Other Central American Countries Watching El Salvador’s “Out Of This World Experiment” to Adopt BTC Too

Other Central American Countries Watching El Salvador’s “Out Of This World Experiment” to Adopt Bitcoin Too, Says CABEI President

The executive president of the region’s development bank said, “everyone is watching” if Bitcoin adoption helps El Salvador reduce the cost of remittances so that they can also adopt the cryptocurrency.

Central American Bank for Economic Integration (CABEI), the development bank of El Salvador, said central American countries are eagerly waiting to see how their bitcoin adoption as a legal tender, alongside the US dollar, cuts the cost of remittances for them.

Remittance is an important source of income for millions of people in the region, and President Nayib Bukele touted Bitcoin adoption as a way to facilitate remittance payments from those living abroad.

“Everyone is watching if it goes well for El Salvador and if, for example, the cost of remittances drops substantially … other countries will probably seek that advantage and adopt it,” Dante Mossi, the executive president of the CABEI, told Reuters.

According to him, countries that receive the most remittances are most likely to turn to Bitcoin, adding besides El Salvador, Guatemala, and Honduras have the most to gain if Bitcoin helps lower the cost of sending remittances.

Recently, CABEI also attended a Central American Monetary Council meeting, part of the Central American Integration System (SICA), where participants asked about El Salvador’s bitcoin plans and showed interest, Mossi said.

Mossi called this an “out of this world experiment” that he says will increase financial inclusion in a region where many people lack access to bank accounts or credit cards.

Carlos Sanchez, CABEI’s head of investments, said the bank’s technical assistance, meant to help El Salvador “navigate waters that have yet to be explored,” is focused on helping them design a legal framework and to make sure that international money laundering protocols are adhered to.

Mossi meanwhile said CABEI had a “fiduciary obligation” to support El Salvador in its request for help.

CABEI is giving El Salvador technical assistance on implementing the cryptocurrency after the World Bank declined to help, citing environmental and transparency drawbacks.

“Regionalism v Globalism,” commented Su Zhu, CEO of Three Arrows Capital, to this.

As we reported this week, Bukele said the country is installing 200 ATMs and preparing over 50 bank branches to handle crypto in preparation to adopt BTC as legal currency.

The government is also giving $30 in bitcoin to those who download its cryptocurrency app called Chivo that is accessible to both citizens and tourists. Transactions in the app will be commission-free, helping save the country $400 million per year in fees, Bukele tweeted.

It was early in June this year when Bukele made the announcement that El Salvador is becoming the first sovereign nation to declare Bitcoin a legal tender. By the end of the month, Congress approved his plan to give the leading cryptocurrency the official currency status with a supermajority.

The law will take effect on September 7.

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Author: AnTy

NFT Summer: Art Blocks Leads the NFT Mania This Week while an EtherRock Is Now Worth Over $1 Million

The euphoria around non-fungible tokens clearly states that this summer is all about NFTs.

This week, payment processor giant Visa also announced its entry into the NFT space by buying CryptoPunk for $150,000.

Late on Monday, Cuy Sheffield, Head of Crypto at Visa, tweeted that “NFTs represent the intersection of culture and commerce and could play an important role in the future of online retail, social media, and entertainment.”

After bridging the crypto ecosystem and Visa’s global network, the online payments company now wants to participate in adopting NFT-commerce, he added.

Mathew Graham of Sino Global Capital called Visa buying an NFT “a bigger signal” than El Salvador announcing Bitcoin as a legal tender. However, Ryan Wyatt, the head of gaming at YouTube who recently said he is “bullish on NFTs,” doesn’t see Visa’s NFT adoption as edgy.

“I didn’t anticipate a company getting into NFT’s on such a short timeline. It was a brilliant move for them, because their earned media they got today was 100x the NFT acquisition itself,” said Wyatt.

Next month, Christie’s is also set to auction CryptoPunks, Meebits, and Bored Ape Yacht Club NFTs. Ahead of this, every day, the floor prices of these NFTs are climbing through the roof.

The most notable one being digital rocks which are now getting sold for more than a million dollars, while two days ago, the cheapest one was sold for $300k and less than $100k two weeks back.

On Monday, one of the EtherRock collections was sold for 400 ETH or about $1.3 million. With only 100 EtherRock out there, the scarcity of this collection is driving up their value. The website reads,

“These virtual rocks serve NO PURPOSE beyond being able to be brought and sold, and giving you a strong sense of pride in being an owner of 1 of the only 100 rocks in the game.”

But it’s Art Blocks leading the NFT scene this week. NFTs from the Ringers and Fidenza series have made it to the top, now being sold for over $1 million, up from $300k three weeks ago.

However, an NFT avatar named Sirxn 0 – Biobluminescent Sirxn from the GHxSTs collection sold for more than $2 million. But that was before late on Monday, Tyler Hobbs’ Fidenza 313 called “The Tulip” was the first one to be sold for 4-digits, 1,000 ETH worth $3.3 mln.

According to Dapp Radar, while NFTs from the Axie Infinity series generate the most trading volume over the past week, the generative artworks form Art Blocks is closing in as it dominates the top 10 NFT collections.

This top list also consists of CryptoPunks with $47 million in sales and Cyberkongz VX and Cyberkongz, Pudgy Penguins, Generative Masks, and the Gutter Cat Gang collection. Cool Cats, MeeBits, World of Women, and Bored Ape Kennel Club are outside the top 10.

Money Stack, with only 150 unique collectibles on the Ethereum blockchain available, is also capturing the attention this week as they see their floor price slowly rising to 6.5 ETH, a new record.

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Author: AnTy

It Is The “Largest Wealth Transfer In History” As The 99% Supports The 1% Of Crypto

After falling under $44k this week, Bitcoin price went back towards $50k to mark the start of the weekend. Currently trading around $49k, the leading cryptocurrency is now just 24.6% away from its all-time high.

Ether (ETH) is also back to hovering at $3,300 while the total market cap is now at nearly $2.19 trillion, getting all that much closer to the mid-May peak just above $2.6 trillion.

This week, Avalanche is leading the market with its 7-days gains of 165% along with Arweave, Audius, Solana, and Terra, which are up 50% to 80% during the same period. AR -9.24% Arweave / USD ARUSD $ 28.24
-$2.61-9.24%
Volume 36.71 m Change -$2.61 Open $28.24 Circulating 33.39 m Market Cap 943.17 m
9 h It Is The “Largest Wealth Transfer In History” As The 99% Supports The 1% Of Crypto 2 d South Koreans Turn to Serum (SRM) As Solana (SOL) Ecosystem Pumps 4 d Open Interest & Funding Rates Indicate “Lack of FOMO” in Cryptocurrency Market
AUDIO -9.12% Audius / USD AUDIOUSD $ 2.87
-$0.26-9.12%
Volume 110.25 m Change -$0.26 Open $2.87 Circulating 400.24 m Market Cap 1.15 b
9 h It Is The “Largest Wealth Transfer In History” As The 99% Supports The 1% Of Crypto 2 d South Koreans Turn to Serum (SRM) As Solana (SOL) Ecosystem Pumps 4 d Open Interest & Funding Rates Indicate “Lack of FOMO” in Cryptocurrency Market
SOL -6.31% Solana / USD SOLUSD $ 73.76
-$4.65-6.31%
Volume 1.51 b Change -$4.65 Open $73.76 Circulating 286.58 m Market Cap 21.14 b
9 h It Is The “Largest Wealth Transfer In History” As The 99% Supports The 1% Of Crypto 1 d BlockFi Signs NBA #1 Draft Pick Cade Cunningham As An Ambassador 1 d Solana Based DeFi Protocol, Luna Yield, Goes Dark as Customers Fear An Exit Scam: Report
LUNA -0.84% Luna Coin / USD LUNAUSD $ 0.01
$0.00-0.84%
Volume 0 Change $0.00 Open $0.01 Circulating 1.71 m Market Cap 14.19 K
9 h It Is The “Largest Wealth Transfer In History” As The 99% Supports The 1% Of Crypto 2 d South Koreans Turn to Serum (SRM) As Solana (SOL) Ecosystem Pumps 4 d Open Interest & Funding Rates Indicate “Lack of FOMO” in Cryptocurrency Market

With Bitcoin (BTC) eyeing the psychological level of $50,000 and hoping for a strong break, central banks officials set to get together at Jackson Hole, Wyoming, where Fed Chair Jerome Powell will deliver the highly anticipated speech to lay out his plans to normalize monetary policy, can affect the market sentiments negatively.

Titled “Macroeconomic Policy in an Uneven Economy,” the speech will be streamed live next week on Friday, August 27.

With discussions around tapering already started, heavy volatility is expected next week, which could affect crypto markets as well.

On Friday, the US dollar index went above 93.7, a level last seen in early November, and is currently trading at 93.458.

Gold meanwhile is currently at $1,780 per ounce, up from an over four-month low at $1,687 on August 9th.

In the crypto market, meanwhile, “the largest wealth transfer in history … from nocoiners and boomers to crypto enthusiasts” is happening, noted trade and economist Alex Kruger.

According to SpartanBlack, a partner at crypto fund The Spartan Group, it’s the other 99%, “everyone else who is not in crypto” supporting the 1% of crypto, “and the funny thing is that they have no idea they are doing it.”

He goes on to explain how the thousands of new millionaires and many billionaires as well minted in crypto are going to cash out a portion of their newfound wealth to buy houses, cars, yachts, jewelry, club memberships, etc.

This, in turn, drives up asset prices that result in real-world inflation, but it is a slow and organic process, and as such, “you don’t see that inflation happening.”

“The people who are not in crypto also happen to be the ones who are less tech-savvy and tend to have a set view of how the world works. They made their mark in the old world order, and they think all of this is a massive bubble or ponzi that will crash spectacularly. That view keeps them away, and they keep subsidizing us year after year unknowingly until at some point it becomes clear that crypto is the new new thing, and it isn’t going away,” said Spartan Black.

Overall, it is a generational wealth transfer from the old to the young, from the clueless to the tech-savvy, from the risk-averse folks to the risk-takers, and from the establishment to the guys who dare to dream up a new world order, he added.

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Author: AnTy

“Bitcoin Fixes This.” OnlyFans Banning Sexual Content Due to Pressure from Banking Partners

“Bitcoin Fixes This.” OnlyFans Banning Sexual Content Due to Pressure from Banking Partners

OnlyFans is banning porn in an attempt to protect its partnerships with banks and payments providers.

On Thursday, the special media platform announced that it will still allow creators to post nude posts and videos provided they’re consistent with OnlyFans’ policy, but not “sexually explicit conduct” with effect from October 1, 2021.

“Legal content, a lifeline for some, effectively banned because it offends the sensibilities of the financial gatekeepers,” commented Neeraj Agrawal of CoinCenter, a non-profit focused on the policy issues facing cryptocurrencies.

The London-based company made this decision as it has been reportedly struggling to raise new funding at a $1 billion valuation as investors are cautious about investing in adult content.

“In order to ensure the long-term sustainability of the platform,” OnlyFans is changing its content guidelines which it said in a statement are “to comply with the requests of our banking partners and payout providers.”

It further added that OnlyFans “(remains) dedicated to our community of 130 million users and over 2 million creators that have earned over $5 billion on our platform.”

The platform’s revenue is estimated to reach $2.5 billion in 2022 on total sales of $12.5 billion.

It isn’t something new that companies that feature adult content are struggling to find payment providers willing to do business with them. In 2018, Patreon, which allows creators to charge for their work, ramped up its crackdown on adult content creators due to pressure from payment providers and major banking networks.

“Bitcoin fixes this,” tweeted Edward Sowden in response to this situation, “about middlemen in the transaction chain being pressured to block payments some random group morally objects to.”

Popular adult site Pornhub has been previously cut off by Visa and Mastercard as well, which led them to accept cryptocurrency payments, including BTC, USDT, TRX, XRP, BNB, USDC, DOGE, and others.

“If you’re an only fans creator, you should consider launching a token gated discord or telegram,” recommended Jess Sloss of Seed Club. “To do this right, there is still a lot to be figured out. Token gated communities in their current state aren’t quite right for most creators.”

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Author: AnTy

Another Futures-backed Bitcoin ETF Filed for “Significant Investor Protections”

This time it’s from Mike Novogratz’s Galaxy Digital under the Investment Company Act of 1940.

Mike Novogratz’s Galaxy Digital has filed for a Bitcoin futures exchange-traded fund (ETF) with the SEC.

The Fund will not invest directly in Bitcoin rather in the futures trading on the regulated platform CME.

This prospectus has been filed under the Investment Company Act of 1940, much like four other applications from VanEck, ProShares, Valkyrie, and Invesco, after SEC Chair Gary Gensler signaled openness to futures-based ETFs that provides “significant investor protections.”

The SEC, however, has yet to approve a single crypto ETF while several, in double digits, have been filed with the US regulator.

Unlike the physically-backed ETF that would track Bitcoin more closely, “Bitcoin futures ETFs, if approved by the SEC, could cost investors 5-10 percentage points in annual returns by rolling contracts from one month to the next, potentially limiting their appeal,” wrote ETF Analysts for Bloomberg, Eric Balchunas and James Seyffart in a note.

Galaxy also filed for a Bitcoin ETF in April and is the sub-advisor to the CI Galaxy Bitcoin ETF, which has $256 million in assets along with the CI Galaxy Ethereum ETF, which has almost $510 million in assets.

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Author: AnTy

Bitcoin and Ether Print Green Candles for 10 Consecutive Days, OI on FTX & CME Rises Sharply

The crypto market is enjoying the greens this week as both Bitcoin and Ether print 10 daily green candles in a row.

Ever since bottoming out on July 20, these crypto assets have been surging, with Bitcoin hitting $42,500, which was last seen on May 20, and Ether climbed to the June 16 level of about $2,484.

The total crypto market has now rallied to $1.68 trillion but is still down from $2.55 trillion in mid-May.

In the derivatives market, the open interest on Bitcoin futures is also going up, now at $14.25 billion, up from $11.27 from June 27 low. In terms of BTC, total OI is now at 341.57k, down from 375.74k BTC on July 17.

Interestingly, in the past 24 hours, FTX had the biggest increase of 15.29% in OI, now at 57.53k, followed by CME‘s 10.21% jump to 36.68k BTC. Leading crypto exchange Binance had one of the lowest increases of 4.71% to 80.91k BTC.

Less than a fortnight back, FTX had 42.5k BTC in OI compared to Binance’s 93.89k. This shows the shift in the market as FTX continues to get more popular and bigger while Binance faces regulatory scrutiny worldwide.

Also, during the recent short squeeze, more Binance traders got liquidated than FTX, much like always in spite of the former only pushing 1 liquidation per second and significantly underreporting the figures.

As for Ether, OI has recovered to $6.41 billion from $4.43 billion on June 26. In ETH terms, it is currently at 2.6 million ETH, while less than a fortnight back, it was 2.77 million. The latest increase in OI across the exchanges has been between 8% to 12%, except for CME, which only had a 2.36% rise in the past 24 hours, followed by Bybit’s 4.8%.

But FTX is clearly leading with its OI on Ether futures now at 3726k, while on July 17, it was 379.5k compared to Binance’s 626.92k, which is a long way to reach 730.97k about two weeks back.

The Macro

While the market is clearly recovering sharply, crypto market participants aren’t really sure if the bull run is continuing from the first half of the year after having a 50% to 75% drawdown in crypto prices. However, the confidence for the same is increasing.

But not only is the micro in favor, but the macro-environment also is not as dim with the US Federal Reserve discussing tapering.

The thing is, tapering might not happen soon, with GDP figures coming in at 6.5%, only slightly better than Q1 and well below the economists’ expectation of 8.5%. Unemployment also increased month over month at 5.9%.

For the first time, volume at Fed’s reverse repurchase facility also topped $1 trillion as investors and financial institutions continued to pour cash into the overnight window. Demand for the reverse repo facility surged as the US debt ceiling looms, the Treasury department cuts down on its bill issuance, and financial firms struggle to find places to invest their excess cash.

Meanwhile, in the current unchartered territory, household savings rates are plummeting. “In the early days of covid, a major point of inconsistent economic data in increasing stimulus + QE/OMO was the massive savings everyone had. Now they’re back to lows,” noted Split Capital.

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Author: AnTy

Global Bitcoin ATM Installation Shoots Past 24,000 In 2021: Report

This year has seen a sharp increase in the number of crypto automated teller machines (ATMs) installed worldwide. Data from Coin ATM Radar shows that crypto ATM installation has increased by more than 70% to over 24,000 this year.

Over 10,000 Crypto ATMs Installed In 2021

No less than 10,000 new crypto ATMs have been installed this year alone, surpassing the 7,620 added in 2020, per Coin ATM Radar. These crypto ATMs are being installed at a speed of roughly 52.3 ATMs per day.

At press time, the crypto ATM tracker reported a total of 24,004 crypto ATMs globally. This represents a 71.73% growth from the 13,993 crypto machines earlier this year.

The US takes the lead for the country with the most installations, according to the report. There are over 21,161 ATMs in the US alone. Canada closely follows the US with 1,698 locations and the UK with 174 locations.

In terms of the manufacturers of the mahines, Genesis Coin tops the list with a total of 9,813 machines installed. This is closely followed by General Bytes with 5,720, Bitaccess with 2,766, and Coinsource with 1,684 machines.

The ATMs are operated by more than 600 different companies. Bitcoin Depot controls the market with about 15.8% market share.

Crypto ATM Operators Sealing Partnership Deals

Earlier this year, Bitcoin Depot started its expansion plans when it launched 115 kiosks across 24 US states, including Alabama, Minnesota, Florida, and California.

Bitcoin Depot has continued to grow its reach. Just last week, the crypto ATM operator sealed a partnership with convenience store chain Circle K.

Through this collaboration, Bitcoin Depot plans to expand its ATMs by installing over 6,000 kiosks across North America by the end of 2021.The partnership has resulted in the installation of more than 700 Bitcoin ATMs in the US and Canada.

Other operators like Coin Cloud and CoinFlip have also signed partnerships with celebrities to boost their operations. Coin Cloud partnered with Oscar-winning filmmaker Spike Lee to promote cryptocurrency ATMs in an ad campaign.

The multimillion-dollar media campaign was tagged “The Currency of Currency” and was directed by Lee.

Last month, Coinflip also partnered with actor and bitcoin investor Neil Patrick Harris on a marketing campaign. The campaign titled “So Flippin’ Easy,” was aimed at promoting cryptocurrency investing.

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Author: Jimmy Aki

Binance and FTX Cut Down Leverage to Just 20x from Over 100x

The average leverage used on FTX is about 2x, says CEO Sam Bankman-Fried, while CZ says this move has been in the interest of Consumer Protection.

“Today, we’re removing high leverage from FTX. The greatest allowable will be 20x,” down from 101x, announced Sam Bankman-Fried, the CEO and founder of cryptocurrency derivatives platform FTX over the weekend. Ceteris Paribus commented,

“No-brainer considering FTX users don’t seem to be ultra degens and puts them on better standing with regulators. IMO the argument about high leverage isn’t even if it’s right or wrong, regulators will not allow it in the long-run. may as well front-run it.”

Just last week, FTX had announced that it had raised $900 million, with a valuation of $18 billion, from many big names, including Coinbase ventures and to whom buying financial giants like Goldman Sachs or CME is “not out of the question” either.

The decision to reduce leverage has come as the crypto market experiences a strong bounce off of lows.

Binance, which has exited its investment in FTX, has also joined in. CEO Changpeng Zhao said on Twitter that they have already started limiting new users to a maximum of 20x leverage a week ago. Previously, it offered a maximum of 125 times leverage.

“In the interest of Consumer Protection, we will apply this to existing users progressively over the next few weeks.”

Meanwhile, several hedge funds have curbed their trading on Binance amidst a growing regulatory crackdown on it, the Financial Times reported.

An Effective Margin System

“After lots of back and forth, we’re going to be the ones to take the first step here: a step in the direction the industry is headed and has been headed for a while,” said Bankman-Fried as he explained in one of his famous Twitter threads.

While some are not happy with this cut-down, especially as the market seems to be getting back in the bull mode, others praised this move, noting that extremely high leverage doesn’t turn out to be positive in the long term. Not to mention, crypto is inherently highly volatile and sees big moves regularly.

“A great move,” said Austerity Sucks, adding, above 20x is “just marketing, and is associated w/shadiness now (“100x group”) there’s no real strategic benefit to such high leverage (except maybe spreads), and can legit hurt retail.”

In the Twitter thread, Bankman-Fried further shared his reasoning behind the same, noting that their product and margin system “tend to attract sophisticated users,” and liquidation on FTX normal orders happens without any extra loss.

He further shared that, much like every other exchange, on FTX as well, liquidations are “a tiny fraction” (less than 1%) of volume and positions. And while “many users have expressed that they like having the option, very few use it,” added Bankman-Fried.

According to him, the average leverage used on FTX is about 2x, and high leverage is not an essential part of the crypto ecosystem.

“An effective margin system is integral to an efficient economic system,” said Bankman-Fried.

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Author: AnTy

ECB Promises to Pump Money; IMF Praises Fed for Being ‘Highly Effective’ at Overshooting 2% Inflation

Amidst this, former BitMEX CEO talks about an investor’s ability to really outperform $4.72 trillion of money created out of thin air in 2021.

European Central Bank (ECB) keeps its monetary policy steady and will continue to be more accommodative for a more extended period.

The central bank has committed to purchasing 1.85 trillion euros ($2.2 trillion) of bonds until March 2022, and policymakers voted to keep this stimulus injection into the market going for the time being.

Interest rates were also left unchanged, with that on the primary deposit facility remaining at 0.5%, the benchmark refinancing rate at 0%, and the marginal lending facility at 0.25%.

Additionally, ECB said it wanted to see inflation stabilizing at 2% over the medium terms adding, this may also imply a transitory period where inflation is “moderately above target.”

Prices rose 1.9% this year to June in the 19-member euro bloc, down from 2% this year to May, which has the ECB expecting inflation to drop, forecasting a decrease of 1.5% – 1.4% in 2022 and 2023, respectively.

The central bank had changed its guidance “to underline our commitment to maintain a persistently accommodative monetary policy stance to meet our inflation target,” said ECB President Christine Lagarde.

“There is still a long way to go before the damage to the economy caused by the pandemic is offset.”

On Friday, ECB member Francois Villeroy de Galhau, who is also the governor of the Bank of France, said it was justified to keep an accommodative monetary policy for now.

Villeroy also said that the ECB sees the midpoint of its forecast horizon for a 2% inflation target coming in around 12-18 months in the eurozone.

Fed “Highly Effective”

As for the US, the Federal Reserve has started to talk about tapering, but Chair Jerome Powell has assured that it is “still a ways off,” and President Joe Biden gave the Fed his blessing to “take whatever steps necessary” to support a strong economy.

The International Monetary Fund’s Executive Board also commended the Fed for being “highly effective” at managing the COVID-l9 crisis and supporting recovery with its commitment to overshoot a 2% inflation target in the near term.

While raising concerns about higher interest rates that will drain capital flows from emerging markets, the board also said that the Fed must carefully communicate its thinking to ensure the eventual withdrawal of monetary accommodation. The IMF said this scaling back,

 “will require deft communications, under a potentially tight timeline, to avoid market misunderstandings, volatility in market pricing, and/or an unwarranted tightening in financial conditions.”

The Fund’s board also said that the US should prioritize spending towards programs that have the most significant impact on productivity and that more could be done to boost tax revenues.

“Don’t Get Shook.”

In 2021, a total of $4.72 trillion has been created out of thin air, collectively in the US, China, and EU. “If the quantum of money increases, it must go somewhere,” noted Arthur Hayes, former BitMEX CEO, in his latest write-up.

“The Fed has removed $1.4 trillion of the highest quality collateral from the system…Whatever anyone says about a taper in the future, in the present, asset managers must replace this collateral with higher risk stuff.”

The Fed’s balance sheet has expanded at a YoY pace of +22.74% and +13.21% YTD. ECB grew its balance sheet by +25.18% YoY, and YTD +13.34%, and China’s most recent 2Q21 YoY GDP print was +7.9% using an 11% growth in credit.

So, how does one outperform this? Bonds are certainly not the answer.

The US GDP forecast for 2021 is +6.60%, vs. the 10-Year bonds that yield 1.20%, equating to a rough negative real yield of -5.40%. In the “strongest Eurozone economy,” Germany, 2021 GDP is expected to print at 4.5%, with real yields approaching negative 5%.

Here, crypto comes as a clear winner, with Bitcoin up 10% YTD and Ethereum 182% and about 250% and 700% YoY, respectively.

“The data is clear – central banks continue to print money. When / if that changes, the data will show us. There is no need to predict when it stops if you own scarce assets that appreciate in fiat terms at least at the same pace of balance sheet expansion. On the past 6-month horizon, crypto underperformed, but from the onset of the COVID pandemic till today, crypto markedly outperformed as central bankers stepped on the gas. Don’t get shook.”

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Author: AnTy

Bitcoin Unaffected by Macro, is Driven by Idiosyncratic Variables But Still Facing A Major Headwind

Crypto assets are in the red this week.

Bitcoin price keeps down around $31,500, and in tandem, Ether has fallen under $1,900. Altcoins are getting hammered except for selective ones like Axie Infinity, with the total market cap now at $1.35 trillion, down 48.5% from the mid-May peak. ETH -3.92% Ethereum / USD ETHUSD $ 1,916.60
-$75.13-3.92%
Volume 15.72 b Change -$75.13 Open $1,916.60 Circulating 116.71 m Market Cap 223.68 b
8 h SEC Extends Decision On WisdomTree’s Bitcoin ETF Application 9 h Bitcoin Unaffected by Macro, is Driven by Idiosyncratic Variables But Still Facing A Major Headwind 9 h Solana Based Crypto Wallet Phantom Raises $9M to Scale Operations
AXS 2.74% Axie Infinity / USD AXSUSD $ 23.96
$0.662.74%
Volume 2.07 b Change $0.66 Open $23.96 Circulating 60.91 m Market Cap 1.46 b
9 h Bitcoin Unaffected by Macro, is Driven by Idiosyncratic Variables But Still Facing A Major Headwind 2 d SLP Farming Is Turning Out to Be Very Lucrative, While Axie Infinity (AXS) Has the Lowest P/E Ratio 3 d KuCoin (KCS) Rallies as Degens Turn to KuCoin Community Chain (KCC)

Meanwhile, the stock market is keeping around its all-time highs hit just this week. The US dollar shows strength around 92.55, with gold recording some gains at $1,825.

The latest price action in the stock market is after Federal Reserve Chairman Jerome Powell’s comments on inflation to remain high for some time and assuring that tapering is not coming just yet.

While Bitcoin sometimes responds to macro events like the last FOMC meeting and the latest CPI data, which showed the highest inflation in 13-years, it does so on rare occasions.

image1

The leading cryptocurrency remains an uncorrelated asset, for the most part. For Bitcoin, the dominant factor contributing to risk measures, basically the percentage of volatility due to factor exposure, is “residual.”

This means the cryptocurrency is mainly driven by bitcoin-specific (i.e., idiosyncratic) variables. And for Bitcoin, these idiosyncratic drivers have been money flows lately.

“Equities, rates, inflation, gold, the dollar, these all matter as everything is interconnected, yet most of the time are of secondary importance when it comes to BTC,” said trader and economist Alex Kruger. “Don’t need to have an explanation for every time the price goes up or down.”

This week, the data showed that the price of food, energy, travel and primarily used cars increased dramatically, the most since 2008, which makes sense given that the costs of these things also fell sharply when the lockdowns were implemented last year.

A significant increase in the prices of everyday items makes crypto assets more attractive as in the past year, compared to other investments, crypto has provided much higher returns and more money to spend.

“When it comes down to inflation, most of it is, in fact, transitory,” Kruger noted.

“Inflation is a rate of change. Prices are supposed to increase in aggregate. Price increases are indeed not transitory. High inflation likely is” because central banks’ reserves creation is slowing down, supply-side bottlenecks are temporary, the population is aging, household savings will mean revert leading to fewer dollars to spend, and employers will hire less than before due to limited wage pressures, he added.

In a fireside chat, American economist Ben Bernanke said that the central bank wants to see some modest inflation. The Fed’s target inflation rate is 2%.

According to him, the Fed will be successful in getting it in low 2% for a time before getting it down to 2.0% while noting that in the 1990s, inflation averaged 3% over that whole decade.

Persistent 3% inflation, however, would produce anxiety this time as it would question credibility, given the 2% target, according to him.

Bernanke, who served two terms as the Federal Reserve Chairman from 2006 to 2014, believes the tapering of the current $120 billion per month bonds buying will be a year-long process, $10 billion per meeting was how it was down in 2013. An increase in its rate won’t happen until the end of tapering, which pushes into 2023.

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Author: AnTy