Bitcoin Fundamentals Briefing, October 2019

Bitcoin Fundamentals Briefing, October 2019

The breaking of mid Autumn sleep

The autumn time this year is quiet for the Bitcoin market. The whole summer, investors were preparing to big shifts in the market’s structure – news headlines were rather promising, suggested Bakkt futures launch, Bitcoin options, big institutional investors’ enter on the market, etc. Here and there were a lot of news telling about Blockchain and cryptocurrencies application in life spheres, beyond trading. There was no shortage of optimistic opinions suggesting outstanding rally in nearest future.

October month, in some sense, has become the one that has shown the reality. All investors’ hopes on fast and furious breakthroughs appear to be in vain. Bakkt shows shy trading volumes and no smell of growing interest among institutional investors, despite that Bitcoin starts to trade on exchanged market (CME previously and now ICE as well). BTC options launch on CME is suffered the same fate.

Still, there is an event that shakes the market for 15% a few days ago…

Positive October events

Although this event is the last one in chain of October events – it is most powerful and we place it first in our list  –

Bitcoin Jumps 12% as China’s Xi Embraces Blockchain, Boosting Crypto Sentiment

Chinese President Xi Jinping said his country should seize opportunities afforded by blockchain, the technology that underpins bitcoin.

Despite China’s ban on cryptocurrency exchanges in 2017, the comments from the leader of the world’s second-largest economy could boost sentiment toward digital assets in general, providing a positive market backdrop for bitcoin, says eToro’s Mati Greenspan.

We must take the blockchain as an important breakthrough for independent innovation of core technologies,” Xi told committee members.

“[We must] clarify the main direction, increase investment, focus on a number of key core technologies, and accelerate the development of blockchain technology and industrial innovation.”

The Chinese president’s statements on blockchain are believed to be his first in-depth remarks on the technology. Chinese officials are developing a digital version of the country’s own currency, but have forbidden other coins from being traded.

“It’s bullish for the entire crypto industry, in general, when you have the leader of one of the world’s largest economies coming to embrace blockchain technology like this,” Greenspan said in a phone interview from Tel Aviv. “Bitcoin, as we know, is a central player in the blockchain industry.”

German finance minister Olaf Scholz wants to introduce digital euro

“Such a payment system would be good for financial center Europe and its integration into the world financial system,” Scholz said late last week in a report published by local business news magazine WiWo (WirtschaftsWoche).

“We should not leave the field to China, Russia, the US or any private providers,” Scholz added, taking a dig at Libra, the Facebook-led proposed stablecoin.

Just last month, Germany passed a blockchain strategy that prevents any parallel currencies to be issued in the country. At the time, Scholz said: “A core element of state sovereignty is the issuing of a currency, we will not leave this task to private companies.”

Germany’s No. 2 Exchange Launches Bitcoin Spot Trading

Exchange Boerse Stuttgart, Germany’s second-largest stock exchange, has opened a regulated trading venue for digital assets, the company said.

Trading began 23rd of September on Boerse Stuttgart Digital Exchange (BSDEX), a fully regulated digital asset exchange under the German Banking Act, according to a statement. As of now, BSDEX is trading only one pair, the bitcoin-euro.

“BSDEX will give retail and institutional investors direct access to digital assets and provide flexible and relatively low-cost trading. We believe blockchain is set to bring about significant changes in the financial industry, and we want to leverage its potential to create the trading venue of the future,” said Peter Großkopf, CTO at BSDEX, in a statement.

Lawmakers Ask Fed to Explain Views on U.S. Dollar Digital Currency

Senior House Financial Services Committee members asked the Federal Reserve to explain its views on the idea of taking up “the project of developing a U.S. dollar digital currency.”

“The nature of money is changing,” and more than 40 countries have already developed or are working on their own national digital currencies, Reps. Bill Foster (D-Ill.) and French Hill (R-Ark.) said in a Sept. 30 letter to Federal Reserve Board Chairman Jerome Powell.

Anthony Pompliano, Co-founder & Partner at Morgan Creek Digital sees fargoing conclusions of this possible step of tokenizing of US dollar. Thus, he writes in twitter:

Bitcoin was released in 2009. A decade later it has grown to a $200+ billion asset. Now the US government is talking about tokenizing their fiat currency in response. In a few years they will likely be talking about adopting Bitcoin as a national currency. Patience.

Another exchange takes the listing of Bitcoin – Swiss SIX exchange lists bitcoin and ether exchange-traded product

Fintech firm Amun AG and cryptocurrency custodian Bitcoin Suisse AG have partnered to launch the ETP, which will allow Swiss investors to add a basket of BTC and ETH to their portfolios, according to a press release shared with The Block on Thursday. Currently, the basket composition of the product is 90% of BTC and 10% of ETH.

“This physically-backed ETP is fully collateralized, which means that for every bitcoin and ether bought for the ETP, there will be an equal corresponding crypto amount stored securely in the Bitcoin Suisse Vault,” said Amun AG.

McAfee Explains ‘Rationale’ For Why He Still Sees $1 Million Bitcoin By 2020

In 2017, the founder of what became one of the world’s top software security companies, McAfee Associates, boldly predicted crypto’s largest asset, bitcoin, would hit a price of $1 million dollars per bitcoin by the end of the year 2020. His reasoning for such a price tag lies in bitcoin’s total supply, as well as logic.

“Let’s get real, there are only 21 million bitcoins,” McAfee said to me in a September 23 interview. “Seven million of which have been lost forever, and then, if Satoshi [bitcoin’s anonymous creator] is dead, add a few more million,” he added.

“In any case, just run some numbers,” McAfee said. “If bitcoin gets to be 5% of world financial transactions, which, you all know it will,” he said, even mentioning “maybe 10% or 20%,” then bitcoin would be worth “$10 million per coin, based on those numbers.”

HK unrest triggered high demand for BTC transactions

Mati Greenspan writes in his twitter:

Bitcoin volumes in HongKong have spiked to their highest level ever recorded LocalBitcoins trading site. About $13 million HKD exchanged in the last week. For a portfolio manager, BTC is still considered a risk asset but for some people, it is clearly treated as a safe haven.

As we understand this precedent is important not due overall exchange volume but because Bitcoin use in periods of unrest and different political turmoil, when other sources of financing could be inaccessible.

CFTC Chair Says Ether Futures ‘Likely’ in 2020

Commodity Futures Trading Commission (CFTC) Chairman Heath Tarbert believes the crypto world will see ethereum futures contracts sometime in 2020.

“I’d say it is likely that you would see a futures contract in the next six months to a year,” , though he cautioned that simply launching a futures contract isn’t the be-all and end-all. He went on to add:

“The volume to which it’ll trade, no idea, that’s where the markets decide, but my guess is now that we’ve provided at least … a little bit more clarity on [ether’s eligibility for futures contracts], my guess is market participants will consider that.”

And of course, we can’t ignore miners’ news. Here is most famous in recent month – Bitmain fulfils commitment to Rockdale, Texas, with launch of cryptocurrency mining farm to construct 50MW facility

“We are excited to launch this facility, which is significant to Bitmain’s global expansion plans. The stable and efficient energy resources in Texas are fundamental to the inevitable scale of growth for the cryptocurrency mining industry,” said Clinton Brown, Rockdale Lead Project Manager for Bitmain.

Construction of the initial 25MW of the mining farm, on a 33,000 acre site owned by Aluminum Company of America, Alcoa, began in 2018 as part of the company’s ongoing plans to build the world’s largest cryptocurrency mine.

Bitmain will continue to construct the 50MW facility, which can expand to a capacity of more than 300MW, making it the largest bitcoin mining facility in the world.

Rockdale, Texas, Mining Facility

Despite few positive news, till the last moment, when Mr. Xi said about Blockchain seizing overall sentiment was far from positive. And there are reasons for that.

October’s frustration

First of all take a look at market’s statistics.  It rises concern on nearest future of the market.  Thus, Larry Cermak writes in twitter that

Nearly $710 million was liquidated on BitMEX in the last 24 hours ($643M in BTC and $53M in ETH, $14M in EOS and XRP). Traded volume spiked a bit to $1.95B but still way lower than volume BitMEX saw in June and July.

Average daily volume in September has been $1.35 billion on BitMEX. That’s about 37% lower than $2.16B in June.

Coinbase rises trading fees on 100-233% from 0.15% to 0.5%

CoinExchange is closed

We regret to inform our community that CoinExchange is closing down said in company’s twitter.

PayPal Drops Out of Facebook’s Libra Payments Network

Payments firm PayPal has become the first company to pull out of an alliance that is trying to launch Facebook’s digital currency Libra. PayPal made the announcement in a statement on the 4th of October, but did not specify what had prompted the decision.

Facebook’s libra cryptocurrency coalition is falling apart as eBay, Visa, Mastercard and Stripe jump ship

  • EBay, Visa, Mastercard and Stripe announced Friday they will no longer be part of Facebook’s libra cryptocurrency project.
  • The news comes one week after PayPal announced its withdrawal as government regulators continue to scrutinize the plans.
  • Facebook CEO Mark Zuckerberg is set to testify on the currency at an Oct. 23 hearing before the House Financial Services Committee.

Trump Administration Popped 2017 Bitcoin Bubble, Ex-CFTC Chair Says

The Trump administration acted to deflate the bitcoin bubble of 2017 by allowing the introduction of futures products, a former official said Monday.

Christopher Giancarlo, who left the U.S. Commodity Futures Trading Commission (CFTC) at the end of his five-year term as chairman in April, told CoinDesk in an interview:

“One of the untold stories of the past few years is that the CFTC, the Treasury, the SEC and the [National Economic Council] director at the time, Gary Cohn, believed that the launch of bitcoin futures would have the impact of popping the bitcoin bubble. And it worked.”

The major feature of derrivative instruments is in providing possibility to take short positions on the asset, which makes possible investors who things that BTC is too expensive to express their opinion and take bearish positions

Without shorts, a market has no pessimists. “If you do believe it’s a ridiculous price but you don’t own, there’s no way to express that view,” Giancarlo told CoinDesk

Facebook Risks Banking Ties Over Libra Concerns, Says ING Exec

An ING executive warned banks may drop Facebook as a customer if the social media giant continues with its experimental foray into cryptocurrency without addressing regulatory concerns.

In an interview with the Financial Times on Tuesday, CEO Ralph Hamers said the Libra project’s unresolved regulatory issues place a degree of risk on banks, as “gatekeeper[s] to the financial system.”

“From the beginning, we’ve said we’re committed to taking the time to get this right. The Libra Association published a white paper to begin a dialogue with the regulators and policymakers who oversee the stability and security of our financial systems. As a member of the Libra Association, we will continue to be a part of this dialogue to ensure that this global financial infrastructure is governed in a way that is reflective of the people it serves. Facebook will not offer Libra through its Calibra wallet until the Association has fully addressed regulators’ concerns and received appropriate approvals.”

France’s Le Maire Attacks Facebook’s ‘Political’ Ambitions With Libra

France’s economic and finance minister says Libra is “unacceptable,” calling it an intrusion into the state’s political sovereignty.

When the euro was created in 1999, member nations surrendered aspects of their sovereignty to a greater European project. To allow Facebook and other Libra Association members to issue private money would undermine this effort, he said.

“Do we really want to give private interests such power, given the consequences it would have on trade and financial stability?” Le Maire asked. “I cannot countenance one of a sovereign state’s most powerful tools, monetary policy, falling under the remit of entities not subject to democratic control.”

Le Maire reiterated the sentiments on Twitter, saying: “Neither political nor sovereignty can be shared with private interests.”

Finally, here is some debates on technical background of the market. Technical analysis now is taking backseat as we see than cryptocurrencies occupy the minds of governments across the Globe. Still, here is a view and arguments of well-known opponent (Peter Schiff) and proponent (M. Pompliano) of a Bitcoin:

Bitcoin Price May Buck Bull Trend & Fall by 75% to $2,000, Peter Schiff Warns

The Bitcoin chart looks horrible. Not only does the flag that followed the recent breakdown project a move to $6K, but we are close to completing the right shoulder of a head and shoulders top, with a $14K head, and neck line just below $8K, that projects a collapse to below $2K!

The bottom line

Technical analysis is always interesting to read, but we have to take a deeper look, right on fundamentals of cryptocurrency market. We will need a lot of wisdom, guys, to understand what’s really going on here.  I’m started to suspect that Bitcoin has dual capability. First purpose is public. This is what we see in news headlines exchange news. Second purpose stands in the shadow.

Concerning first meaning, we need to say that prior Mr. Xi’s words investors mostly were depressed.  All their hopes on fast coming of institutional investors stand in vain. Bakkt shows anemic trading volumes. The presentation of BTC options on CME also gives no results. Libra stifles in tight hug to death. No even minor ray of hope to some breakthrough. The market is stagnating because of no direction ideas. It seems everything is cool – blockchain technology was testing, exchanging are functioning perfect, coins flow here and there, but what’s next? And I have big doubts, guys, that recent Mr. Xi’s words will live for long time. Traders fell in euphoria just because of vacuum of news on the market.

If we consider what Mr.Xi said – he said nothing on BTC as he mostly talked on Blockchain technology and its application in different spehers of life – medicine, social, science, finance etc. Also we should not forget that China itself bans crypto exchanges and they struggle with bargain mining in North China. Politicians could say anywthing – just take a look at D. Trump and his comments on China tariffs war, N. Korea etc. So, I do not get optimism with these Mr. Xi words.

But what is really makes me thrill is a second side of cryptocurrencies which stands under curtain, as I suppose.  I ask you just few questions guys – why big financial whales, such as Paypal, Mastercard, Visa so easily denied Libra? Why all developed governments accross the board rise against it and start talking on its own national crypto currency – US, China, Germany to name some. Why US regulators headed by SEC, Congress and other government authorities put unprecedented pressure on Bitcoin and Libra?

The more I think about it the more I come to conclusion that Bitcoin is just a first step. This is just an experiment over the planet to see how crypto currency will be adopted and how it will function. And this test mostly is passed successfully. What’s next? Governments across the Globe worries that alternative financial system could lead to lost of sovereignty. Facebook in partnership of such giants as Visa, Mastercard and others are strong enough to set alternative financial system and cashflows in any country. This is the reason of mass objection among politicians and bankers and strong wish to launch national cryptocurrency. This makes me to suggest that Bitcoin is a tool of globalisation – one government, one currency, one politics etc. It is the experiment of adoption of single global currency and this experiment shows good results. May be I’m dramatized situation, but facts are stubborn and we can’t ignore them.

 

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Sive Morten

Sive Morten

By day Sive Morten works for the large European bank. In that roll he evaluates the markets including currencies market managing bank risks and evaluating the bank portfolio.

At the Forex Peace Army, he is known as an author of Forex Military School, which quite unique free forex trading course. We do not know of any other free forex trading education covering such a broad spectrum of forex market concepts in such details while keeping it easy to understand and practically use.

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Comments

ED SCHAFFER
5 days ago,
Registered user
What a thought provoking idea Sive presents in the very last paragraph about BTC being a globalist tool to either quash or at least to supplement national currencies. Cryptos are clearly far easier to transport across national boundaries rather than physical bags of either gold or fiat. The occurrence of Hong Kong money flight via BTC is just the very latest current prime example of this utility. All really useful products & services will finally win out in the end as history has proven. Thanks Sive for putting this idea of yours forward for us readers to learn about & think over.
Jeremy T Love
3 days ago,
Registered user
Thank you for this article. I do believe governements and big companies are afraid of BTC, sticking their finger in the dam.