Bitcoin Miners Generating BTC at Fast Pace & ‘Running Down Inventory’ Just as Hard

Bitcoin started this week on a bullish note, reaching above $11,700 only to drop to nearly $11,200 level on Friday after crypto exchange OKEx announced that cryptocurrency withdrawals had been suspended.

According to the local media, two of the executives, including its founder, Star Xu, arrested by the police, have been released on bail. Star Xu has been reportedly assisting in the investigations.

The exchange maintained that the investigation is “not related in any way to anti-money-laundering or to OKEx,” and that the funds are safe and all other functions are unaffected.

OKEx actually holds 1.1% of Bitcoin’s circulating supply (200,000 BTC worth $2.3 billion), and before the suspension of withdrawals, large BTC outflows were observed from the exchange.

As per Glassnode, “a total of 10,000 BTC ($113 million) were withdrawn in two large batches in the past 48h.”

Market Unchanged

Yesterday, what made matters worse for the already jittery markets was the Deribit exchange that was temporarily out of action due to maintenance that had not only BTC price falling but also the futures curve flattening yet again.

On-chain analyst Willy Woo actually expects the last CME gap around $11,200 to get filled as he sees hidden distribution at spot exchanges, with volume sell-off not yet reflected in the price.

But in the near term and overall, he remains bullish, signaled by the growing market fundamentals.

“The on-chain fundamentals which are 3-6 weeks at the minimum timeframes are still unchanged in bullish mode, if we do get a pullback, I’d take it as a chance to deploy capital into BTC if you missed it in the 10k zone,” said Woo.

Still, Some Weakness in Near Term

While the network fundamentals, the hash rate has made an all-time high, miners are “running down inventory quite hard today.” With MRI currently above 100%, it means miners are selling more Bitcoin than they are mining.

This, according to Charlie Morris of ByteTree, is an indication of a “Healthy market to sell into.”

Interestingly, with more than ever hash power used to mine bitcoin, the standard 10 minute time to generate a bitcoin has fallen to 8 minutes 8 seconds, as per Bitinfocharts. In the second half of 2020, the block time has been kept between 12 to 8 minutes.

Overall, bulls haven’t lost yet, and they could further continue higher, especially if equity markets trade up given their correlation that continues to increase, currently above 57%.

“Recent BTC breakout was legit, but more effort needs to be coming from the bulls. Price action remains in a three-wave corrective move after bearish impulsion. Break of $11,740 & $12,500 Highs needs to commence, otherwise bears might try to force more consolidation/downside,” says one analyst.

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Author: AnTy

Bitcoin On The Way to $12,000 as US Dollar Moves Down

After ending the market on a high note last week, this new week is seeing another good start.

What started as a not so pleasant Monday with Bitcoin losing about $200 turned out to be a green one with the digital asset going for $11,550.

“Some technical overhead resistance right now and a CME gap below at 11.1k, pretty low risk in buying the dip if it comes,” says on-chain analyst Willy Woo.

The price now has resistance coming at $13,000-$14,000 with trader Josh Rager seeing $12k real soon.

“Price is back up in previous range prior to breakdown, and personally, I don’t see why we can’t see $12k this week,” said Rager.

Square’s $50 million Bitcoin investment caused the price increase to prevent institutional investors from placing long positions as of yet.

While asset manager accounts long positions on CME went up from 523 to 703, Leveraged funds and other reportable positions accounts didn’t show a direction adjustment indicating a conservative approach, as per CME’s latest report, as of Oct. 6.

Open interest also rebounded from 7,324 to 7,511, after a two week contraction period.

The Longest Run

The good thing for bitcoin is despite a slew of regulatory moves like the UK FCA banning the sale of crypto derivatives and the DOJ issuing a crypto enforcement framework, Bitcoin held to $10,000 strong.

As a matter of fact, it has now been a total of 90 days, so far in 2020 that bitcoin has been above $10k compared to 86 in 2019, 53 in 2018, and 34 in 2017.

According to Fundstrat Global Advisors LLC, regulatory clarity is good for crypto as it would clean up “bad actors.” “Despite select smaller pockets of risk,” they see it as a positive for the overall market, adding, “we believe the prevailing bull market trend is intact.”

But they do see DeFi “coming under pressure” for lack of KYC and AML protocols along with offshore quasi-equity exchange tokens and further risks with “crypto tokens exclusively listed on offshore exchanges where stricter U.S. investor prohibitions could limit liquidity and demand.”

Derisk Mode Still on

Unlike BTC, gold is seeing no such spike, trading at $1,924, the same as S&P 500 at just above 3,500. The US Dollar, however, has declined to 93, which is in strong negative correction to bitcoin.

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The general market remains in de-risking mode ahead of the US Presidential election on Nov. 3rd.

However, investors are growing more hopeful of additional economic stimulus as President Donald Trump said that he wants to see a bigger stimulus package than either Democrats or Republicans were offering.

While Trump made a reversal from earlier last week’s threat to halt negotiations, Senate Majority leader Mitch McConnell expressed doubt that Congress would pass a package before the election.

According to Goldman’s chief equity strategist David Kostin “new information on the election, vaccines, and upcoming 3Q earnings represent substantial cross-currents for equities during the next two months.”

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Author: AnTy

Bitcoin Rules the Macro & Poised to Attract More Traditional Equity Investors

August is coming to an end, and hopefully, it will end Bitcoin’s ranging.

This month started on a good note as July saw the largest digital asset breaking above the key levels, moving from $9,000 to $12,000.

But August remains within $11,000 – $12,000, for the most part, and is now looking to end the month right around where it started it.

Trading under $11,500, bitcoin is managing just over $1.3 billion in ‘real’ trading volume. BTC ranging meanwhile is good for altcoins.

LINK is back on the move and up 5.58% while Cardano, Monero, and EOS are recording greens of over 3%.

Other gainers include NEM (25%), Siacoin (17%), Waves (10.71%), BTT (9.68%), and NEO (7%).

DeFi meanwhile is on their own trajectory of explosive gains.

For starters, YFI has broken above Bitcoin’s ATH to well nearly $25,000. Tendies is trading above $1 with 33% gains and Ampleforth 26.8%.

Against BTC, almost every DeFi token has surged in the past year, last 90 days, and in the past month.

2020 is all about DeFi.

The Macro of it

In the macro world, the stock market is also enjoying an uptrend.

All the market trends this year have been affected by the central bank policies in its attempt to prop up the economy battered by the pandemic. In response, the Federal Reserve dropped the interest rates to virtually zero and started printing money by adopting quantitative easing.

However, in expanding its balance sheet as a percentage of GDP, the Fed is nowhere near the Swiss National Bank and Bank of Japan, though it has surpassed the Bank of England and is making efforts to catch up to European Central bank.

This has US stocks making new highs, with S&P 500 surging over 3,500, up 3.6% from the February high. The equity market still recorded just 7.7% returns YTD.

In comparison to SPY, although bitcoin is still down 42.5% from its ATH, it is up 56.46% in 2020 so far.

Tech dominant Nasdaq had an amazing year, which is up 28.6% but Dow Jones industrial average remains in the red by 0.74% YTD.

Coming onto the precious metals, gold broke the 2011 peak to surpass $2,000, with over 29% returns in 2020. But it was silver that rallied the hardest, 52.7%, and left everything behind.

The US Dollar index meanwhile has been losing its strength since mid-March and is down by 4.65% YTD.

This week, Fed Chairman Jerome Powell also shared that they will let the inflation run above its 2% target and plans to keep interest rates low.

“Crypto discourse has been objectively dominated by the likely bullish nature of this decision for BTC and the rest of the asset class. Traditional equity investors are speculated to continue to want to look elsewhere to invest their capital, and alternative means of currency like Bitcoin, Ethereum, and precious metals should (at least in theory) benefit,” noted Santiment.

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Author: AnTy

People Using Cash-Savings to Load Up on BTC as Protection in a Record Low-Interest Rate World

The 10-year Treasury note yield fell to its record low stretches, not seen in 234 years, according to Deutsche bank.

“The U.S. has been through depressions, deflations, wars, restrictive gold standard regimes, market crashes and many other major events and never before have we seen yields so low back to when the Founding Fathers formed the country,” said Jim Reid, chief credit strategist at the bank.

“In the year 2007, it was normal to get a fixed return of 5% when lending your money to the U.S. government for ten years. Today, you’ll be lucky to get 0.5%,” wrote analyst Mati Greenspan in his daily newsletter Quantum Economics.

With yields falling into negative territory — if we factor in inflation over the next 10-years, you are going to lose even more — and the Fed deciding to keep the interest rates virtually zero, investors are running out of ways to get meaningful returns. And this is why gold and digital gold make an attractive option.

As such, people are increasingly using their interest-earning cash savings to load up on bitcoin, especially as volatile assets take off, said Bloomberg.

The coronavirus pandemic has actually been a boon for account balances — not only lockdowns cut consumer spending, but central banks also injected money at a record pace. The personal savings rate in the US rose to a record 32.2 in April but fell to 19% in June, still at historically high levels. Also, between March and June, customers deposit 16% more into their accounts compared to last year.

What’s Attractive

But is it really the time to hold onto money when the US dollar continues to lose its value thanks to the Fed printing trillions of dollars and the interest rate on traditional safe vehicles falling.

Being up 58.81% in 2020, Bitcoin sure looks appealing just like gold, which has risen 29%, setting a new record. The largest cryptocurrency has been actually the best performing asset of the last decade.

A few months back, billionaire investor Paul Tudor Jones also announced that between 1% and 2% of his assets were held in bitcoin as protection in a low-interest-rate world.

Stocks that have been surging since bottoming out in March — recording its best 100-day performance between March 23 to July 1 since 1933 are also preferred by people in such an environment.

Americans have gained confidence in the market in the long run. A Bankrate survey found 28% of Americans, up from 20% last year, said the stock market was their top choice for long term investment. Cash investments meanwhile hit their lowest level in eight years at 18%.

Bitcoin coming to your near bank

While bitcoin started rallying last week, hitting a new 2020 high today, national banks have got the green light from OCC to offer custody services, which may open new doors for the crypto industry. It may have started with national banks, but it won’t be surprising if state-chartered banks jump in too.

“The door’s just been opened for funds, institutional players, and investment advisers” to expand their relationships to crypto, Kari Larsen, partner at Perkins Coie LLP in New York, told Bloomberg.

This decision has been made after the OCC received questions from several banks about holding digital assets, said acting Comptroller of the Currency Brian Brooks, a former Coinbase employee.

Agency’s decision to allow banks to hold bitcoin and crypto is “a recognition that tens of millions of Americans are invested in this asset,” he said at a virtual conference hosted by the American Bankers Association.

The OCC’s decision would also make it easier for crypto companies to work with banks, which viewed them as high-risk customers due to concerns regarding anti-money laundering (AML) and compliance with the Bank Secretary Act.

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Author: AnTy

Bullish Catalyst on the Horizon: Fed’s Major Policy Change

US stocks started Monday on a muted note with S&P 500 down 0.2% and The Dow Jones Industrial Average -0.6%, while the Nasdaq Composite is up 0.5%.

The slow start of the week is because of the hurdles facing new stimulus packages and business’ dimming outlook while rising coronavirus infections threaten to hamper the economic recovery.

Former Federal Reserve Chairs Ben Bernanke and Janet Yellen meanwhile called for Congress to provide more fiscal stimulus to the U.S. economy.

While the government and central bank continue to provide more fuel for stocks, hedge fund billionaire Leon Cooperman said the market is overvalued, and overlooking “a number of things,” including the growing national debt.

The US Dollar has been falling and is now nearing its lowest levels since the start of the pandemic. Gold prices are little changed trading at $1,811.04 an ounce. But according to Citigroup, bullion could hit a new ATH in the next six-to-nine months.

Bitcoin meanwhile is the same as ever, stuck just above $9,000, for the past month. The range has been only getting tighter and tighter while altcoins are stealing the thunder. It is actually the tightest monthly range in bitcoin’s history.

While bitcoin’s extremely low volatility is expected to see a huge move soon, the Federal Reserve is also looking to keep the stock market happy.

Major bullish catalyst

After unprecedented money printing, the Fed is ready to push the inflation rate above its 2% target.

The traditional Phillips curve, which relies on the theory that inflation accelerates unemployment falls, is now approaching forecasting inflation. The Fed continued to raise interest rates till late 2018 when it was forced to lower it 2019, keeping inflation below the 2% target. Now, faced with the prospect of low inflation, the Fed is signaling an increase. Fed Governor Lael Brainard said last week,

“With inflation exhibiting low sensitivity to labor market tightness, the policy should not preemptively withdraw support based on a historically steeper Phillips curve that is not currently in evidence.”

Brainard said the Fed should focus on the kind of employment outcomes achieved late in the previous recovery. She is saying that the Fed should not tighten policy until inflation reaches 2%, relying on actual inflation outcomes to determine the appropriate time to modify policy than to rely on an inflation forecast. Federal Reserve Bank of Philadelphia President Patrick Harker said,

“I don’t see any need to act any time soon until we see substantial movement in inflation to our 2% target and ideally overshooting a bit.”

Bloomberg says the implication of this for financial markets would be that the Fed expects to “hold policy very easy for a very long time.”

The ultra-loose policy, as we have seen in 2020, has been working out well for stock markets, which are closer to hitting their new all-time highs. Economist and trader Alex Kruger said,

“Major bullish catalyst in the horizon: the Fed letting inflation rise above 2%. Assets to benefit the most are our 2020 friends: stocks, precious metals, and TIPS (as real rates go more negative).”

While a rising SPX, increasing inflation, and ultra-loose monetary policy speak well for bitcoin’s prices, the last couple of months doesn’t reflect strongly on the digital asset.

But with the bitcoin market expecting bitcoin to rally soon and its correlation with equities market strong, these factors may help kickstart a bull run.

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Author: AnTy

Bank of Canada CBDC Insight: Zero-Knowledge Proof Are Insufficient for National Scale Integration

A recent analytical staff note by the Bank of Canada on CBDC’s has highlighted that higher privacy levels may come at a cost. The bank summarized possible privacy CBDC frameworks as it looks to advance research and development in this space.

Known privacy innovations such as Zero-knowledge proofs (ZKPs) have yet to prove their value when it comes to practical privacy solutions on a countrywide-scale, as per the Canadian financial watchdog.

The analytical staff note highlights that a CBDC ecosystem would fundamentally comply with KYC and AML protocols. Therefore, developing such a network for Canada’s population would inevitably dictate the levels of privacy participants enjoy. Going by the value proposition of upcoming virtual ecosystems, finding balance becomes pretty hard leaving hybrid options as the go-to infrastructure:

“A designer, however, could build a system with hybrid privacy levels. In this, unregulated holdings and transactions (offering maximum privacy to users) would be allowed within limits (e.g., a maximum amount) alongside regulated ones without limits.”

Tradeoffs for Higher Privacy

While Canada’s Central Bank has been working on CBDC research for some time, the regulator is reluctant to unlock its sunrise phase as China did with the digital Yuan. According to its note, this position may have been influenced by the underlying risk of integrating a privacy-focused CBDC.

The banknotes that have higher privacy levels come at a cost and may prevent scalability in the long-run. This is because of the enhanced control protocols that need to be integrated for data encapsulation:

“This adds complexity, which raises operational costs. It also adds computational overhead, so scaling to a population size can be challenging or impractical—whether a DLT or non-DLT platform.”

Other than resource intensity, privacy in CBDC networks is still a relatively new concept, given it has yet to prove itself even in systems like ZCash, which leverages Zero-Knowledge proof. At the moment, this tech has not been implemented on a national level. This paints a picture of an immature infrastructure that could expose deep vulnerabilities if tested as monetary policy function:

“The risk here is that their technical complexity, combined with their immaturity, could mask vulnerabilities. Further, no known deployments have scaled up to a national population.”

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Author: Edwin Munyui

Bitcoin Investors Increasingly Becoming Long-term HODLers & Whales Back to Accumulating

This week started on a red note, with the price of bitcoin falling below $8,700. Today, we made our way back above $9,000 only to dropdown again. Crypto Fear and Greed Index remains largely in the neutral or fear category.

Currently BTC/USD is trading around $8,850 while managing the real volume of $1.4 billion.

Meanwhile, Bitcoin sees its largest prolonged withdrawal of funds from exchanges, with more than 310,000 BTC moved out of crypto exchanges since Black Thursday.

Among all the crypto exchanges, Bitfinex recorded the largest outflow of 126,845 BTC followed by Huobi at 95,496 BTC and BitMEX at 95,438 BTC.

“So bullish,” said analyst Cole Garner about this trend. By keeping control of their own keys, bitcoin investors are tilting towards being long-term holders instead of looking for an opportunity to dump their coins.

HODLing and Accumulating

Interestingly, the 1 year HODL factor of bitcoin has also surpassed 50% for the first time. The fact that half of Bitcoin’s active supply hasn’t moved in over a year means an increasing long-term holder base and investors supporting the store of value narrative.

While retail is busy with the security of their coins and keeping a long-term position, bitcoin whales are back to accumulating.

As per the data provided by Santiment, those addresses holding 100 or more bitcoin have added yet another 12,000 BTC to their bags, worth over $108 million since Bitcoin’s drop below $9500 a week back on May 20th.

“Since the start of the year, these addresses have shown a propensity to accumulate into dips and offload their bags slightly before short-term tops occur,” noted Santiment.

On-chain fundamentals threaten to undo the progress

Despite the accumulation, the Glassnode Compass that outlines the general regime in which bitcoin is currently located based on its price behavior and on-chain fundamentals, it is sliding closer to the bearish regime this week.

While the positive price action kept the market sentiments lifted, the overall decrease in on-chain fundamentals “threatens to undo this progress in the coming weeks.”

Also, the fact that bitcoin is no longer testing the important $10,000 level, we may see a “regression back into bearish territory,” that is if on-chain activity and overall market health continue to decline.

However, whether the halving is priced in, is still not absolutely confirmed, as per Glassnode as, during the previous halving, it took several months before bitcoin turned bullish and more than a year before the prices started seeing an increase by order of magnitude.

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Author: AnTy

Bitcoin HODLers Showing Conviction That Hasn’t Been Seen Since November 2015

Bitcoin has ended the quarter first of 2020 on a red note with negative 10% returns, and currently, the world’s leading digital currency is trading just above $6,350, down 1.48% in the past 24 hours.

Coin360
Source: Coin360

However, the market has started to see a shift.

For starters, the HODL Waves are giving a positive sign as today 15% (2.74 million) of available Bitcoin has been sitting idle for 2-3 years with the price of around $6,300.

The last time this HODL Wave age band represented 15% (2.25 million) of available BTC was in November 2015, when the price of bitcoin was $345, as per Unchained Capital.

Source: Bitcoin UTXO Age Distribution

This development according to Adamant Capital’s Tuur Demeester is “bullish” because bitcoin “hodlers are showing conviction, just like in 2015.”

A potent shift in sentiment can be seen as the Bitcoin network also grew at a positive rate last week, jumping 45.11% in comparison to the previous week.

As per Glassnode, on an average, a total of 379.69k new addresses versus 318.4k addresses went to zero were recorded last week. Also, total network growth over the past 7 days has been 428.95k addresses.

Crypto data provider Glassnode also noted, “In the weeks after BTC’s price drop, most (of the On–chain metrics) have bounced out of or sit in zones that have historically signalled bottoms and good entry points.”

Source: @Glassnode

Also, the average size of Bitcoin exchange deposits increased “dramatically.” However, the NetFlow of BTC into exchange remains extremely low compared to historic levels. Bitcoin balance on exchanges has declined by 7%.

While the network is making a recovery, Bitcoin’s price has fallen 1.45% in the past 24 hours trading around $6,350.

However, according to Mike Novogratz CEO of Galaxy Digital, this is a buy the dip opportunity because in 2020 with the Federal Reserve printing the money by restarting the QE program, money is growing on trees.

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Author: AnTy