CRYPTOCURRENCIES BULLISH & BEARISH THEMES- ElormAdj_Fx Blog

CRYPTO BULLISH/ USD BEARISH

• PayPal and Square's Cash App offers basic help for Bitcoin

Renewed interest in the Crypto market by big investors with instruments like BitCoin and Ethereum look positive for 2021 despite regulators clamping down on Crypto derivatives. VISA, for example, is giving BitCoin to their credit card users as a bonus and PayPal is rolling out the trading of Cryptocurrencies in their platform.

• The world’s largest investors place medium to longer-term bets

Bitcoin demand remains relentless as institutional investors scale into their medium and long-term bets. Millions of dollars are going into the cryptoverse and money managers just can’t buy it all at once. Bitcoin is still the trendy trade on Wall Street and that might not go away as many new retail traders have lost confidence with fiat currencies.

• Biden to appoint a crypto advocate to lead a financial transition

Bitcoin seems to have everything going right for it: Mainstream acceptance is improving, President-elect Biden appointed Gary Gensler, someone viewed as friendly towards cryptocurrencies, to lead his financial policy transition, and steady institutional interest. Bitcoin seems like it might have enough momentum before the end of the year to make that run towards the $2,000 level.

• Cryptos to flourish as real yields make fresh record lows

Cryptocurrencies are benefiting from the dollar’s freefall. Bitcoin and Ether will continue to thrive as real yields continue to make fresh record lows, forcing institutional investors to look everywhere outside the fixed income space for opportunities. Emerging markets still look risky and Bitcoin and other digital coins are seeing strong waves of new interest.

• USD cyclical downturn reinforces Bitcoin rally

Let us remind our notion, that although cryptocurrencies generally speaking failed to demonstrate gold-like haven qualities during stock market swings, they are absolute beneficiaries of the U.S. dollar weakness, so it is pretty safe to bet on the continuation of Bitcoin growth for as long as the cyclical dollar downturn continues.

• US Banks have the authority to provide cryptocurrency custodial services

Bitcoin got a boost after the Office of the Comptroller of the Currency (OCC) noted that national banks have authority to provide fiat bank accounts and cryptocurrency custodial services to cryptocurrency custodial services. Bitcoin’s progress into the banking system is gaining steam and this should be positive for the entire crypto space.

CRYPTOCURRENCIES BEARISH THEMES

CRYPTO BEARISH/ USD BULLISH

• Crypto hype is back, a reality check to be painful

It seems crypto-mania is alive and kicking, with bitcoin as ever reaping the rewards. A modest 55% rally over the last month, up more than 350% from its March low, and, let's face it, would anyone be surprised if it doubles again before year-end. Not to be outdone by Tesla, bitcoin has gone wild once again. The hype is back which naturally makes me more than a little nervous. It didn't end well last time and while enthusiasts may be queueing up to tell me why this time it's different, it very rarely ever is. This can and probably will go a lot further but that will only make the fall all the more painful. Strap yourselves in, it's going to be a wild ride.

• ECB looks at the creation of a digital euro

I read a note from Christine Lagarde the head of the ECB, where she mentions that the "ECB is seriously looking at the creation of a digital euro... She also mentioned that the new digital euro wouldn't replace "ever" replace the euro, just be a supplement to the cash euro... " This has got to be another blow to the Bitcoiners of the world... Since the pandemic, we've had the U.S. and China both say they are developing their own respective digital currencies, and now the Eurozone has joined them...

• Digital currencies to be outlawed when government creates their own crypto

The reader wanted me to include the price of Bitcoin in the Market Prices roundup…. And…. Talk about Bitcoin regularly…. Basically, I’m going to say the same thing I’ve said before about Bitcoin…. And I’m saying this knowing that many people have made beau-coup bucks in the cryptocurrency… I believe that Bitcoin is a scam…. There’s nothing their folks… I fear computer hacking, and the thing I think about the most is that Gov’t is going to develop their own digital currency, and when they do that, all other forms of digital currency will most likely be outlawed…. Fed Head Brainard recently mentioned that the Fed is well into their work on their own digital currency…. So, I won’t be putting Bitcoin in the roundup, and I won’t be talking about it, that is if I can get away with that, I won’t!

• BIS announces a strategic partnership with the Fed

OK… for those of you not following along in class previously… Remember when I told you that all the cryptocurrencies didn’t mean a thing in the long run, because once the Gov’t came out with their version of a C.C. it was all over for the other guys… Well, now you have the two most powerful Central Banks in the world, (the Fed & BIS) joining together to come up with their own C.C…. Go ahead and laugh you Bicoiners… The last laugh will be on you! You see the steps that I laid out for you on how this current financial system will all come to an end, come together, and you start to think... "Hey, maybe Chuck was onto something"...

• Little mainstream adoption until financial markets are beyond the coronavirus pandemic

Bitcoin’s weakness could be a big red flag for the overall risk appetite barometer. If financial markets are at a key inflection point and the overall risk-on trade has run out of steam, cryptocurrencies could be the first major asset class that gets sold. Bitcoin could be very vulnerable here as investors become nervous that the snapback rebound is about to get faded. Bitcoin is no longer trading on its fundamentals and will likely see little mainstream adoption until financial markets are beyond the coronavirus pandemic.

• Little chance of offering a positive risk premium relative to bonds or cash

Another bubble we explored a year ago was bitcoin. After April 2018 bitcoin also experienced a sell-off and aggressive rebound, although more volatile and rapid than that of the tech stocks. According to Coinmarketcap.com, the universe of cryptocurrencies fell from a peak market capitalization of $828 billion in early January 2018 to $125 billion at the end of the year, an 84% drop and a loss in the aggregate paper value of over $700 billion. This loss of wealth is roughly equal to the aggregate GDP of Switzerland, the world’s twentieth largest economy (and one that ironically boasts a notoriously safe-haven currency). Bitcoin has now staged an amazing 187% recovery through the first half of 2019.11 Is this just volatility or a true bubble? Based on our definition, plenty of bubble indications remain. If bitcoin truly becomes an accepted currency, no valuation “model” for it exists other than what the public chooses to believe it’s worth, much the same as for the dollar or any other fiat currency.

• The trust factor behind a currency

There is also a trust factor. How would you regard money that, in a manner of speaking, had Zuckerberg’s face on it rather than that of Washington, Hamilton, or Ben Franklin? Speaking for myself, I place Zuckerberg somewhere between Vladimir Putin and Lori Loughlin on the moral/ethical scale. Of course, Libra will be sold to regulators as entirely detached from Facebook the Social-Media Dominator. Does anyone actually believe that Zuckerberg could resist using the information he possesses on two billion subscribers to ‘enhance’ the value of Libra? Such concerns will make it a tough sell to regulators. Wall Street for its part seems unconcerned since all Facebook news these days — even lurid guilt-and-contrition stories — is being treated as good news. The stock could easily hit new record-highs by mid-summer if the damn-the-torpedoes madness that has gripped Wall Street persists.

• Cryptos not being considered hard assets

The crypto coin craze has spawned several misconceptions, such as the notion that Bitcoin is “digital gold.” Whatever their merits (and there are certainly some), cryptocurrencies backed only by digits cannot be equated to gold and will never replace it.[...] The truth is that gold came to be recognized as money precisely because it has utility outside of monetary use. Gold is useful not just to jewelers and artisans, but also to rocket scientists in space technology applications. What exactly would a Bitcoin be useful for outside of its own digital ecosystem? [...] Bitcoin has a market value, which can be fleeting. Bitcoin might be worthless 100 years from now if new technologies supplant it. Gold’s value, on the other hand, is real, immutable, and eternal. Its unique physical properties combined with its rarity ensure it will always be worth something substantial.

• The emergence of next-generation ultra-secure crypto platforms

[...] in 2019, the value of BTC will depend more on outside influences than on BTC itself. We see three Major Potential Threats to BTC: Government cryptos e.g. DCEP; Tether (Potential Bre-X style disaster); and 4th generation Altcoins e.g. AFund client BL?Kcoin and BFXST which will offer end to end Encrypted and quantum-proof security/platform tokens to run on BLAKFX, a next-generation ultra-secure crypto platform.

• The real money isn’t in cryptocurrencies but applications of blockchain

Back in the early 1990s when the consumer Internet was in its infancy, the “World Wide Web” didn’t really exist. We used to use something called ‘gopher’, a text and menu-based version of the web. Then a bunch of engineers perfected hypertext transfer protocol, ‘HTTP’, and the World Wide Web as we know it today was born. Given how much better the user experience was with HTTP, it didn’t take long for the gopher to almost completely disappear. The same thing could happen in crypto. [...] This is what happened with the Internet. Once the technology was developed, the real money wasn’t made by the people who developed TCP/IP and HTTP. It was made by the entrepreneurs who applied the technology in ways that fundamentally changed how we do business… and by the investors who backed them. Right now those opportunities with DLT are wide open.

• Cryptos behave like assets, not so much as currency

Cantor Fitzgerald analyst Joseph Foresi [...] said cryptocurrencies must compete with the U.S. dollar and face an uncertain regulatory future.

• Crypto-exchanges have to comply with SEC rules

Crypto exchanges across the planet are facing conditions that are more challenging as governments, credit card issuers and local banks keep throwing up roadblocks. Banks are making it increasingly difficult for crypto exchanges to access their services. Last week, the Securities and Exchange Commission (SEC) announced that any exchange, including crypto-exchanges, has to comply with SEC rules. The news triggered a sharp sell-off that affected the entire crypto-market. Even though the regulation of crypto-assets will eventually have positive effects for investors in the long-term - such as lower volatility - the price drop suggests that investors are not convinced of those long-term advantages.

• Bitcoin's total quantity-cap, and high level of data-mining and admin required

First of all, given Bitcoin's total quantity-cap, and the high level of data-mining and administration required, transaction fees are likely to rise, undermining the benefit of making small-scale transactions, one of the currency's selling points. Secondly, Bitcoin is not necessarily wholly scalable. It is arguably more a proof of concept that has taken off like a rocket. The currency's continued demand for ever more processing power, so that its transactions can be processed, is a worrying longer-term warning bell.

Source Fxstreet....