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Real estate is risky and bonds are overvalued, boosting Bitcoin bull case: Blockstream CEO
Due to the implementation of increasingly easy monetary policy into the repertoires of the world’s central banks, an “everything bubble” has formed over the past decade.
Effectively all asset classes — from stocks and real estate to bonds— have been boosted because of low-interest rates and large-scale asset purchases by central banks. As Ray Dalio, a legendary hedge fund manager, explained:
“There are a lot of parallels between now and the late 1930s. From 1929 to 1932 we had a debt crisis — interest rates hit zero. Then there was a lot of printing of money, and purchases of financial assets brought their prices higher.”
According to a prominent industry executive, the overvalued and thus risky nature of financial assets is making Bitcoin look attractive in comparison.
Bitcoin is one of the only investments that make sense: Adam Back
Speaking to Bloomberg in a recent interview, Blockstream CEO Adam Back said that Bitcoin is on track to explode higher in the coming five years due to macro trends.
According to him, real-estate investments are poor due to the work-from-home shift in society that may dramatically devalue urban real estate and prop up rural real estate. And bonds, due to central-bank purchases, might be “overvalued,” meaning a Bitcoin investment makes that much more sense for consumers.
Back’s comment is eerily reminiscent of one made by Raoul Pal, a former hedge fund manager turned prominent macro analyst and crypto bull.
Last year, Pal told Bitcoin podcaster Stephan Livera that the most popular asset classes make no sense for millennials because they’re overvalued.
At the time, equities were pushing all-time highs, even though they were extremely overvalued with relatively little profit and upside potential. Bonds weren’t much better due to low or negative rates, alongside with high prices due to central-bank bond purchases. And real estate was (and still is) largely “unaffordable.”
“So what the hell does a millennial do to save for your future, when almost all assets have negative imputed returns for the next 20 years, 10 years? And the answer is well, you take the optionality of cryptocurrency and Bitcoin,” Pal explained.
Preserve wealth through BTC
The poor risk-return profile of other asset classes isn’t the only trend that is making Back bullish on Bitcoin.
Back remarked that with the ongoing recession, which has forced central banks to print a record amount of money, people need ways to preserve their wealth. Back explained:
“It is causing people to think about the value of money and looking for ways to preserve money.”
Due to the fact that Bitcoin has a fixed supply cap of 21 million coins and a known inflation schedule, Back and others believe that the cryptocurrency can emerge as a hedge against the debasement of fiat money.
He has such faith in this theory that he told Bloomberg that BTC could hit $300,000 in the coming five years.
Here's why analysts say Bitcoin's 14% drop on June 2 is actually healthy for the medium-term trend
On June 2, more than $220 million worth of long and short contracts were liquidated on BitMEX. Analysts say it could be a healthy pullback for the medium-term trend of Bitcoin.
In a single day, the price of Bitcoin rose to as high as $10,440 and fell to $8,600 within several minutes. The rapid price drop led to mass liquidations of BTC futures contracts.
The Bitcoin futures market was heavily skewed towards longs
Before the sudden pullback occurred, the Bitcoin futures market was dominated by long contract holders. Simply put, there were significantly more traders bidding on the price of BTC to go up in the short-term.
When the futures market is heavily skewed to one side, it leaves Bitcoin vulnerable to either a long squeeze or a short squeeze.
A long squeeze means a cascade of long contract liquidations causing a sharp decline in the price of Bitcoin, and vice versa. Data showed that about 70 percent of the Bitcoin futures market was holding long contracts. It pushed the funding rate of BTC to rise to 0.16 percent.
The funding rate of a Bitcoin futures contract rises when there are more people expecting the price of BTC to go up. Usually, the funding rate of a BTC futures contract hovers at 0.01 percent. It was 16 times higher than usual.
The drop to $8,600 flushed the market, shaking out overleveraged traders
When the price of Bitcoin was hovering over $10,000, many long contracts were vulnerable to liquidations.
50x to 100x long contracts, which are traders who are borrowing 50 to 100 times of their funds to long Bitcoin, got liquidated at $9,900. Lower leverage long positions were liquidated in the $9,400 to $9,500 range, with BitMEX seeing liquidations of 10x longs at $8,600.
The 5-minute 14 percent drop from $10,000 to $8,600 wiped out 10x to 100x positions, flushing the market of over-leveraged trades.
The correction wiped out high leverage long contracts in the market, which are considered as liabilities by some because they raise the probability of an abrupt price drop as seen on June 2.
Here’s why it may be healthy for the market
Mohit Sorout, founding partner at Bitazu Capital, said that the liquidation of $123 million in shorts and $96 million in longs within 24 hours is a “healthy Bitcoin sentiment reset.”
“A healthy BTC sentiment reset. Range a couple days, trap late bears then run it back up.”
If Bitcoin continues its upward trend with the spot and institutional markets accounting for the majority of buy volume, it will create a fundamentally stronger base for the next extended rally.
The futures market drove the rally of Bitcoin from the $8ks to $10,440 in the past two weeks. When the futures market pushes BTC upwards, it puts the dominant cryptocurrency at risk of a severe pullback.
The recent trend and liquidations of highly-leveraged positions may create a clearer path for Bitcoin towards a newfound upsurge.
Chainlink is “taking a shot” at another breakout as community growth skyrockets
The aggregated crypto market has seen another notable upswing today, and Chainlink is once again leading the way.
Today’s bullish LINK performance comes as the crypto attempts what analysts are describing as another breakout rally that could allow it to begin its journey back up to its early-2020 highs.
This momentum may be driven in part by the incredible community strength that has been established around Chainlink, even leading one billionaire Bitcoin advocate to praise the altcoin’s fervent supporters.
Chainlink attempts another breakout as it leads market-wide rally
At the time of writing, Chainlink is trading up over 6 percent at its current price of $3.70, which marks a notable upswing from daily lows of $3.45 that were set around this time yesterday.
LINK’s upswing today has marked an extension of the momentum that was first incurred on April 16th when the crypto surged from lows of $3.00.
This came about in tandem with BTC’s rally from $6,600, although Chainlink has been firmly outperforming the benchmark cryptocurrency in the time since.
The only peer that has rivaled Chainlink’s mid-term momentum is Tezos, which is currently trading up nearly 10% against USD and 7% against its Bitcoin trading pair.
One analyst on Twitter who goes by the name Big Cheds stated that today’s LINK rally marks the crypto “taking a shot at breaking out” while referencing the chart seen below.
Will growing community strength bolster LINK?
Tyler Winklevoss, the co-founder and CEO of Gemini and a prominent Bitcoin advocate, explained in a recent tweet that he “appreciates the passion” of the LINK community, noting that they are dedicated to a project with “real promise.”
“I really appreciate the passion of the LINK Marines. Their fervor and dedication reminds me of the early Bitcoin and Ethereum communities. Unlike many other crypto armies, they are dedicated to a project that has real promise and technical merit.”
His claims about the strength of the community aren’t unwarranted either, as data from blockchain research and analytics platform IntoTheBlock shows that the Chainlink community has seen tremendous growth in recent times across multiple social platforms.
The data shows a steady climb in the number of Chainlink mentions on platforms like Twitter, Telegram, as well has a stable rise in the number of contributors on the crypto’s GitHub – all signs of a highly active and engaged community.
Will this incredible community strength be enough to push LINK back to its all-time highs of nearly $5.00 though? Only time will tell.
Bitcoin just hopped above $7,000 after 10% correction, convincing analysts of bull case
After a precipitous drop to start the weekend, Bitcoin has begun to mount a strong comeback over the past five hours, with the cryptocurrency rallying to $7,100 just minutes ago after falling as low as $6,750 on Apr. 10. This means that from the local lows, BTC is up over five percent.
Although this move has just begun to transpire, analysts are already coming to conclusions about what comes next for this nascent market. And overall, they’re bullish.
Why analysts expect Bitcoin to rocket even higher
$7,000, notably, is seen as a very important price point for Bitcoin.
Filb Filb — the pseudonymous trader who called BTC’s price action in Q4 2019 and January 2020 months in advance — recently shared that he thinks that $7,000 is a “decision point” for the cryptocurrency, whereas high time frame closes above this level could suggest more upside is imminent.
With Bitcoin’s weekly close coming up in approximately seven hours, it manages to continue to trade above $7,000 could add credence to the argument that it is going to head higher.
Indeed, as reported by CryptoSlate previously, Mohit Sorout of crypto hedge fund Bitazu Capital remarked that he expects BTC to “pop” due to the current composition of the BitMEX order books.
More specifically, the trader revealed that what he’s expecting is for Bitcoin to undergo a short squeeze, whereas leveraged short positions are rapidly pushed out of their trades to cause a strong rally higher. His charts indicate that once Bitcoin returns to the $7,050-7,100 range, there will likely be a cascade of trades closing that could push the cryptocurrency toward its weekly highs of $7,400, maybe even higher.
What’s behind the move?
While it’s hard to tell exactly what the collective crypto diaspora is thinking at one time, the ongoing move in the crypto markets seems to be related in an overall bout of growth in the interest in and demand for Bitcoin and other digital assets.
For example, it was recently observed that Google Trends shows that searches for “Bitcoin Halving” around the world are exploding higher, rallying to 12-month highs as the halving event moves ever closer. BTC rallied into its two previous halvings, responding to the uptick in social interest in the cryptocurrency.
Bloqport tweeted: BREAKING: Google searches for “Bitcoin Halving” are trending worldwide. #Bitcoin
The move may also be related to the fact that over the past week, altcoins have strongly outperformed BTC, which is about to finish the week flat. Certain altcoins, of course, are often seen as a bellwether for the rest of the cryptocurrency market.
Fund manager: Bitcoin price is poised to "pop" due to this reason
Over the past few days, the price of Bitcoin has slid lower after a strong multi-week rally to $7,470, marking a 100 percent increase from the “Black Thursday” bottom of $3,700. As of the time of writing this, BTC trades at $6,800, some nine percent lower than the aforementioned high.
Though, a prominent cryptocurrency fund manager is expecting for Bitcoin to soon “pop.”
How Bitcoin could soon pop
On Apr. 10, Mohit Sorout — a partner at crypto hedge fund Bitazu Capital — remarked that it will “soon” be time for Bitcoin to “pop,” sharing the two charts seen in the embedded message below.
Mohit Sorout tweeted: $BTC pop time soon
Although it wasn’t initially clear to most what exactly he meant with these charts and the accompanying message, Sorout later revealed that what he’s expecting is for Bitcoin to undergo a short squeeze, whereas leveraged short positions are rapidly pushed out of their trades to cause a strong rally higher.
More specifically, the charts indicate that once Bitcoin returns to the $7,050-7,100 range, there will likely be a cascade of trades closing that could push the cryptocurrency toward its weekly highs of $7,400, maybe even higher.
This conclusion can be drawn from the above chart that the Bitazu partner shared. It shows that at $7,050-7,100 and $7,300, there are clusters of liquidation levels for BitMEX short positions that will cause Bitcoin buying if reached.
Pressure is building
While Sorout’s expectation for Bitcoin to “pop” is an expectation based on investors pushing prices to the abovementioned ranges, it is clear that pressure is building, with reports indicating that buyers are starting to enter the crypto market en-masse.
Firstly, there’s been an uptick in buy-side volume with two altcoins, Tezos and ChainLink, which have rallied by 13 percent and 31 percent over the past week, respectively. This indicates a growing demand for cryptocurrency as an overall asset class.
Secondly, Su Zhu of crypto and forex fund Three Arrows Capital observed that on Apr. 10, there was a large Ethereum buy wall on Bitfinex, with buyers putting up a jaw-dropping 250,000 ETH worth of bids between $159 and $162, amounting to a cost of around $40 million.
Su Zhu tweeted: Large $ETH buy wall on bfx here, 200k ether filled and another 50k remaining in the order book
To add credence to this, Bitfinex data indicates that its traders are starting to accumulate margin long Ethereum positions at a rapid clip.
And lastly, multiple pieces of evidence — such as web traffic measured by Alexa, anecdotal stories from friends and family, and order book data — suggest that buy-side demand for Bitcoin is starting to ramp up.
All this corroborates Sorout’s belief that Bitcoin is poised to pop.
Last time this on-chain trend occurred, Bitcoin rallied over 4,000%
Although Bitcoin has stalled dramatically since February’s $10,500 peak, data shows that large cryptocurrency investors have been unfazed. So unfazed, in fact, that they’ve begun to accumulate more and more BTC, stacking coins in seeming preparation for a bull run.
On-chain data: Bitcoin whales are stacking sats like crazy
Data shared by crypto analytics provider Glassnode on Apr. 9 indicates that the number of Bitcoin wallets with over 1,000 coins has seen large growth since December, rising from ~1,750 then to ~1,840, levels not seen since the previous halving in 2016, which came prior to Bitcoin’s 4,000 percent rally from $500 to $20,000 over two years.
glassnode tweeted: The number of $BTC whales continues to grow, hitting 2-year highs - the last time we saw this many during an accumulation phase was in 2016. This becomes interesting when we compare it with the last #Bitcoin halving. Read more in The Week On-Chain
Although not exactly an indicator of future market directionality, many see the trends in holdings of large cryptocurrency players as a good sign of what’s to come, as they’re considered “smart money” that has a good handle on what’s next.
Glassnode explained further:
“The number of whales (i.e. entities with at least 1000 BTC) increased leading up to last month’s market crash, and accelerated during and after the crash. This suggests that larger market players are accumulating BTC, providing an optimistic sign.”
The firm further elaborated that the simple fact that such strong accumulation is taking place in such an “uncertain market environment” is a fair sign that there’s growth ahead for the Bitcoin market.
Notably, this comes just weeks after CryptoSlate reported that from “Black Thursday” on Mar. 12 to Mar. 17, ETH whale addresses (top 100 holders) have “turned to accumulate,” adding 150,000 coins (then valued at $20 million, now valued at $24 million) to their holdings.
Institutional adoption is happening
It makes sense why the number of whale addresses is swelling: there is tangible evidence to suggest that institutional players are starting to enter back into the crypto-asset markets, despite the drop sustained in March.
Fidelity Digital Assets — the crypto services division of Wall Street giant Fidelity Investments, a firm with trillions under management — has confirmed it has seen an uptick in interest over recent weeks.
Speaking to Frank Chaparro of The Block, a spokeswoman for the firm said that:
“From a trading perspective, we continue to onboard new clients every month and are seeing significant pipeline growth. [...] And in recent weeks, we’ve seen more momentum across our business.”
The reporter’s sources confirmed this, purportedly stating that Fidelity’s cryptocurrency arm has been fielding an increase in “inbounds from pension funds, family offices, and macro global hedge funds” as investors look for better ways to invest amid the ongoing coronavirus outbreak.
There’s also adoption in terms of large companies delving into creating crypto- and blockchain-based products. But that’s a story for another time.