First mover: remembering Bitcoin before the pandemic as a rally stall

Bitcoin (BTC) rose for the fourth year in a row, despite struggling to rise above $ 20,000 in a replay of last week’s action after its month-long rally from a low of around $ 5,000 in March.

“The $ 20,000 level, commonly equated with Bitcoin’s all-time high, poses a massive psychological barrier and could likely take a lot of force to break through,” said Mati Greenspan, founder of forex and cryptocurrency research firm Quantum Economics, wrote in his newsletter.

In traditional markets, Asian stocks fell the hardest in two weeks, but European stocks remained stable. US stocks pointed to a higher open after a four-day slump. According to Bloomberg News, investors were optimistic about the launch of vaccines, while doubts about recent efforts by US lawmakers to negotiate a new stimulus package. The so-called third wave of the coronavirus leads to new blocking measures. Gold gained 1% to $ 1,846 an ounce.

Market moves

((Editor’s note: This is the second 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 January and February, just before the rapidly spreading coronavirus hits the global economy, rocks markets and leads to an unprecedented financial response from governments and central banks around the world.)

Trillions of dollars in money pressures this year by the Federal Reserve and other central banks have accelerated the use of Bitcoin as a hedge against currency deterioration by investors in both cryptocurrency markets and traditional financial markets.

But even before the pandemic-induced economic impetus hit global markets, economists were already openly speculating about whether the US dollar could survive another decade as the world’s dominant currency for international payments and currency reserves.

Historically, a catalyst has always led to one currency displacing the other as the world’s most important transaction medium, unit of account and store of value. The US dollar had become the world’s leading currency at the beginning of the 20th century when it replaced the poorly debtful British pound. a century earlier Holland’s guilder had been wiped out by the invasion of the French emperor Napoleon.

In early 2020, China’s proposed digital currency was seen as a potential threat to the greenback, and former Bank of England Governor Mark Carney had gone so far as to propose a “synthetic hegemonic currency” that may be made available “through a network of digital central banks.” became currencies. ”

“There is much discussion about substitutes for the dollar as a global reserve currency,” Bill Adams, chief international economist at US bank PNC, told CoinDesk earlier this year.

However, based on official data on the dollar’s share of global reserves, the US currency looked stronger than ever.

At the start of the new decade, the US dollar’s share of the central bank’s foreign exchange reserves looked stronger than ever.

Source: International Monetary Fund

It wasn’t long before the Bitcoin market got a jolt – after a US drone attack killed an Iranian commander in chief in the first week of January, leading to speculation that heightened geopolitical turmoil could fuel demand for the cryptocurrency. Bitcoin rose to $ 7,300 as analysts said it could serve as a safe haven, much like gold, which is expected to hold its value during times of geopolitical or economic instability.

The hatch soon faded from the news and crypto traders turned to what they believed was the marquee of the bitcoin market of the year – the biennial “halving” that would take place in May, which is where the pace of new offering is The cryptocurrency issued by the Bitcoin network will be reduced by 50%. It is laid down in the underlying programming of the 11-year-old blockchain.

From December to February, Google searches for the term “Bitcoin halving” doubled within a month to its highest level since 2016, and some enthusiasts even created their own website,, to show the remaining days, hours, minutes and Counting down seconds until it happens.

Cryptocurrency lenders reported an accelerated pace of customer activity, in some cases more than 10 times the credit growth reported by major banks like JPMorgan Chase. Traditional financial firms were tied to the broader economy, where U.S. growth slowed from 2.9% in 2018 to 2.3% in 2019. (A newly launched futures contract focused on the US presidential election launched by the FTX cryptocurrency exchange in early February, Donald Trump suggested a 62% chance of winning.)

Crypto traders commented on analyst projections that the halving could skyrocket prices to $ 90,000 or more.

Little did they know, of course, how dramatically the events of the following months would change the global economic outlook. In late February, traders saw how far Bitcoin was from a safe haven – as prices fell alongside US stocks, as authorities around the world battled to contain the spread of the coronavirus beyond China. US Treasuries, viewed as a traditional safe haven asset, rebounded, as did gold.

Bitcoin is “not the same thing as owning treasury and not the same thing as owning gold,” cryptocurrency analyst Greg Cipolaro told CoinDesk on February 24th.

Jeff Dorman, chief investment officer at Los Angeles-based crypto-focused Arca Funds, highlighted the prospect of a separate potential catalyst for higher Bitcoin prices: the Federal Reserve’s monetary easing to stimulate coronavirus-infected markets.

“I don’t expect Bitcoin to be traded as a risky or high-risk asset,” he said. “But over a longer period of time, anything that is inflationary or otherwise devalues ​​other currencies strengthens Bitcoin’s purchasing power.”

That view would take hold in the Bitcoin market later this year, drawing the attention of mutual fund companies like Fidelity Investments and BlackRock, hedge funds like Tudor Investment, and more recently 169-year-old insurance company MassMutual.

Prices nearly tripled to nearly $ 20,000 in 2020.

Iran has rarely re-emerged in bitcoin market talks, and there is little market talk about the halving these days. Now it’s all about printing money. Questions about the future of the dollar remain.

Next Wednesday: The coronavirus hits and the Bitcoin price tank – until the Federal Reserve arrives and the biggest money printing episode in its 107-year history begins.

Bitcoin clock

Diagram showing the hourly Bitcoin inflows to the Huobi exchange (blue lines) with the Bitcoin price (white line).

Source: CryptoQuant

Bitcoin again failed to hold profits above $ 19,500 early Tuesday, possibly due to profit-taking by large Asian investors, according to an analyst.

In the two hours between 4 a.m. and 6 a.m. of Coordinated Universal Time (UTC), the cryptocurrency fell from about $ 19,500 to about $ 19,050. An increased inflow of coins into the Huobi Global crypto exchange, which has a presence in Hong Kong, was observed before prices began to fall.

“Just 15 minutes before the price hit, a total of 2,013 coins in blocks 661,425 through 661,430 were transferred to Huobi,” said Ki Young Ju, CEO of CryptoQuant, adding that block number 661,425 contained 1,017 coins, the highest single block inflow to Huobi since November 30th, a total of 8,836 BTC arrived on Huobi on Monday, with an average transaction of 4.5 BTC, which, according to CryptoQuant, is the highest since March 2018.

The increase in the average forex deposit size suggests that larger investors moved their coins to Huobi and may have liquidated their holdings by $ 19,500, a level that has acted as strong resistance lately.

At press time, Bitcoin has rebounded to nearly $ 19,300 and the path of least resistance for the cryptocurrency remains on the upside, according to analysts. Forcing a breakout above $ 20,000 in the short term, however, could prove to be a difficult task for the bulls with sizable sell orders open ahead of a new record high.

“There are still offers for 19,500 to 20,000 US dollars,” Patrick Heusser, trading director of Crypto Broker AG in Zurich, told CoinDesk. “The US-based cryptocurrency exchange Coinbase has 700 Bitcoin for sale for $ 20,000, but all of the other exchanges up there also have some offers in the 200-300 coin region.”

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The latest on economics and traditional finance

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