Bitcoin (BTC) was higher for a sixth straight day, carrying on after surging 9.9% on Wednesday to surpass $ 20,000 for the first time in the 11-year history of the cryptocurrency.
“We expect this drought to produce ripple effects going into the end of the year as momentum continues to spin bitcoin upside down,” wrote Lennard Neo, head of research for digital asset products publisher , Stack Funds, on Thursday in a report.
Here is a brief summary of CoinDesk’s coverage of the $ 20K rally:
In traditional markets, European stocks gained on British vaccine and pound hopes as officials anticipate a Brexit deal soon. U.S. stock futures pointed to a higher opening as Congressional leaders accelerated a $ 900 billion stimulus bill. The dollar fell after a Federal Reserve meeting on Wednesday disappointed some investors who were expecting a more dovish result. Gold strengthened 0.7% to $ 1,878 per ounce.
For those watching, bitcoin is now up 217% in 2020, about 14 times this year’s earnings in the Standard 500 and US Standard & Poor’s stocks. Gold is up 24%.
Moving the Market
(Editor’s note: This is the fourth installment of First Mover’s iteration of how the bitcoin market evolved during 2020 and what it means for the future. Today, we’re dealing with May, when the Bitcoin blockchain was “halved once” every four years. Extremely high price predictions for the cryptocurrency failed to materialize, but the network’s programmed reduction in the speed of issuing new bitcoin set up a stark contrast to Federal Reserve currency printing, measured in trillions of dollars.)
In early 2020, before the devastating economic toll of the coronavirus became apparent to investors, the main narrative in the bitcoin market was the impending “halving” – an arcane, once-every-four-year occurrence on the underlying blockchain network .
Since the Bitcoin blockchain was invented just 11 years ago, that would be only the third halving in history. It was very technical, but the whole process was hard coded into the basics of the network, and the basics went something like this: At a certain point in May, the speed of issuing new bitcoin by the blockchain would be cut in half, to about 6.25 bitcoins every 10 minutes from the average 12.5-bitcoin clip that had existed over the recent four-year period.
Generally speaking, few surprises were expected, with all the details set out in advance. But that was the point: Under the design of the cryptocurrency, things were supposed to run like clockwork, giving humans little freedom to intervene on the basis of subjectivity or politics.
These were not ordinary times. In the previous months, the deep-seated economic toll of the coronavirus had sent global markets scrambling, dragging bitcoin prices down from a peak of about $ 10,500 in February to as low as $ 3,850 by mid-March. Then, as the Federal Reserve and other global authorities began to pump trillions of dollars into the financial system, asset prices shot back up, and by April bitcoin was trading as high as $ 9,485.
Cryptocurrency market analysts mentioned the halving as a potential catalyst for a price rally; one German bank went so far as to predict that bitcoin could shoot to $ 90,000 or higher.
“Look for prices to try the $ 10,000 level on speculative buzz leading to the halving,” Jehan Chu, co-founder and managing partner at Hong Kong-based blockchain investment and trading company Kenetic Capital, told CoinDesk at the end of April.
CoinDesk even built its own “Bitcoin Block Reward Halving Countdown” to indicate the estimated time and date of the major event. With everything happening in the world, the halving took on a geek-fest tone for crypto dwellers. The suspension came mainly from watching the price charts: Would the halving drive bitcoin prices to the moon?
In the event, the halving came on May 11 and by almost all accounts proved anti-genomic. Industry executives at CoinDesk’s half-count-down talk show, hosted via Zoom, had to pass the time with technical discussions about the future potential of bitcoin mining computers and how much network speed could accelerate over the next four years.
When the blockchain network finally reached block number 630,000, the moment everyone was waiting, someone posted a snippet of code on Twitter showing that the halving had indeed happened. Some huzzahs were around, and everyone left out of the Zoom room.
“This is more of a vacation for the crypto community than anything else,” Mati Greenspan, of the foreign exchange and cryptocurrency research firm Quantum Economics, wrote in a note to clients.
During the month, prices never climbed well above $ 9,000.
“We’re seeing buy-the-go, sell the fact at work,” Russell Shor, senior market expert at foreign exchange and cryptocurrency trading firm FXCM, said in e-mail comments.
Underneath the buzzing buzz, though, was a gesture: The blockchain network was working exactly as designed, and not even the worst economic crisis since the Great Depression threw it off track.
What’s more, the fall in the speed of issuing bitcoin was a sharp contrast to the monetary policies pursued by the Federal Reserve and other large central banks.
The human central bankers, to their credit, were doing all they could to keep the world financial system from collapsing. But the dynamics meant that bitcoin, with its hard-coded and declining supply curve, could serve investors as a deterrent against ruining US dollars and other currencies.
To underscore the point, the Chinese bitcoin mining pool f2pool incorporated a message in the blockchain entry for data block No. 629,999: “NYTimes 09 / Apr / 2020 With $ 2.3T Injection, Fed Plan Exceeds Rescue 2008.” It was a headline for a news article from the previous month, detailing a massive money printing episode by the US central bank.
Coin Metrics, a cryptocurrency analytics company, revisited the theme in a report earlier this week, showing how the blockchain’s quadrilateral suspensions could give investors confidence looking for an asset that is not subject to human discretion and qualitative judgments.
“Halvings will continue to happen every four years until the supply cap of 21 million bitcoin is reached,” the analysts wrote. “This means we can project far into the future, and have clarity on what Bitcoin’s inflation rate will look like, five or 10 years from now.”
That might even be easier than trying to predict what Federal Reserve Chairman Jerome Powell and his colleagues might do at their next meeting in January.
Bitcoin rose to its highest ever highs above $ 23,000 earlier on Thursday, before quickly falling back over $ 1,500.
The cryptocurrency dropped from the all-time high of $ 23,770 to $ 22,185 in the roughly 30 minutes to 09:45 coordinated universal time (UTC), representing a 6.7% fall, according to the CoinDesk 20.
The sharp disadvantage has been supplemented by the highest sales volume per hour since November 26 and suggests an uptrend fatigue. The cryptocurrency could aggregate in the wide range of $ 20,000 to $ 24,000 in the short run. The derivatives market and chain activity suggest where to continue the rally.
While the average level of funding rate on bitcoin’s flat futures across major exchanges has risen from 0.005% to 0.036%, it remains well below the high of 0.093% seen before the November 24. price collapse. every eight hours, the funding rate reflects the cost of holding long positions. It is positive (or shorts paid) when flatsters trade for a spot price premium. As such, a very high funding rate is seen as a sign of leverage being excessively skewed to the bullish side, or over-thinking conditions.
That is, leverage does not deviate too bullishly, which could mean that the cryptocurrency has an opportunity to rally further.
Moreover, there are few signs that large investors are looking to book profits, with prices easily rallying to record highs above $ 23,000. At press time, some 2,400,000 coins were being held on exchanges. That’s the lowest since August 2018, according to a Glassnode data source, and suggests investors are not preparing for a sale.
Read More: Bitcoin Drops Nearly 7% After Setting A New Record High Of $ 23,770
CME announces plans to launch ether future in February (CoinDesk)
Ruffer Investment confirms massive $ 744M bitcoin purchase (CoinDesk)
Paxos raises $ 142M Series C funding following PayPal deal, OCC bank charter application (CoinDesk)
San Francisco’s cryptocurrency exchange, OKCoin, now allows consumers to invest in decentralized finance (DeFi) applications without paying gas fees (CoinDesk)
Kraken exchange plans to integrate bitcoin Lightning Network in 2021 (CoinDesk)
American Express VC unit is investing in FalconX cryptocurrency trading platform (CoinDesk)
Austrian cryptocurrency trading platform Bitpanda establishes a new technology hub in Poland, allocates € 10M ($ 12.2M) to fund the center, with the aim of creating 300 jobs (CoinDesk)
One River hedge fund, backed by Brevan Howard Asset Management Alan Howard, is emerging as a bitcoin buyer with a $ 1B mark, says Bloomberg (CoinDesk)
Update on traditional economy and finance
The Federal Reserve keeps interest rates unchanged, adds qualitative guidance on currency printing speed (CoinDesk)
U.S. Congressional leaders nearly agree to add a new round of $ 1,200 stimulus checks to the proposed $ 900B relief package (Washington Post)
Fifty years of tax cuts for the rich didn’t cheat, says a study (Bloomberg)
Switzerland, Vietnam labeled as currency defaulters by the US Treasury (Washington Post)
Some members of the US Treasury advisory group advocate allowing big asset managers to buy government bonds directly from the Federal Reserve Bank of New York, to add trillions more dollars in liquidity to the market (Reuters)
Goldman Sachs analysts see 10-year US Treasury yields rise to 1.5% by mid-2021, from about 0.9% now (Reuters)
“There is nothing more encouraging for an investor than the knowledge that central banks, with much deeper pockets, will buy the securities they own,” Mohamed El-Erian of Allianz writes in op-ed ( FT)