Cryptocurrency update: Is the BTC bull market back on?

After making strong gains across the past couple of weeks, crypto analysts are suggesting the Bitcoin bull market is back.

Cryptocurrency update

Analyst says crypto bull market could make a return

Bloomberg’s Mike McGlone has stated he believes bitcoin will hit $100,000 this year in a “refreshed” crypto bull market.

McGlone, a commodity strategist, predicts the massive price, despite the May broad crypto sell-off tanking BTC prices. In terms of other coins, Ethereum was McGlone’s other top pick, predicting $5,000 being the path of least resistance.

In September’s Bloomberg Crypto Outlook, McGlone said: “Crypto-assets appear in a revived and refreshed bull market with the 2H benefit of a steep discount from previous highs at the start.”

“We see Ethereum on course toward $5,000 and $100,000 for bitcoin. Portfolios of some combination of gold and bonds appear increasingly naked without some Bitcoin and Ethereum joining the mix,” McGlone continued.

Diminishing supply but a higher level of adoption for practical use may be behind the ETH support. Ethereum’s status as the primary denominator for non-fungible tokens (NFTs), which are dramatically rising in popularity, could also help put prices on an upward trajectory.

The London Fork, a change to the Ethereum blockchain protocol, caused significant coin burn and a drop in overall ETH supply when it went live last month.

Looking to Bitcoin, McGlone believes the $100,000 price is “highly probable, especially after last year’s supply cut. Post-halving years have seen the greatest appreciation, and 4x in 2021 would be quite tame for the No. 1 crypto compared with 55x in 2013 and 15x in 2017.”

Anything can happen in the world of cryptocurrencies. Volatility is the watchword. It will be interesting to see if this most bullish of predictions comes true – especially when we’ve seen the brutal market effects a sustained sell-off can bring.

At the time of writing, Bitcoin futures were trading at $51,812.91 and were up 3.15% on the day.

Ethereum was trading for $3905.05.

Bitcoin price pump El Salvador movement gains traction on Social Media

Twitter and Reddit users are organising plans to support El Salvador’s adoption of BTC as legal tender by buying small amounts of Bitcoin.

By buying up to $30 worth at a time, the users hope this will bring attention to El Salvador’s controversial plan.

On September 7th, El Salvador brings BTC fully into its economy as legal tender. ATM machines have been installed around the country to allow Salvadorans to exchange US dollars for Bitcoin. The government has also a $150m fund to back nationwide conversion efforts.

The $30 amount comes from the fact Salvadorans will be able to download the government’s digital wallet, enter their ID number and receive $30 in Bitcoin going forward.

The whole thing smacks of the recent Gamestop/memestocks market manipulation tactics employed by the more vociferous members of the online trading community. The fact that thousands of online traders could start snapping up more BTC at one time could create ripples that end up with higher BTC/USD conversion rates. That may drain El Salvador’s conversion fund at a rapid rate, and semi-scuppering the launch.

Additionally, the citizens of El Salvador are not particularly keen on the introduction of BTC into their currency system anyway.

A poll by the local Central American University showed that of 1,281 people surveyed, at least 67.9% of 1,281 people disagree or strongly disagree with the use of Bitcoin as a legal tender.

South Korea introduces its first blockchain mutual fund

KB Asset Management, an investment-focussed branch of KB Financial Group, has launched South Korea’s first mutual fund for blockchain technologies.

The KB Global Digital Chain Economy fund will invest in three main areas:

  • Hardware – This includes investment in businesses specialising in the physical products needed to run blockchain servers and/or crypto mining, Companies like NVIDIA, AMD, and Intel are just some of those mentioned by KB Asset Management.
  • Software – Under this umbrella are software suppliers involved in sustaining and creating blockchains, such as IBM, Amazon Web Services and China’s Baidu.
  • Users – The third segment covers companies that have integrated blockchain into their businesses. According to KB, this means it will invest in businesses such as PayPal, Square, NTT Data and Tencent amongst others.

US firms are KB’s primary investment target. A smaller allocation of funds will be put towards companies operating in Japan, Europe, and China.

KB Asset Management had more than $90 billion under management as of February, according to Korea Financial Investment Association data.

Cryptocurrency update: Bitcoin price drop prompts trading fall

The ongoing BTC lull and previous market crash may have caused a freefall in crypto trading volumes.

Cryptocurrency update

Crypto trading volumes fall as BTC price stalls

Trading volumes on major cryptocurrency exchanges dropped over 40% in June according to CryptoCompare data.

The market researcher found that trading activity had plummeted on the largest exchanges, including Binance, Coinbase, Kraken and Bitstamp.

Bitcoin’s current price is likely behind the drop. After peaking at record highs in April, the world’s most popular token has struggled to regain value after crashing to below $29,000 in June.

China’s move to crackdown on crypto mining operations and wrest control of decentralised finance markets into the hands of the government has led to Bitcoin’s struggles. Notably, with Bitcoin miners having to move out of China, the hash rate, or the rate at which new BTC tokens are minted, has fallen. Supply may be even tighter than usual.

Other criticisms around the Bitcoin from an environment, social and governance perspective has also put a dampener on BTC performance. In an increasingly environmentally conscious world, stories of BTC mining consuming as much power annually as Sweden may have put investors off.

The regulatory framework around crypto trading in general is still being hashed out on a global scale. When it comes to Bitcoin, however, intergovernmental bodies like the Financial Action Task Force, are keeping a close eye on its network. Money laundering and using BTC to fund illegal activities is something many watchdogs are keeping a close eye on.

Other financial and institutional bodies are stepping up their efforts to safeguard retail investors against the massive volatility and uncertainty crypto trading can bring too.

Then there are other concerns around the naivety of BTC investors and traders. Many are total newcomers to these two disciplines. They may not have the capital or the experience necessary to whether a Bitcoin bear market, as they only just got in when goings are good.

Even if trading volumes have slumped in June, they are still some of the highest volumes seen in crypto trading yet. But with half the market gone, and the BTC price in the midst of a lengthy correction, it may take something big to entice investors back.

Of course, many large scale buyers with the capital to match may be using this as a period of accumulation. We’ve seen Bitcoin whales snaff up tokens left right and centre during price lulls, and this may be what we’re seeing in the here and now.

El Salvador BTC plans may put a squeeze on the global network

El Salvador’s plan to introduce Bitcoin as legal tender continues to draw flack.

JPMorgan has warned that this would have negative ramifications for both the token and El Salvador should plans go through.

According to a report from the US megabank, such a scheme would put enormous strain on the Bitcoin blockchain network. It would severely limited Bitcoin as a method for exchange, the report said, with issues around illiquidity and the token’s trading nature causing big hurdles.

JPMorgan analysts said that Bitcoin is highly illiquid, noting that most Bitcoin trading volumes are internalized by major exchanges, with more than 90% of Bitcoin not changing hands in more than a year.

“Daily payment activity in El Salvador would represent 4% of recent on-chain transaction volume and more than 1% of the total value of tokens which have been transferred between wallets in the past year,” the report said.

JPMorgan also has worried about convertibility. A continuous imbalance of demand for conversions of Bitcoin and the United States dollar could “cannibalize onshore dollar liquidity” and eventually introduce fiscal and balance of payments risk, according to JPMorgan.

El Salvador’s government passed a bill in June that states Bitcoin would be accepted there as legal tender alongside the US dollar. Under the bill’s stipulations, merchants across El Salvador must accept BTC if offered as a method of payment.

The country also wants to be Central America’s mining hub, with an audacious plan to harness the power of volcanos to power its mining operations.

Coinbase a “tactical trade” says Goldman

Coinbase, the US’ largest crypto exchange, may be on course to beat Wall Street earnings.

The exchange’s Q2 2021 results are due soon as earnings season has begun on Wall Street. Goldman Sachs has identified the stock, which trades under the COIN ticker, as buy.

In an interesting bit of analysis, Goldman researchers say that the current parade of negative crypto headlines could actually be benefiting Coinbase. What Goldman calls “significantly higher elevated crypto asset volatility”, or the wild price action we’ve been seeing in recent months, may have led to increased pre-BTC collapse trading volumes. Coinbase can then capture this activity through its fees.

Even if BTC’s price stays low, Coinbase may be able to profit off uneasy traders looking to divest and others looking to buy in a market downturn.

Goldman acknowledged its analyst’s earnings per share estimate for Coinbase is “11% above consensus” for the year ahead – way ahead of the Wall Street consensus.

Cryptocurrency update: BTC hits accelerator on Telsa u-turn

After hitting the brakes on BTC payments, Tesla appears to have changed its tune, while El Salvador is fully in the cryptocurrency fast lane with a daring new strategy.

Crypto update

Musk’s Tesla Bitcoin handbrake turn

Bitcoin hit the accelerator this morning following yet another market-empowering tweet from Elon Musk.

The Tesla CEO and ardent cryptocurrency supporter has partially u-turned from the automaker’s decision to stop accepting Bitcoin as payment owing to crypto mining’s environmental impact.

Musk said Sunday 13th June that Tesla will resume bitcoin transactions once the electric vehicle maker confirms there is “reasonable” clean energy usage by miners.

In response to a tweet from cryptocurrency news aggregator Coin Telegraph, Musk confirmed his stance, while also addressing questions over Tesla’s own BTC holdings.

It’s not clear how exactly Musk and co. plan to vet crypto miners, or how they would check their green energy credentials. However, this is the first indicator we’ve had that Tesla is shifting its stance following its self-imposed BTC payment ban.

Tesla still owns a substantial number of Bitcoin tokens, valued at anywhere between $1-2bn. In selling a 10% stake in Q1 2021, the carmaker allegedly made more profit from BTC sales than from selling actual cars.

As is commonplace when Musk powers up the Twitter app on his smartphone, this latest tweet has acted as propellant for BTC prices. As of Monday morning, Bitcoin was looking to test the $40,000 level after a few weeks of sideways trading – a 12% leap. We’re still someway off April’s $65,000 record highs, though, and it might take time for the token to reach those levels again.

The environmental cost of cryptocurrency mining has been under intense scrutiny in recent weeks. China has cracked down on mining operations citing massive energy consumption concerns. Iran has banned all such activity until September as blackouts in capital Tehran were triggered by mining operations guzzling up power.

Again, there has been no real indicator as to how Tesla ensures its supply of Bitcoin tokens come from environmentally friendly miners. But green power and clean energy are at the core of Tesla’s philosophy. Ensuring its crypto strategy is in line with basic principles is good for brand image, but it does leave you questioning with a carmaker is dabbling with crypto trading anyway.

That’s legal tender! El Salvador pushes ahead with ambitious BTC plan

El Salvador has become the first country in the world to accept Bitcoin as legal tender.

Under Millennial meme-loving President Nayib Bukele, the Central American state has taken the radical step of turning the world’s most popular crypto into actual, legal currency. It will gain full legal tender status in 90 days’ time.

Merchants were already free to accept payment in BTC at their own discretion, but now they must do so unless they lack the proper technology.

The US dollar will remain El Salvador’s primary currency. Prices for goods and services will be listed in USD rather than BTC for instance. But BTC can now be used for everyday purchases and even for paying taxes.

It’s an interesting move, especially for a digital currency that revolves around decentralised finance. How would paying taxes work exactly – especially when regulators worldwide are keen to crack down on crypto-led money laundering and tax evasion?

What about energy and mining? While the bill that passed BTC into law does not specifically mention mining, President Bukele tweeted a drone-shot video showing a geothermal powerplant in action. Bitcoin by volcano anyone?

The government has set about guaranteeing convertibility of BTC to dollars through a $150 million trust created at the country’s development bank BANDESAL.

Why has El Salvador taken this path? Bukele says the move will help foster financial inclusion, investment, tourism, innovation and economic development.

Bukele is particularly hopeful remittance, i.e. payments sent back home from citizens living overseas, can pick up. Using BTC to pay these would cut out the middleman, and possibly result in billions of extra cash by negating conversion fees.

Others are wary of the decision.

The IMF, with which El Salvador is hashing out a $1bn economic relief deal, states the Central American country’s move “raises a number of macroeconomic, financial and legal issues that require very careful analysis”.

We’ve seen institutional digital currency support rise in recent months – but we’ve also seen numerous regulatory bodies urge caution. An entire country taking the leap to legitimising BTC has legal tender is entirely new ground. Cryptocurrencies, and especially Bitcoin, are inherently volatile. What El Salvador is doing could have considerable blowback.

El Salvador is thus a Central American guinea pig with its legal tender experiment.

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