Blockchain and Cryptocurrency News Roundup

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  • October 19, 2020
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19 October 2020.

Dive into a short summary of some of the biggest headlines in Crypto this week. Bitcoin is making its way to $12K and beyond as BTC supply expects massive shortage, First Mover: OKEx private key Snafu sends Bitcoin lower as China DeFi rises, Calm before the storm? Analyst says $20K Bitcoin possible in 3 months & Spain’s Central Bank prioritizes digital currency research.

Bitcoin is making its way to $12K and beyond as BTC supply expects massive shortage

2020 has witnessed a rapid growth of institutional investments in Bitcoin. In recent months, MicroStrategy, Square, Stone Ridge Asset Management have all invested in Bitcoin. Grayscale Bitcoin Trust has also recently recorded its largest-ever quarterly inflows. Bitcoin is currently trading at $11,433.MicroStrategy, the billion-dollar Nasdaq listed firm purchased a total of 38,250 Bitcoin (BTC) at an aggregate purchase price of $425 million. The leading intelligence firm believes that Bitcoin is a dependable store of value and an attractive investment asset. This purchase of Bitcoin also enabled the Norwegian Government Pension Fund, the Vanguard Group, and BlackRock to indirectly own more than 10,000 Bitcoin altogether. Less than a month later, Square also purchased $50 million in Bitcoin, which is roughly 1 percent of the firm’s total reserve assets. This also led to the speculation of its industry rival, PayPal, could eventually follow suit. Stone Ridge Asset Management recently purchased 10,000 Bitcoin as part of its treasury reserve strategy, similar to MicroStrategy. NYDIG, its subsidiary will be responsible for the custody of these Bitcoins. As institutions are slowly picking up the trend of investing in Bitcoin as a hedge against the current market turbulence, Bitcoin recently hit a high of trading volume on Oct. 4, reaching $71.2 billion. During the period of Sept. 24 to Oct. 8, Bitcoin’s trading volume hit a high stretch since May 2020. However, Bitcoin’s trading volume suddenly dropped on Oct. 9, and has not been able to surpass $26.2 billion in the past week. According to crypto analytics firm Santiment, a rise in BTC trading volume could be an early sign that BItcoin is making a move towards $12,000 and beyond. A crypto technical analyst, Josh Olszewicz, recently tweeted that Bitcoin has formed a bullish TK Cross, according to the Ichimoku Cloud indicator. Olszewicz explained: “Bullish TK recrosses have only ever gone on to break down below the 20-week EMA (140-daily EMA) once, in 2014.” The trader noted that this trend historically leads to a sharp upwards movement, with a 80 percent strike rate, since 2013.

First Mover: OKEx private key Snafu sends Bitcoin lower as China DeFi rises

Bitcoin (BTC) fell 2% Friday, the most in three weeks, after the market was spooked by the announcement that the cryptocurrency exchange OKEx had suspended withdrawals because founder Mingxing “Star” Xu was reportedly taken into police custody. The executive is the holder of a private key needed to authorize withdrawals, and that became impossible since he was out of touch, the exchange wrote in a notice published early Friday morning. Officials with OKEx, which is based in Malta but led by Chinese executives, said the issue involved a personal matter, not the exchange and shouldn’t affect ongoing business. Traders said the price impact might be short-lived. “I don’t think this news colors BTC the wrong way as much as it does the venue,” Vishal Shah, a trader and founder of the Alpha 5 exchange, told CoinDesk.   Decentralized finance, or DeFi, is one of the hottest trends in the crypto industry. So it’s not surprising the DeFi craze would find its way to China, which has an active cryptocurrency community despite government restrictions on trading and token sales. Chinese startups are playing a crucial role in the DeFi boom with highly localized and nimble adaptations of western projects as well as a marketing apparatus that is laser-focused on Chinese crypto communities, industry watchers say. 


Calm before the storm? Analyst says $20K Bitcoin possible in 3 months

The price of Bitcoin (BTC) has been consolidating within a tight range for several months. If the top cryptocurrency successfully breaks out, Bitazu Capital founding partner Mohit Sorout says a record-high would be imminent. Since July 2020, Bitcoin has been ranging between $10,200 and $11,800, a 15% range. It has seen subdued volatility for a prolonged period, except for some short instances of a volatility spike. When Bitcoin stays stable for a long time in a tight price range, a major price movement typically occurs.  Whether a breakout would occur in the near term or not remains an uncertainty. But if it happens, Sorout says it would take three months for BTC to hit $20,000.

Why three months for a Bitcoin all-time high following a breakout?

Based on previous price cycles, Bitcoin tends to move fast after existing a long-range. The pattern historically applied both breakouts and breakdowns. From May 1 to July 20, Bitcoin ranged between $8,800 to $9,800, stabilizing at around $9,100. After two months of consolidation, it took BTC 12 days to record a 32% rally to $12,123 on Binance. Considering the tendency of Bitcoin to see large volatility spikes after prolonged consolidation periods, Sorout said: “Calm before the storm. If $BTC was to break out today, it would most probably reach its previous ATH of $20k within 3 months.” When asked about the reasoning behind the three-month span, Sorout said it is based on an observation of volatility. According to Sorout, a price increase towards $20,000 could happen even earlier than three months. He noted: “An observation based on how violent the rallies are after subdued periods of volatility. Could even be earlier.” One important variable to pinpoint is the decline in futures open interest compared to previous bull markets. Particularly after the U.S. Commodities and Futures Trading Commission or CFTC’s charges against BitMEX, overall futures open interest has dropped. This could lead to a more stable and gradual uptrend for Bitcoin, unlike past bull cycles. A strong narrative around a Bitcoin bull cycle heading into 2021 remains the recent upsurge of institutional demand. On Oct. 17, Grayscale CEO Barry Silbert said the firm hit record-high assets under management at $6.4 billion. Silbert emphasized that the firm saw “BIG inflows this week.” Institutions that have been acquiring Bitcoin, like Square and MicroStrategy, said they perceive Bitcoin as a potential treasury asset. If so, that could mean that many institutional investors are accumulating BTC without the intent to sell in the near future.


Spain’s Central Bank prioritizes digital currency research

Banco de España, Spain’s central bank released its strategic plan from 2020 to 2024, which outlines its priorities over the next four years. In addition to analyzing the European Central Bank’s policies and trends within the Spanish economy, the Bank of Spain will look into a central bank digital currency (CBDC). The plan—which also says it will study the effect of negative interest rates on banks, COVID-related stresses on markets, and several other areas—does not go into much detail on its CBDC efforts. However, it contends that CBDC research is a priority under the theme of “New technologies and Information Sources.” The plan states: “The implications for the financial system and the economy as a whole of the introduction of a central bank digital currency will be analysed, considering various design proposals and including aspects relating to digital identification.” Spain doesn’t issue its own currency—as a member of the Eurosystem, it’s been using the euro since 2002, when it cycled out the Spanish peseta. And it’s unlikely that the bank is curious about issuing a digital peseta. In September 2017, then-European Central Bank (ECB) president Mario Draghi criticized eurozone member Estonia’s idea of issuing its own digital currency. “No member state can introduce its own currency,” Draghi told reporters. “The currency of the eurozone is the euro.” The following year, the Estonian government denied ever having plans to issue “estcoin.” But the European Central Bank is now led by Christine Lagarde, who’s much more interested in digital currencies than Draghi was. Under her leadership, the ECB even trademarked “digital euro.” It recently published a comprehensive report on an ECB-issued digital currency and has launched consultations with the public about the implications of a CBDC. However, that’s still for a digital euro, not a digital peseta. Juan Ayuso Huertas, Director General of Banco de España, is fairly active on this front. He’s a member of the High-Level Task Force on Central Bank Digital Currency, which produced the digital euro report. Earlier this year, Ayuso and Carlos Conesa, an associate director at the central bank, published a report for the Bank of Spain titled “An Introduction to the Current Debate on Central Bank Digital Currency.”


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