Risk-on Assets Rally on Priced-in Tapering, But Aggressive Rate Hikes Would Be “Extremely Bearish”

The US Federal Reserve has announced that it will soon begin reducing the speed of its monthly bond purchases.

Tapering will start “later this month,” said the policymaking Federal Open Market Committee (FOMC) in its post-meeting statement. Under this process, monthly purchases will be reduced by $15 billion – from the current $120 billion a month that the Fed is currently buying.

The move came “in light of the substantial further progress the economy has made toward the Committee’s goals since last December,” it added.

As for raising the interest rate from near zero, the FOMC voted a unanimous no on that one. Fed Chairman Jerome Powell said he wants to see the labor market “heal further” before taking that action.

“We don’t think it’s time yet to raise interest rates,” Powell said. “There is still ground to cover” before the Fed reaches its economic goals.

The paring of bond purchases is expected to conclude around July 2022 on its current schedule, and the central bank officials do not envision a rate hike before that.

Meanwhile, the Fed altered its view on inflation slightly, acknowledging that price increases are rapid but maintaining that it is “transitory” still.

“Inflation is elevated, largely reflecting factors that are expected to be transitory,” the statement said, attributing this jump to supply and demand imbalances driven by the pandemic and the reopening of the economy.

Powell said he expects inflation to remain elevated “well into next year” but said as supply chain bottlenecks abate and growth moves up, inflation will decline, which will support “continued gains in economic activity and employment.”

The Bank of England is now set to meet on Thursday, and the market expects the central bank to hike rates in the face of surging inflation.

Market Reacts Positively

While the Fed is ready for its first step towards pulling back on the massive amount of help it had been providing markets and the economy since last year, it was already priced in as we saw in the markets reaching for fresh highs.

“Fortunately, the taper has long been priced in. Aggressive hikes, though, if they were to materialize, that’d be extremely bearish. And yes, the Fed will hike,” commented trader and economist Alex Kruger.

Global stocks traded at new record-high levels while the US Treasury yields and the dollar edged down.

Much like the traditional market, crypto rallied. The total market cap went on to hit $2.89 trillion as Ether made a new all-time high at $4,675.

“Ethereum has been the clear winner of the Layer-1s for what we believe will be a substantial shift in a potentially prolonged market sentiment uplift. Ethereum will also continue to play a major role in the NFT and metaverse ecosystem build-out,” said Ryan Rabaglia, global head of trading at digital asset platform OSL.

Other notable gainers in the past 24 hours include AMP (20%), HOT (17%), ENG (16%), OMG (13%), EGLD (12%), AXS (11%), AVAX (9%), and SOL (5%).

Altcoins are hitting new highs while Bitcoin is trading at $61,600, 8% away from its $67k peak last month.

In response to the Fed’s tapering, Bitcoin’s first reaction was a drop to $61,135 from $62,600, only to reverse the move to hit $63,470.

“The correlation of crypto versus equities and risk-on sentiments is high,” said Danny Chong, CEO of decentralized asset tracking platform Tranchess.

“Everyone is expecting a bull run with the absence of negative news. To decide the depth of the move, one should ask what can bring it down?”

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Author: AnTy

India Central Bank, RBI, Considers Rolling Out Digital Rupee In A ‘Phased’ Manner

India Central Bank, RBI, Considers Rolling Out Digital Rupee In A ‘Phased’ Manner

The Reserve Bank of India (RBI) is working on a phased implementation strategy for its central bank digital currency (CBDC) program.

India Considers Running CBDC Pilot Programs

The Deputy Governor of RBI, T. Rabi Sankar, said the bank is investigating the issuance of a CBDC and may consider running a series of pilot programs to that effect.

While speaking at a conference organized by the Vidhi Center for Legal Policy, Sankar said introducing a CBDC would help protect the Indian populace from volatile private digital assets.

According to the deputy governor, a phased introduction of a digital Rupee would allow time for needed legal changes to the country’s foreign exchange rules.

Sankar said that several issues would be examined before CBDC implementation could be considered. He added that security or privacy concerns and how retail payments would be organized would also be looked into.

“Some key issues under examination are – (i) the scope of CBDCs – whether they should be used in retail payments or also in wholesale payments; (ii) the underlying technology – whether it should be a distributed ledger or a centralized ledger, for instance, and whether the choice of technology should vary according to use cases; (iii) the validation mechanism – whether token-based or account-based, (iv) distribution architecture – whether direct issuance by the RBI or through banks; (v) degree of anonymity etc.”

While the Indian government has shown signs of interest in CBDC previously, that has not been the same with cryptocurrencies. The country has exhibited various attempts to ban cryptocurrencies outrightly.

Earlier this year, the government hinted at its plans of introducing a law to ban private cryptocurrencies. The legislation had sought to prohibit cryptocurrencies while allowing for certain exceptions to promote blockchain technology.

However, the mood has somewhat changed in recent months, with signs of the country taking a moderate approach and regulating the crypto market.

CBDCs Making Progress In Different Countries

CBDCs have gained a lot of attention over the past year. Several countries have moved forward to study and implement CBDC pilot tests in the wholesale and retail segments.

South Korea recently chose Ground X, a blockchain subsidiary of a local internet company Kakao, as the technology provider for the pilot tests of its digital Won.

According to local media agency Korea JoongAng Daily, Ground X would participate in the South Korean CBDC project alongside US-based blockchain company ConsenSys. Other Kakao affiliates like KakaoBank and Kakao Pay would also participate.

The European Central Bank is also making progress. Last week the bank approved an investigation phase for a CBDC, which would last for 24 months. This stage would focus on addressing issues surrounding design and distribution.

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Author: Jimmy Aki

Billionaire Ray Dalio Believes Digital Yuan Could Become Global Reserve Currency

Billionaire Ray Dalio Believes Digital Yuan Could Become Global Reserve Currency; Could Run on Ethereum

According to billionaire investor Ray Dalio, the CBDC race seems to be heating up, and China may emerge a winner.

Digital Yuan To Outpace Digital Dollar

Bridgewater Associates founder Ray Dalio pointed out that China’s digital yuan could serve as a threat to the continued dominance of the US dollar in the global marketplace.

Speaking on CNBC’s Managing Asia, the American investor noted that China is clearly at the forefront with its digital yuan program compared to the US, which is still undergoing consultation.

This delay by the world’s largest economy could enable the Asian nation’s digital version of its fiat to become more competitive than a potential digital dollar.

According to Dalio, the US will launch a digital dollar, but it will not be the most competitive digital currency given the US rising debt level. However, he pointed out that it will still be viable given the US position as a market leader.

Earmarking China’s digital yuan, Dalio said it would be the most competitive given its pricing and return on investment. He also pointed out that the digital yuan would be a viable alternative to the dollar if it enjoys international acceptance and comes with attractive interest rates.

CBDCs, short form for central bank digital currencies, have been the rave ever since the decentralization era began with Bitcoin. BTC -1.72% Bitcoin / USD BTCUSD $ 36,661.69
-$630.58-1.72%
Volume 34.62 b Change -$630.58 Open $36,661.69 Circulating 18.72 m Market Cap 686.46 b
2 h HRF Bitcoin Development Fund & BitMEX Disburses $210,000 in Grants to Developers 3 h Marathon’s Mining Pool, Marapool, to Signal for Taproot in a Change of Heart 4 h Riksbank Governor Believes Crypto Regulation is Certain, But Exchanges & Trading Is Already Regulated

They are state-backed digital versions of a country’s fiat and are usually issued by the apex bank. The majority of national banks have launched independent CBDC programs in pivoting to a digital economy.

Even some small countries have launched a digital version of their currency, but China has drawn the world’s attention given the implication of its program.

The digital yuan, which started six years ago, has been labeled a ‘threat’ by financial experts to the US dollar’s position as the world’s reserve currency. Dalio points to a potential toppling of the greenback.

The International Monetary Fund (IMF) data puts China at 2% behind the Pound, Euro, and the Japanese Yen. The US leads with 60%, and Dalio says this may not be for long.

According to the American investor, China’s digital yuan could scale up to 10 and 15% in the next couple of years.

China is close to launching its digital yuan, with pilot tests presently ongoing in its major cities. The forthcoming Olympics in Beijing has been chosen as the official wholesale launch.

The US Federal Reserve is only just picking the cue, and Fed boss Jerome Powell has announced plans to publish a discussion paper on the likely impact of a CBDC in the country.

Smart Contracts Compatible With CBDCs

China is planning to launch a digital yuan and make them ‘smart’ with time, per reports from Sina Finance. This is according to the director of the Science and Technology Supervision Bureau of China’s regulatory commission Yao Qian.

Speaking at the International Finance Forum 2021, Qian said that national banks should not only aim to launch digital versions of their currencies but add smart contract functionality. This will enable it to run on the Ethereum blockchain. ETH -2.63% Ethereum / USD ETHUSD $ 2,630.81
-$69.19-2.63%
Volume 27.35 b Change -$69.19 Open $2,630.81 Circulating 116.12 m Market Cap 305.48 b
4 h Riksbank Governor Believes Crypto Regulation is Certain, But Exchanges & Trading Is Already Regulated 6 h Billionaire Ray Dalio Believes Digital Yuan Could Become Global Reserve Currency; Could Run on Ethereum 10 h Ethereum (ETH) Holders Grows by 8.16 Million, Despite the 60% Drawdown

However, Qian advises that this should not be rushed given the inherent challenges smart contracts come with as the industry is still young. He said that the best approach would be to start with a simple, smart contract and then build more complex ones as security and legality become clearer.

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Author: Jimmy Aki

Fed Reserve Chair Jerome Powell Calls BTC A ‘Speculative Asset’ Amid Coinbase Direct Listing

Federal Reserve Chairman Jerome Powell Calls BTC A ‘Speculative Asset’ Amid Coinbase Direct Listing

Cryptocurrencies have been around for more than a decade and have just gained global relevance in the last two years.

This has been largely due to institutional investors seeing digital assets like Bitcoin as a hedge against inflation. However, the US Federal Reserve boss believes that crypto-assets are still not ripe for payments.

Crypto Is Just For Speculation

In a virtual interview organized by the Economic Club of New York, Powell said that cryptocurrencies are ideal as vehicles for price speculation. According to him, they have not attained the status of becoming a payment option.

Powell also said that cryptocurrencies like Bitcoin could be rightly compared to precious metals like gold, given the difficulty of mining them. And since humanity has always placed gold on a high pedestal, he feels that Bitcoin can transform into the same mold.

Powell’s comments may seem contradictory to crypto owners who believe that Bitcoin was created for payment services. The jury is still out on whether Bitcoin would function as a medium of exchange effectively. This is due to the development of solutions like sidechains and Lightning Network.

Companies like Tesla now accept Bitcoin as payment for their sedans, and many more businesses would tow the same line soon. The adoption rate in the traditional markets has also been growing.

Just yesterday, the U.S-based bitcoin exchange Coinbase made its debut on Nasdaq as a publicly-traded company.

The milestone, which is a first for the crypto industry, is poised to attract more investments into the space.

Coinbase opened its shares to the investing public at a whopping $381 per share against the $250 reference price.

The company also made its Q1 report for 2021 public, noting that it generated over $1.8 billion in revenue and onboarded 56 million unique users since its founding.

BTC Better Store Of Value Than Gold

Powell’s views on cryptocurrencies are not entirely novel to the crypto universe. Last month, U.S Treasury Secretary Janet Yellen called Bitcoin a highly speculative asset and not fit to be used as a value transmission mechanism.

According to the well-known Bitcoin critic, value transmission through cryptocurrencies is an extremely inefficient way of conducting transactions. Her comments have not slowed down investments in the sector. Software company MicroStrategy owns Bitcoin worth billions of US dollars. The company’s CEO Michael Saylor sees Bitcoin as a better store of value than gold and other precious metals.

Recently, the company announced that non-employee board members will now be paid using Bitcoin.

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Author: Jimmy Aki

MIT & Boston Federal Reserve Look to Reveal Two Digital Dollar Pilots by July 2021

MIT & Boston Federal Reserve Look to Reveal Two Digital Dollar Pilots by July 2021

The Federal Reserve Bank of Boston and researchers from the Massachusetts Institute of Technology (MIT) are making giant strides in their digital dollar program, according to a Bloomberg report.

Boston Fed To Launch Digital Dollar Prototypes

Researchers from both institutions are reportedly preparing to launch prototypes of two central bank digital currencies (CBDCs) platforms as early as July 2021.

The prototypes would store, move, and settle digital dollar transactions providing ease and convenience for an already crypto-acclimatized population, says James Cunha of the Boston Fed.

Cunha, who declined to state whether any of the prototype platforms would be based on a distributed ledger technology (DLT), said that the financial agency would not delay making their research findings public. Cunha added,

“We think it’s important that we not wait for the policy debate because then we’ll be a year or so behind. This will take significant outreach to the industry and serious debate.”

Apex banks like the People’s Bank of China (PBoc) are reportedly ahead of the pack. The Asian giant, which has been steadily exploring CBDC use cases, has conducted pilot tests in 2021 and would likely see a more distributed approach in the coming year.

Other countries like the Latin American nation, the Commonwealth of the Bahamas, have launched a digital version of their fiat currency called the “Sand Dollar” in 2020.

European nations like the UK are currently researching the technology and monitoring economic impact while others like the Swiss have postponed the program till the following year.

Big Tech Looks To Cash In On CBDCs

But amid all the mixed reactions, CBDCs seems to have gained more fans in the rapidly-growing digital economy. Federal Reserve boss Jerome Powell admitted as much in a recent virtual conference featuring central banks worldwide. In his closing comments, Powell said CBDCs would not outrightly replace the more traditional dollars but would be integrated into the extant payment systems and other forms of money.

But even as the world is slowly coming to grasp what many has described as a “shaking up” of the financial system, some others think a digital dollar may be unnecessary.

In a statement to Congress, the American Bankers Association said that introducing a “Fedcoin” (another name for CBDCs in the US) could bring unintended consequences. To the body, these digital caricatures could threaten the banking system’s stability, and there is no guarantee of it bringing about greater financial inclusion.

This position is one that most legacy financial institutions are taking- calling CBDCs a “costly solution” to a problem that does not exist. But digital payments companies like Visa and MasterCard are already on the treadmill to ensure their platforms get listed to provide these services.

Visa’s North America Chief Oliver Jenkyn said they are in conversations with regulatory agencies on how a potential CBDC would be designed. According to Jenkyn, these conversations would be backed by actions.

These actions were brought to the fore when VISA proposed that CBDC transactions could be validated without an internet connection in its whitepaper.

ViSA is not alone in the CBDC race, with embattled US blockchain firm Ripple Labs also launching a private version of its XRP Ledger (XRPL) protocol specifically for issuance and maintenance of CBDCs.

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Author: Jimmy Aki

Former TD Ameritrade Digital Assets Head Joins Fed Reserve as Chief Innovation Officer

Former TD Ameritrade Digital Assets Head Joins Fed Reserve as Chief Innovation Officer

Sunayna Tuteja has joined the Federal Reserve System as the Chief Innovation Officer. Before heading this position, Tuteja was previously working at TD Ameritrade as the Managing Director, Head of Digital Assets & DLT (Blockchain, Crypto), reads her LinkedIn profile.

TD Ameritrade has been providing its services to cryptocurrency users for some time now. It also made a strategic investment in ErisX, the cryptocurrency spot, and futures exchange during the bear market.

Tuteja joined the broker in 2014 to head its digital strategy department, following which she changed the department that specifically dealt with cryptocurrencies and blockchain technology. Here, Tuteja only spent less than two years.

Under her latest role, she will be working on the Federal Reserve System’s digital innovation strategy. As a CINO, the official is required to stay abreast of the technology industry and market trends to understand their impact on the Fed system. The description for this position reads,

“This role will be responsible for identifying, researching, enabling and evangelizing for innovative new technologies while fostering a culture of technical innovation, encouraging System-wide collaboration and experimentation.”

This is another positive development for the cryptocurrency market, bringing us all that much closer to positive and clear regulations.

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Author: AnTy

ECB President Says Central Banks Are ‘Very Unlikely’ to Add Bitcoin as a Reserve Asset

ECB President Says Central Banks Are ‘Very Unlikely’ to Add Bitcoin as a Reserve Asset

  • ECB President says central banks “are highly unlikely” to add Bitcoin (BTC) as an asset any time soon.
  • The digital euro is still in the works and could be released by 2024, she also said.

In a Business Insider report, European Central Bank (ECB) President, Christine Lagarde, repeated her skepticism on Bitcoin, stating central banks are not looking to add the digital asset as a reserve currency any time soon. During a call with The Economist, Lagarde again said BTC is not a real currency; hence central banks are “very unlikely” to add it to their balances.

“It’s very unlikely – I would say it’s out of the question,” Lagarde on whether central banks will add Bitcoin as a reserve asset.

These, however, are repetitive comments on Bitcoin from Lagarde, who has been against the coin since her appointment to the ECB. Earlier in the year, Lagarde released a statement warning against investment in Bitcoin – stating it is a highly speculative asset and could be used for “reprehensible” money laundering.

However, she believes that there’s room for digital currencies (such as the digital euro) to grow in the coming years. Due to the current global pandemic, governments across have taken a step towards digitization. Agreeing to ECB board members’ proposal, Lagarde stated the ECB is preparing a digital euro, which could be released in the coming four years.

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Author: Lujan Odera

$6B Worth of New Gold Reserve Found in Turkey; “Bitcoin Fixes This with Absolute Scarcity”

$6B Worth of New Gold Reserve Found in Turkey; “Bitcoin Fixes This with Absolute Scarcity”

Meanwhile, Bitcoin still has a fixed cap of 21 million — pristine scarcity.

About 3.5 million ounces of gold that was detected in the mining field of Turkish Agricultural Credit Cooperatives’ subsidiary Gübretaş in Bilecik is estimated to be worth around $6 billion.

“We are talking about a value of about $ 6 billion when we try to put it in value at today’s prices,” said the Chairperson, Fahrettin Poyraz on Tuesday about the reserve in the Söğüt gold mine. About 1.92 million ounces of the reserved are also ready for extraction, he said.

“It is estimated that 1.6 million ounces could be converted into reserves at a rate of 83%,” said Poyraz adding, “We aim to extract the first gold in two years and turn it into value for the Turkish economy.”

And this is what the crypto community has long been talking about all along. While the digital gold, Bitcoin, has a limited 21 million BTC supply, gold reserves continue to be found, expanding its supply.

“Nobody knows the global Gold supply, Bitcoin fixes this with ABSOLUTE SCARCITY,” said BTC proponent Max Keiser.

This isn’t even the first time, back in October, a huge amount of gold reserves, $127 billion was also discovered in Russia.

As Mike Belshe, the CEO of California-based cryptocurrency firm BitGo said in his interview with Bloomberg last week, “The main thing that’s unique about Bitcoin is it’s got a level of scarcity that we really don’t have in any other market.”

When it comes to precious metals, there are also “some endeavors to mine precious metals from asteroids they fly by which could happen at some point. Mathematically bitcoin is pristine in its scarcity,” said Belshe.

Compared to bullion’s 22.33% return in 2020, BTC is up 223% YTD while trading near its all-time high of $24,300 that was set just over this past weekend.

According to Belshe, the world’s largest cryptocurrency has a “property that literally no other asset class has.” Not to mention, Bitcoin is “immune” to the “unprecedented levels” of money printing that central banks are doing around the world.

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Author: AnTy

Here’s What’s in Store for Bitcoin Amidst the Strong Demand & Exhausted Market

The macro trend is bullish, with the BTC exchange reserve going down and the stablecoins reserve going above.

This week is turning out to be about sideways action after last week’s monstrous rally that saw us breaching the all-time high of $20k to reach a new high of $24,300.

The week started on a red note as we dropped to nearly $22,000. Today, BTC/USD has been trading at $22,600 with $5.83 billion BTC 2.69% Bitcoin / USD BTCUSD $ 23 354,3135
628.23 2.69
Volume 42.15 b Change 628.23 Open $23 354,3135 Circulating 18.58 m Market Cap 433.88 b
1 d Crypto Exchange EXMO Hacked; BTC, ETH, XRP, ZEC, USDT, and ETC Stolen By Attacker
.

Everyone is waiting for a correction to get the chance to stack even more sats. However, it is to be seen if and when that pullback comes.

In the short-term, Grayscale, an essential indicator of bitcoin’s institutional demand, has closed subscriptions temporarily with big December futures and options expiry coming this Friday while implied volatility gets “very high” along with the futures basis, painting a bearish picture.

Unlike this, the broader market with the UK virus panic and the fiscal package coming is pulling the market in the opposite ‘bullish’ direction.

“Thinking volatile pause in the trend ahead. 25K-19.5K all in play” noted trader and economist Alex Kruger while cautioning to be “careful loading short-term bullets too soon.”

He said that for a sustained move higher, the market needs the leverage and volatility first to come down.

If we recall the $10,000 breakout, last week’s breach through the $20k was much more aggressive. Compared to July’s 25% movement, December’s action was close to 35% from trough to peak from start to finish.

Although it makes sense for bitcoin to give the market the much-expected dip, there’s no knowing if we’ll see one amidst the strong institutional demand.

With whales active on exchanges, there is a dumping risk, for sure, but Ki-Young Ju, the CEO of data provider CryptoQuant, is “not short on BTC since the buying power is so strong now.”

When the Exchange Inflow Mean hits 2 BTC, as it has now, “it is likely to be sideways or bearish. It always has been sideways since November.”

The bullish macro trend is also evident in the Bitcoin exchange reserve going down, BTC supply on exchanges has declined 20% since January, and stablecoin exchange reserves going up.

“Even if we see some corrections, it would be sharp and recover very fast,” said Ju.

Stablecoin-All-Exchange-Reserve

Source: CryptoQuant

Meanwhile, Bitcoin is in a real supply and liquidity crisis, which is “extremely bullish” for the world’s largest cryptocurrency.

This crisis can be seen in the accumulation addresses that only received bitcoin but never spent them, which is at 2.7 million BTC — hoarding 14.5% of the circulating supply. In addition to this, at least 3 million, 16% of supply, is forever lost.

Not to mention, out of the 210k BTC mined in the past six months, Grayscale has acquired 185k BTC of it.

While the Exchange Balances Liquidity is vanishing, a mere 12% of BTC supply is liquid, as per Glassnode. The amount of miner unspent supply, which has been increasing since the last halving, is currently holding at 1.7 million BTC.

“I believe we will see this significantly reflected in Bitcoin’s price in the upcoming months.”

Rafael Schultze-Kraft Glassnode CTO

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Author: AnTy

Bitcoin and MMT Critic Janet Yellen Picked as Treasury Secretary by Biden

President-elect Joe Biden has chosen former Federal Reserve Chairwoman Janet Yellen to become the next Treasury Secretary. Yellen, an economist, if confirmed by the Senate, will become the first woman to hold the position.

This holds meaning for the crypto market as Jake Chervinksy, a General Counsel at Compound Finance, said,

“This is the single most important decision for the next four years of US crypto policy. The next Treasury Secretary will have enormous influence on whether the right to financial privacy is upheld or sacrificed to mass surveillance & forced custodianship.”

For Wall Street, it could be good news as just last month she said the US needs to “continue extraordinary fiscal support.”

Yellen had been at the forefront of policy-making for three decades, which means nobody knows the Fed better than her. Not only will she be a great Treasury Secretary, but she will also help the government achieve its objective of increased coordination between monetary and fiscal policy, said crypto trader and economist Alex Kruger.

But not only Yellen is not a fan of MMT, having said that its proponents are “confused,” but she is not really a bitcoin proponent either.

Back in December 2017, at the height of the bull run, she called Bitcoin a “highly speculative asset.”

“Bitcoin, at this time, plays a very small role in the payment system. It is not a stable source of value, and it does not constitute legal tender,” she said at the time, adding that while the Fed is researching it, “I think to my mind, limited benefits from introducing it, a limited need for it and some substantial concerns.”

During Yellen’s testimony before the House Financial Services Committee in July 2017, someone photobombed her with the “Buy Bitcoin” sign.

Yellen-buy-bitcoin

In Oct. 2018, while explaining why BTC is not a useful form of currency, Yellen shared that she received “a gift of bitcoins.” Raz Suprovici, the founder of the bitcoin gifting service Biterica, had sent 0.0031642 BTC, worth about $20 at that time, which has now increased to roughly $60, to Yellen to make her understand it better.

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Author: AnTy