Bitcoin Miners Are Accumulating

GB Market Commentary 14/07/2021

by Alex Clark

There has been a significant uptick in bitcoin’s hashrate as Chinese miners successfully relocate to western Europe and the US and, with this, we have also seen an increase in BTC retention by miners, which is a strong buy signal. Further to this, we have seen a 50% reduction in the RSI for BTC, which could either indicate a massive move up or a massive move down… based on the stochastic indicator and the recent rise in bitcoin daily withdrawals from exchanges, in my opinion I believe BTC could be oversold and might make its next move higher.

But despite US inflation rates exceeding expectations at 5.4%, which is the largest move since 1991, this shock has not been a strong enough catalyst to break bitcoin’s recent trading range. This is despite the fact bitcoin is decoupled from any one country’s economy and the asset has a limited supply. Although, data shows that bitcoin is tracking higher bond yields, and those should rise sharply if and when the broader market changes its mind about Jerome Powell’s predictions of transitory inflation.

Ethereum’s London Hard Fork is due to go live on the mainnet in 3 weeks. Among the improvement proposals being added are EIP-1559 which will change Ethereum’s fee rate to a new scheme that makes the asset deflationary in supply. Ethereum is also benefitting from a fall in average transaction fees, down to $2.19 – which is a 97% reduction since their peak. This may prompt users and developers who previously moved to other blockchains in the wake of the high Ethereum network fees to return. The primary beneficiaries of congested Ethereum were Polygon and Binance Smart Chain so if Ethereum manages to encourage decentralised applications to return, these platforms could suffer.

BNY Mellon has reaffirmed its involvement with the cryptocurrency space by agreeing to be the asset service provider for Grayscale’s BTC Trust and by assisting in its endeavour to convert the BTC Trust into an exchange-traded fund.

Brazil’s SEC has authorized the first ETF in Latin America that tracks the performance of Ethereum, providing investors with a safe and regulated way to gain direct exposure to the asset. This comes several months after the commission gave the go-ahead for a Bitcoin ETF. Meanwhile, requests for ETFs pile up on the table of the U.S SEC.

Binance customers in the UK are left without a fiat currency deposit or withdrawal option as Clear Junction suspends both GBP and EUR payments. This comes after Barclay’s and Santander’s recent decision to cease support for card payments to the exchange.

The Met police seized nearly £180m of bitcoin in a money laundering investigation. For many this news is alarming but, in context, criminal activity represented just 0.34% of all cryptocurrency transaction volume in 2020, (equivalent to roughly $10 billion worth of transfers), down from 2.1% in 2019. Further to this, by reinjecting seized crypto back into the system, rather than removing it from the marketplace altogether, law enforcement agencies are demonstrating that they recognise crypto as a genuine asset.

Tesla’s 10Q is due to be released on July 22nd and, with this, we could witness an increase in twitter activity from Musk as well as a potential change in holdings for Tesla. As we near this date BTC and Doge could benefit significantly.