Bitcoin’s 60-day Volatility Plunges to Historic Lows as Consolidation Persists
Bitcoin’s volatility has been diving as of late, with the benchmark cryptocurrency seeing multiple prolonged bouts of sideways trading.
Last week, BTC did see some turbulence that caused its price to rally from lows of $10,400 up to highs of $11,700. This move occurred over multiple days and has since resulted in it seeing yet another phase of consolidation.
Its lack of momentum is not providing investors with any significant insights into its near-term trend, and the resistance that sits just above where it is currently trading at is quite intense.
One result of the recent series of consolidation phases seen by BTC has been its 60-day volatility diving to historic lows.
Typically, this takes place right before the digital asset makes a massive trend defining movement, which could indicate that its near-term price action will have serious implications for where it trends in the days and weeks ahead.
At the time of writing, Bitcoin is trading up just under 1% at its current price of $11,530. This is around where it has been trading throughout the past few days.
Last week, BTC ended a multi-week consolidation phase within the mid-$10,000 region. News of Square acquiring $50 million worth of Bitcoin was the catalyst that helped tip the scales into bulls’ favor.
Now that it is stable within the mid-$11,000 region, bulls and bears are currently battling for control of its near-term outlook.
For bulls to prevail, it is imperative that they surmount $11,600, which is one key resistance level that it has been struggling to break above over the past few days.
$12,000 is another crucial level that needs to be decisively broken above.
Bitcoin has been seeing some wild price swings over the past month, but these have done little to provide the crypto with any type of near-term trend.
It has, however, formed a macro trading range between $10,000 and $12,400. Neither of these levels have been broken throughout the past few months.
This has resulted in its 60-day volatility plunging to historic lows, as one analyst observed.
“60-day BTC volatility sitting near historic lows,” he said while pointing to the chart seen below.
Image Courtesy of Josh Olszewicz. Chart via TradingView.
How Bitcoin continues reacting to $11,600 should offer some insights into whether or not this macro consolidation phase will continue extending further.
- Forget Bitcoin: Here Are 3 Stocks You Should Buy Instead
- Bitcoin Has Hit An ‘Inflection Point,’ Predicts Major Twilio, Pinterest, LinkedIn, And Twitch Investor, Bessemer Ventures
- Bitcoin News Roundup for Oct. 14, 2020
- CFTC Chairman Heath Tarbert Talks Ethereum, DeFi and the Next BitMEX
- A Russian Company Is Opening a Mining Farm in the Arctic
Forget Bitcoin: Here Are 3 Stocks You Should Buy Instead
Amid the chaos of 2020, it’s not just tech stocks that have been a pleasant surprise. The most popular and valuable cryptocurrency on the planet, bitcoin, ended Saturday, Oct. 10, having gained 57% on a year-to-date basis.
There are a number of reasons for bitcoin’s ascent in 2020. For example, bitcoin’s block rewards — i.e., the amount of bitcoin awarded to cryptocurrency miners for proving the validity of transactions across its blockchain — were halved on May 11. Historically, bitcoin has run up substantially prior to a halving event.
Image source: Getty Images.
Bitcoin has also benefited as a safe-haven investment in the wake of the coronavirus recession. With cash use discouraged due to possible virus transmission, a strong case has been made for digital payments to replace cash.
Also, don’t forget that bitcoin acts as the bridge currency that investors often have to purchase if they choose to invest in other less-common cryptocurrencies (those not named Ethereum or Ripple). This creates a steady level of demand and ownership for what’s perceived to be a limited token.
But if you ask me, there are much better ways to invest your money than by purchasing bitcoin. The issue with the most popular cryptocurrency is twofold.
First, there’s a scarcity-versus-utility problem. Since a substantive percentage of outstanding tokens are held by investors who have no intention of using their coins to make purchases, the utility of bitcoin as a purveyor of digital transactions is quite low. Since programming is all that keeps bitcoin’s token limit at 21 million, this could be overridden in the future. Thus, bitcoin either has limited utility or scarcity — not both.
The other issue I have with bitcoin is that fiat currencies are being tested in conjunction with blockchain. The real value in crypto technology is in the underlying blockchain, not the token itself. Since buying into bitcoin gives folks no ownership of the blockchain, investors are, arguably, buying into the wrong asset.
Instead of buying bitcoin, here are three considerably smarter stocks to buy with your hard-earned money.
Image source: Square.
If you absolutely want bitcoin exposure, the best way to do that would be to buy fintech stock Square (NYSE:SQ).
Square’s longest-running operating segment, and the one most folks are going to be familiar with, is its seller ecosystem. Square has been supplying point-of-sale devices and analytics to small businesses for the past eight years. The seller ecosystem primarily generates revenue from merchant fees, and has seen gross payment volume traversing its network grow by a compound annual rate of 49% between 2012 and 2019.
However, the long-term growth driver for Square is peer-to-peer digital payment platform Cash App. In the 2-1/2 years between the end of 2017 and June 2020, Cash App’s monthly active user (MAU) count more than quadrupled to 30 million, with some 7 million MAUs also using Cash Card. Cash Card is a traditional debit-card that links to a users’ Cash App balance.
Last week, Square announced that it had purchased 4,709 bitcoin for $50 million, bringing its total assets tied up in in the most popular digital token to approximately 1%. While Cash App does collect merchant fees and expedited transfer fees from its users, it’s especially popular for bitcoin exchange and investment. If you want to put your money to work in a company with a bright future and exposure to bitcoin, Square is it.
Image source: Getty Images.
Another smart way to put your money to work is to buy Singapore-based Sea Limited (NYSE:SE). Sea gives investors access to Southeastern Asia, which remains a largely underbanked region of the world, yet is experiencing a windfall of growth from a burgeoning middle class throughout the region.
To date, Sea’s gaming division has been its breadwinner. Mobile hit game Free Fire helped push adjusted revenue in its digital entertainment segment up 62% from the prior-year period in the second quarter. The company also announced that quarterly paying users jumped 91% from the prior-year period. But the dominance of digital entertainment won’t be long-lived for Sea Limited — and that’s actually a good thing for investors.
The far more exciting operating segment for the company is its Shopee e-commerce platform. Adjusted revenue rose by more than 187% in the most recent quarter, with gross orders up 150% from the prior-year period and gross merchandise value crossing its network more than doubling to $8 billion. Without question, the pandemic played a role in bolstering online orders throughout Southeastern Asia. But it’s not as if Shopee wasn’t growing like a weed before the coronavirus pandemic hit.
Additionally, Sea launched SeaMoney in 2014, which today provides mobile wallet services and payment processing for individuals and businesses. In Q2 2020, the number of paying users for its mobile wallet services topped 15 million.
If your heart is set on digital payments, skip bitcoin and enjoy the high-growth and digital exposure you’ll get with Sea Limited.
Image source: Getty Images.
Third and finally, I’d encourage investors to avoid bitcoin and buy into Shopify (NYSE:SHOP). If your thesis surrounding bitcoin is that it could lead to a digital purchasing revolution, cloud-based e-commerce solutions provider Shopify is the company for you.
According to the company, it already possesses the second-highest share (5.9%) of U.S. retail e-commerce in the consumption-dependent United States. While that’s more than 31 percentage points behind Amazon, which dominates the online retail space, Shopify has seen gross merchandise volume (GMV) catapult from $7.8 billion in 2015 to $61.1 billion by 2019. For context, Shopify’s GMV was over $30 billion just in the coronavirus-challenged second quarter, so it’s well on its way to surpassing its GMV from last year.
The beauty of the Shopify platform is that the company is only scratching the surface, in terms of addressable market, yet is already the second-largest online retailer by GMV. Only within the past couple of years have larger businesses begun using its cloud-based e-commerce solutions, which comes atop an estimated $78 billion in total addressable market from small businesses (which have long been the company’s primary target).
What’s more, this is a subscription-driven business model that’s highlighted by robust margins and minimal client churn. During the second quarter, monthly recurring revenue from its core solutions and Shopify Plus accounted for 86% of total sales.
This is a high-growth company that’s still in the early innings, and investors would be wise to choose it over an investment in bitcoin.
Author: Sean Williams
Bitcoin Has Hit An ‘Inflection Point,’ Predicts Major Twilio, Pinterest, LinkedIn, And Twitch Investor, Bessemer Ventures
Bitcoin has been pushed into the limelight in recent weeks by a number of high-profile companies investing in the cryptocurrency.
The bitcoin price has soared through 2020, climbing over 60% since January, however, the flood of recent groundbreaking announcements has failed to give bitcoin much of a boost.
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Bitcoin has attracted some high-profile investors and supporters over recent months.
“We strongly believe bitcoin will become a globally accepted asset class that institutions will increasingly seek portfolio exposure to given its asymmetric risk profile, scarcity characteristics, and ability to serve as a digital store of value,” Bessemer Ventures wrote in a blog post outlining its “thesis across the crypto landscape.”
“With the rapid expansion of central bank balance sheets around the globe, bitcoin is poised to serve as ‘digital gold’ and a hedge against future inflation,” the post, authored by four Bessemer partners, investors and advisors, read.
Bessemer has recently taken part in a $50 million fundraising round for New York Digital Investment Group (NYDIG), a subsidiary of New York-based asset manager Stone Ridge, Forbes revealed this week. NYDIG, formed in 2017 to “bring regulatory-compliant services to the institutional space,” is the custodian of Stone Ridge’s 10,000 bitcoin tokens, valued at $115 million at today’s price.
Bessemer, pointing to digital asset manager Grayscale reporting record inflows into its bitcoin fund quarter-after-quarter, now expects institutional demand for bitcoin to accelerate, partly due to the work done by NYDIG to create “a trusted custodian for digital assets.”
“Institutional demand for this emerging asset class has hit an inflection point,” according to Bessemer. “The technical hurdles and regulatory friction have made it difficult for institutions to invest and manage these new stores of value—until now.”
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Derivatives trading is quickly emerging as one of the most exciting opportunities in bitcoin and … [+] crypto, according to Bessemer, and “has room to run.”
Elsewhere, Bessemer predicts the relatively small bitcoin options market, which has only emerged over the last couple of years, will continue to grow.
“Options only account for ~1% of the average daily trading volume for bitcoin today, relative to 20%-25% in more mature markets like equities, oil, and gold,” the Bessemer blog post read. “While still nascent today, derivatives trading is quickly emerging as one of the most exciting opportunities in crypto.”
Author: Billy Bambrough
Bitcoin News Roundup for Oct. 14, 2020
Cryptocurrency markets are sending strong signals right now that the innovations coming from fast-emerging technologies like decentralized finance, or DeFi, could shake up the global order of banks and money managers and insurance companies.
Talk of returns and yields was salted throughout the technical discussions of protocols and governance systems and blockchain arcana like “layer 1” and “layer 2” and “rollups” and “shards.”
Even traditional-market regulators are starting to acknowledge the growth possibilities that cryptocurrency bulls have been betting on for years.
DeFi, in which developers are using open-source software to create semi-automated lending and trading systems atop blockchain networks, proved its potential in recent months as projects like Compound and Uniswap attracted billions of dollars of crypto collateral. A series of “yield farming” projects like Yearn.Finance have made it easy to rack up extra token rewards, a way of juicing fixed-income returns in digital-asset markets.
The crypto industry appears to have emerged from its larval phase into the pupal: The form is taking shape, but coming-of-age challenges are yet to be overcome, from reliability to marketing and of course scaling to the point where millions of users can be accommodated.
There are steep risks, as with the past few months’ flame-outs of DeFi projects like SushiSwap, whose founder suddenly decided to cash out tokens at the top of the market, crashing the market, and Yam, which succumbed to a bug.
“In many cases you can risk permanent loss of your capital by participating in some of these activities,” Ryan Watkins, a senior research analyst at Messari, said on one of the panels.
And it’s premature to compare the scale of cryptocurrencies to the traditional financial system.
“The future is dynamic portfolios that are expensive to construct in traditional finance,” said Tarun Chitra, CEO of Gauntlet, a simulation platform for crypto networks. His Zoom feed was the most colorful by far:
Another company, Blox, plans to help customers pool ether (ETH) to get past a threshold needed to “stake” on the Ethereum blockchain. Staking is similar to holding an interest-bearing deposit and will go live with a major upgrade purportedly to arrive by the end of 2020.
In one of the panels at the conference, David Hoffman, founding father of the DeFi-focused publication Bankless, mapped out the bullish case for ether and said prices could climb to $10,000 or higher, from about $380 now.
In a subsequent session, Vishal Shah, founder and CEO of the crypto derivatives exchange Alpha5, mapped out the bearish case but concluded by saying prices could double under that scenario.
Ether prices have already tripled this year. The lofty valuations might just be hype. Or they might be a sign that cryptocurrency traders are looking ahead to the industry’s maturation.
The bitcoin market has turned indecisive, according to Wednesday’s doji candle.
Key indicators like the 14-day relative strength index remain biased bullish. Additionally, the 5- and 10-day averages continue to trend north, indicating the path of least resistance is to the higher side.
Further, recent disclosures of bitcoin holdings by payments company Square and Stone Ridge Asset Management has validated the cryptocurrency’s appeal as an alternative investment.
As such, odds appear stacked in favor of a continued bull run. That said, in the short-run, the cryptocurrency remains vulnerable to sell-offs in the global equity markets. At press time, bitcoin is trading in the red near $11,340.
– Omkar Godbole
Ethereum’s Vitalik Buterin calls on power users to move to layer 2 scaling. (CoinDesk)
U.S. Justice Department’s 83-page cryptocurrency enforcement framework is shot across the bow to international exchanges. (CoinDesk)
Algorand’s new Europe accelerator to boost startups with up to $500K in funding. (CoinDesk)
Hopes fade for a U.S. stimulus package. (CNBC)
Federal Reserve vice chair says it’s an “open question” whether U.S. central bank will have to keep buying Treasury bonds indefinitely. (WSJ)
Pandemic response will drive up global public debt to a record, IMF says. (WSJ)
The world’s biggest economies have extended a program allowing the poorest nations to suspend debt repayments. (WSJ)
Finance chiefs of five biggest U.S. lenders have mixed views on Covid economy. (Reuters)
Author: Published 21 hours ago on October 14, 2020
By Republished by Plato
CFTC Chairman Heath Tarbert Talks Ethereum, DeFi and the Next BitMEX
“Let me just basically say how impressed I am by Ethereum, full stop, period.”
The fireside discussion picked up where a similar conversation last year left off: How Ethereum and its expected shift to a proof-of-stake consensus mechanism might fit into U.S. commodities laws.
“I’m not willing to say necessarily that” governance by staking would definitely put Ethereum 2.0, the coming reboot of the world’s second-largest blockchain, into a securities classification, he said. “It’s still decentralized in a way that your typical company or even a cryptocurrency that really has a company standing behind it” isn’t.
Ether (the blockchain’s native cryptocurrency) right now is considered a commodity, similar to bitcoin, the only other cryptocurrency with a regulated derivatives market in the U.S. However, it’s unclear whether a proof-of-stake network would be treated similarly under U.S. law or if it would more closely resemble a security.
“The more decentralized it becomes over time and the more that it effectively runs itself, the more likely it is it’s going to fall within the commodity category and not the securities [group],” Tarbert said.
This issue is contingent on what the U.S. Securities and Exchange Commission (SEC) says, Tarbert said.
“We usually defer to the SEC’s views on [what is] a security, so if the SEC says ‘this is not a security,’ then we’re generally confident we can come in at that point and say it’s a commodity,” he said.
Tarbert has been an outspoken supporter of the cryptocurrency space since his arrival at the CFTC in mid-2019. Under his tenure, the first Ethereum-based derivatives contracts entered the U.S., validating a view he expressed last year. More recently, he said that “a large part” of the financial system could end up existing in a blockchain format.
It was in that spirit Wednesday that he addressed the burgeoning DeFi field, where a dizzying array of complex products have presented novel challenges for regulators. On the one hand, he saw cause for optimism.
“The whole idea of DeFi really is, number one it’s obviously revolutionary, and I think at the end of the day, could lead to a massive disintermediation of the financial system and the traditional players,” Tarbert said. “And ultimately, [it] could potentially even reduce systemic risk in some ways because we don’t have the finance system concentrated in these large globally, systemically important institutions.”
Tarbert does not expect this shift to happen immediately, saying it could be “decades” away, but the potential for this sort of disintermediation does mean that involved parties should be asking questions about network resilience.
“If we think about [if] a large portion of our global financial system winds up on Ethereum, then we have real concerns about the theory … what if Ethereum went down?” he asked.
Tarbert did not provide a firm answer about how assets involved in or issued by DeFi projects might fit into securities or commodities laws, noting that it could depend on what the digital contracts do and how tokens are distributed.
When asked about Uniswap’s airdropped UNI governance token, Tarbert said it “has some features” of a security, but also “significant differences,” not least of all the fact that the assets were distributed for free.
“If people didn’t necessarily pay for it … then it’s hard to see, at what point there would be an economic loss,” he said. Again, though, the CFTC chairman said this would be something for the SEC to consider.
If regulators aren’t bringing actions against potential violators of securities laws, private individuals can still bring their own lawsuits, Tarbert said, at which point a court would have to decide.
So-called fair token distributions like Yearn.Finance’s, where tokens aren’t set aside for the project’s founding team, are also a tough call.
“The issue with fair launch, that takes the founders out of it,” but there are still concerns about market manipulation which the regulators might still have to evaluate, Tarbert said.
Making Ethereum more environmentally-friendly would be an additional benefit from shifting to proof-of-stake, Tarbert said during the chat, noting that proof-of-work, the consensus mechanism currently used by the blockchain (and pioneered by Bitcoin) requires energy-intensive machinery.
“There are issues with mining, of course, so number one [is] environmental issues,” he said. “And so I think we were generally supportive as a larger matter in reducing … the environmental footprint and moving to proof-of-stake clearly does that.”
He likened current transaction costs on Ethereum’s congested network to the cost of flying across the country compared to buying a car in the 1930s.
“At some point, we’ve got to move in terms of scale and efficiency to deal with environmental issues but also to deal with the cost issue,” he said. “I see proof-of-stake as being potentially helpful.”
The CFTC recently brought an enforcement action against BitMEX, one of the world’s largest crypto derivatives exchanges. In charges unveiled this month, BitMEX is accused of allowing U.S. residents to transact on its platform without registering as a futures commission merchant or obtaining other licenses.
BitMEX also failed to comply with the Bank Secrecy Act in conducting know-your-customer and anti-money-laundering procedures, the CFTC alleged alongside prosecutors with the U.S. Attorney’s Office for the Southern District of New York.
“I want the U.S. to lead in digital assets,” Tarbert said, explaining why the agency pursued BitMEX. “What we want, our desire is to create an environment where innovators in digital asset exchanges can grow up here in the United States, they can come to places like the CFTC and get a license and they can benefit from our regulatory regime. What we don’t want to see are offshore exchanges that are effectively flouting U.S. laws.”
The agency has an “obligation” to go after non-compliant exchanges, he said. When asked if the agency is looking at other platforms as well, he answered: “I’ll say maybe.”
A Russian Company Is Opening a Mining Farm in the Arctic
BitCluster, a cryptocurrency mining company in Russia, is setting up shop where few dare to wander.
A new mining farm above the Arctic Circle, in the industrial area of Norilsk in the Taymyr Peninsula, will provide 11.2 megawatts of power for mining bitcoin. The farm will be working as a “mining hotel,” meaning that it will be hosting application-specific integrated circuits (ASICs) for customers, charging them for electricity consumption.
The first client will be from China, she added. BitCluster is now working on the logistics to move that client’s mining machines from Sichuan province to Norilsk, where the price for electricity is quite cheap, at less than 4 cents per kilowatt/hour. The client’s name was not disclosed.
“On Oct. 24, the rainy season in China ends,” Arestova said. “So they will have their electricity tariffs raised. Chinese miners will start moving around, looking for better tariffs.” BitCluster might have a small bunch of its own ASICs in the venue, too, but that will be a small part of the entire farm, Arestova said.
The plans got the blessing from Norilsk’s local authorities. Alexander Pestryakov, the chairman of the Norilsk city council, said the mining farm’s launch is “only the beginning of the digital reality of Norilsk,” as quoted by Norilsk’s newspaper, Zapolyarnaya Pravda, which earlier announced the opening of the mining farm.
“The construction of data centers in the Arctic will attract large investments there, which will undoubtedly become a driver of regional development,” Pestryakov said.