It’s really very quiet in the cryptocurrency market; Quietness that the emerging asset class is definitely not used to! Bitcoin price is consolidating in an increasingly narrow channel, respecting its downward support as stock markets hit yearly lows, but still failing to show any real upward push. Bitcoin’s 20-day volatility became equal to NASDAQ volatility for the first time in two years. However, while the bitcoin price has remained roughly the same since the beginning of September, the Nasdaq and the S&P are down 13% and 10% respectively since that time.
Like its volatility, Bitcoin’s real price fell to a year-end 2020 low last week after the US CPI posted higher-than-expected inflation data. Indeed, cryptocurrencies are swimming in a calm wave when compared to traditional stock markets, but also to bonds. As analyst Will Clemente said, the volatility in the Treasury markets has skyrocketed relative to Bitcoin’s volatility over the past few months. The rhetoric that Bitcoin is too volatile is suddenly running out of steam.
Are we gradually seeing the hoped-for shift whereby bitcoin essentially serves as a risk asset for one of inflation protection? Beneath this perceived calm, several data allow at least a reasonable hypothesis to be built.
As we mentioned first, the correlation between bitcoin and Nasdaq, a technology index that includes many stocks considered risky, has reached its lowest level since January. According to IntoTheBlock, a cryptocurrency data and analytics company, the 30-day correlation between Bitcoin and the S&P 500 has fallen to 0.04 — practically zero, with a correlation close to 0 indicating that there is no correlation between prices. In short, the separation is clear. Whether or not it is temporary remains to be seen.
The tool is BTC and ETH Visual File Size Range (VPVR) It indicates that both assets are trading near important levels of activity. As long as this is the case, the price is likely to remain fairly stable, barring an unexpected catalyst. However, at the same time, more than 37,800 BTC left cryptocurrency exchanges yesterday alone, according to data tracked by CryptoQuant. This is the largest daily influx of bitcoins since June 17, when traders withdrew nearly 68,000 bitcoins from exchanges. In addition, more than 121,000 BTC, or roughly $2.4 billion at current prices, have left the exchanges in the last 30 days. This exit is often interpreted as a desire for long-term custody, while the opposite move illustrates a corresponding desire to sell crypto assets on exchanges. For example, bitcoin bottomed out domestically at around $18,000 when its outflows from the exchanges reached nearly 68,000 bitcoins on June 17. The price of the cryptocurrency rose towards $24,500 in the following weeks.
“Bitcoin prices have shown notable relative strength recently, amid a traditionally volatile market backdrop,” Glassnode noted in its weekly review published Oct. 10, adding: “Several macro metrics indicate that bitcoin investors are establishing what could be a market floor. bearish, with many similarities to the lows of previous cycles.” In short, despite the weaknesses in the stock markets, it appears that the bitcoin market is simply lacking sellers at the current price level.
When all assets are down like this year, focusing on price is often not the best metric for analysis. At a fundamental level, over the past few months, indications that major financial institutions and tech companies believe cryptocurrencies are here to stay have multiplied. In August, BlackRock, the world’s largest asset manager, launched a special Bitcoin Cash fund to introduce its clients to the current price of Bitcoin. Google announced this month that it will start accepting cryptocurrency as payment for its cloud services early next year by connecting with Coinbase. On the same day, the 239-year-old Bank of New York Mellon launched its own bitcoin and ethereum custody service. In short, despite the price gloom, the asset class is far from slack in its adoption and development. As the saying goes, which translates very poorly: ” Bear markets to build “.
A recent paper by Fidelity digital assets Labeled “Bullish Dollar and Bitcoin,” it adds a layer on the underlying proposal for the parent cryptocurrency. In this report, analysts point out how far Bitcoin as an asset has deviated from what is currently considered the norm. In the new high inflation environment, stable issuance and supply of bitcoin is of particular importance. “Therefore, bitcoin may soon stand in stark contrast to the path that the rest of the world and fiat currencies might take — namely, the path of increasing supply, creating additional money, and expanding central banks’ balance sheets,” the report states. The company predicts that “further depreciation may be required to relieve the high debt burden among advanced economies, while recent events in the UK have demonstrated counterparty and liability risks in the system, making monetary intervention and liquidity doses a feature that does not appear. Of Likely to disappear anytime soon. […] By comparison, bitcoin remains one of the few assets that is not someone else’s liability, does not have counterparty risk, and cannot alter its supply schedule.” The report humbly concludes, “It is up to investors and the market to decide whether this real estate looks more gravity”.
Ethereum network migrates to consensus mode Proof of work to me Proof of stake It was hardly finished when the developers just launched testnet For the next major update: Shanghai. On Friday, the Ethereum Foundation announced the launch of a pre-Shanghai testnet dubbed “Shandong”. Shandong will act as a testing ground for many of the Ethereum improvement proposals that the core Ethereum developers will build, improve and eventually reduce to the limited number of updates that will be included in Shanghai when they finally go live. This upgrade is expected to be introduced by September 2023 at the latest. An improvement likely to be included in Shanghai is EIP-4895, which would allow people and entities holding ETH pledges with Ethereum to withdraw them. Last month, the merger moved the Ethereum network to a proof-of-stake mechanism, where users can now deposit pre-existing ETH stakes in order to generate new ETH. However, deposited ETH, or bet, is currently not removable. EIP-4895 will allow users to withdraw ETH and their earnings.
An early version of the 2022 IRS tax form sees cryptocurrencies, stablecoins, and non-fungible tokens grouped into a new category of “digital assets.” Possession of these assets is clearly addressed in the draft tax form: “You have a financial interest in a digital asset if you are a registered owner of a digital asset, or if you have an interest in an account containing one or more digital assets, including rights and obligations to have an interest.” financial, or if you own a wallet containing digital assets.” In short, the category is better defined at the level of taxable assets, while still including the maximum number of digital assets.
Finally, note that Tether has announced that it will remove commercial paper from its reserves for the sake of transparency. This type of asset will be replaced by US Treasury bonds, which are considered safer in terms of stability and liquidity. “This announcement is part of Tether’s ongoing efforts to increase transparency, with investor protection being at the heart of Tether’s reserve management,” the company’s blog post read. “Reducing commercial paper to zero demonstrates Tether’s commitment to backing its tokens with the safest reserves on the market.”
The fund is currently about two-thirds exposed, almost exclusively in bitcoin, apart from a small minor position in MATIC.
This article is brought to you by Fonds Rivemont. The Rivemont Crypto Fund is Canada’s first actively managed cryptocurrency fund. RRSP and TFSA qualification. Accredited investors can learn more over here.
Disclaimer: This column does not necessarily reflect the opinion of CryptonewsFR and does not constitute investment advice or trading instructions..
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