26th NOVEMBER 2019
This week we cover:
- BITCOIN, MILLENNIALS & BANK DISTRUST
- PAYPAL CEO OWNS BITCOIN
- CHINA ENFORCES CRYPTO CONTROLS
- BAKKT PHYSICAL BTC CONTRACTS CONTINUE TO SURGE
- BINANCE SUING THE BLOCK OVER FUD
- YAHOO ADDS CRYPTO TO ITS WEBSITE
- MINER CAPITULATION?
- BTC TECHNICAL ANALYSIS
- FEAR, GREED AND MENTALITY
BITCOIN, MILLENNIAL’S & BANK DISTRUST
“Millennials will become the wealthiest generation in history”, so says The Rhythm of Bitcoin about the great wealth transfer within the next few decades. “Banks should be worried, if they’re not already. Millennials have started making a major shift towards the use of unconventional banking, with Bitcoin posed to be the beneficiary of the ‘Great Wealth Transfer’ of our time.”
As technology evolves and the generational change takes place, we will see a huge shift in wealth across the globe. Inheritance alone is expected to transition $68 trillion, the largest in history, from parents to their kids. Within the next decade, estimates suggest the disposable income of millennials will grow 500% to over $7 trillion.
The investment approach for millennials is significantly different to that of previous generations. Based on their life experiences, millennials have an inherent mistrust of banks and as a result of living through the 2008 recession – watching banks falter at the centre of global financial instability.
So if you’re suss on banks, where do you turn? Well, among other things, you guessed it… cryptocurrency. The Rhythm of Bitcoin report the following numbers, based on answers from 1,000 US respondents:
- 43% of millennial respondents trust crypto exchanges more than US stock exchanges
- 25% of millennials earning over $100K (alone or joint) or owning over $50K in investable assets, are either holding or using cryptocurrencies
- 31% are interested in using cryptocurrencies
- 9% of the population own Bitcoin. If you look at respondents between 18-34, that number increases to 18%.
PAYPAL CEO OWNS BITCOIN
Speaking to Fortune, PayPal CEO Dan Schulman revealed he “owns Bitcoin – and only Bitcoin”. “(There is) a lot of promise in blockchain technologies and that PayPal finds it intriguing.”
Schulman believes the benefits revolve more around identity than efficiency. He also briefly discussed PayPal’s withdrawal from the Libra association, citing that early on the prospect “was very interesting and promising” but after further research they “found out that there is a lot that needs to happen for it to see daylight.” PayPal had enough in their own development pipeline and needed to channel all their resources into that. Check out Crypto Potato for the full article.
CHINA ENFORCES CRYPTO CONTROLS
Just as China seemed to be coming round to the potential legalisation of cryptocurrency trading and mining, a statement from the PBOC Sanghai Head Office has come out, stating “People’s Bank of China (PBOC) has issued a regulatory update about tightening regulatory control over cryptocurrencies to clamp down on them and foreign crypto exchanges that allow the Chinese to trade on them.” @Doveywan tweeted the below after the announcement:
Dovey went on to report that IEO, ICO and STOs are still deemed illegal in China, that any type of crypto project fundraising is deemed illegal in China, and are in fact considered ‘financial fraud, pyramid schemes’. The statement goes even further, outlining:
“Special rectification of cryptocurrency-related trading platform, which can be registered overseas, shall be immediately rectified and retired”
It’s a good reminder that as investors we must be mindful not to get swept up with positive news on Blockchain coming out of China. And remember, news about blockchain is not necessarily news about Bitcoin. They are distinctly separate, particularly in the eyes of Chinese lawmakers.
BAKKT PHYSICAL BTC CONTRACTS CONTINUE TO SURGE
Bakkt physically-settled Bitcoin futures continue to set volume records with Friday’s volume hitting 2728 contracts. While I’m not a fan of their discussions re offering cash-settled futures, I am a huge supporter of continually higher volumes for physical futures. With total newly mined Bitcoin each day sitting at around 1800, demand on Bakkt alone is completely outstripping this which reduces supply from the exchanges and could potentially result in a price uplift pending other factors.
BINANCE SUING THE BLOCK OVER FUD
Last week Crypto publication The Block, released a story, “Binance’s Shanghai office shut down following police raid, sources say”. The article picked up speed quickly and was passed off as fact by many on the Twittersphere. Some believe it was a catalyst for the large drop in Bitcoin’s price this week, which is a fair assessment, if you were to pair it up with the news coming from China regarding government legislation.
Dousing the fire is Binance CEO Changpeng Zhao who this week stated Binance would be suing The Block over the article. Binance executives and supporters believe that the story is nothing but FUD, a means of spreading fear, uncertainty and doubt into the markets. Binance CFO Wei Zhou put it pretty simply – there couldn’t have been a raid, because Binance don’t even have offices in Shanghai…
YAHOO ADDS CRYPTO TO ITS WEBSITE
On November 21, Verizon Media-owned Yahoo Finance and CoinMarketCap (CMC) confirmed their strategic partnership to incorporate a cryptocurrency screener page on Yahoo’s finance page which will show pricing of 118 digital currencies. In addition to crypto pricing, CMC is also offering educational information in a push to develop adoption on Yahoo Finance. This will mean CMC’s daily newsletter and blog content will be fully integrated with Yahoo’s news stream and crypto screener page. Yahoo Finance also plans to add two CMC crypto indices, the 200 and 200EX.
A mining capitulation is signalled by a “bearish crossover” called an “inversion, of the Hash Ribbons – an indicator that uses long-term moving average of the hash rate and a short-term moving average of the hash rate to show how healthy the Bitcoin mining ecosystem is. The inversion is when the long-term level crosses above the short-term level, signalling that miners have stopped allocating resources to improve the security of Bitcoin.”
Miner capitulation can be detrimental to the overall market due to the supply pressures it can cause. Depending on the size of the mining farm and their overhead costs, (mainly electricity) then this inflection point varies among peers. But generally speaking, when a miner capitulates, they will start market selling their Bitcoin. The cycle of miners selling unprofitably mined coins can fall into a vicious cycle, which inevitably leads to fear overtaking the market sentiment.
The last two bearish crossovers happened in July 2016 and again in November 2018. The first inversion was followed by a 30% drop in coin price and the second was when Bitcoin began its 50% crash from $6K to $3K.
With those dips in mind, I am the bearer of bad news. The Hash Ribbons have just inverted again. It happened a few days ago and was signalled by $17 million worth of Bitcoin from unknown miners’ wallets being dumped on market at $8K. At time of writing, Bitcoin value is $6.5K.
2016 inversion and price movement:
Image note: Large mining wallets capitulating this week are signalled by the large purple volume bar, far right.
From a macro birds-eye view, the longer-term upward trend line has clearly been broken and we are now heading towards the lower level trend line.
BTC is respecting the lower level trend line which was set during the early 2018 BTC rally. We can see in the highlighted eclipse on the chart, BTC touched this lower level during its collapse and bounced straight off it!
Zooming closer in, we can see that BTC has made a strong bounce from the sub 7K territory and above the lower level trend line. We can also see that we are oversold on the RSI.
This week will be an interesting week. If BTC can not hold above the 7k line, and remain above the lower level trend, we could test 6k.
FEAR, GREED AND MENTALITY
Alternative.me Fear and Greed index has finally tipped into ‘Extreme Fear’ with a score of 17. This indicates we’re in the midst of a significant market correction. As the market pushes lower, we will inevitably see this signal drop into more fearful territory. I have covered in previous rundowns that a score of 7 is nearly always a significant turning point for the market and followed by price appreciation, so keep your eyes on this one.
With Bitcoin sitting below $6.5K and the index needling extreme fear, this could present an opportunity to continue a dollar cost averaging approach.
As always, stick to your investment plans. It’s not new advice and I’ll use the words of Warren Buffett to hammer the point home again and again – be fearful when others are greedy and greedy when others are fearful. In other words? Buy low. Sell high.
Author: Julian Carruthers
Not financial or investment advice, always do your own research.