Bitcoin (BTC) was lower for a second day, slipping below $ 18,000 to its lowest in nearly two weeks.
“The momentum that characterized bitcoin throughout October and November seems to have cooled,” Matt Blom, head of sales and trading for cryptocurrency-focused financial firm Diginex, told clients on Friday in a note . “Prices are returning even in the light of positive news.”
In traditional markets, European shares fell as Germany reported record-breaking virus cases and deaths, and the U.S. stock futures pointed to lower open fade optimism amid stimulus talks in Washington. Gold weakened 0.1% to $ 1,834 an ounce.
If everyone says bitcoin is a hedge against central bank currency printing, does that make it a hedge against central bank currency printing?
It looks that way. Or at least that’s one interpretation of recent news developments and market signals.
Currency issued by the government as US dollars is accepted as a form of payment because the government mandates that they be so. Such tenders are often referred to as “fiat” currency, from the Latin “Yes.”
Bitcoin was invented 11 years ago as a new form of electronic peer-to-peer payment built on top of a blockchain network that no government, company or person could control. But it is the restrictions on the supply of the cryptocurrency, hard-coded to the underlying network programming, that have recently garnered so much attention from big investors: Only 21 million bitcoin can ever be created, a real stumbling block for economists financial or analysts familiar with the supply. and demand calculations typically applied to commodity markets from gold to oil to cocoa to pork bells.
As governments and associated central banks have created trillions of dollars of fresh currency this year to combat the steep economic downturn of the coronavirus, more large institutional investors are deciding that bitcoin will hold its value as fiat currency becomes more numerous ever.
Take the latest announcement from MassMutual, a US life insurance company that has $ 567 billion of assets under management on Dec. 31. As reported by CoinDesk’s Danny Nelson, the insurance company said Thursday it would take an equity stake of 5 % in the cryptocurrency investment company NYDIG while buying $ 100 million of bitcoin for a general investment account.
“It comes as no surprise to me that MassMutual is once again leading their industry by seeing and acting on the long-term value of the bitcoin financial risk premium for their policy owners,” said NYDIG Executive Chairman Ross Stevens in a statement to press posted on the insurance website of the company.
Take note of that term: “financial risk premium” – the idea that bitcoin will protect investors from the risk that monetary authorities will continue to print more money. This is the thread of the whole publication.
“As we have seen in recent weeks, the level of institutional participation in this small market is growing at a very rapid pace, and will only continue to grow from here,” Mati Greenspan, founder of the foreign exchange Quantum Economics cryptocurrency analysis, Thursday in a newsletter.
One takeaway is that perception may be turning into reality. If enough clever, powerful people with deep pockets decide that bitcoin is a hedge against the risk of financial easing, then fiat: Yes.
Thursday brought the news that the European Central Bank, led by President Christine Lagarde, would expand a pandemic related asset-buying program by € 500 billion (US $ 607 billion) to € 1.85 trillion. This is the European version of quantitative easing, where central banks pump funds into markets to boost asset prices and stimulate economic growth. The ECB has already cut one of its key lending rates to negative levels, so the added impetus is pushing monetary policy stance to an unprecedented level of looseness.
“The general policy position is expected to remain very accommodating,” Claus Vistesen, chief eurozone economist for the forecasting company Pantheon, told clients on Thursday in a note. “This includes persistent QE, in one form or another, and negative rates as far as the eye can see.”
First Mover has discussed at length how dramatically bitcoin prices have increased this year, at about 156%, as the US Federal Reserve prints trillions of dollars of fresh money to stimulate the economy and help fund a staggering and fast debt load Treasury Department. of $ 27.4 trillion.
There has also been much discussion in foreign exchange cycles of a decline in the value of the dollar against the euro, or rather an 8.2% appreciation of the European currency this year against the dollar to $ 1.21.
Less frequently quoted is the price of bitcoin denominated in euros, which has also climbed 136% dramatically to € 15,099.
Such gains could play into the perception that bitcoin is as good a hedge against ruining a euro as it is against the other dollar. Or maybe another currency as well, if large investors continue to buy into the building.
Bitcoin was losing ground on Friday amid a risk-free mood in traditional markets.
The highest cryptocurrency by market value is trading near $ 17,700 at press time, representing a fall of more than 3% on the day. Meanwhile, Europe’s major stock markets and the future of the S&P 500 are flashing red on Brexit uncertainty and the seemingly endless US fiscal stimulus negotiations.
The sour mood gives the US dollar a lift in foreign exchange markets, putting additional pressure on dollar-denominated bitcoin.
Short-term technical studies are beginning to roll over in favor of the bears. The 14-day broad-track relative strength index has fallen into the bearish territory below 50 for the first time since October 6. Back then, bitcoin was trading near $ 10,500.
The RSI’s bearish turn follows the cryptocurrency’s recent downside of a narrow price range. As such, support for the two-month growing trend, currently at $ 17,000, is open. Some investors have positioned for extended withdrawals, as discussed earlier this week.
Read More: Wallets With Over 1,000 Bitcoin Has Hit The Record Number, Chainalysis Says
Crypto-friendly CFTC Chairman Tarbert plans to step down from his leadership position early next year (CoinDesk)
Indian banks are once again serving crypto traders and exchanges (CoinDesk)
Bitcoin whales buy low, sell high; retail investors go after rallies, according to data (CoinDesk)
Ethereum blockchain ecosystem boasts almost 2,300 developers on average, far more than Bitcoin’s No. 2, Electric Capital report shows (CoinDesk)
JPMorgan completes live blockchain repo trade ahead of new product launch (CoinDesk)
Bitcoin chart views rose along with the price in November, says TradingView (CoinDesk)
Binance Smart Chain successfully integrates Chainlink’s decentralized oracle network (Binance)
Update on traditional economy and finance
Unemployment claims rise to highest since September (WSJ)
Brexit no deal more likely as dinner meeting between UK, top European Commission officials leave teams who believe compromise may not be possible before time runs out (Bloomberg)
Missouri Republican Senator Josh Hawley presents bill to provide second round of $ 1,200 stimulus checks (CNBC)
Origin of mortgage for speed for best year ever with 30 year interest rates below 3% (WSJ)
Stimulus talks drag on as US legislative leaders McConnell, Pelosi give no indication that they are ready to engage (Bloomberg)
Pricing the S&P 500 in hourly pay shows a fourfold increase in a decade (Bloomberg)
Realty’s investment arm of the world’s largest asset manager, BlackRock, has received additional $ 53M capital commitments for its fifth Asia-focused fund (Nikkei Asia Review)