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5 things to know in Bitcoin this week

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Bitcoin (BTC) starts a new week in uncertain territory as $10,000 stays in place but fundamentals shift to bullish.

Cointelegraph highlights five things that could shape BTC price action in the coming days.

Peak oil demand was in 2019

In what will likely become a frequently-quoted announcement, oil giant BP said this weekend that the world has hit peak demand for the black gold. 

In a report quoted by Bloomberg, BP said that demand for oil would stay “broadly flat” for the next twenty years, with pressure coming from alternative fuels and coronavirus.

“It subsequently recovers but never back to pre-Covid levels,” Spencer Dale, the firm’s chief economist said. 

“It brings forward the point at which oil demand peaks to 2019.”

Macro asset year-to-date returns. Source: Skew

The startling admission is yet another surprise to come out of the global economy, at the same time as central banks admit that unconventional monetary policy has become the norm in 2020. 

With coronavirus at the helm and lockdown returning to at least one country on Monday, Bitcoin looks poised to benefit from oil and fiat currency weakness, as before.

As Cointelegraph reported, previous extreme volatility in the price of certain oil assets allowed BTC to shine as a hedge against losses.

Bets placed on another Fed shake-up

Another week, another meeting for the United States Federal Reserve — and a chance for safe havens to capitalize on its policy shifts.

On Wednesday, the Fed will outline how it plans to implement economic measures which will impact inflation — something which previously sparked dollar weakness.

“Maintaining a policy status quo in this context would be akin to throwing in a towel, which would undermine the credibility of the new framework right out of the gate,” Aneta Markowska, chief financial economist at Jefferies told MarketWatch on Monday.

Any actions from the Fed could weigh on the U.S. dollar currency index (DXY) once again, something to which Bitcoin has shown significant inverse correlation since July.

Gold markets are already considering the likelihood of a shake-up, analysts say, betting on the Fed putting itself in an increasingly difficult position. The precious metal has formed a “golden triangle” and is ripe for a breakout.

For Bitcoin, it’s all about DXY — a reversal of recent strength at the beginning of September would be a clear bull signal. Conversely, continued gains would likely keep selling pressure at $10,500 intact.

DXY 2-month chart

DXY 2-month chart. Source: TradingView

“The coronavirus crisis is many times more destructive than the financial crisis of 2008,” Steve Barrow, head of forex strategy at Standard Bank, meanwhile summarized to Bloomberg. 

“There’s every reason to believe that the move to tighter monetary policy will take as long –- and probably much longer — than the post-financial-crisis period.”

Weird is the new normal for central banks

In terms of central bank policy specifically, this year is seeing a seismic change similar to oil demand. 

With Bitcoin as an antidote to central bank meddling with the money supply, any further devaluation in fiat is only to be welcomed by BTC proponents looking for a safety net.

“Global central bankers are discovering that monetary policies they once viewed as unconventional and temporary are now proving to be conventional and long-lasting,” Bloomberg summarized about the situation worldwide.

According to data from the publication, major central banks are employing crisis policies in 2020 that they have never used before. 

As RT host Max Keiser often comments on his show, The Keiser Report, nothing is as permanent as temporary fiscal policy from a central bank.

Bitcoin hash rate hits fresh all-time highs

Within Bitcoin, however, the future looks decidedly rosy. Hash rate — a measure of how much computing power miners have decided to dedicate to validating transactions — has broken out to hit yet another all-time high.

On Monday, data from Blockchain shows, the seven-day average hash rate stood at 135 exahashes per second (EH/s).

Bitcoin 7-day average hash rate 2-month chart

Bitcoin 7-day average hash rate 2-month chart. Source: Blockchain

Hash rate strength underscores miners’ continued faith in Bitcoin’s long-term profitability. Difficulty, perhaps the most essential measure of blockchain health, is set for a 5.4% increase this week — something which will send it, too, to record highs.

Commenting on the general situation, Cointelegraph Markets analyst Michaël van de Poppe suggested that zooming out was all that was needed for a bullish take on Bitcoin.

“If you’d like to compare periods and market cycles, the current state of the market is comparable to 2016,” he tweeted on Monday. 

“Slow upwards grind, with long sideways consolidation periods. In 2016, several were seen. In 2020, 2021, it’s likely we’ll see that too. Bullish.”

The Tether effect returns

Cryptocurrency commentators are also eyeing moves by stablecoin Tether (USDT) as a pointer for BTC price trajectory.

Specifically, Tether’s burgeoning market cap, passing $15 billion in recent days, has historically spurred Bitcoin gains. 

“Bitcoin tether printer divergence. This story always seems to end the same way,” analyst Cole Garner tweeted, highlighting how previous increases in the USDT supply positively impacted Bitcoin.

As Cointelegraph previously reported, stablecoin holders, including those of USDT, appeared keen to snap up “cheap” BTC at prices around $10,000.





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China’s attempt to kill Bitcoin failed — Here are 3 reasons why

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Bitcoin (BTC) might have suffered its largest coordinated attack over the last couple of months, but in this instance, the investor community did not capitulate. China outright banning mining in most regions after giving BTC miners a two-week notice and this caused the single largest mining difficulty adjustment after the network hash rate dropped 50%.

The market sentiment surrounding Bitcoin was already damaged after Elon Musk announced that Tesla would no longer accept Bitcoin payments due to the environmental impact of the mining process. It remains unknown whether China’s decision was influenced or related to Musk’s remarks, but undoubtedly those events held a negative effect.

A couple of weeks later, on June 16, China blocked cryptocurrency exchanges from web search results. Meanwhile, derivatives exchange Huobi started to restrict leverage trading and blocked new users from China.

Finally, on June 21, the People’s Bank of China (PBoC) instructed banks to shut down the bank accounts of over-the-counter desks and even their social networks accounts were banned. OTC desk essentially act as a fiat gateway in the region so without them it would be difficult to exchange from Bitcoin to stablecoins.

As these events unfolded, some analysts were reluctant to describe the tactics as nothing other than meaningless FUD, but in hindsight, it appears that China launched a very well-planned and executed attack on the Bitcoin network and mining industry.

The short-term impact could be considered a moderate success due to the collapse in Bitcoin price and the rising concerns that a 51% hashrate attack could occur.

Despite the maneuvers, China’s attack ultimately failed and here are the main reasons why. 

The hashrate recovered to 100 million TH/s

After peaking at 186 million TH/s on May 12, the Bitcoin network hash rate, an estimate of the total mining power, started to plunge. The first couple of weeks were due to restrictions to coal-powered areas, estimated at 25% of the mining capacity.

However, as the ban extended to other regions, the indicator bottomed at 85 million TH/s, its lowest level in two years.

Bitcoin estimated hashrate. Source: Blockchain.com

As the data above indicates, the Bitcoin network’s processing power recovered to 100 million TH/s in less than three weeks. Some miners had successfully moved their equipment to Kazakhstan, while others shifted to Canada and the U.S.

Peer-to-peer (p2p) markets carried on

Even though the companies involved in crypto transactions have been banned from the country, individuals continued to act as intermediaries—some of these recorded over 10,000 successful peer-to-peer transactions according to data from the exchange’s own ranking system.

Huobi Global peer-to-peer market advertisement. Source: Huobi

Both Huobi and Binance offer a similar marketplace where users can trade multiple cryptocurrencies including USD Tether (USDT). After converting their fiat to stablecoin, transacting on a regular or derivatives exchange becomes possible.

Asia-based exchanges still dominate spot volume

A complete crackdown on trading from Chinese entities would likely be reflected in the exchanges previously based on the region, like Binance, OKEx, and Huobi. However, looking at the recent volume data, there hadn’t been a meaningful impact.

Weekly spot volume, USD. Source: Cryptorank.io

Take notice of how the three ‘Asia-based’ exchanges remain dominant, while Coinbase, Kraken, and Bitfinex are nowhere near their trading activities.

China’s ban on Bitcoin mining and transactions may have led to some temporary hiccups and a negative impact on BTC price, but the network and price have recovered in a way that is better than many expected.

Currently, there is no way to measure the OTC transactions where larger blocks are traded but it is just a matter of time until these intermediaries find new gateways and payment routes.

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.