After breaching $10K over the weekend for the first time since March 2018, bitcoin has accelerated its sharp move higher and, trading close to $13,000 on Wednesday, up almost 20% in the past 24 hours. It is now up 240% since the start of the year, and even though it remains below its all-time high of nearly $20,000, at the current pace, it will surpass its all time high in just a few days.
The last time Bitcoin rose above $12,000 was in December 2017, when it continued to rally, on some days moving several thousand dollars inhours, eventually reaching its all time high as $19,511 just before Christmas 2017. That surge, however, was followed by a calamitous drop as retail investors fled, with the crypto dropping below $6,000 by February, and hitting $3000 just months later. All in all, in December 2017 and January 2018, Bitcoin spent about six weeks above $12,000.
Will this time be different, is the main question asked by traders. And as usual, the second biggest question posed by traders, investors, speculators and plain old haters is what is the reason behind the move.
According to some, Facebook’s announcement this month has revived interest in coins, while investors seeking safety have also pushed up Bitcoin’s price.
“It obviously does appear to be benefiting from some sort of flows that gold is benefiting, too,” CMC Markets chief strategist Michael Hewson said. “You’ve got all this stuff about Libra going on, which is renewing interest in bitcoin. Crypto is back in vogue.”
That part was right; what he said next, however, was not – he added that the investors buying bitcoin were speculative. That is precisely the opposite of what JPM found last weekend when the bank concluded that the current bout of buying is not retail – as was the case for much of 2017 – but institutional.
Meanwhile, as bulls cheer signs that the next bubble in cryptos is well and truly here, sparked by interest in virtual currencies from major companies like Facebook and JPMorgan, skeptics say it’s unclear how those initiatives will ultimately benefit Bitcoin and its peers.
It is also unclear if Facebook’s Libra “crypto” experiment has anything to do with the recent move. To be sure, it’s not news as it was well known months in advance that Facebook was launching its “crypto” product, which as explained here before, is not even crypto. Instead what appears to be causing the rush into bitcoin, ethereum and other cryptos is global monetary policy (and Chinese capital flight).
For an extended attempt to explain the recent surge in bitcoin, here is a tweet storm from CoinShares Chairman Danny Masters who lays out his, in our opinion, far more accurate take of what is behind the latest bubble in bitcoin.
1/ No, it’s not @facebook‘s “crypto” experiment. My trading instincts say it’s dollar weakness.
Earlier I had the pleasure of sitting down with @lisaabramowicz1 and @ptsweeney on @Bloomberg to discuss what’s fueling bitcoin recent run: https://t.co/PdpCuGE45m
— Danny Masters (@dannylmasters) June 25, 2019
2/ Contrary to many headlines, so far Libra / Calibra does not appear to be a “cryptocurrency.”
Rather, it represents fiat value transported on cryptocurrency rails.
— Danny Masters (@dannylmasters) June 25, 2019
3/ Because of this, it’s inheriting the legal & regulatory hurdles associated with both crypto (difficult) & the legacy banking system (also difficult).
Our firm (@CoinSharesCo) is very familiar with this regulatory quagmire.
Facebook certainly has their work cut out for them.
— Danny Masters (@dannylmasters) June 25, 2019
4/ So why might they take on this endeavor? Because of growth.
My colleague @Melt_Dem has an excellent piece exploring their motivations: https://t.co/OEUp5a3bvC
More or less, the opportunity to monetize 2.9 billion users is too lucrative even for Facebook to pass up.
— Danny Masters (@dannylmasters) June 25, 2019
5/ Though this news did not drive the recent price movement in my opinion, bitcoin will still benefit when (if) Libra manages to launch as it will provide a new crypto on-ramp for 2.9 billion users while familiarizing them with digital wallets and public-private key cryptography.
— Danny Masters (@dannylmasters) June 25, 2019
6/ But if Facebook isn’t to thank for the recent price action, what is?
As a trader, I always have to look at the larger backdrop.
The main theme I see in the market right now is USD weakness with additional uncertainty injected by the Fed.
— Danny Masters (@dannylmasters) June 25, 2019
7/ Today we’re in uncharted territory with central banks & negative interest rates – arguably more so than post ’08 financial crisis.
This means policymakers are leaving fewer tools to fight the next downturn that inevitably will occur. Investor psychology is notoriously fickle.
— Danny Masters (@dannylmasters) June 25, 2019
8/ Yet coincidentally #bitcoin is up over 200% through the first six-months of 2019, and continues to gain dominance as the crypto winter thawshttps://t.co/pwgL5c4rYS
— Danny Masters (@dannylmasters) June 25, 2019
9/ Another encouraging sign is that now we have more professional custodians:
– Fidelity @DigitalAssets is live
– @CoinbaseCustody too
– @ledgerx just secured @CFTC licenses
– @Bakkt futures supposedly launching in July(Physical delivery is necessary for any true hedging.)
— Danny Masters (@dannylmasters) June 25, 2019
10/ But don’t get too excited too soon – it’s not as if institutions are all of a sudden racing in…
Looking at CME volume, I get a different story than they do:https://t.co/R44TZvEFab
— Danny Masters (@dannylmasters) June 25, 2019
11/ Napkin math for CME $BTC futures volume compared to others supports this read…
– 1/5th of crude volume
– 1/16th of @Bitmex volume
– 1/100th of gold volumeIn my view, we’ve got a long way to go before we can reasonably conclude that institutional money is here for good.
— Danny Masters (@dannylmasters) June 25, 2019
12/ So to answer the question “is bitcoin back?”
My take – yes, bitcoin dominance is back… but only comparatively speaking, of course.
— Danny Masters (@dannylmasters) June 25, 2019
Finally, for those wondering where bitcoin may end up before the current bubble pops, here is the infamous bitcoin “log”chart which see the current hitting $60,000 some time soon.
via ZeroHedge News https://ift.tt/31XsjEn Tyler Durden