Bitcoin fundamentals briefing, November 2019

Bitcoin fundamentals briefing, November 2019

Bitcoin nose dive

November month stands a bit detached compares to the whole history of Bitcoin market, although it was not too long.  I’m not sure folks, that we able to find positive news of at least minor value. I would call November as “crush of all hopes”. Market now stands at very fragile border and if it will be broken – abyss opens and chances on collapse of BTC increases. Still,  market holds by war and keeps chances on upside action, although odds diminish dramatically in recent few days when price hits ~6-6.5K area. Now, take a look by yourself what has happened.

First, I would like to recall the issue that we are finished at in our October Briefing:

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

We warned that it would be better to wait and do not make snap judgement as worlds of any politician person could be tricky. We saw many examples in the past. And now Bitcoin totally has erased the rally that has happened as reaction on this Mr. Xi statement. Second –

China’s central bank orders probe of cryptocurrency activities in Shanghai

The target of this investigation is businesses that conduct cryptocurrency trading, token sales, and distributions of tokens from overseas initial coin offerings (ICOs). Once identified, these firms will be reported to the PBOC and the financial regulatory bureau. They will also be required to shut down their businesses.

But this is not all yet  – take a look at this one as well:

Chinese Agency Scraps Plan to Eliminate Bitcoin Mining Industry

The National Development and Reform Commission (NDRC), a top-level economic planning agency under China’s State Council, published a finalized new Catalog for Guiding Industry Restructuring on Wednesday that will take effect from Jan 1, 2020.

In the final version, which will replace the current one published in 2011, the agency has removed bitcoin mining or other virtual currency mining activities from the initially proposed category of industries that should be eliminated from China. Description related to virtual currency or bitcoin mining can’t be found in the finalized catalog.

As you understand it is difficult to unite Mr. Xi words on Blockchain technology and recent steps by China government authorities.  Let’s go further…

BOJ Kuroda says cryptocurrency won’t threaten yen, largely speculative

“Cryptocurrencies aren’t legal tenders and don’t have assets to back up their value,” Kuroda told parliament, adding that the prospect of them threatening the role of globally-trusted legal tenders such as the yen was low.

Developed Countries Have Little Need for CBDCs, Says Bank of Korea Official

The Bank of Korea has again poured cold water on the idea of adopting a central bank digital currency (CBDC), according to remarks made by an official of the central bank.

Hong Kyung-sik, director of financial settlement at the central bank, argued that in Korea, as in most advanced economies, there is very little need for a CBDC.

“In Korea, we already have advanced payment and settlement infrastructure. In addition, the degree of openness is also internationally high,” Hong said, according to conference notes published on the central bank’s website.

“The possibility that CBDC issuance will soon become a reality in major countries is still small,” Hong noted.

The Bank of Korea has long been skeptical of CBDCs and in the past has expressed concern about the development of these currencies.

No, Royal Bank of Canada Isn’t Opening a Crypto Exchange

“While RBC does not comment on ongoing proprietary research and development, we can confirm that these patent filings are not in support of work towards a cryptocurrency exchange for clients,” the spokesperson said. “RBC has no near-term plans to launch a cryptocurrency exchange for clients.”

B.C. cryptocurrency exchange shuts doors owing more than $16M to customers

Securities commission says RCMP notified about possible money-laundering concerns at Einstein Exchange. Under a cloud of complaints, investigations and lawsuits, a controversial Vancouver cryptocurrency exchange has shut its doors with more than $16 million owing to customers.

Binance are aware of a large-scale user email leak from another exchange

If you are one of the affected users and you also have a Binance account under the same email address, we recommend changing your email immediately – said on Binance official twitter account.

Bitcoin Needs ‘Real Use Cases’ to Become Digital Gold, Says ICE Chief

Bitcoin might become “digital gold,” but first it needs to be used more in everyday business, Intercontinental Exchange’s chief executive said.

“Because I’m old I think of [how] gold became a store of value because at one point it was a currency,” he said. “We had gold coins, it was in circulation, and over time because of the nature of its ability to spend, … it became a store of value and today, you know, in a crisis we all accept gold as a form of payment.”

Bitcoin may follow a similar trajectory, Sprecher said, citing its development and mining capabilities. He added:

“We don’t think that that that whole space will be relevant and and grow unless there are real use cases and we do … think that a use case is going to be the digital transfer of value through payments.”

3iQ expects to launch Bitcoin ETF this quarter after “favorable” ruling from Canada’s top securities regulator

The Ontario Securities Commission (OSC) has ruled to allow crypto fund manager 3iQ to issue a prospectus for its prospective exchange-traded Bitcoin fund, signaling that Canada’s top securities regulator may be about to approve the launch of the nation’s first Bitcoin ETF.

Incredibly, both of 3iQ’s custody and surveillance providers are U.S. institutions, suggesting Canadian regulators have a softer, if not more progressive, view of how a Bitcoin fund could be operated safely in the securities market. 3iQ plans to custody the fund’s BTC with Gemini Trust Company while using VanEck for its index and market data. Both firms are based in New York and ironically are counted amongst the SEC’s rejected ETF applicants.

Crypto tokens are not real money. Libra is under question – Bundestag
“From the point of view of the Federal Government, it will be ensured that stablecoins do not establish themselves as an alternative to state currencies and thus call into question the existing monetary system,” the answer reads.

According to the Federal Government, the examination of whether the Libra concept initiated by Facebook is lawful with regard to German and European law has not yet been completed. The White Paper published by the Libra Association is not an appropriate basis for making a reliable answer to this question. It requires a further specification of the business model by the Libra Association and its shareholders.

Alibaba Denies ‘Partnership’ With Lolli, Highlighting Crypto Industry Pitfalls

On Monday, CoinDesk reported the shopping app Lolli was offering bitcoin rewards to U.S.-based Alibaba shoppers for Singles Day.

“Alibaba.com’s contractor is terminating the relationship with the subcontractor who was working with Lolli. As a result, Lolli should no longer promote or bring traffic to Alibaba.com.”

EP. SYLVIA GARCIA AND REP. LANCE GOODEN INTRODUCE THE MANAGED STABLECOINS ARE SECURITIES ACT OF 2019

Congresswoman Sylvia Garcia (D-TX) and her colleague Congressman Lance Gooden (R-TX) introduced the Managed Stablecoins are Securities Act of 2019. This piece of legislation would protect consumers against certain cryptocurrencies, such as Facebook Libra Project. The bill would clarify that “managed stablecoins” are securities under the Security Exchange Act of 1934 and thus regulated by the Security and Exchange Commission.

Elliptic Launches the World’s First XRP Transaction Monitoring System – Identifies $400M of Illicit Activity in XRP Transactions

Elliptic, the leading provider of crypto-asset risk management solutions for crypto businesses and financial institutions, today announces transaction monitoring support for XRP, the currency of the Ripple payment network.

“We began researching XRP more than a year ago and have already identified several hundred XRP accounts linked to illicit activity ranging from thefts to scams and the sale of stolen credit cards,” said Dr. Tom Robinson, Chief Scientist and Co-founder, Elliptic.

There are over $400 million worth of illicit activities conducted via XRP, and a large portion of these activities are scams and Ponzi schemes, Elliptic, a blockchain analytics startup, found in its research. 

Italians Prefer BTC to Visa or Mastercard When Shopping Online

On Oct. 31, the Italian news outlet La Stampa reported that the Boston-based marketing analysis company, it was stated that in the list of the most used methods of online payment systems in Italy, Bitcoin comes in a strong, third place, just behind PayPal and the Italian reloadable prepaid card service PostePay.

The data further revealed that Italians use Bitcoin for shopping online more widely than traditional credit cards, such as Visa, Mastercard or American Express.

According to La Stampa, Bitcoin is used more than 215,800 times per month for online purchases in Italy, while American Express is used just 189,000 per month. Visa, Mastercard, and other credit cards lag with only 33,950 online transactions per month.

Technical moments

In our traditional technical part of briefing we will take a look at two moments. Could some big BTC owner move market and second –  how price of bitcoin and mining volume mutually impact to each other.

A Lone Bitcoin Whale Likely Fueled 2017 Surge, Study Finds

A Texas academic created a stir last year by alleging that Bitcoin’s astronomical surge in 2017 was probably triggered by manipulation. He’s now doubling down with a striking new claim: a single market whale was likely behind the misconduct, seemingly with the power to move prices at will.

“Our results suggest instead of thousands of investors moving the price of Bitcoin, it’s just one large one,” Griffin said in an interview. “Years from now, people will be surprised to learn investors handed over billions to people they didn’t know and who faced little oversight.”

Tether rejected the claims, with General Counsel Stuart Hoegner arguing in a statement that the paper is “foundationally flawed” because it is based on an insufficient data set. The research was probably published to back a “parasitic lawsuit,” the general counsel added.

Griffin and Shams’s hypothesis that Bitcoin was manipulated is based partly on the theory that new Tethers are created without the dollars to back them and then used to buy Bitcoin, leading to rising prices.

Read also : Tether Used to Manipulate Price of Bitcoin During 2017 Peak: New Study

This is interesting subject guys. Tether could deny whatever they want but such cases bring nothing positive to overall sentiment of the market and shows its imperfections. There are a lot of rich people, conservative institutional investors who watch on cryptocurrencies. And appearing of this kind of issues do not make closer the moment when they will invest…

Miners capitulation

Second interesting technical analysis tool is relation between mining and BTC price. This theory suggests that mining value and price strongly relates to each other. As price starts to drop, it is become less attractive to mine more. Second miners hurry to sell what they have mined while price is still high. This sell-off triggers another wave of price drop and cycle repeats.

The major idea suggests that it is good moment to buy at recovery after mining capitulation.

Charles Edwards educates this subject in details and one of the most active followers of this strategy. Thus, he writes in twitter on 19th of November:

There is ~60% chance of a Bitcoin miner capitulation. But the extent of this HR growth plateau has never occurred before in Bitcoin’s history. Miners face a tough choice: 1) Mine more & accumulate more 2) Cut back & potentially ‘miss’ a major bull run

No idea why anyone would interpret Miner Capitulation as FUD. Historically, all occurrences have been excellent buy opportunities. The best buys are DURING a capitulation. But it’s very hard to time. A safe bet to minimise losses, and get huge returns, is to buy on recovery.

Charles Edwards twitter

The followers of this theory mostly look at hash rate dynamic -when it starts to slow, it works like early sign of mining contraction and possible decreasing of BTC value. Currently market stands at the point where has rate stagnates.

As a bottom line:

Finally, guys, those of you who follow our regular technical updates on BTC, also know that market stands at the edge. This is a very thin and fragile border, and BTC barely holds above it, risking to fall in the deep.

It is crucial to the market to hold above the current 6.4K area and start rising. Otherwise technical view suggests further drop to 4.4K first and ultimately to 1.8K area.

Here we talk on long-term charts, such as weekly and monthly, which mostly reflect not some short-term fluctuations but long-term sentiment. Indeed, fundamental analysis shows that market stagnates in a dead way, not knowing in what direction it could progress. Investors still stand in frustration that we’ve mentioned already – big hopes on institutional investors’ money are not realized, and nobody knows what to do next.

That’s being said we do not see any changes in sentiment that was set last month. And this sentiment promises nothing good to the bulls by far.

 

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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.

As if that wasn't enough, he is the part of the Shoulders of Giants Program. He shares with his fellow traders at FPA his view and forcast of the Gold Market, Currency Market, and Crypto Market in form of weekly analytics and daily video updates.

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Comments

VinceStern
11 days ago,
Registered user
Hi @Sive Morten,

I really appreciate your calm and pondered analysis on Bitcoin, a refreshing professional view very different from those who are crypto enthusiasts and cannot distance themselves.

I'd like to point you to a fresh article on the miner's "financial firepower":

https://medium.com/paradigma-capital/stop-blaming-miners-for-falling-btc-prices-3c2a149cde11

According to this study, it is very, very small in relative size of the market and thus should not be able to move the market significantly. That does not mean the market will not respond to the break of the supposed miner's production cost level, as it is a very emotional market which responds strongly to these beliefs and self-fulfilled prophecies.
Interesting read to have in mind.

Thanks again and keep posting the good stuff, BR!