29th OCTOBER 2019
NI HAO BITCOIN & BLOCKCHAIN
Coming straight out of China is the biggest news for the week … and possibly even the year. Xi Jinping, President of the People’s Republic of China and General Secretary of the Communist Party of China, spoke at the 18th collective study on Thursday in Beijing (turn on translate for this one!) a committee designed to solve problems, “…ranging from financing businesses to mass transit and poverty alleviation” and made statements that China and its people need to “seize the opportunity” that blockchain technology presents;
“We must take the blockchain as an important breakthrough for independent innovation of core technologies …[We must] clarify the main direction, increase investment, focus on a number of key core technologies, and accelerate the development of blockchain technology and industrial innovation.”
It is widely believed that these statements are the first public bitcoin and blockchain statements from President Xi Jinping. He further touched on the creation of a platform labelled “Blockchain+”, specifically designed to provide “personal development such as education, employment and food and medicinal safety, among other basic needs.”
As always in China, there are strict regulations surrounding this and it was stressed that it would be “necessary to implement the rule of law network” into the existing and future blockchain technologies. To that end Xi Jinping said testing of blockchain would be widespread and investments would be made into training platforms and innovative teams. It is important to note that trading of cryptocurrencies is presently illegal in China and has been since 2017. However, the country is due to launch a digital renminbi very soon, and this will be managed by the central bank.
FAST FORWARD 24 HOURS
Less than 24 hours after the address from Xi Jinping announcing to the world that China was ready to treat Blockchain and crypto as a legitimate space, the Standing Committee passed a cryptography law to come into effect January 1st 2020. Coindesk reported;
“The new law aims to tackle emerging regulatory and legal challenges in commercial cryptography use-cases as they play an increasingly important role in developing the Chinese economy, according to the law’s latest draft proposal prior to approval.”
Further translating the comments made by the committee from the draft proposal;
“Clear guidelines and regulations are needed to evaluate commercial cryptography technologies used in the major fields related to the national interest as the current ‘loose’ system is not suitable for the industry anymore.”
“The key take away is — the developing of new cryptography, hashing algo, even the usage of the tech, will be in the official legal realm. This means you need to follow the CCP standard for all ‘encrypted’ behaviors, which can be VERY broad, from mining to block propagation.”
The committee said the new law will encourage research and development on commercial cryptography technologies, while building up an inclusive standardized regulatory system for the market. It will also encourage nationwide educational efforts, such as public exhibitions, to promote cryptography among government officials, companies and social groups. Imagine a country the size of China being actively taught and promoted to about the benefits of blockchain technology.
I find it hard to believe the crypto trading ban in China will last forever. It’s hard to imagine that China isn’t already mining and accumulating large amounts behind play. And if that’s the case, it’s possible when they have enough, whatever that number may be, that they regulate and allow open crypto trading in China. China made it very clear early on, that the ban was in place primarily to ensure the government had time to adequately regulate the space and understand it fully prior to allowing its citizens to take part in it.
RUSSIA TO SHUT OUT THE WORLD
Russia has scheduled its RuNet testing to begin from November 1st 2019. Defense One reports on it as the latest move in a series of technical and policy steps intended to allow the Russian government to cut its citizens off from the rest of the world. It’s being pitched as protecting the country from potential cyber attacks but the reality is very different. Defense One reports;
“On Monday, the [Russian] government approved the provision on conducting exercises to ensure the stable, safe and holistic functioning of the Internet and public communications networks in the Russian Federation.”
The word “holistic” shows up in the sovereign internet law that will require all “internet traffic in Russia to pass through official choke points, allowing the government to shut down outside access, block websites that they don’t like, and monitor traffic.”
A very scary proposition. Changes to peoples’ rights really highlight the importance and need in the global market for alternatives like blockchain technology so that all people, no matter their status or governmental restrictions, can communicate and transact as a free society.
BINANCE LAUNCHES RUBLE TRADING
Just over a week ago, massive crypto exchange, Binance announced via Twitter that they would be offering trading of the Russian Ruble and cryptocurrency pairings on its platforms whilst attending a Government led event “Open Innovations Forum” in Moscow.
Honestly, I find this pretty surprising news given the cryptocurrency industry in Russia is not yet officially regulated. The country has continually delayed its crypto bill on digital and financial assets with the most recent delay in October. Russia are moving towards having full visibility of its citizens’ internet traffic yet Binance launches trading for the national currency? Something isn’t making sense here. It’s certainly an interesting development and absolutely one worth keeping an eye on.
BAKKT CONTINUE TO SET RECORDS
Bakkt has been consistently posting record volumes across its futures platform and this week’s 40% Bitcoin price increase saw it set yet another by hitting 1,179 in a single day’s trade.
While it could be argued that they’re coming off a very low base, these kinds of institutional platforms take time to grow and mature. A quick look at the most recent volume posted this morning and the sudden jump in overall volume is clear.
If a platform like this starts to see significant volume in the hundreds of millions of dollars then it goes towards proving the institutional interest in Bitcoin futures is here to stay.
AMERICAN CRYPTO USERS ON GROWTH TRAJECTORY
Bitcoinist reported last week, US crypto ownership is up 81% since 2018. These numbers were based on a Pureprofile report commissioned by Finder and found that over the last year, Americans who own cryptocurrency has almost doubled from 7.95% to 14.4%. Astounding numbers when you consider that equates to 36.5 million Americans owning a digital asset of some kind. The report further revealed that while almost all wallets contained Bitcoin, over half (55.4%) also contained other altcoins.
A separate report run by Nobl Insurance LLC outlined that some “25 million Americans are considering buying crypto in the coming 12 months. 37% of cryptocurrency holders own over $5,000 of assets, and a further 8% hold over $50,000 in crypto.” If we take a step back and compare these numbers to the adoption life cycle, we can note that the cryptocurrency space is really still an Early Adopter. Imagine the price appreciation and utilities that will be built once it hits the late majority.
BITCOIN TECHNICAL ANALYSIS
This week has been one of the most eventful weeks for Bitcoin in a while. Traditional Technical analysis was playing out as expected and traders were waiting for the 50/200MA death cross to play out causing a further drop in Bitcoins price. Everything was going to plan until President Xi of China through a spanner in the works!
Presidents Xi’s statement about China looking to adopt blockchain technology saw Bitcoin do a full 360! As a result, the usual effect of a 50/200MA death cross was completely ignored and Bitcoin was sent off to the moon! Within 24 hours Bitcoins price climbed the third most it has ever done in a single day, 40%, and pushed straight through the key resistance line at $9500 USD all the way up to $10,900. Since then BTC has headed back down to the low of $9000 USD and now the market is indecisive of where it wants to go.
This next week will be very important for Bitcoin. If the price can push above the $10,000 USD mark, then we could see a run all the way to $12-14,000. However, if the bulls fail to keep the price above $10,000 USD, then we could see Bitcoin drift back towards $7,500 mark.
There are a lot of eyes on the market as volumes are as high as they have ever been throughout 2019. As always stay diligent and do your own research!
TRUMP ADMINISTRATION REINED IN LAST CRYPTO BULL RUN
In a Coindesk interview this week, Christopher Giancarlo, who left the U.S. Commodity Futures Trading Commission (CFTC) at the end of his five-year term as chairman in April, is quoted as saying;
“One of the untold stories of the past few years is that the CFTC, the Treasury, the SEC and the [National Economic Council] director at the time, Gary Cohn, believed that the launch of bitcoin futures would have the impact of popping the bitcoin bubble.
And it worked.”
At the time, Bitcoin’s price was heading towards its (then) all time high of $20K USD and the government “saw a bubble building and we thought the best way to address it was to allow the market to interact with it”. Speaking on the lack of a derivatives market, Giancarlo told Coindesk that “If you don’t have that derivative, then all you’ve got are believers [and] it’s a believers’ market.” He added, “Regulators mustn’t be complacent when faced with a bubble – but they must act in a way that keeps markets free. In the case of 2017, permitting bitcoin futures presented just such an opportunity.”
What other actions have been taken behind play over the years to ensure the Crypto “bubble” is kept under control… I wonder if the news from China this week will see the United States take bullish action for a change?
GREYSCALE PASSES $2.7 BILLION UNDER MANAGEMENT
Greyscale investments tweeted this week that they have just hit $2.7 Billion USD in funds under management. Earlier this month, Greyscale announced it had “…raised $254.9 million into its investment products, triple the assets raised during the second quarter, when the company raised $84.8 million. The inflows mark Grayscale’s strongest quarterly asset raise since the firm’s inception.”
The majority of the capital was from institutions, with 84% of that from hedge funds. This is a trend that has continually gained momentum throughout 2019. Greyscale also announced this week its second wave of national advertising in the #DropGold campaign they’ve been running, “The campaign promotes Bitcoin and Grayscale’s flagship investment product” and “features a commercial which mocks gold as a useless rock in today’s modern world by juxtaposing it with the potential value that exposure to digital currencies may provide.”
FEAR, GREED AND MENTALITY
After what felt like an eternity of sitting in the fearful 30s, the Alternative.me Fear and Greed index has finally seen a drive up into the 50s today. We can most likely attribute this to the news out of China this week and subsequent price appreciation in Bitcoin as well as several alt coins. It’s worth noting it hasn’t yet jumped into greedy territory but is sitting in neutral, signalling that the market is somewhat divided – plenty of people are shouting for both bearish and bullish outcomes at this stage. Whatever your approach may be, just don’t leave the party when the market does decide to move north again. Should you be concerned about any further downside, make sure you have your stop losses in and avoid emotion on any volatility.
Author: Julian Carruthers
Not financial or investment advice, always do your own research.