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Omkar Godbole

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A global surge in negative-yielding bonds is likely to bolster bitcoin’s appeal as an alternative investment over the long run, experts say.

  • The amount of global debt offering negative yields has more than doubled to $16.3 trillion in the past seven months to hit the highest level since April 2019, as noted by macro analyst Holger Zschaepitz.
  • In other words, currently, over $16 trillion in such bonds is guaranteed to incur losses if held till maturity.
    With central banks buying bonds at a frantic pace to support the global economy, the tally of negative-yielding debt is heading toward a fresh record high above $17 trillion.
  • As such, the search for yield is likely to intensify, leading to increased rotation of money out of bonds and into perceived inflation hedges such as bitcoin, according to Stack Fund CEO Matthew Dibb.
  • “Going forward, the search for yield is likely to be a major driver of growth in bitcoin’s price and adoption,” Dibb told CoinDesk .
  • So far stocks have been the major benefactor of negative-yielding bonds, he added.
Global negative-yielding debt
Source: Bloomberg via Holger Zscahepitz
  • Economist and trader Alex Kruger told CoinDesk he expects the soaring negative-yielding debt to reignite bitcoin’s bull run once the uncertainty brought by the U.S. presidential election is out of the way.
  • The cryptocurrency has rallied by nearly 200% over the past seven months alongside the spike in the negative-yielding debt.
  • The period started with the “Black Thursday” markets crash on March 12. Year to date, bitcoin is up 58%.
    The recent disclosures of bitcoin investments by companies like Stone Ridge Asset Management and payments company Square have boosted bitcoin’s appeal as an alternative asset.
  • While the broader outlook is bullish, in the short term, the cryptocurrency remains vulnerable to bouts of sell-off in the global equity markets.
  • At press time, bitcoin is changing hands near $11,300, representing a 1% decline on the day. Prices clocked a high of $11,723 earlier this week.
  • Stock markets, too, have come under pressure this week due to the resurgence of coronavirus across Europe and deadlock in Washington over additional fiscal stimulus.

Author: Omkar Godbole

Source: Coindesk: World’s Growing Stockpile of Negative-Yielding Debt a Positive for Bitcoin, Say Analysts

Bitcoin (BTC) has crossed into bullish territory with the biggest weekly gain in 2.5 months.

  • The top cryptocurrency by market value climbed nearly 6.6% in the seven days to Oct. 11, capping its biggest single-week percentage rise since the last week of July.
  • The flipping of the stiff resistance of $11,200 (Sept. 18) into support is bullish, according to Stack Funds research analyst Lennard Neo.
  • So far, however, the follow-through to the breakout has been poor: The cryptocurrency is currently trading in the red near $11,250, having printed highs near $11,500 over the weekend.
Bitcoin weekly and daily charts
Source: TradingView
  • However, the pullback may be short-lived, miner outflows suggest.
  • Last week, bitcoin miners sold more than they generated and ran down inventory by around 1,000 BTC, according to data source Bytetree.com.
Bitcoin miners’ rolling inventory
Source: ByteTree
  • The miners’ rolling inventory (MRI) figure, which tracks the changes in how much bitcoin miners are holding, held well above 100% last week; the five- and 12-week MRIs are also above 100%.
  • Miners liquidate their holdings almost on a daily basis to cover operational costs but will offer more when they feel the market has the strength to absorb the additional coins without harming price.
  • As such, the increased miner outflow is sign of strength in the market, according to Charlie Morris, chief investment officer at ByteTree Asset Management.
  • Additionally, payment company Square’s recent disclosure of major bitcoin investments has given market players a fresh shot of confidence, Philip Gradwell, chief economist at the blockchain analysis firm Chainalysis, told CoinDesk.
  • The major portion of the last week’s 6.6% rise happened after Square announced its bitcoin investment on Thursday.
  • While the path of least resistance for bitcoin appears to be on the higher side, a move to the next major resistance at $12,000 may remain elusive if the resurgence of the coronavirus cases across Europe, tanks global equities and boosts haven demand for the U.S. dollar.
  • “The macro-environment factors still play a strong factor in the direction of BTC as its correlation to the SPX [S&P 500] continues,” data analytics firm Santiment noted.
  • Disclosure: The author holds small positions in bitcoin and litecoin.

Author: Omkar Godbole

Source: Coin Desk: Bitcoin Down 1% After Biggest Weekly Price Gain Since July

Bitcoin exchange reserves have fallen to a 21-month low, a possible sign investors are feeling bullish about the shape of the market.

  • Glassnode data shows the number of bitcoins held in exchange addresses fell by 0.83% to 2,610,278 BTC on Monday, the lowest level since Nov. 24, 2018.
  • Investors tend to move digital assets from their wallets and onto exchanges when they lose confidence in the current price movement so they can easily sell them.
  • In the days leading up to the Black Thursday sell-off, when bitcoin crashed by 40%, exchange balances surged by 2% to a high of 2,947,555 BTC.
  • But bitcoin has since surged to a 13-month high of $12,400 on Monday and is currently up 200% from the $3,867 low it fell to five months ago.
  • As such, exchange balances are down 1.4% over the past week, and nearly 3% in the last month. Balances were down more than 11% from the March 13 high at press time.

  • The price rises come despite bitcoin looking increasingly overbought on the weekly chart relative strength index (RSI) – an indicator that helps traders recognize the signs of overbought and oversold markets.

  • eToro analyst Simon Peters told CoinDesk: “Lower BTC spot exchange balance indicates a current holding mentality among investors, I see this as being pretty bullish.”

Author: Omkar Godbole

Source: Coindesk: Bitcoin Holding Sentiment Strongest in Nearly Two Years

Bitcoin remains in consolidation below a critical resistance despite hashrate reaching record highs over the weekend.

  • Data from Glassnode shows the seven-day average for bitcoin’s hashrate – the computing power dedicated to mining blocks – rose to a record high of 129.03 exahashes per second (EH/s) over the weekend.
  • Bitcoin’s July rally has stalled near $12,000, making the psychological level a resistance to beat for the bulls. It was sidelining near $11,900 at press time.
  • But some argue that an increasing hashrate is a bullish price signal.
  • Earlier this year, Jeremy Britton, CEO of Boston Trading Co. told Finance Magnates rising hashrate forced miners to hoard rather than sell newly mined coins, reducing downwards pressure and raising the price floor.
Bitcoin hashrate
Source: Glassnode
  • But price increases don’t always follow from higher hashrates, according to Philip Gradwell, an economist at the blockchain intelligence firm Chainalysis.
  • “Miners may be better at predicting the future price, but that doesn’t really cause the prices to go up,” Gradwell told CoinDesk in a Telegram chat on Monday.
  • A direct correlation between the hash rate and the price has not been seen before – bitcoin’s price fell 30% in the second half of 2019 even though the hashrate rose 64% to 97 EH/s.
  • Stack Fund co-founder and COO Matthew Dibb told CoinDesk miners may be scaling up their capacity, ergo hashrate, in anticipation of a rising bitcoin price, but didn’t think there was actually an established causal link between the two.

Author: Omkar Godbole

Source: Coindesk: Bitcoin Price Holds Below $12K Even as Hashrate Hits All-Time High

Bitcoin jumped above $9,500 on Wednesday, ending a four-week-long low-volatility squeeze.

Now the cryptocurrency looks set to climb toward the psychological hurdle of $10,000, as suggested by several factors.

1. Volatility returns

  • Bitcoin’s high of $9,551 on Wednesday was its highest level since June 24, according to CoinDesk’s Bitcoin Price Index.
  • The gain has confirmed a Bollinger band breakout on the daily chart and opened the doors for a move of $400 or more on the higher side, as noted by Adrian Zdunczyk, CEO of trading community The BIRB Nest in a blog post.
Daily chart
Source: TradingView
  • Bollinger bands are volatility indicators placed two standard deviations above and below the 20-day moving average.
  • They had recently narrowed to levels last seen in November 2018 as the cryptocurrency traded in the very restricted range of $9,000–$9,400.
  • A big move often follows a period of very low volatility.

2. Institutional interest rising

CME Bitcoin futures open interest
Source: Skew
  • Open interest or open positions in bitcoin futures listed on the Chicago Mercantile Exchange (CME) – considered synonymous with institutional interest – jumped 15% to a one-month high of $452 million on Wednesday.
  • The metric has risen by 24% over the past three days alongside bitcoin’s uptick from $9,120 to $9,550, according to data source Skew.
  • Global open interest (as gauged by data from 12 major crypto derivatives exchanges) has risen above $4 billion for the first time since early March.
  • A price rally is said to have legs if it is accompanied by an uptick in open interest.

3. ‘Risk-on’ markets

  • The “risk-on” mood in the traditional markets further supports stronger gains for the leading cryptocurrency.
  • Global stock markets are trading at five-month highs while the U.S. dollar, a safe haven in times of crisis, is languishing near March lows, according to Investing.com.
  • The EU’s fiscal stimulus deal and market expectations of an additional U.S. coronavirus stimulus package are pushing stocks higher.
  • Bitcoin has recently developed a stronger positive correlation with the equity markets.
  • It’s worth noting that escalating China-U.S. tensions pose a risk to the equity market rally and possibly bitcoin prices.

Author: Omkar Godbole

Source: Coin Desk: 3 Reasons Bitcoin’s Price Could Soon Rise to $10K

View:

  • Bitcoin’s options market suggests Monday’s price drop could be short-lived.
  • However, the cryptocurrency remains vulnerable to a sell-off in stocks and increased miner hoarding is a sign the market lacks strength.

Bitcoin is feeling the pull of gravity on Monday alongside losses in the traditional markets.

At press time, bitcoin is changing hands near $9,080, representing a 2.7% decline on the day. Prices hit a three-week low of $8,910 during the early European trading hours, according to CoinDesk’s Bitcoin Price Index.

Meanwhile, futures tied to the S&P 500 are down over 2.5% and major Asian and European equity market indices are in the red red, apparently over fears of a second wave of coronavirus infections in China.

The decline in bitcoin prices, however, could be short-lived, options market data suggests.

While bitcoin looks to be tracking equities lower, the top cryptocurrency’s put-call volume ratio has risen to three-month highs. At 1.79, the ratio currently stands at the highest value since the markets crash on March 12, according to data provided by crypto derivatives research firm Skew.

The put-call volume ratio is an indicator of relative trading volumes of put options (bearish bets) to call options (bullish bets). To put it another way, trading volume in put options has been significantly higher than that in calls.

“A put-call ratio above 1 is considered to be an indicator of a selloff while a put-call ratio below 1 is an opportunity to buy,” as per Investopedia.

However, when the ratio gets too high (extreme bearishness), the market is considered to be ready for a reversal higher, and when the ratio is too low, the market is considered close to topping out.

Put-call volume ratio

In bitcoin’s case, a reading above 1.7 could be considered too high. In the past, the ratio has breached that level only two times. Further, on both occasions, prices bottomed out on the same day or the following day.

The put-call volume ratio rose to a high of 1.89 on March 12, when the cryptocurrency fell by nearly 40%. On the following day, prices bottomed out at $3,867.

Similarly, the cryptocurrency bottomed out near $6,500 in mid-December with the put-call ratio rising to levels around 2.00.

As such, the latest reading of 1.79 could be considered an advance warning of an impending bear trap – more so, as the put-call open interest ratio, which measures the number of open put options relative to open call options, recently hit a 14-month low of 0.40.

Put-call open interest ratio

“The divergence between the put-call volume and the decreasing put-call open interest implies that a lot of the put positions have been closed out on profit-taking,” according to Chris Thomas, head of digital assets at Swissquote Bank.

Validating Thomas’ argument is the recent decline in the one-month put-call skew from 9.4% to 6.3%. The put-call skew measures the price of puts relative to that of calls. The decline, therefore, represents a recovery in demand for (bullish) call options.

Meanwhile, the three-and six-month skews are also hovering in the negative territory, implying stronger demand for call options expiring in the September and December expiry contracts.

That said, options market positioning is known to change quickly and the cryptocurrency remains vulnerable to potential deeper sell-off in the equity markets.

“The key thing to watch over the next few weeks is the Covid related equities sell off. If markets react very negatively towards the increased Covid cases, we may see more panic which could also pull bitcoin lower,” said Thomas.

In addition, bitcoin’s network statistics are painting a bearish picture and the cryptocurrency’s “fair value” looks to be below $7,000, according to Atlantic House fund manager and ByteTree founder Charlie Morris.

Miners, in particular, have accumulated inventory over the past seven days, selling less coins than they generated.

Miners’ Rolling Inventory (MRI)
Source: ByteTree

Miners often hoard coins when they feel the market lacks the strength to absorb further sales, as discussed earlier this month.

Author: Omkar Godbole

Source: Coin Desk: Bitcoin Price Drop May Be a Bear Trap, Options Market Suggests

Bitcoin could be on the verge of breaking into a multi-month bull run, according to a lesser-known data metric.

The percentage of bitcoin’s circulating supply in profit is currently hovering at 87%, according to data provided by blockchain analytics firm Glassnode. The metric is calculated by looking at the ratio of coins with a value that is higher now than when they were last moved.

Essentially, over 16 million BTC out of the total circulating supply of 18.4 million is currently making gains. More importantly, the 87% level is close to that seen at the onset of the previous long-term bull markets.

“Historically, levels of 90% and higher have clearly marked pronounced bull markets,” noted Glassnode in its weekly insights report.

For instance, the percentage of circulating supply in profit rose above 90% in October 2016 as the cryptocurrency rallied from the August low of $470 up to record highs above $1,100 in the first quarter of 2017.

Circulating supply of bitcoin in profit (2016-2017)

Bitcoin continued to gain altitude and ultimately reached a record high of $20,000 in December 2017. Throughout the meteoric rally, the non-price metric hovered largely in the range of 80 to 99%.

Circulating supply of bitcoin in profit (2013)
Source: Glassnode

Looking further back, the percentage of supply in profit crossed well above 90% in January 2013 and remained above that level for three months as bitcoin rose to clock highs near $250 in mid-April. A similar pattern was seen as prices rose to record highs above $1,000 in mid-November the same year.

So, if history is a guide, bitcoin may embark on a stellar bull run if and when the percentage of supply in profit rises above 90%.

Bitcoin will likely cross that key level if prices rise above $10,000, reinforcing the argument put forward by analysts that $10,000 is the level to beat for the bulls.

At press time, bitcoin is changing hands near $9,740, marginally down on the day. The cryptocurrency has rallied by nearly 150% over the past three months, lifting the percent supply in profit from 43% to 87%.

Circulating supply of bitcoin in profit (2011-2020)

The metric may be of help in identifying major price tops and bottoms. In the past, readings near 40% have marked bear market bottoms, while highs above 95% have coincided with market tops.

Author: Omkar Godbole

Source: Coin Desk: Another Data Point Suggests Bitcoin Close to Prolonged Bull Market

With bitcoin’s price losing altitude again, small investors appear to be seeking exposure to the top cryptocurrency by market value.

Prices fell by 9.8% last week to register bitcoin’s biggest weekly decline since the second week of March, according to CoinDesk’s Bitcoin Price Index. A two-week low of $8,630 was registered early on Monday, with prices last seen at $8,730 – down over 11% from the post-halving high of $9,960 registered on May 18.

Despite the price drop – or perhaps because of it – the number of addresses holding smaller amounts of bitcoin has continued to rise.

The number of unique addresses holding at least 0.01 BTC (around $87 at press time) rose to a new high of 8,478,746 on Sunday, according to data provided by blockchain intelligence firm Glassnode.

Meanwhile, the number of addresses holding at least 0.1 BTC (roughly $870) also rose to a lifetime high, reaching 3,053,004 on Friday. Both metrics regained their upward trajectory following the May 11 mining reward halving.

“Retail investors are likely in an accumulation phase,” said Ki Young Ju, CEO of blockchain analytics firm CryptoQuant.

The dip demand may be associated with the bullish narrative that bitcoin could repeat history by charting a solid price rally over the next 12 months. The cryptocurrency witnessed a 30% pullback in the four weeks following its second reward halving on July 9, 2016. However, the decline was erased in the subsequent months and prices rallied to record highs by March 2016.

Prominent trading firms are also retaining a constructive outlook on the cryptocurrency. “The price pullback was expected and the long-term bias remains bullish. We would accumulate if prices drop to the $6,000-$8,000 range,” said Darius Sit, co-founder and managing director at Singapore-based QCP capital.

That said, the growth in the number of small addresses does not necessarily all represent new individual investors. This is because a single user can hold cryptocurrency in multiple addresses.

Exchanges and custodial services also tend to hold bitcoins in multiple addresses. “Wallet management systems of virtual asset service providers have become more complex and granular. Their wallet clusters include more small wallets for security, etc.,” said Ju.

As such, it is difficult to gauge exactly how much of the small address growth has been driven by new investor participation.

Even if small investor participation is increasing, it is unlikely to have a big impact on prices because the market is still dominated by large players, popularly known as “whales.” The number of addresses holding at least 10,000 BTC and 1,000 BTC have declined over the last two weeks, according to Glassnode data.

Moreover, options market activity suggests a deeper price drop could be in the offing in the near-term. “Traders are buying out-of-the-money puts,” said Chris Thomas, head of digital assets at Swissquote Bank.

A put option represents a bearish bet on the cryptocurrency, while a call option represents a bullish bet. An out-of-the-money put option has a strike price that is lower than the market price of the underlying asset.

Thomas expects bitcoin to move toward the $8,000–$8,200 range in the short term. That looks likely, as per the charts, as the cryptocurrency has breached a trendline rising from March lows.

Daily chart

Bitcoin fell by 5% on Monday, violating the support of the 2.5-month-long bullish trendline marked. The breakdown is backed by deeper bars on the MACD histogram, a sign of strengthening bearish momentum.

“However, the relative strength index is neutral (going sideways),” Yuriy Mazur, head of data analytics at cryptocurrency exchange CEX.IO, told CoinDesk, while adding that “there is no clear understanding where BTC will go currently. It may either retrace back to $6,500 or reach $10,000. We may get a clear indication of the further direction in the nearest days.”

The immediate bearish case would weaken if prices rise above Sunday’s high of $9,310 on the back of strong volumes. That said, a convincing move above $10,000 may be needed to restore the bullish trend.

“After the halving took place, there were practically no buyers for bitcoin, but in the range of $9,900–$10,000, a zone of hard technical resistance formed, that is very difficult to overcome under the current conditions,” said Mazur.

Author: Omkar Godbole

Source: Coin Desk: As Bitcoin Falls to 2-Week Lows, Small Investors Look to Be Buying

Bitcoin is quickly gathering upward momentum alongside a surge in open positions on futures listed on the Chicago Mercantile Exchange (CME).

The top cryptocurrency by market value jumped to a high of $9,220 at 10:20 UTC on Wednesday, having settled (UTC) above $9,000 on Tuesday to register its first above-$9,000 daily close in two months.

Meanwhile, open interest – or the number of futures contracts outstanding on the CME – rose to $351 million on Tuesday, the highest level since July 10, 2019, according to the data provided by crypto derivatives research firm Skew.

Source: Skew

Open interest hit a bottom of $107 million on March 12, when bitcoin’s price fell by over 40% amid the coronavirus-led crash in the traditional markets. Since then, open positions have risen by 228%.

“The uptick in the CME open interest is indicative of professional traders returning to the bitcoin market,” noted analytics resource Arcane Research in its monthly report. CME open interest is widely considered to be a proxy for institutional activity.

While that may be the case, retail investors, too, could be trading CME futures through TD Ameritrade, an online broker.

Further, the latest open interest figure may have been distorted due to the rumored entry of Renaissance Technologies’ into CME futures trading. In March, the quantitative analysis-heavy firm gave the green light for its Medallion fund to trade the CME’s cash-settled bitcoin futures market.

Some observers argue that only U.S.-regulated institutions are required to trade on the CME while the rest may be trading on other major exchanges like BitMEX.

Put simply, the uptick in the CME open interest does not necessarily represent institutional activity, more so as the exchange accounts for a small portion of the global futures open interest.

“It’s still small relative to the rest of the market and the overall market open interest is still quite low,” said Darius Sit, co-founder and managing director at Singapore-based QCP Capital.

Global futures open interest
Source: Skew

Total open interest in futures listed on major exchanges across the globe stood at over $2.5 billion on Tuesday, the highest level since March 11, when the tally was around $3.8 billion. Meanwhile, CME’s contribution to the global tally was 14%.

Nevertheless, the uptick in both the CME and global volume is likely to bring cheer to bulls as a rise in open interest alongside an upward move in prices is said to confirm an uptrend.

At press time, bitcoin is trading near $9,220, representing a 2.5% gain on the day.

The cryptocurrency has broken out of a six-day-long narrowing price range, signaling a continuation of the price rally from lows near $6,700 observed on April 20. The move strengthens the case for a rise to $10,000 ahead of next Tuesday’s mining reward halving.

Author: Omkar Godbole

Source: Coin Desk: Bitcoin Breaches $9.2K as Open Positions on CME Futures Hit 10-Month High

Bitcoin’s bulls are taking a breather, having engineered the longest run of daily gains since last summer.

At press time, the number one cryptocurrency by market capitalization is trading in a sideways manner around $7,730 on major exchanges, representing a 0.60 percent decline on the day, according to CoinDesk’s Bitcoin Price Index.

The lackluster trading comes a day after prices hit a 6.5-week high of $7,800. Notably, the cryptocurrency has eked out modest gains in each of the last seven days. Bitcoin last rallied for seven straight days in July 2019.

Daily charts

The seven-day winning trend (above right) from July 30 to Aug. 5, 2019, saw prices rise by over $2,600 to highs near $12,000. While the upward move was bigger than the latest $1,000 rise from $6,800 to $7,800, it was short-lived and reversed in the following 10 days.

Meanwhile, most analysts are anticipating an extension of the recent uptrend, possibly to $10,000, in the days leading up to the mining reward halving, due on May 12.

Some observers, however, think the cryptocurrency could witness a pullback before breaking above $8,000 in a convincing manner.

“Feels like we have gone quite far over the last week and now there’s every chance of a small pullback (perhaps as far as to $7,000) over the course of the next few days,” Chris Thomas, head of digital assets at Swissquote Bank, told CoinDesk.

To make $8,000 a tough task, bitcoin is also approaching a cluster of resistance levels lined up in the $7,800 to $8,000 range.

Daily chart

To start with, the $7,800-$7,900 area has offered strong support and resistance over the last year. “Technically its quite a large resistance for bitcoin to break,” said Jones.

Further, the 200- and 100-day averages are lined up at $7,978 and $7,973, respectively.

If these levels prove a tough nut to crack, the market may test dip demand, or buyers’ resolve to keep the upward trend on track, by revisiting support at $7,469 (April 7 high) and $7,300 (April 18 high).

Alternatively, a high-volume move above $8,000 would shift the focus to the resistance of the trendline connecting Feb. 13 and Feb. 18 highs at $8,275.

The odds of bitcoin rising to $10,000 ahead of halving, as suggested by Jehan Chu, co-founder at Hong Kong-based blockchain investment and trading firm Kenetic on Monday, would strengthen if the descending trendline resistance is breached.

4-hour chart

The 4-hour chart is reporting conflicting signals.

While the bearish divergence of the relative strength index (RSI) indicates scope for a price pullback, the symmetrical triangle breakout confirmed on Monday suggests the path of least resistance is to the higher side.

Price patterns usually take precedence over indicators. However, in this case the odds of a pullback, as suggested by the RSI, look strong as the cryptocurrency has already failed twice to chew through resistance at $7,800.

Author: Omkar Godbole

Source: Coin Desk: Bitcoin Rally Pauses Near $7.8K After Longest Winning Run in 8 Months

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