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Bitcoin Weekly Outlook: All Eyes on Powell and Mnuchin Testimonies

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Bitcoin posted choppy trades last week but managed to close the session modestly higher. The Federal Open Market Committee’s meeting on policy decision was the most significant catalyst behind the cryptocurrency’s conflicted market bias.

BTC/USD rose by about 7.5 percent to $11,099 ahead of the Federal Reserve Chairman Jerome Powell’s press conference. Traders anticipated the Fed chair to deliver a long-term dovish outlook. And he did so by saying that the US central bank would keep interest rates lower until 2023 while aiming to target inflation above 2 percent.

Nevertheless, BTC/USD uptrend eased on Thursday and Friday as traders assessed Powell’s optimistic remarks on the US economic recovery. The pair showed resilience to bulls because of the policymakers’ reluctance to introduce a second stimulus package.

Finally, late in the week, BTC/USD inched towards its session high at $11,179, only to pare a portion of it over the weekend. The short-term gains came in the wake of low employment data and commitments by other central banks to introduce more stimulus to revive their economies.

Congress Testimonies

Bitcoin looks ahead at a fruitful weekly session as the market waits for the congressional testimonies from Mr. Powell and the US Treasury Secretary Steven Mnuchin.

The two will discuss the long-pending COVID aid before the Senate Banking Committee on Thursday. Observers believe that Mr. Powell would most likely let Mr. Mnuchin talk about the US government’s plans to introduce the second stimulus package.

The central bank official might shed more light on how his office would achieve higher inflation in the coming years in his standalone address on Wednesday to the House of Representatives’ Select Subcommittee. That might further raise investors’ appetite for riskier assets.

Bitcoin has opened in positive territory this week ahead of the high-profile testimonies.

BTC/USD is eyeing a close above $11,000 on stimulus hopes. Source: TradingView.com

BTC/USD surged 0.64 percent to near $10,990, once again raising expectations of a $11,000-retest. It might likely do so on Monday or Tuesday, based on traders’ advanced upside reactions to Mr. Powell’s speeches, as seen throughout this year.

Bitcoin against Weaker Dollar

Part of Bitcoin’s upside outlook comes from expectations of a weaker US dollar.

The greenback was trading lower on Monday, showing investors’ resilience in adding more capital to their cash stocks. That, again, could be due to expectations from Mr. Mnuchin to confirm or point in the direction of the confirmation of the next stimulus.

us dollar, bitcoin, btcusdt, btcusd, dxy, xbtusd, cryptocurrency

DXY slipped another 0.23 percent on Monday. Source: TradingView.com

Meanwhile, the dollar could also pull back on the release of September’s US manufacturing, services, and composite PMI data.

“Analysts are expecting prints above the 50.00 mark which draws the line between contraction (below 50) and expansion (above 50),” said Dimitri Zabelin, Currency Analyst for DailyFX.com. “While the data is expected to be weaker than the prior prints – falling in line with the notion of slowing economic acceleration – the risk-on tilt that may ensue may punish USD.”

All and all, BTC/USD eyes a close above $11,000, with technical targets suggesting a mild bull run towards $11,500.

That is, of course, possible if Mr. Mnuchin commits to a stimulus deal. Last week, the Treasury Secretary said that the government should not worry about deficits or shrinking balance sheets.



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Just HODL! Bitcoin and Ethereum outperform ‘lower risk’ crypto index funds

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In the past two decades, index and exchange-traded funds (ETF) have become some of the most popular forms of investing because they offer investors a passive way to gain exposure to a basket of stocks as opposed to investing in individual stocks which increases risk of loss. 

Since 2018, this trend has extended to the crypto sector and products like the Bitwise 10 Large Cap Crypto Index (BITX) tracks the total return of Bitcoin (BTC), Ether (ETH), Cardano (ADA), Bitcoin Cash (BCH), Litecoin (LTC), Solana (SOL), Chainlink (LINK), Polygon (MATIC), Stellar (XLM) and Uniswap (UNI).

The ability to access multiple top projects through one weighted average market cap index sounds like a great way to spread out risk and gain exposure to a wider range of assets, but do these products offer investors a better return in terms of profit and protection against volatility when compared to the top-ranking cryptocurrencies?

Hodling versus crypto baskets

Delphi Digital took a closer look at the performance of the Bitwise 10 and compared it to the performance of Bitcoin following the December 2018 market bottom. The results show that investing in BTC was a more profitable strategy even though BITX was slightly less volatile.

Bitcoin price vs. Bitwise 10. Source: Delphi Digital

According to the report, “indices aren’t meant to outperform individual assets, they’re meant to be lower-risk portfolios compared to holding an individual asset,” so it’s not surprising to see BTC outperform BITX on a purely cost basis.

The index did offer less downside risk to investors as the market sold-off in May but the difference was “trivial” as “BTC’s max drawdown was 53% and Bitwise’s was 50%.”

Overall, the benefits of investing in an index versus Bitcoin are not that great because the volatile nature of the crypto market and frequent large drawdowns often have a larger effect on altcoins.

Delphi Digital said:

“Crypto indices continue to be a work-in-progress. Choosing assets, allocations, and re-balancing thresholds is a difficult task for an emerging asset class like crypto. But as the industry matures, we expect more efficient indices to pop up and gain traction.”

Ethereum also outperforms DeFi baskets

Decentralized finance (DeFi) has been one of the hottest crypto sectors in 2021 led by decentralized exchanges like Uniswap (UNI) and SushiSwap (SUSHI) and lending platforms like AAVE and Compound (COMP).

The DeFi Pulse Index (DPI) aims to tap into this rapid growth and the DPI token has allocations to 14 of the top DeFi tokens, including UNI, SUSHI, AAVE, COMP, Maker (MKR), Synthetic (SNX) and Yearn.finance (YFI).

When comparing the performance of DPI to Ether since the inception of the index, Ether significantly outperformed in terms of profitability and volatility, as evidenced by a 57% drawdown on Ether versus 65% for DPI.

Ether price vs. DeFi Pulse Index price. Source: Delphi Digital

While this is an “imperfect comparison” according to Delphi Digital due to the fact that “the risk and volatility of DeFi tokens are higher than Ether’s,” it still highlights the point that the traditional benefits seen from indices are not mirrored by crypto-based baskets.

Delphi Digital said:

“You could’ve just HODL-ed ETH for a superior risk-return profile.”

For the time being, Bitcoin and Ether have proven to be two of the lower-risk cryptocurrency plays available when compared to crypto index funds that offer exposure to a larger number of assets.

The views and opinions expressed here are solely those of the author and do not necessarily reflect the views of Cointelegraph.com. Every investment and trading move involves risk, you should conduct your own research when making a decision.