Time To Wake Up

The Bull-Run continues

Tuesday, 17th November 2020 – An avalanche of bullish market events, data, statistics and supporters came to light last week. We are continuing with the previous week’s bullish sentiment, and now seeing a clear case that investors are waking up, on all fronts. Financial services vendors like Galaxy Digital and PayPal are preparing for the looming run of institutional and retail investors into the crypto market. Hedge fund managers and analysts, which have been in denial and silence for years, now can’t stop talking about Bitcoin. Without that being not interesting enough, we are now also seeing new market patterns emerging and being confirmed. But first, before we dive into new market patterns, we take a deep-dive into the markets and close this week’s review with an outlook of what we can expect to come.

Bitcoin’s Bull Run and Institutional Interest

Stanley Druckenmiller, another hedge fund manager, announced his interest and holdings in Bitcoin – showing us a tendency of where smart money is heading to. JPMorgan issued another positive report about Bitcoin’s value to its institutional clientele – JPMorgan, the largest Bank by market cap, presenting further support to its institutional customer base by nature, supports the current market trend. While Spot volumes decreased drastically in October, Derivatives volumes stayed constant – which indicates increased institutional market participation. 

CME Bitcoin futures reached new all-time highs, in terms of usage – the CME is the go-to futures exchange for wall street traders. According to data from Dune Analytics, about $360 million worth of Bitcoin were tokenized in October, notably less than the $737 million in September – tokenized Bitcoin being mainly used as collateral for DeFi lending platforms, showing a clear trend of capital flowing back into Bitcoin. Tether reached $18 billion in market cap, growth in line with Bitcoin’s price surge – increasing supply of stable coins reflects the surging demand for cryptocurrencies.

The number of active Bitcoin wallets hit a new all-time high – high network usage usually indicates a positive market sentiment. Celsius reports it’s doubled its Crypto holdings to $2.2B in six months – the second biggest Crypto lender presenting us with strong numbers, adds to the bullish market perception. According to data from Coinwarz, Bitcoin’s hash rate saw a 43% increase in just two days, on November 9 – the rapid surge in Bitcoin’s aggregated hashing power (the speed at which Bitcoin is being mined), reveals that big mining operators prepare for the upcoming bull run. 

Based on data apprehended from Arcane Research, Bitcoin’s daily trading volume is up by 270% this week and pushes past three billion U.S. Dollar – the numbers demonstrate a confident upwards trend. With $759 million raised, VC investments into Crypto startups rose by 3x in Q3, compared to Q2 this year – the immense growth adds to euphoric market direction. The mempool (Bitcoin’s backlog in outstanding transactions) was cleared after we’ve seen an increase in hashing power earlier in the week, resulting in plummeting Bitcoin fees and contributing to its network activity – as already indicated, high network activity is generally correlated with robust market sentiment. 

The World Economic Forum calls out blockchain to be the key to sustainable digital finance – besides market data, we’ve also got the support now, of the largest economic organization, representing the leading economic forces on this planet. Bitcoin’s options market data demonstrates a bullish mood – “Skew’s data shows the net demand for call options, or bullish bets, is outstripping the net demand for puts, or bearish bets” Omkar Godbole from CoinDesk reports. For the first time in three years, Bitcoin price is shooting beyond $16k – All-time high after all-time high, with no end in sight. 

⁠Ray Dalio is under the strong impression that nations will outlaw Bitcoin if the price keeps rising – seemingly, like many other seasoned investors, Ray hasn’t spent much time learning more about the largest cryptocurrency by market cap, which he never spoke about previously either. However, increased mainstream media attention shows where Bitcoin currently is: at the center of attention. 

After announcing its move into the new emerging asset class last month, PayPal released its buy and sell service for Cryptocurrencies now to U.S. customers – with 43.86% of its 346 million active worldwide customers, using the service in the US, we have about 152 million customers now being able to purchase Cryptocurrencies. PayPal also increased the weekly purchase limit from $10k to $20k, due to unexpected demand levels seen in the testing period. Furthermore, we have 55 million Bitcoin wallets in existence and not even a million of them are on average showing daily activity (until recently). Adding 152 million potential market participants and comparing it to the current active amount of participants, shows what lays in front of us.  

Galaxy Digital’s Bitcoin Fund reflects market euphoria with a 17% return in its third quarter earning and announces two acquisitions, adding to its institutional product and services portfolio  – like Celcius Network, big market players present us with numbers we can use to predict where the market is going. Not only do we see a strong third quarter, but we also see that old school wall street investor, Mike Novogratz, is preparing for the looming institutional run into Crypto.

Brian Kelly, another hedge fund manager who shared in the past his support for Bitcoin, says that the increasing attention of larger investors towards Bitcoin is down to its fixed supply and that central banks all around the world will move towards digital central bank currencies – here we not only see further backing of the current market notion, but also clear signs of central bank adoption of Bitcoin’s underlying core technology: Blockchain. Adoption is another clear indicator of growing demand.

Market Patterns – Short Term Gains in DeFi and Traditional Markets after Cool-off

While the largest Cryptocurrency by market cap pushes past $16k and outperformed Gold and Stocks, it makes a strong case for its low correlation to other asset classes – in an escalating geopolitical environment and with climbing marco-economic uncertainty, investors look for alternative strategies to decrease risk in other types of assets in their portfolio. 

Despite Ethereum suffering infrastructure issues on November 11, prices keep rising – although, we do see a staggering amount of hacks in the DeFi space and even Ethereum, the second largest cryptocurrency by market cap, experiencing issues related to its infrastructure, the market seems to be so inherently bullish that we didn’t even see any negative impact in price action. 

The announcement of a potential vaccine candidate induced Bitcoin’s price to go sideways and allows DeFi, Ethereum, and altcoins to rally higher – sideways movements or even larger dips, in a bull market, are very common. Now, other cryptocurrencies, which tend to follow Bitcoin’s direction after a breather, have the opportunity to gain from the heightened market attention and so they did.

With $13.9 billion, the total amount of cryptocurrencies locked in the DeFi space is hitting another record on November 14 – also here we are seeing clear indications that DeFi coins are gaining momentum after the largest cryptocurrency is taking a pause. Transactions higher than $100k increased by about 280% from the previous week – not only do we make out clear signs that that momentum is shifting towards DeFi, but also that institutional investors are moving back in.

After reaching $16k the amount of Bitcoin holders in profit peaked at 98% – the highest level since 2017. That leads us to two scenarios, investors will either take their profits or, as we have also seen in the months leading up to the ATH in 2017, the price will continue to rise and hit new record heights after record heights.

The stock market ends the week in profit, while Bitcoin dips below $16k – coinciding with Bitcoin’s weekend sideways movement is the rise of the stock market. Wall street ended the week with new record highs, following the Covid-19 vaccine breakthrough this week. A similar story unfolded the previous week, as stocks performed well on Friday, closed, and then Bitcoin moved again: sideways. Which makes us wonder, where are we heading next?

Outlook

Famous ⁠Bitcoin analyst, Willy Woo, predicts price peak in December 2021 as main bull run begins now – Willy compares the current price movement with the previous market cycle, which began right after the Bitcoin halving, about 4 years ago, in July 2016. Bitcoin’s halving event is, like its limited supply, programmed into its underlying core code and decreases its supply, every four years by 50%. This year it happened in May, led to a short cool-off in the market and continued with the increase to current price levels, due to the decrease in supply. A likely outcome if market cycles repeat as they did in the past, which they tend to do.

Well-known strategic investor, Lynn Alden, says that macro factors could lead Bitcoin to $1 trillion in market cap – with Central Bank money printing and the distribution of the announced COVID-19 vaccine, likely going to take the entire next year, the macro-economic outlook remains uncertain. With such uncertainty, we will surely see Bitcoin continuing to rise. $1 trillion in market cap would be an increase by 3.3 fold, which seems very likely, looking at all the other events noted in this market review.

Through a leaked report, we learned over the weekend that a Citigroup executive predicts a $318k Bitcoin price target for Bitcoin until Dec 2021 and compares the current market cycle to the 1970s Gold market – to many traders and analysts, technical analysis seems to hold esoteric values. However, the comparison to the Gold market cycle in the 70s might hold larger value in justifying the price prediction. Gold experienced a 50 years of a compressed price range between $20–$35, before a breakout took place after a change in monetary policy by Nixon in 1971. Something very likely to happen, taken today’s marco-economic situation.

Conclusion

In retrospect we can always analyze the data that lies at hand and identify the changing narrative of market sentiment. According to well-respected System Trader, Brent Donnoly, identifying the market narrative should help to make more informed trading decisions. Such narrative for instance is that when Bitcoin is losing momentum, the DeFi and altcoin market is gaining strength. And another strong narrative, that has been built up over the past weeks, and confirmed to an extreme extent, is that we are by far in a bull-market cycle. A bull-market cycle also includes short-term dips, in Bitcoins case sometimes quite significant dips. It will happen, maybe this week, maybe next week, maybe next month. Be prepared and manage risk. 

Still not sure about Bitcoin? Read Fidelity’s latest article, issued by its research team over the weekend, addressing Bitcoin critics. 

Further, a Summary of Market Events

Regulations

• SEC’s Peirce: Regulations Are Slow Because They Need to Be 09/11 CD
• UK Treasury to publish draft stablecoin regulations 10/11 TBC
• ShapeShift Confirms Regulatory Risk Led to Privacy Coin Delistings 10/11 DC
• ⁠OCC’s Brian Brooks testifies to the importance of crypto before US Senate 10/11 CT
• ⁠Biden taps crypto-savvy former CFTC chair for transition team 11/11 CT
• ⁠OCC is too caught up in crypto under former Coinbase exec, congresspeople say 11/11 CT
• ⁠Cuba’s exploding crypto interest comes amid an absence of regulation 11/11 CT
• ⁠The SEC collected $1.26 billion from unregistered ICOs in 2020 12/11 CT
• Pakistan’s SEC Discusses Cryptocurrency Regulation,
  Central Bank Confirms No Crypto Ban 15/11 BN
• ⁠The US SEC amendments and SAFT process 15/11 CT
• ⁠Incoming Senator hopes to ‘bring Bitcoin into the national conversation’ 15/11 CT
• ⁠‘Slippery slope’ as new Bitcoin mining pool censors transactions 12/11 CT

Continuous Adoption in Traditional Finance

• ‘Dr Doom’ Nouriel Roubini Admits Bitcoin May Be a Store of Value,
  Sees Big Revolution in Central Bank Digital Currencies 09/11 BN
• Billionaire Stan Druckenmiller Owns Bitcoin,
  Calls It Attractive Store of Value That Could Be Better Than Gold 10/11 BN
• ⁠One of the world’s top banks issues bonds that can be bought with Bitcoin 11/11 CT
• Meet the $10B Asset Manager With a 10,000 BTC Treasury 12/11 CD
• ECB’s Lagarde Says Digital Euro May Launch in 2-4 Years 12/11 CD
• How Ant’s Suspended IPO Is Related to China’s Digital Yuan 12/11 CD
• Deutsche Bank: central bank digital currency will replace cash in long term 12/11 TBC
• ⁠PayPal’s crypto trading goes live in the US 12/11 CT
• From PayPal to Libra: Big Tech Has Forced Central Banks to Wake Up to CBDCs,
  Says Benoit Coeure 13/11 CD
• ⁠Belarus’ largest bank reportedly launches crypto exchange service 13/11 CT
• “Banks will have to adjust” to crypto, says Bank of England leader 13/11 CT
• Hedge Fund Manager Brian Kelly Says Increasing Institutional Interest in Bitcoin
  Down to its Fixed Supply 14/11 BN
• ⁠Galaxy Digital Acquires 2 Crypto Firms, Sees Big Wave of Institutional Demand for Bitcoin 14/11 BN

Emerging DeFi

• Bitcoin is peerless thanks to early distribution, CoinMetrics analysts argue 10/11 CT
• Crypto exchange FTX lists futures on tokenized stocks, with up to 100x leverage 10/11 TBC
• ⁠Ethereum 2.0 deposits at 10% of launch threshold as deadline approaches 10/11 CT
• ⁠Bitcoin is peerless thanks to early distribution, CoinMetrics analysts argue 10/11 CT
• TrustToken Taps Chainlink for On-Chain Proof of Reserves for TrueUSD Stablecoin 11/11 CD
• ⁠Sam Bankman-Fried believes even ETH 2 can’t handle DeFi’s potential growth 11/11 CT
• ⁠Uniswap ‘community call’ will discuss extending liquidity mining rewards 11/11 CT
• ⁠Binance pauses Ethereum withdrawals as network suffers ‘minor hard-fork’ 11/11 CT
• Developers Debate Disclosure Protocols After ‘Accidental’ Ethereum Hard Fork 13/11 CD
• Brent Crude Oil Futures Now Tradable on DeFi Exchange Synthetix 12/11 CD
• Total Value Locked in DeFi Sector Hits Record $13.6B 12/11 CD
• Report: Blockchain Price Oracle Manipulation Produces Millions in Losses,
  Shows No Signs of Slowing 12/11 BN
• ⁠Institutional money is pumping the DeFi markets back up 12/11 CT
• DAO treasuries still down 40% after October’s DeFi downtrend 13/11 CT
• ⁠DeFi the odds: Total user numbers up 55% in just six weeks 13/11 CT
• The DeFi market desperately needs to connect with real-world assets 14/11 CT

Scandals, Investigations & Hacks

• ⁠U.S. law firm says IRS is coming after Coinbase users who evade taxes 11/11 CT
• Sharktron Defi Project Devs Exit Scam: Tron Foundation Says
  Part of Missing Funds Now Frozen 10/11 BN
• Kucoin Recovers 84% of Funds Stolen in $280 Million Hack 11/11 BN
• ⁠U.S. law firm says IRS is coming after Coinbase users who evade taxes 11/11 CT
• Bad Loans, Bad Bets, Bad Blood: How Crypto Lender Cred Really Went Bankrupt 12/11 CD
• $300M in Bitcoin Flow to Binance From Huobi as China Gets Tougher on Exchanges 13/11 CD
• DeFi Platform Akropolis Admits to Being Hacked for $2 Million 13/11 DC
• ⁠Silence is not golden: OKEx still quiet as customers seek answers 13/11 CT
• ⁠CZ: Binance traders find ‘intelligent’ ways to circumvent US block 13/11 CT
• Value DeFi Suffers $6M Flash Loan Attack 14/11 CT