Has a Bubble Burst? Brokers Beat Volume #8

Welcome to the eighth issue of the Broker’s Beat. We’re sorry for getting it to you so late in the day, but with the overnight action in the Bitcoin markets, we thought it would be more appropriate to rewrite the digest so it would fit the current dynamics. 

Read on for more price analysis, mining insight, and news about liquidity in the markets.

Bitcoin, Metals, And Equities “Will Fly” If Dollar Downtend Deepens

Source: BarChart

“Comparing the long-term price action of the DXY with Bitcoin shows how a fall in the dollar could send the cryptocurrency much higher. The last significant fall in the greenback led to Bitcoin’s $20,000 top – could this next drop create yet another crypto bubble?”

What now for Bitcoin price? September starts with abrupt BTC sell-off

Source: CoinTelegraph

“Some traders expect the price of Bitcoin to drop to as low as the $11,000 support area. A drop below $10,500 and a consolidation under it would raise the chances of a bearish trend. Traders generally consider $11,000 and $11,700 as the key levels for BTC. Technically, if Bitcoin remains below $11,000 for a prolonged period, it might indicate a bearish pullback. If BTC remains stable above $11,700, traders say it raises the chances of a rally.”

Square’s Cash App Fuels Leap in Stock

Source: Market Screener

“Square shares have rallied 28% in the past month and are up 166% since the start of the year, while bank stocks have fallen sharply. The run-up is mostly due to the popularity of its Cash App offering, which lets consumers send money to one another via smartphone, purchase things with a prepaid debit card and invest in bitcoin and slices of individual stocks, analysts and investors said.”

Major European Stock Exchange Lists First Bitcoin Product

Source: Decrypt

“‘Basically it’s a security product to own non-custodial (Coinbase) bitcoin,’ said Posch. ‘That means you now have three intermediaries, although the basic idea of Bitcoin is to empower the individual and eliminate intermediaries and all those financial constructs that led to the banking crisis in 2008.’ ”

After a week of roughly staying flat, Bitcoin went through an approximately 7% market correction downwards overnight. Currently trading in the $10,700 range, this could be the beginning of a bearish trend in the market.

As you can see in the 5-day chart below, this morning saw a rapid drop after what looked like relatively calm markets. The RSI dropped to 21.6, which quickly corrected back inside a more normal range. 

As much as we like to use technical analysis, it’s also important to ask why the price dropped so rapidly.

According to CryptoQuant, a blockchain data startup, the amount of outflows from miner wallets in the last 24 hours has spiked. That miners are selling off approximately 2,000 BTC is easy to interpret as a bearish signal, but time will tell if this is truly the case. Last time this happened, it was the beginning of the bull run of 2017.

Traders seem less sure of Bitcoin’s medium-term future in regards to the USD right now. You would think that uncertainty in US markets would mean only good things for Bitcoin, but there is a potential for a strong recovery in the economy, which would lessen the need for Bitcoin.

In relation to our discussion above, mining dominance is actually the key here. Experts are saying that some miners don’t want a bull market, because that would bring more competition into the field. 

Instead, these miners would prefer to maintain healthy – but not greedy – margins. That’s why they decided to execute this large selloff in the last few days. 

This is obviously just one interpretation of what’s going on, but it is definitely an interesting one and one that shouldn’t be ignored. On the whole, it’s important to remember that miners are traders too. 

They have a duty to bolster profits as much as possible, and this selloff may have been part of the trading strategy they have in play. Or it’s part of a larger panic, but we aren’t seeing that reflected in the broader world right now.

To further our comments above about the effect of mining on the recent price swings, we’ve got the 30-day charts for total hash rate and total mining revenues below. 

You can see that there actually aren’t that many changes or drastic swings in the hash rate. Nothing big has happened, which makes us think that this recent selloff is noise.

Plus, even though the miner’s revenue is volatile, it stayed within the same range for the last 30 days. This helps us reframe everything as an adjustment period before finding a new normal. The “producers” of Bitcoin have to get used to the swings in price as well. 

There have been a few interesting pieces of news we’d like to highlight for you. First, Serum has opted to work with Jump Trading to assist with liquidity on their DEX. They already claim to be the most liquid DEX in the world, and this is expected to boost their profile even more. 

Plus, as we mentioned earlier in the digest, Wiener Börse has announced the listing of their first Bitcoin-related product. This is being interpreted as a strong adoption signal, but at the same time receiving a lot of criticism Bitcoin purists. There are technically three intermediaries involved with each transaction, since it’s a security product to own non-custodial Bitcoin. That makes it far more “risky” in the sense that the user never really has custody of their own Bitcoin. 

Going forward, it seems like moves of this nature are treated as bittersweet. Greater Bitcoin investment, but also compromises of the original Bitcoin promise. 

There’s also the worry that with Coinbase being the intermediary for the Bitcoin being used in the ETP, they may gain too much power in the market and actually be able to move the markets. 

This concludes another week of the Broker’s Beat. Hopefully, this helped you understand what has been going on in the markets in the last few days. 

Happy trading!