Bitcoin’s Rising Popularity Not an ‘Existential Threat’ to Gold’s Last Resort Status

Amidst the wild bull rally of 2020, several mainstream firms have commented on Bitcoin’s ability to outdo gold in the long term. In its recent report, JPMorgan also said that if Bitcoin continues to see the institutional adoption it is seeing, which has just “begun,” gold can “suffer” over the coming years.

However, according to Goldman Sachs Group, Bitcoin and gold can coexist despite the largest digital currency pinching some demand from the traditional safe haven asset. The bank said in a note,

“Gold’s recent underperformance versus real rates and the dollar has left some investors concerned that Bitcoin is replacing gold as the inflation hedge of choice.”

While the banking giant noted that there’d been some substitution, “we do not see Bitcoin’s rising popularity as an existential threat to gold’s status as the currency of last resort,” it added.

As we reported, Bitcoin flows have been increasing massively thanks to the cryptocurrency’s more than 210% rally this year. Meanwhile, the world’s largest gold ETF recorded the most significant outflow last month has not recorded any inflows. Goldman said,

“We do not see evidence that Bitcoin’s rally is cannibalizing gold’s bull market and believe the two can coexist.”

Dan Tapiero, co-founder-10T Holdings, a supporter of both Bitcoin and gold, agrees with Goldman Sachs and that there are not enough stores of value available for investors. He said,

“Non-financial market people do not understand that we have an overall SHORTAGE of stores of value available in the markets.”

“GOLD not losing its SOV premium any time soon, unlikely in my LIFETIME.”

According to Goldman, wealthy and institutional investors avoid digital assets due to “transparency issues,” and “speculative retail investment causes Bitcoin to act as an excessively risky asset.”

According to Jeff Currie, head of commodities research at Goldman Sachs, “Bitcoin is the retail inflation hedge.”

In an interview with Bloomberg, Currie said it is the copper chart that looks “similar” to Bitcoin, and what they have in common is they both are “risk-on growth proxies.”

He further added that gold remains a “defensive asset” and “there’s really no evidence” that Bitcoin hasn’t stolen demand from the precious metal.

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Author: AnTy

Bitcoin OTC Indicators Point to Ongoing Institutional Buying And This Means Only One Thing

Bitcoin is holding firmly to its gains made during the wild rally of 4Q20. Trading above $24,000, yes, another all-time high on the weekend, with $4.7 billion in ‘real’ volume, BTC/USD is up 230% this year.

Despite these substantial gains, bitcoin is not looking like it will correct anytime soon. Many are expecting the digital asset to run even higher up before any pullback could be expected.

Similar views are of Ki-Young Ju, CEO of data provider CryptoQuant, and the reason for this continued bullishness is the ongoing institutional buying.

“This BTC bull-run never stops as long as these OTC indicators keep saying institutional-buying,” said Ju pointing to all the large over-the-desk deals still going on vigorously.

For starters, massive outflows can be seen in Coinbase BTC outflows going to their new cold wallet for custody that held 6k to 8k BTC. Whenever the US’s biggest exchange moves a significant amount of Bitcoins to other cold wallets, it indicates OTC deals.

The largest digital asset manager, Grayscale, which continues to add up BTC to its stash, uses Genesis Trading for buying Bitcoin, which in turn uses Coinbase OTC desks for that. Coinbase was the one that helped MicroStrategy in its initial $250 million investment. Ruffer also confirmed that they purchased their BTC via Coinbase.

Another indicator is the Fund Flow Ratio for all exchanges, the ratio of network transaction volume of exchanges among all the tokens transferred on the network. If this value goes up, it implies most of the network transactions are exchange deposits/withdrawals; otherwise, transaction volumes are coming from non-exchange wallets. Young Ju noted,

“Since the price is eventually determined on exchanges, massive non-exchange transaction volume is considered as a bullish signal. These transactions include OTC deals.”

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Currently, only 5% of the network transactions are used for exchange deposits and withdrawals. The same level was seen in February 2019 when major exchanges launched OTC desks.

Looking at Tokens Transferred, which is the number of Bitcoins transferred on the network, this indicator has been trading up ever since early August.

If the value of Token Transferred goes up and the fund flow ratio for all cryptocurrency exchanges goes down, it again “implies that huge OTC deals are ongoing.”

Based on these on-chain indicators that estimate OTC deals going under the hood by institutional investors, large OTC deals are happening, and they point out that “institutions are continuing to buy BTC.”

So, much like this week, which saw several levels and all-time highs getting breached, we could continue further up.

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Author: AnTy

Grayscale Recording Inflows “Unlike Ever Before;” Meanwhile Largest Gold ETF Yet to See Any

Bitcoin is enjoying a wild rally, having surged more than 20% since yesterday this too, while average BTC fees being just above $4.

Trading above $23,000 with $11.27 billion in ‘real’ volume, the market is euphoric with greens.

Bitcoin’s market cap has reached above $430 billion today, adding more than $70 billion since yesterday.

This is all the result of the factors at play in this bull market that we haven’t ever seen before in terms of “investment banks writing research highlighting bitcoin superiority to gold,” said Michael Sonnenshein, Managing Director of the largest crypto asset manager Grayscale Investments.

We also saw prominent investors like Paul Tudor Jones, Stanley Druckenmiller, BlackRock CIO, and many others coming out supporting this asset class and corporations like Square and MicroStrategy adding bitcoin to their balance sheet as a reserve asset.

As Sonnenshein shared in his interview with CNBC, Grayscale is currently seeing flows that “are now probably up 6x what they were last year.”

Elaborating on the type of investors that are buying GBTC at over 34% premium to Bitcoin price and ETHE at nearly 210% premium to Ether, Sonnenshein said these “investors that are putting capital to work are unlike any of the investors we’re seeing ever before.” He said,

“It’s some of the world’s largest investors and the allocations that they’re making are bigger than we’ve ever seen before and their time horizon for this is generally something over the medium to longer-term.”

As of writing, GBTC holds just above 569k BTC, worth more than $12 billion, representing just over 3% of Bitcoins’ circulating supply, while their Ether stash represents 2.58% supply at 2.94 million ETH worth $1.84 billion.

Unlike all the flows that Bitcoin sees currently, gold has yet to recover from all the outflows it started recording last month. Kevin Rooke noted,

“The world’s largest gold ETF sold 8.3% of its gold so far in Q4 (100+ tons), and hasn’t seen any inflows in 17 trading days. November 19th was the last day the NAV of GLD actually went up, almost a month ago.”

However, the price of gold did manage to uptrend some on the back of declining USD, and Federal Reserve Chairman Jerome Powell vowing that they will keep up with its massive monetary stimulus.

Climbing to $1,890, the bullion still recorded 22.32% returns in 2020 compared to Bitcoin’s 223%.

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Author: AnTy

An ‘Extremely Bullish’ Institutional Catalyst for Ethereum is on the Horizon

As Bitcoin enjoys a wild ride to $23,800, Ethereum also managed to make it above $670.

Interestingly for the second-largest cryptocurrency with a market cap of $75 billion, it is still 57% away from its all-time high despite rallying more than 400% in 2020. And now that Bitcoin has hit a new peak, ETH is expected to follow and make it above $1,000.

In line with these gains, the total number of addresses with a balance of ETH surpassed 50 million for the first time, as per IntoTheBlock data. Not only did ETH make a new record, but it is the first crypto-asset to reach this milestone.

Yesterday, as we reported, CME also announced that it would be launching the Ether futures on February 8, 2021.

It is a big deal for the cryptocurrency as CME represents the institutional interest in the digital asset. Although CME’s bitcoin futures launch at the top of the 2017 bull market was taken as a negative sign for the prices, the retracement was expected after the wild rally.

CME’s bitcoin futures just acted as a catalyst for that correction. Now, as we see in 2020, the biggest regulated bitcoin futures market has been recording more than $1 billion in open interest (OI) on bitcoin futures.

Similarly, CME’s Ether futures, where each contract will have 50 units, will bring more institutional support to the digital asset. Trader and economist Alex Kruger said,

“People mostly remember how bitcoin hit its top on 2017 the exact day the CME BTC futures launched, and proceeded to crash right after. They forget that the CME launch drove the price from 6K to 20K, +225% in 2.5 months. The launch of CME ETH futures is extremely bullish.”

Institutions have been exclusively going into Bitcoin as an inflation hedge. Still, Ether is also now making its place among the investment portfolio, emerging as silver to Bitcoin’s gold, in reference to Ray Dalio discussing cryptocurrencies’ future, seeing their categorization as precious commodities and industrial commodities.

Already, Grayscale’s Ethereum product (ETHE) has 2.94 million Ether in its holding. Jake Chervinksy, General Counsel at Compound Finance, said,

“CME launching ETH futures is a big deal. Combined with Grayscale’s ETHE’s recent growth, this signals rising institutional interest in (& comfort with) ETH. This doesn’t happen without significant demand. ETH’s market structure is maturing quickly.”

Interestingly, while Grayscale holds over 2.5% of Ethereum supply, another 1.53 million Eth (worth more than $1 billion) is locked in ETH 2.0 deposit contract, and a whopping 7.1 million ETH is locked in DeFi.

Things are about to get interesting for Ethereum as well.

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Author: AnTy

Bitcoin Enters “Hodlers’ Sweet Spot,” Relative Unrealized Profit Points to “Plenty of Room to Grow”

Bitcoin has been having a wild day, having hit $15,300 today with the volume going to $4.3 billion.

The fall in the USD index to May 2018 level also pushes BTC higher, just like gold, which is near $1,950.

For the leading digital asset, there isn’t much resistance standing between here and the all-time high of $20,000.

As one trader noted, “that was the last major resistance until ATH,” while another adds to the hopium with “BTC 20K now doable in 2020. 25K-30K in 2021, all possible.”

According to the world’s largest money manager BlackRock as well, crypto is a useful addition to a balanced portfolio besides cash, emerging markets, and some risky assets that offer an effective hedge today.

And there’s still “plenty of room to grow” based on Bitcoin’s relative unrealized profit despite the digital asset already being up more than 107% YTD.

During the previous cycles, the global tops were hit when the metric had a reading of 0.8. Last year’s local top at $13,900 was hit at 0.64. This time, currently, BTC is at around $15,250 and the metric has only a reading of 0.53.

BTC Relative Unrealized Profits
Source: Glassnode

Strong Fundamentals

With the latest jump in price, near-record addresses are active on the Bitcoin network.

Yesterday, a total of 1.17 million addresses were active, and there have been only nine days in BTC’s entire history when the network saw more activity.

Only 600 addresses were short of hitting the record set on December 17, 2017, when Bitcoin made an all-time high.

When it comes to other fundamentals, over 64% of Bitcoin addresses holding BTC for over a year, up 20.6% over the last 12 months. Also, the number of BTC addresses with a balance managed to increase by 15.9% throughout the last 33 months at 33.03 million, as per IntoTheBlock.

Since January 2018, when we last hit the price that BTC is currently at, the hash rate of the network actually increased by 744%, demonstrating “the value miners see in Bitcoin, but also the value Bitcoin obtains from its miners.”

The Bitcoin hash rate, which dropped for the past couple of weeks, going under 100 Th/s due to the rainy season being over in China and many miners switching off and seeking new hosting facilities which are now seeing a 25% increase in revenue, is also back at 128 Th/s.

This happened after Bitcoin had the second biggest negative difficulty adjustment this week, which was nine years after the biggest one in October 2011.

With this, the unconfirmed transactions were also down at 30k from the high of 150k last week. Naturally, the average bitcoin transaction fees are around $8, which surged above $13.

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Author: AnTy