Bitcoin is trading higher on Tuesday, and the bull market is looking less overheated than it did a day ago.
At press time, the top cryptocurrency by market value is changing hands near $31,590, representing a 5% gain on a 24-hour basis. Bitcoin had dipped by 15% to near $28,000 during Monday’s European trading hours.
The sudden sell-off happened after the average perpetual funding rate (the cost of holding long positions) on major derivatives exchanges rose to an 11-month high of 0.137%, implying excess bullish leverage.
“The bitcoin futures market was very over-leveraged and overcrowded before the drop,” analyst Joseph Young noted in a Substack post, adding that the market now looks less overheated with funding rates having dropped.
The average now stands at 0.039%, according to data provided by the blockchain intelligence firm Glassnode. Further, major exchanges liquidated $936 billion-worth of long positions on Monday – the highest in at least eight months – wiping out excess leverage.
Bitcoin’s swift recovery from Monday’s low indicates dip demand, a sign of the bullish mood in the market.
“The Coinbase premium reappeared as bitcoin began to recover, which is a good sign,” Young noted. “This means high-net-worth investors in the U.S. took advantage of the drop and bought bitcoin.”
The options market continues to paint a bullish picture amid the high price volatility, with the one-, three-, and six-month put-call skews hovering well into the negative territory, according to data source Skew.
Put-call skews measure the cost of puts (bearish bets) relative to calls (bullish bets). Meanwhile, on-chain metrics show scope for a continued price rally.
While bitcoin’s market value to realized value (MVRV) Z-score has risen to a three-year high of 5.32, it remains well below the 7.0 level at which an asset is considered near a top, per Glassnode. Historically, above-7.0 readings have marked an end of bull markets.
According to trader Alex Kruger, Monday’s low of $28,154 could turn out to be this week’s bottom, especially if the U.S. Democrats sweep Tuesday’s Georgia elections and gain control of the Senate.
A Democrat-controlled Senate would pave the way for more significant fiscal stimulus, according to Goldman Sachs. Fiscal stimulus is inflationary in nature and would likely strengthen the long-term bull case of scarce assets such as gold and bitcoin.
Bitcoin hit $34k on a bull run that has seen it more than triple in value
There are a few reasons why.
Is Bitcoin crossing over into the mainstream?
Bitcoin smashed all expectations today. It accelerated past $30k in the early hours of January 2nd to knock past $31,000 and $32,000 this afternoon, daring to hit $33,000 by the early evening. Then shortly after, it passed $34,000 to hit its current all-time high, $34,608.
AnalystsDecryptspoke to attribute the boom to three things: retail investors, institutional investors balancing the books, and a single whale’s trade that set an army of algo-traders chomping in search of a profit.
Retail Therapy
“We’re starting to see some retail interest in bitcoin now, at last,” Eric Wall, CIO of crypto fund Arcane Assets, toldDecrypt. Search volume for Bitcoin is through the roof, according to Google Trends data—”It’s the first time since the last $20k peak that we’ve seen anything like this.”
Wall, like other expertsDecryptspoke to, told us that retail investors are partly responsible for driving the weekend surge.
Nimrod Lehavi, CEO and founder of crypto payments company Simplex, also observed “surging demand among retail investors.”
But retail investors only explain part of Bitcoin’s rise this weekend, he said. Lehavi’s retail customers used to spend 90% of their money on Bitcoin. This weekend, that’s down to 50%; investors are increasingly interested in Tether, the US dollar-pegged stablecoin, and ETH.
Traders are already “looking for ‘the next BTC’,” said Lehavi.
Institutional Money
Institutional investors are the tanks that thrust Bitcoin’s price upward in the last quarter of 2020.
And they’ve hardly gone away. The hedge fund of former White House Communications Director Anthony Scaramucci is set to open a huge Bitcoin Fund on Monday, for instance, and MicroStrategy CEO Michael Saylor has no plans to buy less Bitcoin.
Demand from institutional investors helped surge Bitcoin’s price this weekend, according to analystsDecryptspoke to.
Joshua Ho, founder and partner of Singaporean trading firm QCP Capital, attributes this weekend’s rise to “continuous institutional interest from all sides.”
His logic is that institutional investors are so eager to buy up Bitcoin that they’re driving up the price.
Wall said the price hike could be the result of institutional investors withdrawing their funds to long-term storage vaults, reducing the number of Bitcoin available for retail traders.
A recent report from Glassnode concluded that just 22% of Bitcoin is left for traders, since institutional investors have already snapped up most of the available Bitcoin, driving the demand up and further fuelling the bull run.
Still, why, of all things, would the price rise on a Saturday, when most institutional investors would surely prefer ski trips and weekend city breaks to crypto trading?
Pierce Crosby, general manager of TradingView, said that volume spikes at the turn of the year are down to cash-heavy treasuries and asset managers rebalancing their books for 2021.
“With some deciding to allocate even 1% into crypto, there will be a large imbalance in buyers versus sellers, near term,” he said.
Algo-Trader Riot
But there’s also something else afoot.
At the weekend, retail investors and algo-traders run amok; when Monday comes, institutional investors set the market straight. “Just a question of when big sellers come in again,” said Ho.
Ho said that a sudden withdrawal of $1.15 billion from a Coinbase Pro wallet earlier today could have triggered trading bots to buy Bitcoin. Trading bots quickly place trades when someone moves a large amount of Bitcoin to take advantage (what they perceive to be) a rising market.
The nature of the purchase is unknown. “The large outflow probably indicates a large buy went through that hasn’t been announced yet,” said Ho, while Wall said it could be an exchange shuffling around their funds between internal wallets.
Either way, it riled the bots and pumped the market.
What next?
Crosby expects the price to keep jumping around since weekend volatility is historically much higher than during the week. “This weekend is no different,” he said.
A correction could be in order.
But how large will the correction be, should it occur? Wall told Decrypt, “I wouldn’t start to get scared just yet, this still looks to me like it has a lot further to go. Another 2x from here in the first and second quarter is entirely possible.”
Disclaimer
The views and opinions expressed by the author are for informational purposes only and do not constitute financial, investment, or other advice.
Prominent crypto analysts and finance veterans are making their Bitcoin price predictions for the new year.
Analysts are all over the place when it comes to their 2021 BTC bets. Some believe the asset is on pace to reach the six-figure mark, while critics say Bitcoin doesn’t stand a chance against regulatory hurdles.
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Citibank analyst Tom Fitzpatrick recently said Bitcoin could soar up to $318,000 by December of next year, representing a low to high rally of 102x, which would make this boom cycle the weakest in terms of percentage growth in Bitcoin’s history.
Following a year of economic uncertainty and unprecedented fiscal policy, Fitzpatrick says investors will continue seeking refuge in Bitcoin to protect their wealth.
Bloomberg analyst Mike McGlone has high targets for Bitcoin as well. With growing institutional support, McGlone says Bitcoin is poised to continue its rally through 2021, cracking the $1 trillion market cap, and potentially seeing price resistance at $50,000.
Blockfyre co-founder and Moonrock Capital managing partner Simon Dedic has also shared his 2021 Bitcoin predictions.
According to Dedic, the last three years have been good to cryptocurrency, but he doubts the monster altcoin rally in 2017 will happen again. That said, Dedic still predicts Bitcoin will hit $150,000.
“In 2017, you could have bought literally any alt and it was a good investment. [In my opinion], this won’t happen again.However, I still believe that the bull run will return, pumping the few solid alts out there.
Predictions:
$BTC $150,000
$ETH $9,000
$LINK $200
$BNB $500
$VET $1
$XTZ $200″
Creator of the BTC stock-to-flow valuation model and pseudonymous analyst PlanB is also betting on a six-figure Bitcoin in 2021. The high-profile analyst estimates BTC can trade as high as $300,000 before 2021 expires.
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On the flips side, the economist who predicted the 2008 economic crash, Nouriel “The Doom” Roubini maintains the leading digital asset will crumble in the wake of future regulation.
In a reply to crypto lawyer Jake Chervinsky, who claimed it was unlikely the government could clamp down on crypto, Roubini tweeted that he has no doubt the incoming Biden administration will create a bearish environment for crypto assets.
“You are delusional. Biden’s team, starting with Yellen who was my boss at CEA, will crack down on this criminal tax evading & AML-KYC-TFC-evading crypto/shitcoins cesspool much more than Mnuchin. Get a life as you have become a crypto hired gun cheerleader/enabler.”
On Sunday, Bitcoin printed a new all-time high of $28,288, according to CoinMarketCap.
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Disclaimer: Opinions expressed at The Daily Hodl are not investment advice. Investors should do their due diligence before making any high-risk investments in Bitcoin, cryptocurrency or digital assets. Please be advised that your transfers and trades are at your own risk, and any loses you may incur are your responsibility. The Daily Hodl does not recommend the buying or selling of any cryptocurrencies or digital assets, nor is The Daily Hodl an investment advisor. Please note that The Daily Hodl participates in affiliate marketing.
After a historic day in which the headlines could hardly keep up with price action and Bitcoin set a new all-time high above $26,500, traders and analysts are now turning their attention towards what could be in store for the digital currency over the next five days as 2020 comes to a close.
Historic candle
While a 8-9% daily gain might be pittance compared to Bitcoin’s historical volatility — there was a 42% rally as recently as 2019 — as Messari founder Ryan Selkis pointed out, today’s rally featured only the second $2,300 candle in the digital currency’s history:
Bitcoin’s first $2300 candle took 8.5 years.
It’s done that again today. pic.twitter.com/FfiCrG9OhX
— Ryan Bitcorn Selkis (@twobitidiot) December 26, 2020
Perhaps caught in the euphoria, some traders are already looking towards when daily candles eclipse five figures:
When will #Bitcoin have its first $10k daily candle?
— Luke.hodl (@Coinosphere) December 26, 2020
Clamoring for $30,000
Positive headwinds are swirling for Bitcoin’s next step. “Bitcoin” is currently trending on Twitter with 164,000 recent tweets — comfortably outstripping the next highest trending item, the archeological discovery of a street food stall in the ruins of Pompeii.
Additionally, as Cointelegraph has previously reported, this recent rally has put Bitcoin back on the path plotted by the popular Stock to Flow (S2F) model, which forecasts a price of :
Another popular folk metric indicated that Bitcoin mania still has a long ways to climb towards 2017 peaks as well. According to Google analytics, search history for “Bitcoin” is barely at a fifth of all time high levels:
Google Trends data:
Searches for ‘buy #Bitcoin’ are around 1/5th of their all-time peak
Will searches eventually 10x the last peak? It has begun. pic.twitter.com/MUgRfPsvlD
— Alistair Milne (@alistairmilne) December 26, 2020
All together, the positive sentiment and parabolic price action have a greater and greater number of traders clamoring for ‘30k by the 30th” — a $30,000 price on the 30th of December:
Retweet for 30k #BTC by the 30th
— Stacking (@StackingUSD) December 26, 2020
Blow off top?
Despite the positive sentiment and price action that puts Cape Canaveral to shame, some traders are already lining up possible short positions. One trader is calling for a blow-off top in the next two weeks:
Update – Weekend blow off in full motion.
I suspect the hammer will come within the next 2 weeks pic.twitter.com/3xAirpOJrz
— Crypto Leo (@CryptoLeos) December 26, 2020
While it remains the minority sentiment, he’s not alone and thinking turbulence could be ahead for Bitcoin. $2.3 billion worth of Bitcoin futures expired on Christmas day, which historically has led to choppy markets.
Bitcoin is the one asset everyone in 2020 is talking about whether they are for or against the cryptocurrency. Naysayers are out in full force, and supporters are stronger than ever and growing by the numbers – even enlisting celebrities, hedge fund managers, and more.
Top analysts from both crypto and traditional finance, along with the asset’s biggest believers, expect each of the rare coins to reach prices of as high as $400,000. But why then do only 12% of Deutsche Bank clients responding to a crypto-related survey see the price per BTC reaching $100,000 or more? Are these clients way off, or are the recent skeptics of the stock-to-flow model correct, and the cryptocurrency will vastly underperform against expectations?
Contrarian Investing: Will Too Early Of Euphoria Preemptively Kill The Current Crypto Bull run
Some of the greatest investors the world has ever known built their fortune on contrarian strategies. Warren Buffett was an advocate of being fearful while others are greedy, and vice versa. Baron Rothschild is credited with the “buy the blood in the streets” quote. And John Templeton warned that “bull markets are born on pessimism, grow on skepticism, mature on optimism, and die of euphoria.”
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Black Thursday in 2020 was about as pessimistic as things could get for Bitcoin, an asset that for the first time was threatened with crashing to zero. It took shutting off derivatives platform BitMEX’s liquidation engine to stop the cascade effect causing the collapse.
Related Reading | Why Investors Are Spending Stimulus Checks To Buy Bitcoin
As the asset recovered ahead of its halving, crypto investors remained skeptical given the sudden impact on the global economy the pandemic had. Throughout the rest of the year, talk of Bitcoin “maturing” into a respected financial asset became the norm thanks to the digital gold narrative and the asset’s outperforming every other traditional asset in a year when money is needed most.
But are predictions for $400,0000 and beyond a sign that the market is becoming euphoric and is at risk of momentum dying out as Templeton suggests could happen? And is that why the bulk of Deutsche Bank survey respondents don’t see the cryptocurrency reaching beyond $100,000 or more per BTC?
12% of Deutsche Bank Survey Respondents Beleive Bitcoin Will Breach $100,000 In 2021
With the leading cryptocurrency by market cap top of mind for much of the world of finance, whether they are believers or not, it has caused a wider range of criticism from experts outside of the crypto industry norm.
Rather than listening to Willy Woo or Charles Edwards – respected Bitcoin analysts – traditional finance pays closer attention to analysts from Wall Street focused outlets they know and trust.
Deutsche Bank clients were questioned as part of a recent survey regarding their thoughts about where Bitcoin might be one year from now. The asset’s price next year is currently a hot button topic with a bull market seemingly underway.
However, the price predictions provided by the respondents paint a far less bullish picture than most. The majority do agree Bitcoin will trade higher in 2021, ranging between $20,000 and $49,999. Under one-third of respondents aren’t sold, and think that Bitcoin will be below $20,000 in 2021.
Related Reading | Bitcoin Dominance In December: Why The Future Of Altcoins Hinge On This Month’s Close
But only the smallest subset of 12% think the cryptocurrency that is expected to change the world will reach over $100,000 next year. Are the majority wrong, not the right audience to ask, or is there something to the data?
Bitcoin is cyclical and appears to follow a four-year bubble pattern due to the asset’s hard-coded halving mechanism. But because there are so few cycles prior, there’s not much to conclude other than coincidental cyclical behavior exists.
But if the limited data is enough to get investors to subscribe to the four-year theory, then couldn’t the same data and the theory of “diminishing returns” also be conceivable?
According to Deutsche Bank survey respondents, this is it for Bitcoin in 2021 | BTCUSD on TradingView.com
Bitcoin has according to its chart been in two major bull markets, with the third potentially beginning now. From the 2013 bull breakout to the 2014 peak, the cryptocurrency provided a return of 8972%. Dividing that ROI by 4.61 results in roughly 1950% – the exact ROI of the 2016 bull breakout to the $20,000 top.
Reducing the 1950% by another 4.61 for the exact percentage of diminishing returns predicts an ROI of roughly 420% more upside between 2020 and 2021 and a target of around $100,000 per BTC.
If this is true, the current euphoria isn’t yet tapped out, but the bull run might not make it to such heights until the next try, or based on the law of diminishing returns, several cycles away.
Featured image from Deposit Photos, Charts from TradingView.com
Ripple’s XRP, currently the fourth biggest cryptocurrency by value, according to CoinMarketCap, is fighting for its life.
XRP, the digital token controlled by the San Francisco-based company Ripple, has lost half its value in the last 24 hours, going into free fall after the U.S. Securities and Exchange Commission (SEC) said the token had been illegally marketed to retail customers.
Now, as a number of minor cryptocurrency exchanges remove XRP from their platforms, traders and analysts are questioning the future of XRP—with one long-time critic calling it “the beginning of the end.”
MORE FROM FORBESWhy This Former Billionaire And Goldman Sachs Veteran Now Sees Bitcoin Hitting $50,000 In 2021By Billy Bambrough
Ripple, the company behind XRP, has said it will oppose a lawsuit against it by the U.S. Securities … [+]and Exchange Commission.
LightRocket via Getty Images
“I think it is the beginning of the end,” said Frances Coppola, a financial analyst and commentator who has publicly criticized the company and the XRP token in the past. “Investors are already dumping XRP as quickly as they can.”
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The XRP price, after soaring through November on the back of a hotly-anticipated new cryptocurrency giveaway, has crashed from $0.64 to $0.30 in under a week as traders and investors process the news.
Earlier this week, Ripple’s chief executive Brad Garlinghouse revealed the SEC had filed a lawsuit against the company arguing the XRP token is a tradable asset, known as a security, and as such is subject to its regulations. The lawsuit alleges that Ripple has raised $1.3 billion in unregistered securities offerings since 2013.
Three smaller crypto exchanges, OSL, Beaxy and CrossTower, have either temporarily suspended XRP trading or removed it entirely. In a further blow, Bitwise Asset Management has liquidated its XRP position, it said in a statement.
Meanwhile, a spokesperson for U.S.-based Coinbase, one of the world’s largest exchanges that boasts almost 40 million users around the world and is gearing up for a mammoth IPO, said it is currently “considering [its] options” when asked how it will respond to the SEC lawsuit against Ripple.
“Any exchange that allows trading in XRP is potentially breaking the law, so exchanges are bound to delist it,” Coppola said, adding the SEC has “a very well put together case,” although couching that “the wheels of the law grind very slowly, so XRP isn’t going to disappear yet.”
“This potential court case is deadly serious for XRP, possibly even lethal,” financial author and trading veteran Glen Goodman, who has bought and sold XRP “at various times in the past,” said via email.
“The SEC doesn’t muck about—if it wants to make an example of Ripple as a warning shot to similar crypto companies, it will go all out to win this case, and XRP may have to be delisted from most crypto exchanges.”
MORE FROM FORBESElon Musk Sparks Wild Speculation Tesla Could Buy BitcoinBy Billy Bambrough
The XRP price has lost almost half its value in just 24 hours, sparking panic among investors.
Coinbase
However, Ripple chief executive Brad Garlinghouse, who has also been charged with violating the U.S. Securities Act along with former chief executive Chris Larsen, has vowed to fight the lawsuit.
“The SEC is completely wrong on the facts and the law and we are confident we will ultimately prevail before a neutral fact-finder,” Garlinghouse wrote in a blog post.
“The SEC has permitted XRP to function as a currency for over eight years, and we question the motivation for bringing this action just days before the change in administration.”
Ripple’s response, combined with the SEC’s timing, coming at the end of the Trump administration, appears to have halted XRP’s sell-off, for now.
“XRP fell fast and hard, but it quickly found support at the level where it started its mammoth bull-run a month ago,” said Goodman. “So to put it in perspective, we’re still only back to November’s prices here! But it could get much worse, depending on how the SEC’s new management decide to proceed. The officials who started this court case are leaving with the Trump administration, so we can’t know what their replacements will decide to do.”
However, the outlook for Ripple and XRP in the coming year looks bleak, with some cryptocurrency investors expecting XRP to continue its long-term decline that’s seen it lose over 90% of its value since its early 2018 highs.
“Тhe prospects for a transformative 2021 for Ripple seem utopian now. Just as regulatory pressure was easing, the SEC made it clear that it delays but doesn’t forget,” Antoni Trenchev, managing partner of digital asset manager Nexo, said via email. “Throughout 2020, XRP’s price has been directly correlated with the project’s dwindling traction on social media and the SEC lawsuit has dealt a further blow to XRP’s potential for a price rebound.”
Elsewhere, some in the bitcoin and cryptocurrency community who think Ripple’s control of XRP meant that it was insufficiently decentralized to be considered similar to bitcoin or other major tokens have cheered Ripple’s woes.
“It is good for bitcoin in the sense that more people will get educated on why bitcoin is different from everything else in crypto,” said an engineer at bitcoin-buying app Swan Bitcoin known as Gigi, who’s also the author of bitcoin book 21 Lessons.
“Grouping bitcoin with projects that can be hit by such a lawsuit is a category error. The whole point of bitcoin is to bring something into existence that is like a natural resource, something that simply exists in the world. Nothing else in the crypto space has this property.”
XRP has undergone a strong plunge over the past 24 hours after it was revealed that the U.S. Securities and Exchange Commission is targeting Ripple.
Per CoinGecko, the coin is down 20% in the past 24 hours alone. The coin currently trades for $0.37 and has once again become the fourth largest crypto asset by market capitalization, trading below Tether’s USDT.
XRP is the worst performing crypto asset in the top 100 by market capitalization, aside from UMA.
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Analysts think that XRP could drop even further.
Related Reading: Here’s Why Ethereum’s DeFi Market May Be Near A Bottom
XRP Could Drop Even Further
Analysts think that XRP could drop even further after sustaining a 30% crash on the recent SEC news. Ryan Selkis, CEO of Messari, recently published a thread outlining key points that were mentioned in the Securities and Exchange Commission complaint. He thinks that these points will mark the end of XRP’s uptrend:
“XRP holders are completely f*cked. I’d expect sub $0.10 by mid-Jan. I think the company will get away with the “securities” element and it will be a battle, but: + ODL is dead + liquidity partners dead + distribution schemes dead.”
Selkis explained that while Ripple had ambitious goals, none of those goals have been realized:
“Institutions are *finally* dipping their toes in the BTC and stablecoin waters. XRP is grossly inferior to both by nature, and now has *at best* multi-year litigation that awaits. It. Is. Over. For XRP.”
I just read the Ripple complaint 3x.
XRP holders are completely f*cked. I’d expect sub $0.10 by mid-Jan.
I think the company will get away with the “securities” element and it will be a battle, but:
+ ODL is dead
+ liquidity partners dead
+ distribution schemes dead
😬
— Ryan Bitcorn Selkis (@twobitidiot) December 23, 2020
Related Reading: Tyler Winklevoss: A “Tsunami” of Capital Is Coming For Bitcoin
Ripple Comments on Legal Proceedings
Ripple has commented on these legal proceedings, saying that there are facts wrong about XRP. Said the company’s lawyers:
“The SEC is completely wrong on the facts and law and we are confident we will ultimately prevail before a neutral fact-finder. XRP, the third largest virtual currency with billions of dollars in trading every day, is a currency like the SEC has deemed Bitcoin and Ether, and is not an investment contract. This case bears no resemblance to the initial coin offering cases the SEC has previously brought and stretches the Howey standard beyond recognition.”
Bard Garlinghouse, CEO of Ripple, also asserted in an extensive blog statement that XRP “do not share in the profits of Ripple or receive dividends, nor do they have voting rights or other corporate rights.”
He added that unlike securities XRP’s value “has not been correlated with Ripple’s activities.”
Related Reading: 3 Bitcoin On-Chain Trends Show a Macro Bull Market Is Brewing
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Price tags: xrpusd, xrpbtc, xrp
Charts from TradingView.com
Analysts: XRP to Plunge Further Even After 30% Drop on SEC Lawsuit
The U.S. Treasury’s Financial Crimes Enforcement Network has proposed new rules for regulating non-custodial crypto wallets.
If implemented, institutions would have to identify anyone using an unhosted wallet to transact over $3,000.
Transactions over $10,000, from these wallets, would have to be reported directly to FinCEN.
The U.S. Treasury yesterdayproposed a regulationthat would require banks and crypto exchanges to confirm the identity of the owners of non-custodial cryptocurrency wallets to whom its customers send crypto.
According tothe proposal, put forward by the Treasury’s Financial Crimes Enforcement Network, banks and other financial institutions that exchange or issue money must “submit reports, keep records, and verify the identity of [some] customers” who send cryptocurrency into private wallets. These institutions would have to verify and record the names and physical addresses of wallet holders who receive $3,000 in crypto, and report those details to FinCEN when a customer sends over $10,000.
The new regulation would subject wallet owners to the Bank Secrecy Act, which is designed to prevent things like money laundering. The logic is that increased recordkeeping would help police track criminals that use cryptocurrencies to prevent “state-sponsored ransomware and cybersecurity attacks, sanctions evasion, and financing of global terrorism.”
The new rules aren’t yet in effect. FinCEN is asking for written comments on the proposal until January 4—a relatively short window, owing to what the FinCEN cites as “significant national security imperatives” that necessitate a quicker-than-usual implementation.
Marta Belcher, an attorney at Ropes & Gray, toldDecryptthat this is an “extremely abbreviated timeline.”
She’s among several crypto analysts and lawmakers who believe that the proposal infringes on civil liberties.
“This is part of a disturbing trend of the U.S. government increasingly turning to financial intermediaries to collect sensitive user data of cryptocurrency users and applying the financial surveillance of the traditional banking system to crypto,” Belcher toldDecrypt.
Cynthia Lummis, the GOP lawmaker and Bitcoin-friendly senator-elect for Wyoming, argued on Twitter yesterday that the regulation would be “a step backward” for the USA, which is just beginning to “realize the transformative effects of digital assets and financial technology.”
Lummis also said she’s spoken with Treasury Secretary Steven Mnuchin about the issue. “Let the sunshine in, Mr. Secretary,” she said.
Warren Davidson, another conservative congressperson, echoed Lummis in a quote tweet, writing, “Those charged with securing America’s financial future should not fear the light of public debate and recorded votes.”
Jake Chervinsky, general counsel at Compound Finance, slammed the 15-day public comment window as “midnight rulemaking.”
He was quick to point out the limited scope of the proposed regulation.
“This doesn’t requireKYCfor every transaction with a non-custodial wallet. It isn’t an outright ban on self-custody. It doesn’t prohibit the act of using a permissionless network,” he wrote, honing in on what he sees as the bright side, before reiterating that the new rules would still be ineffective: “It doesn’t stop VASP [virtual asset service provider] customers from transacting with bad guys.”
Continued Chervinsky, “The rule would impose huge burdens on VASPs, their customers, & society at large, perhaps infringing constitutional rights, without conveying any benefit to government in general or law enforcement in particular.”
For, now he said, the best the crypto community can do is “keep calm & carry on.”
Bitcoin is once again ripping to new all-time highs.
A weekend rally has the crypto king up 6.75% at $24,106, according to CoinMarketCap. BTC is up 30.39% in the last week and up 234% since the start of 2020.
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Quantitative analyst PlanB says BTC appears to be shrugging off new rules on cryptocurrency transactions proposed by the US Treasury’s FinCEN department late Friday.
#bitcoin looking strong, despite US KYC/AML crap pic.twitter.com/D01V0omOiW
— PlanB (@100trillionUSD) December 19, 2020
Analyst Cantering Clark tells his 40,000 Twitter followers that derivatives appear to be leading today’s rally.
“Perps leading all of this. Expecting a flush at some point before a bigger move up. Might overextend up in the interim but I see us sweeping back down into the $22,000 zone either way.”
Trader Scott Melker says he just closed a leveraged position of his own. About 70% of his spot portfolio remains in BTC.
“Closed my BTC leveraged long. Overbought bear divs are likely, not guaranteed. But I would love to long a retrace if given the chance. Especially a retest of the old all times high as support.”
Digital Currency Group CEO Barry Silbert and Kraken’s director of business development are citing a classic fear of missing out among investors.
Satoshi baked in a fomo viral loop into Bitcoin:
As the number of users grows, the value per coin increases. It has the potential for a positive feedback loop; as users increase, the value goes up, which could attract more users to take advantage of the increasing value.” – SN
— Dan Held (@danheld) December 19, 2020
The crypto fear and greed index from Alternative.me remains firmly in the greed zone, where it has been for weeks as Bitcoin continues to take out new all-time highs.
According to the creators of the index, extreme greed is a potential sign that investors are over-exuberant and a correction may be on the horizon.
Extreme fear often indicates that traders may have overcompensated and the market is overbought.
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Disclaimer: Opinions expressed at The Daily Hodl are not investment advice. Investors should do their due diligence before making any high-risk investments in Bitcoin, cryptocurrency or digital assets. Please be advised that your transfers and trades are at your own risk, and any loses you may incur are your responsibility. The Daily Hodl does not recommend the buying or selling of any cryptocurrencies or digital assets, nor is The Daily Hodl an investment advisor. Please note that The Daily Hodl participates in affiliate marketing.
This week various media reported that U.S. Treasury Secretary Steven Mnuchin was considering whether or not legislation governing self-custodied wallets should be implemented.
This led some analysts and crypto pundits to speculate whether or not this would impact Bitcoin, and the current bullish momentum that has been driving crypto prices higher.
The threat of new crypto sector-focused regulations is a credible event which has negatively impacted crypto prices in the past, but this time around there are a fewreasons why the proposed rule probably will not lead to a Bitcoin price crash.
BTC/USD 4-hour chart. Source: TradingView.com
The possibility of regulation is priced into the crypto market
Initially, industry executives expressed major concerns when Coinbase CEO Brian Armstrong shared what he had heard about the planned rule.
Last week we heard rumors that the U.S. Treasury and Secretary Mnuchin were planning to rush out some new regulation regarding self-hosted crypto wallets before the end of his term. I’m concerned that this would have unintended side effects, and wanted to share those concerns.
— Brian Armstrong (@brian_armstrong) November 25, 2020
These worries were amplified when Circle CEO Jeremy Allaire told Ryan Selkis that the possible regulation could be detrimental to the entire cryptocurrency sector. The comments from the two industry heavyweights led the entire industry to become cautious about the planned rule proposal.
However, recent reports suggest that the rule might require multiple transactions that are equivalent to $10,000 a day to be reported by financial institutions. Compared with the initial rumors about the rule, it is arguably less rigorous than it appeared. In fact, some experts say the proposed rule is similar to the existing FATF travel rule.
Considering that the rule could be less restrictive than the initially planned regulation, and the fact that the market has had sufficient time to act on it, it’s possible that the market has priced it in at this point.
What path can Mnuchin take?
There are two main paths Mnuchin could take to introduce the self-custody wallet regulation. First, he could take the conventional route of rulemaking, which requires a hearing and a 30-day period.
If Mnuchin takes the conventional approach, the proposal would have to be released this week before the current Presidential term comes to an end.
Alternatively, Mnuchin could aim for a “good cause” way of passing the regulation. This would allow Mnuchin to speed up the process. Jason Civalleri, an attorney, said:
“Further, there’s an exception for if an agency articulates ‘good cause’ that the notice/public procedure requirements are ‘impracticable, unnecessary, or contrary to the public interest.’ For example, one possible use of this exception is if needed to stop a pandemic. So Treasury would have to articulate why it wants to skip this requirement for ‘good cause.’ For example, maybe it can show an extraordinary amount of criminal activity will be stymied by the new rule’s early implementation. Seems unlikely, but maybe?”
At this point, it is more likely for Mnuchin to take the conventional approach. To take the “good cause” method, he would need to find sufficient evidence to prove that crypto sees significant criminal activity.
Hence, the probability that the proposed rule would be introduced in the upcoming days remains the highest, which would be optimistic for Bitcoin. Matt Odell, a Bitcoin and privacy advocate, said:
“The Block speculating that US gov will simply require exchanges to report bitcoin withdrawals larger than $10k. I already assumed they did this tbh. The concerns Armstrong and Davidson voiced seemed to expect much worse. Maybe the public concern helped. Very bullish if true.”
