Introduction

The past few weeks were marked by a tremendous acceleration in bitcoin price, that recently broke the 18,000 level, nearly doubling in value since early December. We previously saw that the massive liquidity injections from major central banks and especially the Federal Reserve has led to a sharp recovery in most of the asset classes since mid-March and a sharp consolidation on the US dollar, with the DXY down 10%. Figure 1 shows the performance of a diversity of assets since the market reached its low on March 20th; Bitcoin is by far the asset that experienced the most drastic recovery, up 380%, followed by the 'FANGs' stocks, up 125% since their bottom.

Hence, investors have been asking themselves the following question: is the move done on bitcoin or should we experience much higher prices in the medium term?

Figure 1

Source: Eikon Reuters

With most of the European nations under national lockdowns, which is also expected to be announced in the US in the near term, investors have been speculating that economies will strongly rely on governments' support in the next few months, which implies a significant increase in central banks' assets. We saw that assets from the top major 5 central banks (Fed, ECB, BoJ, PBoC, and BoE) have grown by over 7 trillion USD this year, which has clearly supported most of the markets and resulted in a sharp recovery in asset prices and fundamentals. Figure 2 shows a very strong relationship between the annual change in CBs assets and the price of Bitcoin; as more restrictions imply more debt financed by central banks (i.e. QE), the cryptocurrency has surged as some investors have been looking at bitcoin as a hedge against currency 'debasement'.

Figure 2

Source: Eikon Reuters, RR calculations

Another interesting development has been the strong divergence between bitcoin and FANGs stocks in recent weeks; figure 3 shows that while the FANG+ index has been oscillating around 5,300 since the start of September, bitcoin has surged from $10,000 to $18,000. We saw that in the past, bitcoin prices were very sensitive to equity moves (especially the mega-cap growth stocks) and were strongly correlated during upside momentum but also during equity drawdowns. Bitcoin went down 60% during the February/March episode and was also down nearly 20% during the early September bear consolidation.

Hence, investors will be curious in the future to see if bitcoin prices can hold if tech stocks start to fall.

Figure 3

Source: Eikon Reuters

Even though US real interest rates seem to have found their low back in August, with the 5Y real IR trading at -1.4% back then (currently at -1.25%), the amount of negative-yielding debt has continued to surge in recent months. After peaking at 17tr USD in August 2019 (when the 2Y10Y US yield curve inverted), the amount of negative yielding debt had fallen dramatically until March 2020 to 8tr USD and then started to skyrocket again. The negative-yielding debt could be seen as a 'real-time gauge' of the economic activity; more debt yielding below 0 percent simply means growing concerns over the economic outlook. Therefore, we could also link the rise in bitcoin to the constant increase in the amount of negative-yielding debt around the world.

Interestingly, gold, which has also shown a strong co-movement with the negative-yielding debt in the past few years, has been following the US real rate in recent weeks and constantly testing new lows, which implies that the precious metal is still very sensitive to US real rates in the current environment.

Figure 4

Source: Eikon Reuters

In the medium to long term, we are strongly bullish on bitcoin as we think it could act as a strong hedge against currency depreciation and inflationary pressures. In figure 5, we look at the equity curve of the top asset in each decade of the past 50 years; we first had gold in the 1970s due to the unexpected sudden rise in inflation coming from the oil shocks, then came the Japanese stocks in the 1980s with Japan's economic miracle, then the US boom in the 1990s led to a titanic performance in US growth stocks, then the double-digit growth in China led to an outperformance of consumer staples in the 2000s, and then the prominent growth of new Internet companies led to a strong performance in Tech stocks in the past decade. If we look at the cumulative returns of each asset in the past 50 years, a person who invested $100 would have accumulated over USD 1.3 million of wealth, averaging 22.2% in annual return for a volatility of 25.3% (Sharpe ratio of 0.88).

We are strongly convinced that cryptos (especially bitcoin) could be the best pick for the next 10 years and that investors should hold some bitcoin in their portfolio as it could eventually act as a good diversifier and generate significant returns from current levels.

Figure 5

Source: Eikon Reuters, RR calculations

In the short run, we could see a small consolidation as bitcoin approaches its ST resistance at 19,500 (December 2017 high) as investors start to take profit on the cryptocurrency. We think that any significant bounce on bitcoin should be considered as a good opportunity to buy the dip.

Disclosure: I am/we are long BTC, GBPUSD. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.

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New Restrictions, More QE, Higher Bitcoin Prices - Seeking Alpha

Bitcoin (BTC) being on a bull run may be hounding all the attention but the world's apex cryptocurrency is getting outdone by several decentralized finance, or "DeFi," projects.

What Happened: SushiSwap (SUSHI), one such DeFi cryptocurrency,has surged 96.24% in a 7-day period up to press time beating Bitcoin, which is up 12.86%.

DeFi has seen rising popularity in the cryptocurrency community, with some dubbing it as a fad. A lot of DeFi projects may be in a bubble, but that doesn't mean that "DeFi will eventually disappear entirely,"Binance CEO Changpeng Zhao said this week, as reported by Cointelegraph.

Zhao advocated cryptocurrencies like Bitcoin saying it was the money of freedom for millions of people worldwide.

Why It Matters: SushiSwap, the DeFi protocol supported by SUSHI,has been among the most popular such projects. SUSHI had surged 331% to $11.17 in September before its anonymousfounder cashed out $6 million worth of tokens, tanking the cryptocurrency.

Yearn Finance (YFI), another DeFi cryptocurrency, which offers yield farming, surpassed Bitcoins 7-day gains this week.At press time, YFI is up 13.1% in the 24-hour trailing period and 49.3% over seven days at $24,667.87.

SUSHI traded 16.85% higher at $1.33 at press time, while Bitcoin traded 0.51% higher at $17,756.63.

See Also:Bitcoin Storms Past $18,000

2020 Benzinga.com. Benzinga does not provide investment advice. All rights reserved.

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Think Bitcoin Is On The Run? Sushi Cryptocurrency Has Surged Nearly 100% In A Week - Benzinga

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Table of Content (TOC):Chapter 1 Introduction and OverviewChapter 2 Industry Cost Structure and Economic ImpactChapter 3 Rising Trends and New Technologies with Major key playersChapter 4 Global Cryptocurrency Mining Market Analysis, Trends, Growth FactorChapter 5 Cryptocurrency Mining Market Application and Business with Potential AnalysisChapter 6 Global Cryptocurrency Mining Market Segment, Type, ApplicationChapter 7 Global Cryptocurrency Mining Market Analysis (by Application, Type, End-User)Chapter 8 Major Key Vendors Analysis of Cryptocurrency Mining MarketChapter 9 Development Trend of AnalysisChapter 10 Conclusion

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Cryptocurrency Mining Market to Observe Strong Growth to Generate Massive Revenue in Coming Years 2020 to 2027 - re:Jerusalem

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The scope of the Cryptocurrency and Blockchain Market report is as follows the report provides information on growth segments and opportunities for investment and Benchmark performance against key competitors. Geographically, the global mobile application market has been segmented into four regions such as North America, Europe, Asia Pacific and the rest of the world.

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Impact of Outbreak of Coronavirus (Covid-19) on Cryptocurrency and Blockchain Market 2020-2027| Intel Corporation, Microsoft Corporation, NVIDIA...

A battle for currency supremacy is underway as China doles out millions of digital yuan.

Cryptocurrencies offer innovative payment and security solutions for commerce, supply chains, and manufacturing. They make global payments faster, safer, more efficient, and more transparent. For years, Washington has neglected or misunderstood this most promising U.S. innovation, leaving American start-ups lost in a maze of regulatory uncertainty. Now that blockchain and cryptocurrency solutions have entered the real economy, revolutionizing money and payments, regulatory confusion has set the cryptocurrency community ablaze.Meanwhile, the Chinese are poised to capitalize on US policy mistakes yet again.

The leading American innovators in blockchain solutions are on the verge of leaving the US in frustration.Why?Because Washington has failed to develop a clear regulatory framework that would keep them in the US and ensure American leadership.This is the declaration of the CEO of Ripple, Americas leading cryptocurreny firm, who says the US is losing the tech war to China.

While Americas Constitution supports the flourishing of new technology, the administrative state has killed many important innovations in the cradle. This happens as obsolete agencies look for new things to regulate and join forces with protected industries to stifle competition, the process of regulatory capture described by Nobel economist George Stigler. At least eight US federal regulatory bodies have asserted jurisdiction over new fintech and digital currencies.This is not to say there should be no accountability in financial innovation, but the right policy should focus on achieving the objective in the most efficient, least intrusive way. Policymakers should think intelligently about the function they are trying to perform, not copy-paste paper-based bureaucracy on anything new.

Other countries are not immune to capture, but they are smart enough to not kill the golden goose. They have developed market-friendly frameworks to welcome crypto innovation to their shores, but the talent and scalability of the US market made the risk worthwhile until now.Crypto entrepreneurs hoped that after their billions of dollars in investments and development of innovative products that Washington would wake up, but no. Meanwhile China has advanced to garner increasing share of US and global financial markets.

The coming year will make or break cryptocurrency in the US. It depends on whether Congress and the Executive Branch can resolve their conflicting views of financial innovation, stop the grab bag of regulatory enforcement, and build a coherent policy framework. Bad actors have always found ways to exploit new developments, but that is not an excuse to deny consumers the fruits of new technologies. Law enforcement exists to prevent and punish crime, not to stop enterprise. Indeed, digital currency can reduce certain financial crimes.

Sadly, the current administration, purporting to promote the interests of Main Street investors, has been at war with itself on cryptocurrency. Outgoing Securities and Exchange Commission (SEC) Chairman Jay Clayton treated cryptocurrencies and other fintech startups like flies, swatting innovators with more than 50 enforcements. This contrasts with SEC Commissioner Hester Peirce who sees crypto as the next great technology. Again, the issue is not that poor conduct should not be addressed; its a question of priorities. For years, the SEC has done busy work while the Chinese government has exploited Americas stock exchanges and US technology.

As a new report from Congress bipartisan U.S. China Commission (USCC) notes, 217 Chinese companies are listed on US exchanges with a total market capitalization of $2.2 trillion, including 13 Chinese state-owned enterprises. According to the USCC, these companies endanger US national security through censorship and surveillance, evade American standards of transparency, and jeopardize the wealth of American investors. The SEC has not been able to perform oversight on the audits of these companies because of systematic blocking by the Chinese government. Meanwhile the number and size of these Chinese companies traded in the US has ballooned. Failing to deal with the real threats to Americas financial system, the SEC has directed its energy to homegrown startups.

The US lost the race on Bitcoin, and China now controls 65 percent of the computing power to mine the currency. The next battle is underway as the Chinese government has piloted a program to distribute digital yuan, a digital currency backed by Chinas central bank.It is only a matter of time before Chinas digital currency is offered to billions across the globe coupled with Chinese payment solutions copied from U.S. innovators.The US wont be able to block the proliferation of digital yuan. It can only win by making a better solution and getting to market first.

The SECs Clayton will step down at the end of the year, providing an opportunity confirm a Chair who will recognize the value that cryptocurrencies and blockchain technology, will step up stop Chinas abuse of Americas exchanges, and put American consumers first. Americans, not the Chinese government, should be first in line for American technological innovation. The new SEC Chair will be critical to ensuring whether the U.S. dollar retains its position as the worlds reserve currency.US policymakers should promote crypto, not crush it. Otherwise and once again, China will pick up the technology that the US discards.

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The SEC Swats Cryptocurrency Flies While The Chinese Government Takes The Farm. - Forbes

On November 10, six members of the U.S. House of Representatives wrote to Acting Comptroller of the Currency Brian Brooks raising concerns about the OCCs recent unilateral actions to regulate cryptocurrencies. In the letter, the members question the OCCs regulatory priorities. For example, the members highlight that, through recent actions, such as its advance notice of proposed rulemaking on digital activities (covered by InfoBytes here), the OCC has sought to serve those already-banked with better payments options while potentially overlooking opportunities for assisting the unbanked and underbanked to participate in the economy and the banking system. Additionally, the members note that the OCCs interpretive decisions, which authorize financial institutions to hold cryptocurrency and stablecoins for customers (covered by InfoBytes here and here), may have broad implications for the future of banking and are best made in collaboration with your fellow regulators and with Congress to ensure we avoid potential harms to institutional safety and soundness and equity and inclusion. In closing, the members ask the OCC to answer a number of questions, including (i) whether stablecoin reserves will be segregated from calculating the capital requirements of large banks; (ii) what consumer protections the agency will impose on stablecoin providers; and (iii) whether the OCC has collaborated with other federal regulators on their recent decisions.

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Representatives question the OCC's cryptocurrency and stablecoin efforts - Lexology