Bears Go into Hibernation as Bitcoin Soars: Broker’s Beat Issue #4

bitcoin soars

Welcome to the fourth issue of our recently unveiled newsletter, ‘The Broker’s Beat’. This week, we go deep into what’s going on with Bitcoin and the crypto world as a whole, and how rapid pumps like this can actually be a bad thing. Even as Bitcoin soars, problems will emerge.

These are exciting times in the crypto world, and we want to make sure to give as much colour as possible on current events and how you can interpret them (and profit from them) going forward. 

US Congressmen Want IRS to Balance Taxation and Innovation in the Cryptocurrency Space


“Eager to keep the U.S. abreast with this technology, the congressmen end their letter by urging the IRS to continue pursuing its mandate “but also (to) ensure innovation won’t be driven elsewhere.”

This letter by the four members of Congress is the latest signal that the U.S. is moving to embrace blockchain technology and cryptocurrencies.”

Multiple Indian Ministries Discussing on a Law to Ban Crypto

Source: Finance Magnates

“Citing an anonymous government official, Moneycontrol reported that the government has been consulting with the law ministry, ministry of information and technology, and the Reserve Bank of India (RBI) to draft a framework to ban cryptocurrency trading in India.”

Putin fury: Russia cracks down on Bitcoin under strict new cryptocurrency law

Source: Express

“Russia has banned the use of cryptocurrencies as a form of payment after signing a strict new bill into law over the weekend. The ban forms part of a wider bill to regulate online money – also called digital financial asset (DFA) transactions. The bill does give cryptocurrency a legal status in the country, and means cryptocurrencies like Bitcoin can be sold, purchased, and exchanged. Russian banks and finance exchanges can also take part in the sale and purchase of cryptocurrencies, but they have to be registered with Russia’s Central Bank. However, they cannot be used as a means of payment to buy anything.”

Bitcoin’s hedge fund sharks are swimming with the whales

Source: Bloomberg

“Bitcoin is doing that thing again. After a 50% slump in the cryptocurrency’s price to about $4,000 in mid-March, when Covid-19 panic was gripping the financial markets, it has bounced back to trade at about $11,200. Veteran crypto-watchers have seen this rapid shift from fear to greed many times before, and they know it can have painful consequences. The first time Bitcoin’s price went past five figures, in 2017, it fueled a speculative frenzy that ended almost as soon as it began, leading to an 80% slump over 12 months. And when Bitcoin rose above $10,000 in February this year, any hope for a rally was snuffed out by Covid.”

Last week in the Broker’s Beat, we were optimistic and could see how recent bullish trends may lead to a longer bull market, but more details have emerged recently. 

The crypto market came roaring back for a second week as momentum continued to drive returns. Now we are slightly bearish on Bitcoin… at least for the time-being. Indicators that were more moderate last week have pushed the limit. 

We mentioned that indicators revealed that the rally may have been too fast to be sustainable and recommended that traders shift back into fiat should RSI cross under 70.

As we forecasted, RSI finally crossed under the 70 mark on Sunday, with Bitcoin closing down 6.3% as a response. The reason why we are bearish this week is because MACD seems to indicate that momentum is slowing. Should MACD cross below the zero line, this would be a classic mechanical sell signal, suggesting that the pullback is not yet complete. 

technical analysis

To be clear, we believe this is a pullback, not the beginning of another downtrend, as we continue to be mid-term bullish until the end of 2020. The fundamentals and technicals are both in line with our long-term belief that Bitcoin’s utility as a store of value will be realized during a crisis like the one we’re currently going through.

We spent quite a while last week talking about the breakdown of BTC’s hash rate between major and minor miners, and this week we’d like to provide a little more colour to that. 

The percentage breakdown is shown below and is something we’ll discuss each week going forward. Recent shifts have mostly been at the expense of the F2Pool and we can see some growth in the Huobi.pool. 

hash rate distribution

Last week, BTC’s hash rate had just hit a new high of 126.94 terahashes per second. Since then, this figure has moderated out a bit. As you can see in the 30-day chart below, the hash rate has dropped in the last week, although it is still quite volatile.

And now that Bitcoin has stabilized a bit, we need to look to long-term indicators to figure out what may happen next. For context, we’ve included a 1-year chart of the hash rate below. This chart shows that the hash rate is still very close to an all time high, and there’s been a general trend of cycles at the same rhythm for a while now.

The newest pump in Bitcoin is allowing the less efficient miners to continue running, since their revenues are covering the costs (at least for the time-being). However, we expect that the hash rate will go through some significant volatility as the difficulty rate changes and another breakout occurs (whichever comes first).

trader's digest

As with last week, not a lot has occurred on a macro level in terms of liquidity and trading recently.

Bitcoin’s pump is contagious, with many other assets in the space pumping massively. As of the time of publishing, Ethereum is up 23.61% on the week and Ripple is up 24.93%. This fits with the observation that Bitcoin’s dominance has dropped to 61.75%. 

On a micro-scale, Ripple has announced that their liquidity is conintually increasing as they have been selling more and more XRP. Q2 saw them sell $32.55 million worth of XRP, which is many times their previous quarter’s sale of $1.75 million. 

They are saying that these over the counter transactions sales add value to the network and increase liquidity as a whole for the remittances platform.

That concludes the fourth issue of the Broker’s Beat. Tomorrow we’re publishing our DeFi market overview. Watch out for this high-value report in your inbox. You won’t want to miss it!