First Mover: Geek Fest becomes relevant when Bitcoin hands over $ 21,000, $ 22,000, $ 23,000

Bitcoin (BTC) was higher for a sixth straight day and continued after rising 9.9% on Wednesday, topping $ 20,000 for the first time in cryptocurrency’s 11-year history.

“We expect this sluggishness to create ripple effects by the end of the year as Bitcoin’s momentum continues to move higher,” Lennard Neo, head of research for the Stack Funds issuer for digital asset products, wrote in a report Thursday.

Here’s a quick recap of CoinDesk’s coverage of the $ 20,000 rally:

In traditional markets, European stocks rallied on coronavirus vaccine hopes and the British pound rose as officials predicted an imminent Brexit deal. US stock futures indicated a higher opening as Congress leaders issued a $ 900 billion stimulus bill. The dollar collapsed after Wednesday’s Federal Reserve meeting, disappointing some investors who were expecting a more cautious outcome. Gold gained 0.7% to $ 1,878 an ounce.

For those of you keeping track, Bitcoin is up 217% in 2020, roughly 14 times this year’s profit on the Standard & Poor’s 500 index of US stocks. Gold is up 24%.

Year-to-date cumulative price returns for Bitcoin compared to gold and the Standard & Poor’s 500 index of US stocks.

Source: TradingView / CoinDesk

Market moves

((Editor’s note: This is the fourth part of First Mover’s round-up of how the Bitcoin market evolved over the course of 2020 and what it means for the future. Today we cover the month of May, when the Bitcoin blockchain went through a “halving” every four years. There were no exceptionally high price predictions for the cryptocurrency, but the network’s programmed reduction in the pace of new Bitcoin issuance contrasted sharply with the Federal Reserve’s money printing, measured in trillions of dollars.)

In early 2020, before investors realized the devastating economic burden posed by the coronavirus, the impending “halving” was the main narrative in the Bitcoin market – an arcane event that happens every four years on the underlying blockchain network.

Since the Bitcoin blockchain was only invented 11 years ago, this would only be the third halving in history. It was very technical, but the whole process was tightly integrated into the underlying programming of the network, and the basics went something like this: At some point in May, the pace of reissuing bitcoin through the blockchain would halve. to roughly 6.25 bitcoins every 10 minutes or so from the 12.5 bitcoin average clip that prevailed over the past four years.

In general, few surprises were expected, with all the details set in advance. But that was kind of a point: After the cryptocurrency was designed, things should run like clockwork, giving people little leeway to intervene based on subjectivity or politics.

These were not the usual times. In the past few months, the deep economic burden from the coronavirus had shaken global markets, slipping Bitcoin prices from a high of around $ 10,500 in February to as much as $ 3,850 by mid-March. Then, as the Federal Reserve and other global agencies started pumping trillions of dollars into the financial system, asset prices rose again and by April bitcoin was trading as high as $ 9,485.

Cryptocurrency market analysts spoke of the halving as a potential catalyst for a price rally. One German bank went so far as to predict that Bitcoin could shoot to $ 90,000 or more.

“Look for prices to hit the $ 10,000 level of speculative sums that will cut it in half,” Jehan Chu, co-founder and managing partner of Hong Kong-based blockchain investment and trading firm Kenetic Capital, told in late April CoinDesk.

CoinDesk even created its own “Bitcoin Block Reward Halving Countdown” to mark the estimated time and date of the major event. With everything going on in the world, the halving took on the feel of a geek festival for crypto insiders. Most of the tension came from the price charts: Would the halving drive Bitcoin prices to the moon?

CoinDesk’s Bitcoin countdown clock will halve from April 28th.

Source: CoinDesk

As it turned out, the halving came on May 11th and, by pretty much all data, turned out to be anti-climactic. Industry executives on a CoinDesk halved countdown talk show held over Zoom had to take the time to technical discussions about the future potential of Bitcoin mining computers and accelerating network speeds over the next four years.

When the blockchain network finally hit block number 630,000, the moment everyone was waiting for someone posted a snippet of code on Twitter showing that the halving had indeed happened. There were a few huzzahs everywhere and everyone got out of the zoom room.

“This is more of a holiday for the crypto community than anything,” wrote Mati Greenspan of forex and cryptocurrency research firm Quantum Economics in a message to customers.

During the month, prices never went well above $ 9,000.

“We’re seeing the rumor being bought and sold,” said Russell Shor, a senior market specialist at forex and cryptocurrency trading firm FXCM, in emailed comments.

Under the drained buzz, however, there was a revelation: the blockchain network worked exactly as planned and not even the worst economic crisis since the Great Depression had it deviated from course.

In addition, the slowing of the pace of Bitcoin issuance contrasted sharply with monetary policies by the Federal Reserve and other major central banks.

The human central bankers did everything in their credit to prevent the collapse of the world’s financial system. The momentum, however, meant that Bitcoin, with its hard-coded and shrinking supply curve, could serve investors as a bulwark against the depreciation of the US dollar and other currencies.

To underline this point, the Chinese Bitcoin mining pool f2pool has embedded a message in the blockchain record for data block no. 629,999: “NYTimes 09 / Apr / 2020 With an injection of 2.3 million USD, the plan exceeds the Fed’s 2008 bailout by far. ”It was a headline for a news article from the previous month that described a massive US Federal Reserve money press episode.

Coin Metrics, a cryptocurrency analytics firm, took up the subject again in a report earlier this week, illustrating how the four-year blockchain halving can provide confidence to investors looking for an asset that is beyond human discretion and qualitative judgment.

“Every four years there will be halving until the upper limit of 21 million Bitcoin is reached,” the analysts write. “This means that we can project far into the future and have clarity about what Bitcoin’s rate of inflation will be in a year, five or ten years.”

That might even be easier than predicting what Federal Reserve Chairman Jerome Powell and his colleagues might do at their next meeting in January.

The halving of the Bitcoin blockchain in May resulted in a sharp drop in the cryptocurrency’s annual inflation rate.

Source: Coin Metrics

Bitcoin Watch

Bitcoin’s hourly chart shows a high rejection rate of over $ 23,700.

Source: TradingView / CoinDesk

Bitcoin hit a new record high of over $ 23,000 on Thursday before quickly falling back over $ 1,500.

The cryptocurrency fell from the all-time high of $ 23,770 to $ 22,185 in the roughly 30 minutes to 9:45 a.m. of coordinated universal time (UTC), a 6.7% decline according to CoinDesk 20.

The sudden retreat was supported by the highest hourly sales volume since Nov 26th and suggests that the uptrend is getting tired. The cryptocurrency could consolidate in the wide range of $ 20,000 to $ 24,000 in the short term. The derivatives market and activity in the chain suggest that the rally can continue.

While the average funding rate for Bitcoin Perpetual Futures on major exchanges has risen from 0.005% to 0.036%, it remains well below the high of 0.093% prior to the November 24th price drop. The funding rate is calculated every eight hours and reflects the cost of holding long positions. It is positive (or longs pay shorts) when perpetuals are trading at a premium at the spot price. Therefore, a very high funding rate is generally viewed as a sign that leverage is overly bullish or that conditions are overbought.

In other words, the leverage is not too bullish, which could mean the cryptocurrency can go up even further.

Additionally, there is little evidence that big investors are looking to make gains, with prices rising slightly to record highs above $ 23,000. At the time of going to press, there were around 2,400,000 coins on exchanges. According to the Glassnode data source, this is the lowest level since August 2018 and suggests that investors are not preparing for a sell-off.

Read More

What is hot?

CME Announces Plans To Launch Ether Futures In February (CoinDesk)

Ruffer Investment Confirms Massive $ 744M Bitcoin Purchase (CoinDesk)

Paxos raises $ 142 million in Series C funds following the PayPal deal, the OCC Bank Charter Application (CoinDesk).

San Francisco-based cryptocurrency exchange OKCoin now allows users to invest in DeFi (Decentral Finance) applications without paying gas fees (CoinDesk).

Kraken Exchange Plans to Integrate Bitcoin’s Lightning Network in 2021 (CoinDesk)

The American Express VC unit invests in the FalconX trading platform for cryptocurrencies (CoinDesk).

The Austrian cryptocurrency trading platform Bitpanda is setting up a new tech hub in Poland and is providing EUR 10 million (USD 12.2 million) to finance the center to create 300 jobs (CoinDesk).

One River hedge fund, backed by Alan Howard’s Brevan Howard Asset Management, is acting as a bitcoin buyer with a $ 1 billion goal, says Bloomberg (CoinDesk).


The latest on economics and traditional finance

The Federal Reserve keeps interest rates unchanged and adds qualitative guidance on the pace of money printing (CoinDesk).

US Congress leaders almost agree to add a new round of $ 1,200 worth of stimulus checks to the proposed $ 900 billion Washington Post bailout package.

Fifty years of tax cuts for the rich have not come down, according to a study (Bloomberg)

Switzerland, Vietnam classified as currency manipulators by the US Treasury Department (Washington Post)

Some members of the US Treasury Advisory Group advocate allowing large asset managers to buy government bonds direct from the New York Federal Reserve Bank to add trillions in liquidity to the market (Reuters)

The analysts at Goldman Sachs assume that the yields on ten-year US government bonds will rise from the current 0.9% to 1.5% by mid-2021 (Reuters).

“Nothing is more reassuring for an investor than the knowledge that central banks with much deeper pockets are buying the securities they own,” writes Mohamed El-Erian of Allianz in op-ed (FT).

Tweet of the day

Sign up to receive First Mover in your inbox every weekday.

Comments are closed.