First Mover: Geek-Fest Gets Relevant As Bitcoin Passes $ 21K, $ 22K, $ 23K

Bitcoin (BTC) was higher for a sixth consecutive day, after climbing 9.9% Wednesday to surpass $ 20,000 for the first time in the cryptocurrency’s 11-year history.

“We expect this slowness to generate ripple effects by the end of the year as bitcoin’s momentum continues to slide upward,” Lennard Neo, lead research at the publisher of digital asset products Stack Funds, wrote in a report Thursday.

Here’s a quick recap of CoinDesk’s coverage of the rally past $ 20K:

In traditional markets, European stocks gained on vaccine hopes and the British pound rose as officials predicted a Brexit deal soon. US stock futures pointed to a higher open position as congressional leaders enacted a $ 900 billion stimulus bill. The dollar slumped after Wednesday’s Federal Reserve meeting disappointed some investors who expected a milder outcome. Gold gained 0.7% to $ 1,878 an ounce.

For those tracking, bitcoin is now up 217% in 2020, about 14 times this year’s gains in the Standard & Poor’s 500 Index of US stocks. Gold is up 24%.

Cumulative year-to-date price returns for bitcoin versus gold and the Standard & Poor’s 500 Index of US stocks.
Source: TradingView / CoinDesk

Market is moving

(Editor’s Note: This is the fourth installment of First Mover’s summary of how the bitcoin market has evolved over 2020 and what it means for the future. Today we will cover the month of May, when the Bitcoin blockchain “halved” once every four years. Extraordinarily high price predictions for the cryptocurrency failed to materialize, but the network-programmed slowdown in the rate of new bitcoin issuance contrasted sharply with the Federal Reserve’s printing money measured in trillions of dollars..)

In early 2020, before the devastating economic toll of the coronavirus on investors became apparent, the main story in the bitcoin market was the impending “halving” – a mysterious event that takes place once every four years on the underlying blockchain network.

Considering the Bitcoin blockchain was only invented 11 years ago, it would only be the third halving in history. It was very technical, but the whole process was hard-coded into the network’s underlying programming, and the basics went like this: At some point in May, the rate of new bitcoin issuance by the blockchain would be cut in half, to about 6 , 25 bitcoins every 10 minutes or so from the 12.5-bitcoin average clip that had prevailed for the past four years.

In general, few surprises were expected, with all the details set out in advance. But that was kind of the point: Under the design of the cryptocurrency, things had to run smoothly, leaving little room for people to intervene based on subjectivity or politics.

These were not ordinary times. In the previous months, the deep economic toll from the coronavirus caused global markets to falter, pushing bitcoin prices down from a high of around $ 10,500 in February to as low as $ 3,850 in mid-March. When the Federal Reserve and other global authorities started pumping trillions of dollars into the financial system, asset prices skyrocketed again, and bitcoin traded as high as $ 9,485 in April.

Cryptocurrency market analysts called the halving a potential catalyst for a price hike; a German bank went so far as to predict that bitcoin could shoot to $ 90,000 or higher.

“Look for prices to try the $ 10,000 level on speculative buzz leading to the halving,” Jehan Chu, co-founder and managing partner at Hong Kong-based blockchain investment and trading firm Kenetic Capital, told CoinDesk in late April. .

CoinDesk even built its own “Bitcoin Block Reward Halving Countdown” to mark the estimated time and date of the big event. With everything going on in the world, the halving got the feel of a nerd fest for crypto insiders. The tension mainly came from looking at the price charts: would the halving drive bitcoin prices to the moon?

CoinDesk’s bitcoin halving countdown clock, starting April 28.
Source: CoinDesk

As it turned out, the halving came on May 11 and turned out to be anti-climactic by virtually all accounts. Business leaders on a CoinDesk half-countdown talk show, held via Zoom, had to pass the time with technical discussions about the future potential of bitcoin mining computers and how much the network’s speed could accelerate over the next four years.

When the blockchain network finally reached block number 630,000, the moment everyone was waiting for, someone posted a snippet of code on Twitter showing that the halving had indeed taken place. There were some huzzahs everywhere and everyone dropped out of the Zoom room.

“This is more of a holiday for the crypto community than anything else,” Mati Greenspan of the foreign exchange and cryptocurrency research firm Quantum Economics wrote in a note to clients.

Over the month, prices have never increased much above $ 9,000.

“We see buy-it-rumors, sell-the-fact at work,” Russell Shor, a senior market specialist with currency trading and cryptocurrency trading firm FXCM, said in email comments.

However, beneath the deflating buzz was a revelation: the blockchain network worked exactly as intended, and even the worst economic crisis since the Great Depression hadn’t thrown it off course.

In addition, the slowdown in the rate of bitcoin issuance contrasted sharply with the monetary policy of the Federal Reserve and other major central banks.

To their credit, the human central bankers did everything they could to keep the world’s financial system from collapsing. But the dynamics meant that bitcoin, with its hard-coded and ever-narrowing supply curve, could serve investors as a bulwark against the downturn in the US dollar and other currencies.

To underscore the point, Chinese bitcoin mining pool f2pool has embedded a message in the blockchain record for data block No. 629,999: “NYTimes 09 / Apr / 2020 With an injection of $ 2.3T, the Fed’s plan far exceeds more than the 2008 rescue. ” It was a headline for a news article from the previous month describing a large-scale episode of the US central bank’s money printing.

Coin Metrics, a cryptocurrency analytics firm, revisited the theme in a report earlier this week, illustrating how the blockchain’s four-year halves can instill confidence in investors looking for assets that are not subject to human discretion and qualitative judgment.

“Halvings will occur every four years until the stock limit of 21 million bitcoin is reached,” the analysts wrote. “This means that we can project far into the future and have clarity about what Bitcoin inflation will look like in one, five or ten years.”

That may be even easier than trying to predict what Federal Reserve Chairman Jerome Powell and his colleagues might do at their next meeting in January.

The halving of the Bitcoin blockchain in May led to a sharp drop in the annual inflation of the cryptocurrency.
Source: Currency statistics

Bitcoin Watch

Bitcoin’s hourly chart shows a high volume rejection rate above $ 23,700.
Source: TradingView / CoinDesk

Bitcoin surged to new all-time highs above USD 23,000 earlier on Thursday, before rapidly declining more than USD 1,500.

The cryptocurrency fell from its all-time high of $ 23,770 to $ 22,185 in the roughly 30 minutes to 9:45 AM Coordinated Universal Time (UTC), representing a decline of 6.7%, according to CoinDesk 20.

The sudden downturn was supported by the highest hourly sales volume since Nov. 26 and indicates upward fatigue. The cryptocurrency could consolidate in the wide range of $ 20,000 to $ 24,000 in the near term. The derivatives market and the activities in the chain suggest room for a continuation of the rally.

While the average funding rate on bitcoin perpetual futures on major exchanges has risen from 0.005% to 0.036%, it remains well below the highest level of 0.093% seen before the November 24 price drop. The funding rate, which is calculated every eight hours, reflects the cost of holding long positions. It’s positive (or longs pay shorts) when perpetuals trade at a premium over the spot price. As such, a very high funding level is widely considered to be a sign that leverage has shifted excessively to the bullish side, or that the terms are over-bought.

In other words, the leverage is not too bullish, which could mean that the cryptocurrency has room to rise further.

Beyond that, there is little sign that major investors are looking to make a profit, with prices easily rising to record highs above USD 23,000. At the time of the press, there were approximately 2,400,000 coins on exchanges. That’s the lowest since August 2018, according to data source Glassnode, and suggests investors are not preparing for a sell-off.

Read more: Bitcoin is down nearly 7% after hitting a new all-time high of $ 23,770

What’s hot

CME Announces Plans To Launch Ether Futures In February (CoinDesk)

Ruffer Investment Confirms Massive $ 744 Million Bitcoin Purchase (CoinDesk)

Paxos Raises $ 142M Series C Financing Following PayPal Deal, OCC Bank Charter Application (CoinDesk)

San Francisco-based cryptocurrency exchange OKCoin now allows users to invest in decentralized financial (DeFi) applications without paying gas fees (CoinDesk)

Cracking Exchange Plans To Integrate Bitcoin’s Lightning Network In 2021 (CoinDesk)

American Express VC Unit Invests In FalconX Cryptocurrency Trading Platform (CoinDesk)

Austrian cryptocurrency trading platform Bitpanda sets up new tech hub in Poland, allocates € 10 million ($ 12.2 million) to fund the center, aiming to create 300 jobs (CoinDesk)

One River hedge fund, backed by Alan Howard’s Brevan Howard Asset Management, emerges as bitcoin buyer with $ 1 billion target, Bloomberg says (CoinDesk)


The latest news about the economy and traditional finance

Federal Reserve Holds Interest Rates Unchanged, Adds Qualitative Guidance on Pace of Money Printing (CoinDesk)

US Congress leaders almost agree to add another round of $ 1,200 stimulus checks to proposed $ 900 billion aid package (Washington Post)

Fifty years of tax cuts for the rich have failed, study says (Bloomberg)

Switzerland, Vietnam labeled as currency manipulators by US Treasury (Washington Post)

Some members of the US Treasury advisory group are calling for large asset managers to buy government bonds directly from the Federal Reserve Bank of New York, adding trillions of dollars in liquidity to the market (Reuters)

Goldman Sachs analysts see 10-year U.S. Treasury yields rise to 1.5% by mid-2021, from around 0.9% now (Reuters)

“Nothing is more reassuring to an investor than knowing that central banks, with much larger wallets, will buy the securities they own,” Allianz’s Mohamed El-Erian writes in an opinion piece (FT)

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