Productive assets primed for uplift in stimulus driven markets
Recent weeks have seen regulators drop down the hammer on various cryptocurrency operations. BitMEX founders saw the CFTC pull the trigger on a lawsuit for potentially servicing US clients. The outspoken John McAfee who steered many Initial Coin Offerings (ICO) is now heading for a lawsuit against the US Securities and Exchange Commission (SEC). The Financial Action Task Force (FATF) placed ‘geographic red flags’ around cryptocurrency operations that could lead to money-laundering. And the latest, although expected, has come from the UK’s financial body, the Financial Conduct Authority (FCA), who has banned the sale of derivatives and Exchange Traded Products (ETP/ETN) to retail investors. This was then followed-up by further banning products that track cryptocurrency prices as the watchdog said that there is “no reliable basis for valuing cryptoassets.”
Moot Precautions?
The whirlwind of action coming from regulators across the globe although raises alarm bells, have mostly fallen on deaf ears for Bitcoin traders who continue to hold a long-term perspective. Price remains above the 10k mark despite some intra-day volatility that didn’t unravel as previous bearish incidents. In fact, data analytics and trading platform Skew shows that realized volatility has his a three-year low.
Chainalysis’ Chief-Economist Philip Gradwell has taken positions for Bitcoin fundamentals and prices on both the short-term and long-term in a recent Market Intel report. Bitcoin saw a 60k drop in liquidity as investors withdrew back into wallets. Mr Gradwell interprets this as investors holding a long-term “conviction about bitcoin using the relatively lower prices as an opportunity to increase their holdings.”
New dimensions are being added to the cryptocurrency world. Nearly 100k Bitcoins now sit wrapped on the Ethereum blockchain as traders take opportunities on Decentralized Exchanges at a premium.
Messari founder Ryan Selkis has his own take on recent developments in this arena. “While sophisticated firms are putting BTC’s newfound utility to work, these developments present plenty of opportunities for the average BTC holder as well. You can earn passive income by lending WBTC or by depositing it into AMM pools to provide liquidity for traders and earn trading fees.”
TradeBlock data shows that Ether being deposited on DeFi apps continues to hit new highs. “The total value of digital currencies deposited in DeFi smart contracts hit a new all-time high this past week, cruising past $10 billion in notional value” turning Ethereum into a very active trading asset. DeFi tokens are however beginning to take a hit.
Elections to test Bitcoin
Bitcoin now enters its first elections since having become a world renowned cryptoasset being traded on institutional exchanges such as CME and offerings from Bakkt. This will be the first true test for the cryptocurrency as US stimulus and election jitters weigh in on global markets.
With Bitcoin continuing to tether itself closely to market movements, it has yet to find a clear foot direction against gold or the S&P500. Scenarios are plentiful and the infamous Winklevoss brothers have taken a crack an analyzing the potential of a $500k Bitcoin.
“What’s tragic is all the trust people have put into governments, the Fed, and “leaders.” Years ago I decided to put my trust in math, instead. That’s why I own #Bitcoin, ether, and whole slew of other cryptos. I’ve hedged my bets, not taking any chances.” Tyler Winklevoss — Tweet
Hyperinflation fears have come to play worldwide. While there has been little evidence of any increase in goods and services, a weak economic base caused by rapid stimulus can prove a boon for productive assets such as gold, cryptocurrency, and real estate.
Investors looking for a meaningful return are likely to begin considering Bitcoin even more as even real estate rental returns become soft due to coronavirus pressures on employment as well as having sidelined commercial properties.
What is becoming evident by the day, is that institutional investors and larger traders are really ‘hodling’.
