditional world, and now the DeFi space is running at a quicker pace than crypto.

On Tuesday, a new DeFi project for yield farming was launched called Yam. Within a few hours of its launch, the unaudited project saw a whopping $250 million locked in it. Temporarily it even hit a $325 million nominal fully diluted market cap.

Even BitMEX CEO Arthur Hayes has jumped into farm YAM, which the community can’t decide if it is good or bad.

No Premine, No Value But Gains & Gains

The launch of YAM came on a gloomy day when the crypto market turned red following bitcoin down. But, DeFi is in its world.

After surging to an all-time high of $125 today, YAM has gone down to $83.68, as per CoinGecko. Similar to another popular DeFi token YFI, “YAM holds zero inherent value,” reads the announcement.

A governance token of Yam Finance, the project is all about farming YAM by staking popular DeFi tokens.

“Distributed in the spirit of YFI — no premine, no founder shares, no VC interests — simply equal-opportunity staking distribution to attract a broad and vision-aligned community to steward the future of the protocol and token.”

By offering a larger APR rate on several digital assets, it has pushed the prices of the likes of COMP and SNX higher as such decoupling from the broad crypto market.

Many of the tokens involved here are enjoying a surge in their prices — in the past 24 hours, COMP has jumped a whopping 43%, LEND 19.76%, LINK 11.62%, Synthetix 19.86%, and Maker by 22.82%.

Farmers Get YAM

“An experimental protocol,” YAM comes with elastic supply, full on-chain governance, and a governable treasury, similar to Ampleforth (AMPL), where the supply expands and contracts as per market conditions intending to target a 1 USD peg per token.

The difference is 10% of each supply expansion (known as a rebase) is used to buy yCRV, a high-yielding basket of stablecoins. This yCRV is then held in a community governed treasury and used to support price stability.

In its ‘fair-farming’ pools, Liquidity Pools (LP) are awarded YAM. There are eight staking pools, including LINK, COMP, LEND, YFI, MKR, SNX, WETH, and ETH/AMPL.

A total of 5 million YAM are there but subject to change by future releases, which are set to occur every 12 hours. Initially, 2 million YAM, 250k per pool, per week will be distributed to users who stake the tokens as mentioned above. The rest of the 3 million is distributed to YAM LPs for the yCRV/YAM Uniswap Pool.

“This was a 10-day project from start to launch,” says the team while “strongly” urging “caution to anyone who chooses to engage with these contracts.”

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Author: AnTy

Ethereum Longs Pushing Strong with Many Factors Backing Them But Shorts are also Strong

While altcoins are surging, the second-largest cryptocurrency has been relatively silent, not as much as bitcoin but pretty subdued still.

But things might change for Ether as well as the traders bet on an uptrend.

ETHUSD longs on Bitfinex have reached yet another all-time high. These longs have been surging for more than two years, since March 2018. Earlier this year, they went parabolic. In the past five months, they spiked more than 200%.

The notional value of ETH longs was $308 million in mid-March, which has now risen to $444 million.

In 2020, ETHUSD shorts also jumped but at a higher percentage than the longs at 393% in the past six months. But unlike longs, they are still far away from its all-time high in December 2018, as per TradingView.

For now, Ether is in the green barely while trading at $241. In the past seven days, it has spiked 7% and 89% YTD. Experts are expecting Ether to outperform Bitcoin in the near future.

Also, Ether’s implied volatility is moving up, and total open interest on futures is now near its peak.

Analyst Pentoshi also notes, “We are seeing the largest bullish divergence ever in regards to daily active addresses and price in Eths history. With DeFi, + 2.0, I can’t help but think the next year is going to be wild.”

Potential Ether Drivers

The seven-day moving average of the number of active Ether addresses has peaked to 405,014 — the highest level in two years, May 2018.

Active addresses are the unique addresses that are active as a sender or receiver on the network. While this week, this number is slightly down from last week, it is still up 115% from Jan. 30 low of 180,750.

This increased activity could be the result of Ethereum-based Decentralized Finance (DeFi) platforms and stablecoins, especially the daily USDT transaction on the network, which has increased by more than 400% this year.

Already, close to a record, 3.1 million ETH are locked in various DeFi projects. Moreover, $60 million worth of BTC moved to Ethereum last month, and Wrapped Bitcoin is responsible for about 75% of this growth.

Amidst this, the Dapp report shows Ethereum users doubled compared to the first quarter, and DeFi application Compound was the one responsible for this, which pushed the volume over $10 million in Q2 2020.

This heightened demand is expected by many to fuel Ethereum’s bull run.

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Author: AnTy

Former PBoC Vice-Chair Says the Backend Infrastructure for China’s Digital Yuan is Complete

China’s much anticipated Digital Yuan backend development is complete, according to Wang Zhongmin, the former Vice-Chair of the PBoC National Council for Social Security Fund. Wang made this announcement during the virtual 2020 FinTech Forum that was held by Beijing’s Fintech 50 Forum in collaboration with Tencent FinTech Research Institute.

The initiative, which began around five years ago, is in its sunrise phase following a pilot in 4 Chinese cities. Going forward, PBoC is optimistic about replacing the fiat renminbi (RMB) in circulation with a digital yuan.

It, therefore, follows that Wang’s sentiments could signal an earlier integration with China’s monetary system. Notably, China fast-tracked the development of its PBoC backed digital currency after Facebook announced Libra last year.

With crypto assets on the rise, China is looking to emerge as a leader in this space, hoping to replace the U.S dollar as the world’s reserve currency.

According to Wang, the digital yuan would not only serve as a digital base currency but also a payment ecosystem that accommodates other crypto-assets and sovereign currencies. Its integration is, therefore, expected to spur greater cooperation and competition in the digital currency space while maintaining oversight.

Also, the move towards a digital yuan is in line with measures against the spread of COVID-19. Wang was keen to note that both governments and private entities have since taken into consideration digital payment tech.

Other notable jurisdictions that have moved to support a CBDC include Italy; the country’s banking association (ABI) recently said that they are ready to take part in the piloting of a digital Euro.

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Author: Edwin Munyui

Economist Alex Krüger Strikes at Bitcoin Stock-To-Flow (S2F) Model Again

PlanB’s Stock-to-Flow is one of the most popular models in the bitcoin market. Much of the popularity and devotion to the model could be attributed to its price target. This scarcity-based model predicts bitcoin’s value over $100,000 before December 2021.

And the opposers of this model have voiced the “cult around S2F” the very reason for their disagreement.

“Selling S2F as having absolute predictive power is not only ‘waste of time’, it’s dangerous for tens (hundreds?) of thousands of retail crypto traders who don’t understand statistics and substitute DYOR by varied guru dictums,” previously said Bitfinex Bitcoin whale Joe007 who has long been criticizing the model.

In PlanB’s defense, he does acknowledge the opposing views and encourages the community to read the analysis of those who have contending views.

But given that the bitcoin market is still a speculative one, people remain more interested in the information pieces that talk about prices mooning to million dollars.

Recently, the quant analyst updated his model to include the BTC S2F cross-asset (S2FX) model that takes phases of an asset into account and enables valuation of different assets like silver, gold, and BTC with one formula.

“S2FX model shows a significant relationship between S2F and market value of these six assets (low p-Values F-test and low p-Values coefficients) with a perfect fit (99.7% R2),” wrote PlanB.

Notably, it also projects a higher Bitcoin value in the next bull cycle at $288,000.

May as well use Moon Cycles to Predict BTC Price

Economist and trader Alex Kruger, who is also an S2F model critic and believes it to be “massively overhyped” yet again took to Twitter to share his opposing views including this model cannot be used to predict BTC price.

Those using S2F to predict bitcoin may as well be using the moon cycles to predict BTC, he said.

He pointed to Sebastian Kripfganz, Assistant Professor in Econometrics at the University of Exeter who “debunked” the cointegration by arguing that considerations can only be among non-stationary variables and S2F is a stationary variable.

Kruger’s personal arguments are based on the S2F not being a stochastic process, “not random, but rather deterministic.” It is rather based on a spurious regression with a high r-squared.

However, PlanB mentions in his article that “many have verified the non-spurious relationship between S2F and BTC price.”

“The S2F analysis is interesting. But the S2F model is useless for predicting price, as the underlying assumptions of the model are not met. Now and always,” concluded Kruger.

But according to PlanB, the economist is “jumping to conclusions too fast” that involves “zero analysis.”

What the analyst is interested in is an article with his analysis, data, and reasoning. As per Kruger, “Stock to Flow and Price are NOT cointegrated because Stock to Flow is not a unit root process, i.e. not random” will be here before the halving.

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Author: AnTy