Bitcoin price may have taken a temporary breather but the sharp correction below $30,000 did little to dismay the bullish sentiment of crypto market participants.
The CME Bitcoin futures market reached an all-time high volume at $2.7 billion on Jan. 4 and the same day, LMAX Digital also achieved a record-high at $2.62 billion in traded volume. This huge surge in trading activity suggests institutional investors are continuing to invest in Bitcoin (BTC).
Due to institutional adoption, analysts believe that Bitcoin could rally as high as $100,000 in 2021. However, JPMorgan Chase analysts led by Nikolaos Panigirtzoglou have a slightly different view as they believe Bitcoin’s volatility must converge with that of gold to result in a “crowding out of gold.” Until then, the analysts do not expect Bitcoin to rise above $146,000 this year.
Even as Bitcoin takes a breather from its recent uptrend, there are a few tokens that have continued their up-move unabated. Let’s inspect the possible fundamental reasons behind their rally and ascertain the technical levels to watch out for.
Ether’s price has surged in the past few days and so has the activity on the Ethereum network. This has boosted gas fees on the network by a huge margin. While the higher fees may not trouble the wealthy, the smaller traders are likely to find it difficult to do lower-valued transactions.
To save on the skyrocketing gas fees, traders seem to have onboarded Loorpring (LRC), which saw boosted trading volume on its decentralized exchange, and data from Dune Analytics shows the figure rose to $5.49 million.
It is only recently that Loopring Exchange v2 was launched based on Loopring Protocol 3.6, and considering. the current market-wide rally and surge in ETH gas fees, it could not have come at a better time.
The team also plans to launch AMM liquidity mining and a few other programs on Jan. 7 to boost adoption of zkRollup layer-2 scalability and increase liquidity, According to Loopring’s estimation, the annualized returns of the initial three AMM pools could be as high as 40%.
If trading activity remains high, the Ethereum network’s congestion may not ease quickly and that could work in Loopring’s favor. Let’s see how its token has responded to this positive fundamental development.
LRC price skyrocketed from $0.175 on Jan. 3 to an intraday high at $0.585 today, a 234% rally within three days. This surge has pushed the RSI deep into the overbought territory, which suggests an increased risk of a minor pullback or consolidation.
The LRC/USD pair is currently facing a minor resistance close to the 200% Fibonacci extension level at $0.58952.
However, if the bulls continue their buying and push the price above $0.509, the rally could extend to the 261.8% extension level at $0.73617 and then the 300% extension level at $0.82681.
In a strong uptrend, the corrections are sharp and short-lived. The first support on the downside is the 38.2% Fibonacci retracement level of the most recent leg of the up-move at $0.42838.
A strong rebound off this level will suggest that traders are aggressively buying on dips without waiting for a deeper correction and that may enhance the prospects of resumption of the uptrend.
This bullish momentum may weaken if the pair breaks below the 50% retracement level at $0.38.
In a trending market, traders smell an opportunity to make oversized returns by using leverage. While futures can be an attractive proposition, it is also risky because an increase in volatility or a sharp reversal could result in large losses if timely steps are not taken to square up or adjust the position.
During such times, when the market is on a tear, traders prefer to use options as they have limited risk but large profit potential due to leverage.
Other than this, several experienced traders also use options to hedge their futures positions or their spot purchases if they are in large quantities. This seems to have benefited the Hegic (HEGIC) options trading protocol, which traded record options volumes on Jan. 3.
Token owners who do not want to trade options may benefit by providing liquidity to one of the pools on Hegic and earn rewards.
HEGIC has rallied from an intraday low at $0.0751 to an intraday high at $0.25 today, a 232% rally in just over a week. The sharp recovery from the recent lows suggests aggressive buying by the bulls.
If the bulls can sustain the price above $0.24, it will complete a V bottom that has a pattern target of $0.4049.
However, if the bulls fail to sustain the HEGIC/USD pair above $0.24, a drop to $0.18 is possible. If the price turns up from this level, the bulls will again try to resume the uptrend. If they succeed, the pair could form an inverted head and shoulders pattern, which will be a positive sign.
This bullish view will be invalidated if the pair turns down and breaks below $0.16. Such a move could keep the pair range-bound for a few days.
It is not only the crypto markets that have been on a strong bull run, even the U.S. equity markets have risen sharply in 2020. Thus, an exchange that offers varied trading products to its customers is likely to be a beneficiary.
Currently, FTX exchange offers thematic products such as derivative contracts on the U.S. Presidential election, pre-IPO contracts for Airbnb and Coinbase, tokenized stocks of cannabis-focused companies, and the recent addition has been the spot and futures products offered by Grayscale Bitcoin Trust, Grayscale Ethereum Trust, and Bitwise Index. Such a wide array of trading products across several asset classes may have attracted several traders.
Additionally, a recent partnership between FTX and Capitalise.ai that offers clients the opportunity to automate their trading using freestyle text is likely to be a positive as many traders like to use mechanical trading systems to remove the sentiment quotient from trading. Backed by these positives, let’s see how FTX Token (FTT) has performed.
FTT has rallied from an intraday low at $4.552 on Dec. 23 to an intraday high at $8.112 today, a 78% gain within a short time. The long tails on the candlesticks of Jan. 4 and today show that bears tried to reverse the rally but the bulls aggressively purchased the dips.
However, due to the sharp up-move of the past few days, the RSI has risen deep into the overbought territory. This suggests that the FTT/USD pair could be ripe for a consolidation or a minor correction.
On the downside, the bulls may attempt to defend $7 and then the 20-day exponential moving average ($5.83). If the pair rebounds off either support, it will suggest that the sentiment remains positive and that the bulls are buying on dips.
On the upside, the bulls are likely to face a stiff hurdle at the psychological resistance near $10 but if the level is crossed, the next stop could be $12.
This bullish view will invalidate if the price turns down and breaks below the 20-day EMA. Such a move will suggest aggressive profit booking by the traders and a lack of buying support at lower levels.
The views and opinions expressed here are solely those of the author and do not necessarily reflect the views of Cointelegraph. Every investment and trading move involves risk, you should conduct your own research when making a decision.
Canadian VR Company Sells $4.2M of Bitcoin Following the Double-Spending FUD
NexTech AR Solutions, a Vancouver, Canada-headquartered developer of VR and AR solutions, has booked a $200,000 profit after selling over 130 bitcoins. The firm justified its decision with the double-spending that allegedly occurred on the BTC network yesterday.
- According to a press release published by the company, NexTech has sold all of its BTC holdings, amounting to 130.187 bitcoins. With today’s prices, this amount is worth north of $4,2 million.
- The sale has come less than a month after the initial purchase – revealed on December 29th, 2020. Despite the relatively short period, though, BTC’s price has expanded, and the firm managed to realize a profit of $200,000 after the sale. This means a 5% ROI in just a little over three weeks.
- However, what’s more interesting is the company’s reasoning for the sale. NexTech CEO Evan Cappelberg said that the decision came after reports of a “critical flaw called a ‘double spend’ may have occurred, which, if true, allows someone to spend the same Bitcoin twice.”
- The executive argued that such a development would undermine the faith in the BTC network. “If the system is built on scarcity and faith in the system, then a ‘double spend’ would eliminate both – essentially destroying the store of value it was meant to be.”
- This alleged double-spending accident raised numerous concerns inside and outside of the community. Nevertheless, Andreas Antonopoulos, among the most popular BTC proponents, debunked the rumor with comprehensive tweets and explanations.
- He called the rumor an “irresponsible publication” and said that the situation was nothing more than two blocks getting mined almost simultaneously.
- Antonopoulos further explained that this was a regular block reorganization instead of a double spend and concluded that “nothing weird or outside the consensus algorithm happened. Bitcoin continues to work exactly as it should.”
- Similarly, Blockstream CEO Adam Back shared Antonopoulos’s conclusion, saying that “there was no Bitcoin double spend. Stop misreporting stuff, seriously.”
Bitcoin Correction Intact While Altcoins Skyrocket: The Crypto Weekly Recap
Bitcoin failed to recover in the past seven days and it marked a further decline of about 8%. This has its current price hovering around $32,000 and its dominance has declined to 64.1%. But before we take a look at what this means for the altcoin market, let’s see what happened with BTC.
The cryptocurrency started off trading above $35K and even took a shot at $38K on Saturday. The bears had a mind of their own, however, and prevented this from happening, sending the market in a sideways trajectory for the next few days.
Yesterday, though, things took a turn for the worst as the market tanked and lost about $5K in just a few hours. This continued in today’s trading session as the price hit a low of around $28,800. The bulls regrouped and prevented a 4-hour candle close below $30K and managed to recover to where we currently stand at around $32,000.
In between all this, however, a lot of things happened in the altcoin market. Ethereum breached its former all-time high above $1430, major large-cap coins such as LINK and Polkadot also saw serious increases. Cumulatively, this reduced Bitcoin’s dominance to about 64% and it’s interesting to see how things will develop from here.
What may have triggered the sell-off during the past few days was news that a double-spent had happened on Bitcoin’s network – something which, if true, could undermine the entire credibility of its blockchain. Well-known proponent and industry expert Andreas Antonopoulos took it to Twitter to explain in great detail why this wasn’t the case. He made it clear that nothing that happened was out of the ordinary and that Bitcoin’s network is and has been operating exactly as intended.
Elsewhere, the US Treasury Secretary nominee, Janet Yellen, reiterated that cryptocurrencies have been used for illicit activities but also said that they can improve the current financial system.
“Long Bitcoin” has also become the most crowded trade according to a survey by the Bank of America, which goes on to show that the interest in the cryptocurrency continues to increase.
In any case, it’s interesting to see how the next week will go and if the coveted $30K mark for Bitcoin will hold up.
Market Cap: $937B | 24H Vol: 166B | BTC Dominance: 64.1%
BTC: $32,460 (-8.89%) | ETH: $1,237 (+7.53%) | XRP: $0.273 (-1.41%)
Andreas Antonopoulos Fights FUD With Facts: Bitcoin Is Safe And Worked As Expected. Long-term Bitcoin proponent and industry expert Andreas Antonopolous took it to Twitter to bust the recent FUD that a double-spent had taken place on Bitcoin’s network. He reiterated that the protocol is working fine and as intended.
US Treasury Secretary Nominee Yellen: Crypto Can Improve The Financial System. The nominee of President Joe Biden for the US Treasury Secretary, Janet Yellen, has said that the technology behind cryptocurrencies has the potential to improve the efficiency of the financial system.
Largest Asset Manager BlackRock May Start Trading Bitcoin Futures. The world’s largest asset manager, BlackRock, has filed two documents with the SEC, letting the watchdog know that some of its funds may start trading cash-settled Bitcoin futures contracts in a huge move for the entire cryptocurrency industry.
Ethereum 2.0 on Track as Staked ETH Tops $3.6 Billion. According to the latest update from developers who are working on Ethereum 2.0, everything is on track and the network is also growing in terms of the amount staked and its security. This comes as ETH hit a new all-time high this week.
Bitcoin And Tesla Stock The Biggest Market Bubbles According to a Deutsche Bank Survey. According to a survey conducted by the large multinational Deutsche Bank, Bitcoin and Tesla stocks are the biggest market bubbles in the recent month. It indicated that more than half of the investors believe in this narrative.
Long Bitcoin Unseats Tech Stocks as the Most Crowded Trade in January, BofA Reports. Long Bitcoin has become the most popular trade recently, unseating stocks of technology companies. This became clear in a study conducted by the Bank of America. Bitcoin continues to gain interest.
This week we have a chart analysis of Bitcoin, Ethereum, Ripple, Polkadot, and Chainlink – click here for the full price analysis.
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Bitcoin as a last resort? Murmurs of crypto as reserve currency abound
Reserve currency is money held by central banks or treasuries usually for international transactions. Argentina is not going to be able to purchase a Boeing 737 MAX passenger jet, for example, with its highly inflationary peso; it will have to pay with U.S. dollars, which is why Argentina keeps dollars on hand — i.e., in “reserve.”
A second basic function is to support the value of a national currency. If the Brazilian real, for instance, plummets during an economic contraction, Brazil’s central bank could bid it up again by purchasing reals with dollars that it holds in reserve.
Could Bitcoin (BTC) fulfill these key functions of a reserve currency? “I certainly think so, in the future at least,” Franklin Noll, a monetary historian and the president of Noll Historical Consulting, told Cointelegraph. Bitcoin’s electronic nature makes it well suited for settling payments. “If gold was used in the past to do so, this digital gold should do the job as well, if not better.”
Meanwhile, these are unusual times. When markets crashed amid the COVID-19 crisis in March, Bitcoin followed suit. “BTC did not perform well,” Sinjin David Jung, managing director at International Blockchain Monetary Reserve, told Cointelegraph. But in early 2021, the world is facing a different circumstance, one marked by extensive stimulus spending — especially in the United States — and if the dollar falters, according to Jung:
“BTC’s position is almost like the ‘last resort reserve currency’ in holding value if the increase of the U.S. dollar supply becomes the only tool for avoiding financial depression while paradoxically resulting in supercharging the market.”
“The U.S. dollar is still king”
But challenges remain, and Bitcoin probably won’t supplant USD anytime soon. Said Noll: “The current problem with Bitcoin — as with gold — is that few, if any, goods or debts are denominated in Bitcoin.” Furthermore, according to him: “It’s hard to see a future where a significant amount of the world’s trade is denominated in Bitcoin. The U.S. dollar is still king.”
Jonas Gross, project manager at the Frankfurt School Blockchain Center — a think tank associated with the Frankfurt School of Finance & Management — sees little chance that BTC will be used as a reserve currency by any industrialized country in the near future. “Skepticism remains very high,” he told Cointelegraph, referring to a recent statement made by European Central Bank president Christine Lagarde that called for global regulation of BTC because of money laundering concerns, among others.
That said, “the U.S. dollar’s dominance as the world’s reserve currency could indeed be threatened,” continued Gross. China is in advanced testing of its central bank digital currency — i.e., its digital currency/electronic payment project — which could be launched as early as 2022, and foreigners might be allowed to access and use it for transactions. In that event, Gross added:
“It would be possible to use a digital version of the yuan for global payments easily and conveniently — transaction costs could be reduced, and the digital yuan would ‘flow across borders’ quite easily.”
China’s yuan will have to go some distance to catch the dollar, however. USD accounted for 60.46% of the world’s allocated foreign exchange reserves as of Q3 2020, followed by the euro (20.53%), Japanese yen (5.92%) and U.K. pound sterling (4.50%), according to the International Monetary Fund. The yuan was only fifth (2.13%).
Just six dominant reserve currencies since 1450
Campbell Harvey, professor of international business at Duke University, told Cointelegraph that as the rates of borrowing in the United States rise, “the riskier it [USD] becomes as a reserve currency. At some point, it is too risky, and alternatives are sought.” Indeed, economic history teaches that global reserve currencies do not last forever.
In August, business intelligence firm MicroStrategy announced that it had adopted Bitcoin as its primary treasury reserve asset. At the start of 2021, former Canadian prime minister Stephen Harper raised the ante, suggesting that not only companies but governments might use crypto as a reserve, albeit as part of a “basket of things” that also included gold and fiat.
There have been six major world reserve periods since 1450, with an average span of about 94 years. The U.S. dollar has already been the world’s reserve for 100 years, surpassing the average, and is nearly equal to its predecessor, the British pound, which dominated for roughly 105 years.
BTC by itself is unlikely to become a reserve currency because of its extreme volatility, though, Harvey said. “Currently, the USD volatility versus 10 leading currencies is about 3%–4% per year. BTC is in the range of 80%–90%.” Gold, he added, has an annual volatility of about 15%.
Part of a basket?
On the other hand, cryptocurrencies could be used as part of a basket in the future, added Harvey. “It would unlikely be a single cryptocurrency in the basket. By the time this happens, all major central banks will have their version of a cryptocurrency.”
The idea of a diversified basket is not new, continued Harvey, referencing F. A. Hayek’s 1943 Economic Journal paper titled “A Commodity Reserve Currency.” Still, “there are plenty of issues: What assets do you use and what are the weights?” Also, who actually determines the weightings and if and when an asset is to be added or dropped?
“Bitcoin could indeed be used as part of a ‘basket of things’ as a hedge against inflation and political turmoil,” Gross said. One already sees BTC being used as a corporate treasury reserve, he added, mentioning MicroStrategy. Noll, too, viewed some corporations’ recent embrace of Bitcoin as a treasury reserve as a significant development:
“It is a short step from widespread private reserve currency/asset to public reserve currency/asset. If Bitcoin is good enough for banks, insurance companies and cities, it certainly is good enough for a small nation looking to bolster its own reserves.”
José Parra-Moyano, assistant professor at Copenhagen Business School, told Cointelegraph: “It could be that if Bitcoin or other cryptocurrencies establish and continue showing technical security, central banks will incorporate them to their reserves.” But maintaining technical security over time won’t be easy, he suggested.
Is the infrastructure sufficient?
Is BTC’s infrastructure anywhere close to ready? Jung told Cointelegraph: “At this point, only BTC [among cryptos] could be considered a contender for the last resort reserve currency”; its transparency, simplicity and track record “clearly show it to be engineered for this function.”
“There are indeed some hurdles to overcome,” according to Gross. “Lower volatility and higher speed — e.g., implemented through the Lightning Network — would increase BTC’s attractiveness.” Furthermore, he outlined that efforts to educate regulators about cryptocurrencies should be improved so that they understand the potential of the technology “from a portfolio diversification perspective.”
Other potential obstacles are Bitcoin’s “newness” — it has only existed for 12 years — noted Harvey, as well as its still-limited adoption, vulnerability to manipulation — “see the academic evidence on USDT and BTC” — and also vulnerability to algorithmic attacks, “a 51% attack is costly but feasible.” Harvey added:
“Central banks don’t like it because it’s deflationary, and the algorithmic nature of the money creation usurps their economic influence — of course, this last point is also a selling point.”
Jung believes that the often-cited volatility flaw is exaggerated. BTC can’t help but be volatile in the process of its positioning as the last resort reserve currency. It will “continue to be volatile until the conditions are met when the U.S. dollar value starts to consistently drop even as the excess U.S. dollars are fueling greater market gains.”
Finally, in asking about BTC’s potential as a reserve currency, it is assumed that there will always be the need for such a reserve. Harvey, for one, isn’t so sure. “Why do we even need a ‘reserve’ currency?” he asked. “In the future, everything will be tokenized. To pay for something, you will have your choice what to pay in — e.g., BTC, gold, IBM stock, etc. Users will have easy access to millions of cross rates and will be instantly able to ‘pay with whatever asset you choose.’”
“Inherently when you speak about a reserve currency, it is all about long-term stability and competitiveness,” said Jung. “As such, the U.S. dollar will always act as the world’s primary reserve in times of geopolitical uncertainty. But what happens when the world and the U.S. dollar is in a continual state of quantitative easing?”
In that event, all bets are off, and national governments, beginning with smaller countries, might indeed gravitate to a basket of hard and digital assets as their reserve currency of “last resort.” Crypto and blockchain proponents will just have to continue spreading the word and hope that BTC or any other cryptocurrency will eventually become mature and worthy to take up the mantle of a commonly accepted reserve.
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