Category Archives: Bitcoin
Bitcoin and bonds wont cut it. Buy these 6 types of assets for protection in a bear market, says strategist. – MarketWatch
Wednesday was a quiet day for markets, and Thursday looks set for the same in what may be a taste of doldrums in the summer ahead.
But that doesnt mean investors should kick back and relax in the sun just yet, because major risks to stocks remain. If a bear market is indeed on the horizon, investors need to look for new, uncorrelated assets to survive the next selloff, advised Vincent Deluard, a strategist at broker StoneX, in our call of the day. The strategist said to look at six types of assets in particular, because bitcoin and bonds just wont cut it.
Risks are everywhere in a time of peak liquidity, peak valuations, and peak economic optimism, the strategist said, with stocks 50% to 100% more expensive than they were at the height of the 1990s dot-com bubble.
And market concentration is also more extreme, with U.S. stocks accounting for 56% of the MSCI World Index. In fact, tech giants Apple AAPL, -0.53%, Amazon AMZN, -0.22%, Facebook FB, -1.21% and Microsoft MSFT, +0.15%, electric-car maker Tesla TSLA, -0.89%, and graphics microchip maker Nvidia NVDA, +4.88% have the same market capitalization as the U.K., German, French, Italian, Russian, and Polish indexescombined.
This sets the stage for stocks on a hair trigger. Unfortunately for investors, traditional hedges are expensive or ineffective, or both, Deluard said.
For the first time in 15 years, long-term Treasuries the ultimate risk-off asset of the past decade are positively correlated with stocks, and the typical inverse relationship between stock valuations and the price of options has broken down.
Investors desperate rush for the holy grail of diversification has reduced the appeal offered by traditionally uncorrelated assets: gold GOLD, +0.92%, the Yen USDJPY, +0.01%, the Swiss Franc USDCHF, +0.30%, and bitcoin BTCUSD, -0.76% have lost value during recent equity selloffs, Deluard said, but gold and commodities have proved better protection against recent inflation surprises.
According to Deluard, the five main risks of 2021 are rising yields, inflation surprises, wider spread, an equity market selloff, and a blowup of overpriced growth stocks.
Deluards advice is to look at six types of assets to best protect yourself against these specific risks in the year ahead. Financials, commodities, and energy stocks are the best hedges, Deluard said, which dovetails with his bullish view on Latin American and especially Mexican assets. Bets on those cyclical sectors should be complemented by traditional risk-off plays such as gold and Japanese stocks, the strategist added.
This barbell portfolio should protect investors against the main risks of 2021 at a relatively cheap price, Deluard said. Rare, good news in an otherwise bleak environment.
The markets
U.S. stocks DJIA, +0.19% SPX, +0.08% COMP, +0.09% opened higher, after stock market futures remained in the red for much of the premarket. Equities in Europe SXXP, +0.57% UKX, +0.04% DAX, +0.74% PX1, +0.75% and Asia NIK, +2.10% HSI, +0.04% SHCOMP, -0.22% were mixed but mostly positive, with no huge moves in either direction among the major stock-market indexes.
The chart
Between stories of fast-food restaurants struggling to find burger flippers and news that Amazon will hire 75,000 workers at an average pay of more than $17 an hour well above U.S. minimum wage rising pay is on the mind.
Workers and their families may well be thinking about time, too, said Russ Mould, an analyst at AJ Bell, who provided our chart of the day. Since 1947, Americans pay has fallen by 5 percentage points as a portion of GDP. American corporate profits have increased by almost exactly the same amount.
Random reads
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Bitcoin and bonds wont cut it. Buy these 6 types of assets for protection in a bear market, says strategist. - MarketWatch
The Cryptocurrencies That Outperformed During Bitcoin’s Crash – Barron’s
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Just about the entire cryptocurrency ecosystem has gotten washed out in the past week, as news of government crackdowns and other negative headlines have dominated the discussion.
Not every coin has been plunging, however. One of the generally positive things about the decline in cryptocurrency values is that different assets are reacting in different ways to the selloff.
To be sure, the damage is widespread. Bitcoin has fallen 12% in the past week and Ether, the second most valuable cryptocurrency, is down 21%. Excluding stablecoins, whose values hover around $1 because they are pegged to the dollar, the top 12 coins have all fallen. But others have risen over that period.
Barrons screened for coins within the top 100 cryptos by market cap that have outperformed over the past week, and found several that have held up.
Source: coinmarketcap.com
They include coins that arent exactly household names, but that are being explored as potentially useful technologies: Polygon, Helium, Celsius, and Maker. Its dangerous to assume that the relative winners will hold up in the longer-term cryptocurrencies can move sharply based on trading on opaque unregulated markets and may suffer from low liquidity. With smaller coins in particular, investors need to understand the platform they are buying into because they are essentially investing in an early-stage venture capital start-up.
That said, projects that held up in the selloff are worth watching. One reason some of these coins did well may have been because they dodged some of the overall crypto networks problems during the selloff.
One thing we saw during the panic was that both centralized and many decentralized exchanges had issues keeping up with demand, Matt Hougan, chief investment officer of crypto fund provider Bitwise Asset Management, told Barrons in an email. Many centralized exchanges simply went down for periods of time during the selloff, as they were overloaded by traders.
That may have been the case with Polygon, formerly called Matic, the 14th most valuable cryptocurrency. It is a so-called Layer 2 technology thats built on top of the Ethereum blockchain, and is meant to make transactions faster and less expensive. Hougan thinks that Polygon was able to bypass some of the congestion in the system during the selloff because it is meant to process more transactions. Because of this approach, their network wasnt congested, he wrote. As a result, users were able to trade with ease on [Polygon] while other approaches faced challenges.
Polygon is involved in some of the hottest areas of cryptocurrencies, including working with trading platforms to make it easier to trade non-fungible tokens, or NFTs. Right now, trading NFTs can be expensive because of gas fees associated with using trading platforms.
Polygon may have increased for another reason, too it appears to be better for the environment than some other coins. It uses a proof of stake system to validate transactions on the blockchain. Bitcoin uses proof of work, a system thats much more energy intensive. Tesla CEO Elon Musk has criticized Bitcoins impact on climate change, causing some proof of stake tokens to outperform proof of work ones.
Helium is a particularly unusual cryptocurrency that is part of a project meant to decentralize wireless communications. Its aim is to get households and businesses to install small telecom hubs on their property almost like mini cell towers and then reward them with a token called HNT. The company says it has nearly 42,000 hot spots around the world. It has received funding from New York venture-capital firm Union Square Ventures.
The Celsius network is known for allowing people to earn interest in their crypto holdings, or to borrow crypto. Celsius says that it has more than 700,000 users and that it is gaining nearly 100,000 users a month. Lending and borrowing are increasingly popular on crypto platforms, and Celsius is becoming a bigger hub for that.
Maker is a token thats part of another unique finance project within cryptocurrencies. MakerDAO is an organization that created a decentralized stablecoin called DAI that can be lent out without intermediaries. Maker is a key hub in the defi movement that is trying to move traditional banking activities to a decentralized network where there are no gatekeepers and people can more easily lend or borrow currencies. The Maker tokens give users a voting stake in the creation of the market, and will presumably rise in value if DAI is used more frequently.
Write to avi.salzman@barrons.com
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The Cryptocurrencies That Outperformed During Bitcoin's Crash - Barron's
Bitcoins Reliance on Stablecoins Harks Back to the Wild West of Finance – The Wall Street Journal
Stablecoins are one of the weirdest things in the whole bizarro world of cryptocurrencies, because they operate on principles directly opposed to the rest of the crypto system.
Crypto true believers argue that bitcoin and its ilk will supplant fiat currencies issued by governments, while the whole point of the innovative blockchain that underlies them is to overcome what pseudonymous inventor Satoshi Nakamotocalled the inherent weaknesses of the trust based model.
Yet stablecoins, and especially the largest, Tether, are thriving. Tethers $60 billion of issuance leaves it jockeying for third place in crypto market value behind bitcoin and ethereum. There are scores of others, and Facebook s Libra, renamed Diem last year, plans to join in with stablecoins covering several currencies.
Stablecoins are a type of cryptocurrency tied one-for-one to dollars or other traditional currencies and whose value relies on trusting the issuer.
Stablecoins have also become central to the financial infrastructure of crypto. According to data provider Crypto Compare theres more trading between Tether and bitcoin than between bitcoin and all fiat currencies put together. For crypto traders, at least, stablecoins are a vital tool, because of the speed with which they can be used to move money from one crypto exchange to another, and because they provide a handy way to park cash temporarily in what is basically dollars.
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Bitcoins Reliance on Stablecoins Harks Back to the Wild West of Finance - The Wall Street Journal
Bitcoin investors are flying too close to the sun: analyst – Yahoo Finance
Jeffrey Halley, OANDA's Senior Market Analyst for Asia Pacific, joins Yahoo Finance Live to discuss the outlook for cryptocurrency, a potential Bitcoin regulation and the future of digital payments.
JULIE HYMAN: Cryptocurrencies have calmed down to some extent, at least by crypto standards, I suppose. We are still seeing some action in Bitcoin. Right now, it's up about 2%. Earlier, when we checked, I believe it was lower, so continuing with volatility, both to the up and to the down side. Let's talk to somebody about crypto and where it's going from here.
Jeffrey Halley is with us, OANDA senior market analyst of Asia-Pacific. And Jeffrey, as you look at the recent moves that we have seen in cryptocurrencies, I know that you sort of have thoughts on what the long-term investable case is. I want to leave that aside just for a second and talk about the recent price action and where you think Bitcoin in particular is going to go from here.
JEFFREY HALLEY: Yeah, I often say that Bitcoin and the crypto space is a tradable asset and not-- but not necessarily an investable asset. So it has extreme volatility, and there's money to be made there. There's money to be lost there as well. And I won't dispute that one. And I wish all those traders the very best. I think it was very indicative that when it broke the 200-day moving average and crashed down to 30,000 very quickly, that there was very, very little liquidity.
So it very much behaves like an emerging market when things get tough. So the saying in emerging markets is, an emerging market is a market you can't emerge from in an emergency. And I think that's sort of indicative of the price action that we're going to see now. I think a lot of traders were taken out of positioning on that crash. And we're going to see even less liquidity going forward than we did.
I think equally, quite a few of them tried to get back in again as it rallied up off 30,000. But it is struggling above 40,000 now. And I'm just-- I'm not quite convinced just by looking at the technical picture that we're not going to see another big move down. We're going to see liquidity gaps now because a lot of positioning has been taken out of the market. So we're going to see cryptos in general gapping between price points as liquidity disappears.
Story continues
MYLES UDLAND: Well, so and Jeff, in thinking about the role that emerging markets, emerging assets tend to play when it comes to the performance of more established markets, are you thinking that there won't be quite as much spillover perhaps as some folks have braced for, as the size of the crypto market has grown in absolute dollars. We still haven't seen too, too much of a weekend washout really dampening risk sentiment, at least so far as we've seen here in US markets.
JEFFREY HALLEY: Yeah, it's a very good point because until we saw that crash it seems like a lifetime ago, but I think it was the beginning of last week. And so we saw that. I didn't really feel there was a lot of cross-asset spillover. But actually, when the Bitcoin crashed along with the other cryptos, we did see a spillover. We saw gold rise. We saw some stocks coming under pressure. We saw the dollar rise. And I think investors, a lot of these investors are going to have multiple assets in their portfolios.
And it could well be the case that we saw in March last year where one position moves underwater, it has to be sold, and they have to liquidate other positionings and other asset classes to cover those losses. And I believe that the crypto market actually did hit a $2 trillion market cap when Bitcoin was at $65,000 a coin. That's a lot of money to get wiped out. And if it's still around a trillion dollars now, and it crashes by 30%, well, that's a big hit in the financial markets. And I think this will actually also draw the attention of the regulators. If we start seeing it spilling into other asset classes, they're going to start paying attention a lot more.
BRIAN SOZZI: Jeffrey, you talk-- I want to make sure I have this right. So you're talking about liquidity potentially drying up, regulators doing what they are known or likely to do, regulate. Do you think there's another crash coming here this summer?
JEFFREY HALLEY: I think there's a real risk now that I think-- I trace it back to this Colonial Pipeline saga. And I think that might be cryptos flying too close to the sun. They may have poked a sleeping bear just once too often and woken it up with regards to the regulators and/or governments. When you start launching attacks on United States infrastructure-- and we're seeing it going on in some other parts of the world at the moment, like New Zealand as well. When you start launching attacks on infrastructure and then taking the ransoms in Bitcoin or other cryptos, that's going to get the attention of some very serious and very powerful people at all levels of government.
And I believe that the China measures that we've seen are, in part, due to that. And it wasn't so much about the actual power draw at all. And I believe that the risk has ratcheted up exponentially now that blocs such as Europe and/or the United States actually start taking some measures to either regulate or partially ban cryptos, as we know it. So I think it does actually face an existential threat from that sector at the moment. And that will, of course, be bearish for those coins.
JULIE HYMAN: Do you think, though, that there's a scenario where you have that kind of regular-- you know, the crypto folks, Jeffrey, will say we want regulation. We welcome regulation, right? That's what they tend to say because they argue it will legitimize the cryptocurrencies in some measure. Do you see a scenario where cryptocurrencies can still rise in price and there is regulation?
JEFFREY HALLEY: It's a little hard to say because you talk to the original Bitcoin creators and the original pioneers in the space-- the whole reason for cryptos to exist is to be outside of control to have this libertarian, do what you want, and move money and procure goods and services as you wish anywhere in the world. It's only when this institutional money has emerged into the space this year that we've started hearing that. I struggle to see how they can actually coexist if governments and major countries around the world are going to regulate their use or even ban their use.
I do potentially see a future for digital coins like the digital Yuan. They're talking of-- the Fed's talking about a digital US dollar now. I can see those having a future. But I can't see them coexisting with what we've seen going on in the space at the moment, which seems, to me, driven more by speculative mania than underlying fundamentals at this stage.
JULIE HYMAN: Jeffrey, thanks so much. Jeffrey Halley is OANDA senior market analyst of Asia-Pacific. I don't know-- these days, you're a little bit of a lone voice in the wilderness, Jeffrey. So we'll see how it all pans out. Thank you so much for taking the time to talk to us.
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Bitcoin investors are flying too close to the sun: analyst - Yahoo Finance
Bitcoin Investing vs. Invisible Hardware of the Nanocosm – Yahoo Finance
Welcome back to Cook's Kitchen!
Last week I explained what the Bitcoin faithful were missing about their precious "digital gold" in this article and video...
Bitcoin Crash Lessons: Passionate Belief Still Needs Risk Management
And in the past week, I've had many conversations about those views, even publicly on Twitter. You can always follow me @KevinBCook to eavesdrop in real-time, but I'll share one exchange that was right up our alley.
First, the premise: the acerbic wit of one OJ Renick, anchor extraordinaire of the TD Ameritrade Network investing broadcast, coined an important new market acronym Wednesday to describe, and warn, Bitcoin faithful about what was happening in their minds and margin-based accounts.
It was MUD: Maniacal Unwavering Devotion.
And it was a beautiful contribution to the conversation I began last week.
Second, the interaction: Immediately, OJ's tweet about his article explaining MUD (published on his LinkedIn blog) drew some very important fire...
A crypto thought leader wrote...
"I don't know a single *crypto* thought leader that warned people of the upcoming *bitcoin* crash" (quoting OJ Renick from his article).
He proceeds...
"Why should I (a public proponent of accumulating bitcoin for the long term) encourage people to gamble their bitcoin by trying to time unpredictable markets?"
And here was my immediate reply...
Exactly the question needs to be asked & answered. I proposed last week that "faithful fundamentalists" ignore that even a revolutionary new asset class trades at market prices, susceptible to human emotional extremes (bubbles & crashes). Think of newbs following & buying at $60K.
My point, as always here, was that it's fine for BTC "thought leaders" to engage in fantasies of accumulating their precious for the "inevitable" surges to $100K and $500K, but the average follower with less than $10K to spare can't really handle or understand the 50% crashes.
Until Bitcoin has quantifiable use cases and big institutional support (think buying from BlackRock, JPMorgan, and central banks), the fundamental value of it is hard to model, let alone quantify. That means it's trading mostly on emotional speculation and passionately-held beliefs. Or influential whims and changes of heart (@elon if you musk ask who).
Don't get me wrong. In my piece last week, I argued that Bitcoin is an entirely new asset class for the digital age. And there are good reasons that it's 10X better -- and more volatile -- than that barbarous relic gold.
So maybe we should warn new BTC "investors" about possibilities for "wild randomness," as the great Benoit Mandelbrot described the central feature of complex and chaotic markets. After I understood what he and Nassim Taleb were trying to teach us about volatility in human-built systems, I realized that "when anything can happen, there is no standard for deviation."
The Semi Ecosystem is a Rich Jungle of Investing Opportunities
While some "coiners" look for opportunity in the hundreds of alt-coins that may go from a thousandth of a cent to 5 cents -- for a 5,000X windfall -- those dreams will remain as infrequent as they are random.
What I'm encouraging investors to do is look at the companies building the actual infrastructure of the Crypto-Blockchain space.
And that's what I've been focused on for the month of May with deeper dives into the sales and earnings growth of Micron MU, Applied Materials AMAT, and NVIDIA.
On Wednesday morning, I published a piece on ASML Holding N.V. ASML the Netherlands-based giant of photolithography for integrated circuit (IC) manufacture.
That article spins a few quick circles around many of the players that we find most important in the buildout of the Nanosphere. That was my new term last year for the world of sub-10 nanometer technology that was becoming crucial to the next stages of ICs for phones, cars, medicine, and aerospace.
But then I found that futurist and technology guru George Gilder calls it the Nanocosm, and I'm going with him since he is probably the best independent semiconductor researcher on the planet. He is also the author of the 1989 book Microcosm: The Quantum Era in Economics and Technology, which set the stage for a whole generation of investors and technologists to understand this invisible world of power laws.
Be sure to check out the article on ASML linked above to find out which mega-investor just became the 5th largest holder of ASML shares in Q1.
NVIDIA Is Taking It Down, Way Down
In the video attached to this article, I talk a bit about NVIDIA NVDA innovation heading down to the 5nm level for its next-gen GPU architecture, Hopper. Since NVIDIA contracts Taiwan Semiconductor, or TSMC, to build this hardware, word gets out in the supply chain and DigiTimes has been reporting on this "mystery" chipset for the past year.
What is known with a little more certainty is that NVIDIA has orders in with TSMC for 7nm technology that goes into Ampere GPU cards. According to Kara Copple writing for WePC.com "TSMC will be producingApples AAPL 5nm ARM-based processors and also AMDs Ryzen 5000 series of CPUs. Its fair to say TSMC has some big projects on its hands."
And for TSMC to build any of this requires the sophisticated laser etching technology of ASML.
I taped the video on Wednesday morning before NVIDIA reported its latest quarterly results. As I type now, investors are reacting to stunning growth in the company's two primary segments:
Gaming revenue of $2.76 billion was up 106% from a year ago. Datacenter revenue of $2.05 billion was up 79% from this time last year.
They even got a boost from crypto mining as they offer that niche market new specialized GPUs for massively parallel, high-speed processing. More importantly, current Q2 revenue guidance at $6.3 billion was more than 14% higher than the analyst consensus of $5.5B! That has investment banks jumping over each other to raise price targets north of $750.
After NVIDIA's show-stopping annual GPU Tech Conference, held virtually in April, I wrote about my own $750 PT on NVDA and how Datacenter was on pace to overtake Gaming this year. Here's what I wrote then...
Jefferies semiconductor analyst Mark Lipacis wrote a powerful research report in September that the former is growing at 40% CAGR vs just 10% for the latter.
Based on that math, this is the year that Datacenter takes over Gaming in revenues. And based on his 5-year projections, Lipacis sees Gaming growing to a nearly $12 billion business while DC blows the doors off to $34 billion.
For perspective, this year's total revenue is only expected to be in the neighborhood of $22.5 billion.
To be clear, Lipacis was inspired to write this new report after NVIDIA announced it had an agreement to buy UK-based ARM Holdings for $40 billion. That deal remains controversial -- for everyone but NVDA -- and also uncertain in terms of the probability of actually closing any time soon.
The primary issues revolve around ARM's technology for mobile devices which is licensed to everyone from Apple to Qualcomm.
ARM also deals in CPUs (serial processing), which is part of what made it attractive to NVIDIA's GPU (parallel processing) expertise. But one of the most important elements to keep in mind when talking about Jensen Huang & Co. is that he surrounds himself with the best engineering talent in the world, just like Elon.
And that's why they develop complete "stacks" of hardware and software in the CUDA platform to give power tools to data miners and modelers, automation innovators, and scientific researchers expanding the limits of our knowledge and technology in medicine, energy, aerospace, materials, autos, and smart cities.
Gilder on the Nanocosm
I mentioned that my ASML article has details on the new 5th largest investor. The video actually has a good screenshot of the top ten.
But I also want to share why George Gilder is a new buyer of ASML shares, which have more than doubled in the past year from $325 to over $650. I'll let him explain in his own words...
"Without Taiwan Semiconductors and crucially ASML, your iPhone 12's M-1 processor chip would not exist. Without ASML, TSM would not be able to make Huawei's 5G HiSilicon processors. The same is true for Samsung and your Galaxy phone.
"ASML is the key. ASML's technical lead in the field is so great, and growing, that it has essentially 100% market share of the photolithography market for single-digit-nanometer geometries."
The Semi Ecosystem is a complex jungle. As complicated as NVIDIA's proposed acquisition of ARM may be, they also contract with the other big Asian chip foundry, Samsung, to spread out their risk away from TSMC -- and maybe to avoid any technology IP slipping into view of Apple.
For this jungle, it pays to pay attention to a wily and brilliant veteran like Gilder, who knows that a premier "arms dealer" like ASML and its invisible technologies may be one of the smartest bets of all. Be sure to check out my ASML article to learn about his latest work on the Blockchain.
Disclosure: I own NVDA shares for the Zacks TAZR Trader portfolio.
Bitcoin, Like the Internet Itself, Could Change Everything
Blockchain and cryptocurrency has sparked one of the most exciting discussion topics of a generation. Some call it the Internet of Money and predict it could change the way money works forever. If true, it could do to banks what Netflix did to Blockbuster and Amazon did to Sears. Experts agree were still in the early stages of this technology, and as it grows, it will create several investing opportunities.
Zacks has just revealed 3 companies that can help investors capitalize on the explosive profit potential of Bitcoin and the other cryptocurrencies with significantly less volatility than buying them directly.
See 3 crypto-related stocks now >>
Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free reportMicron Technology, Inc. (MU) : Free Stock Analysis ReportNVIDIA Corporation (NVDA) : Free Stock Analysis ReportApple Inc. (AAPL) : Free Stock Analysis ReportASML Holding N.V. (ASML) : Free Stock Analysis ReportApplied Materials, Inc. (AMAT) : Free Stock Analysis ReportTo read this article on Zacks.com click here.Zacks Investment Research
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Bitcoin Investing vs. Invisible Hardware of the Nanocosm - Yahoo Finance
Bitcoin: I’ll either be rich, or wrong – Financial Times
The pros and cons of investing in highly volatile cryptocurrencies
When 29-year-old Sam found out that his younger brother had made 30,000 trading bitcoin, he couldnt believe what he was hearing. The self-employed musician decided to put the last 2,000 of his savings into various cryptocurrencies, hoping he could double his money. However, wild swings in crypto valuations are proving a test of his strategy. Presenter Claer Barrett explores the highs and lows of investing in cryptocurrencies with experts Abhishek Sachdev, a professional investor who has personally invested 20,000, and Eva Szalay, the FTs currencies correspondent. They discuss cryptos long-term potential as an asset class and the risks that investors such as Sam need to be aware of, as well as the allure of investing in highly volatile unregulated assets.Review clips: BBC Newsnight, CNBC.
If you would like to be a guest on Money Clinic and chat to Claer about a money issue thats bothering you, get in touch our email is money@ft.com - and you can follow Claer on Twitter and Instagram @ClaerB.
Further reading:
-Read Eva Szalays article Bitcoin: too good to miss, or a bubble ready to burst?
-Following Elon Musks tweets about the environmental impact of mining Bitcoin, check out this FT article Bitcoins growing energy problem: Its a dirty currency
-Here is how the FT covered the story of the Bitcoin price crash last week
-Check out our recent investment masterclass episode with FT columnist Merryn Somerset Webb, where she chats to Claer about Bitcoin and all kinds of other investment trends
See acast.com/privacy for privacy and opt-out information.
A transcript for this podcast is currently unavailable, view our accessibility guide.
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Bitcoin: I'll either be rich, or wrong - Financial Times
Crypto News: Bitcoin, Other Cryptocurrencies Suffer Another Weekend Rout – Barron’s
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Bitcoin prices stabilized on Monday, after investors endured another weekend tumble for cryptocurrencies.
A Sunday selloff for Bitcoin extended a week of declines following increased scrutiny on the sector by regulators in the U.S. and China.
After soaring earlier this year on a wave of investor interest, the price of cryptocurrencies slumped in the past week. From a May 16 price of $44,062, Bitcoin has dropped about 17%, including Sundays decline. It is also down about 43% from its all-time high of $64,788.34 set in April.
As of about 4:30 a.m. ET on Monday, Bitcoin traded around $36,400, bouncing off its 24-hour low of $31,179.69. It had been trading around $34,000 on Sunday evening, according to CoinDesk. Ethereum, the second-largest cryptocurrency, rose to $2,261.62 on Monday, from a 24-hour low of $1,733.58. Dogecoin was trading at 32 cents, well off its 24-hour low of 24 cents.
Last months initial public offering of crypto exchange Coinbase (ticker: COIN) helped fuel enthusiasm for virtual currencies in the first months of the year. But digital currencies have lived up to their reputation as a volatile asset class.
Tesla CEO Elon Musk has also fanned the flames by tweeting provocatively about Dogecoin and Bitcoin in recent weeks after his electric car company bought $1.5 billion of Bitcoin in February. Musk first said he would accept Bitcoin as payment for Tesla cars, and then reversed that decision, citing the environmental effects of mining new coins.
On Wednesday, the Treasury Department said it wants to require businesses to report cryptocurrency transfers over $10,000 to the Internal Revenue Service as the tax agency gears up for a broader crackdown on tax evasion.That sent Bitcoin plunging 30% before recovering much of its losses.
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Bitcoin fell below $40,000 earlier last week after the Peoples Bank of China warned about recent speculation in the crypto market, reportedly saying financial and payment institutions were banned from pricing or conducting business in virtual currencies.
The Federal Reserve has also been examining the role of digital currency and plans to release a research paper this summer that outlines its thinking on the development of a central bank digital currency for use by the general public.
Still, the roller-coaster ride may prove to be too much, even for the big institutions that began backing Bitcoin and the blockchain technology behind it in recent years. For the first time in months, there is evidence that professional investors have been shifting their crypto assets to gold, J.P. Morgan said in a recent note.
Write to editors@barrons.com
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Crypto News: Bitcoin, Other Cryptocurrencies Suffer Another Weekend Rout - Barron's
Bitcoin is up, then down. But exactly how does it work? – USA TODAY
From Dogecoin to Bitcoin to Coinbase, cryptocurrency is the hottest trend in investing right now. Heres what you need to know before buying in. USA TODAY
Whether the price is surging or dipping, Bitcoin stays a hot topic.
The price of the famously volatile digital currency fell nearly 30% at one point Wednesday after the China Banking Association warned member banks of the risks associated with digital currencies. The decline narrowed to below 10% that same afternoon, but Bitcoin had still lost about $70 billion in market value in 24 hours.
Bitcoin has lost about 38% of its value since April 13 when it hit a high of more than $64,800, according to Coindesk. The China warning was just the latest headwind: Before Wednesday, Teslas decision to not accept the digital currency as payment for cars after it said it would and murmurings in Washington about tighter regulation of digital currencies had put pressure on Bitcoin. The price is still up about 31% in 2021 and nearly 300% from a year ago.
Heres a look at Bitcoin and digital currencies in general:
Bitcoin is a digital currency that is not tied to a bank or government and allows users to spend money anonymously. The coins are created by users who mine them by lending computing power to verify other users transactions. They receive Bitcoins in exchange.
The coins also can be bought and sold on exchanges with U.S. dollars and other currencies. Some businesses take Bitcoin as payment, and a number of financial institutions allow it in their clients portfolios, but overall mainstream acceptance is still limited.
Bitcoin on the upswing: Bitcoin, cryptocurrencies rebound amid volatile week of trading
Chicago Tribune has a new owner: Tribune investors approve hedge fund takeover, shifting control of Chicago Tribune
Warren Buffett called Bitcoin rat poison, but the technology behind it is something everyone can agree on. Here are other life-changing uses you didnt know about.
Bitcoins are basically lines of computer code that are digitally signed each time they travel from one owner to the next. Transactions can be made anonymously, making the currency popular with libertarians as well as tech enthusiasts, speculators and criminals.
Bitcoins have to be stored in a digital wallet, either online through an exchange like Coinbase, or offline on a hard drive using specialized software. According to Coinbase, there are about 18.7 million Bitcoins in circulation and only 21 million will ever exist. The reason for that is unclear, and where all the Bitcoins are is anyones guess.
On Wednesday, a statement posted on the Chinese Banking Associations website said financial institutions should resolutely refrain from providing services using digital currencies because of their volatility.
(Photo: Getty Images)
Virtually every cryptocurrency fell after the industry groups statement.
As of 4:15 p.m. eastern time that day , Bitcoin was down more than 7% at around $40,310 per coin. Most cryptocurrencies lost between 7% and 22% of their value and shares of Coinbase dropped 5.4%.
Its not unusual for the value of Bitcoin to change by thousands of dollars in a short time period, though swings totaling around $20,000 in one day are extreme. On the last trading day of 2020, Bitcoin closed just under $30,000. In mid-April, it flirted with $65,000.
Yes, and a fairly big one. Musk announced in February that his electric car company Tesla had invested $1.5 billion in Bitcoin. In March, Tesla began accepting Bitcoin as payment. Those actions contributed to the run-up in Bitcoins price, and Musk also promoted the digital currency Dogecoin, which also spiked in value.
However, Musk reversed course in just a short time, saying last week that Tesla would stop accepting Bitcoin because of the potential environmental damage that can result from Bitcoin mining. The announcement sent Bitcoin falling below $50,000 and set the tone for the big pullback recently in most cryptocurrencies.
A number of Bitcoin fans pushed back on Musks reasoning. Fellow billionaire Mark Cuban said that gold mining is much more damaging to the environment than the mining of Bitcoin.
A 2019 study by the Technical University of Munich and the Massachusetts Institute of Technology found that the Bitcoin network generates an amount of CO2 similar to a large Western city or an entire developing country like Sri Lanka. But a University of Cambridge study last year estimated that on average, 39% of proof-of-work crypto mining was powered by renewable energy, primarily hydroelectric energy.
There had been some concern among Bitcoin investors that Tesla would sell some or all of its Bitcoin holdings, but Musk indicated in a tweet Wednesday that Tesla was sticking with its investment.
The digital payment company Square and its CEO Jack Dorsey,also the CEO of Twitter,have been big proponents of Bitcoin.
Overstock.com also accepts Bitcoin, and in February, BNY Mellon, the oldest bank in the U.S., said it would include digital currencies in the services it provides to clients. And Mastercard said it would start supporting select crypto currencies on its network.
Bitcoin has become popular enough that more than 300,000 transactions typically occur in an average day, according to Bitcoin wallet site blockchain.info. Still, its popularity is low compared with cash and credit cards.
Yes, plenty of it.
Tracking Bitcoins price is obviously easier than trying to figure out its value, which is why so many institutions, experts and traders are skeptical about it and cryptocurrency in general.
Digital currencies were seen as replacements for paper money, but that hasnt happened so far. Federal Reserve Chair Jerome Powell has said the central bank prefers to call crypto coins crypto assets, because their volatility undermines their ability to store value, a basic function of a currency.
While some banks and financial services companies are getting in on it, others are staying away.
Regulators arent very worried about a possible crash in digital currencies dragging down the rest of the financial system or economy.
Even with the recent sell-off, digital currencies have a market value of about $1.72 trillion, according to the website coinmarketcap.com. But that pales compared with the $46.9 trillion stock market, $41.3 trillion residential real estate market and nearly $21 trillion Treasury market at the start of the year.
The European Central Bank said Wednesday that the risk of cryptocurrencies affecting the financial systems stability looks limited at present. In large part, thats because theyre still not widely used for payments and institutions under its purview still have little exposure to crypto-linked instruments.
Earlier this month, the Federal Reserve said a survey of market contacts found roughly one in five cited cryptocurrencies as a potential shock to the system over the next 12 to 18 months. Thats a turnaround from the fall, when a similar survey found none mentioning cryptocurrencies.
Washington officials have been talking about regulating digital currencies more, and worries about a heavier hand have played a role in the recent swoon in prices.
Gary Gensler, who took over as chairman of the Securities and Exchange Commission last month, has said that cryptocurrency markets would benefit from more oversight to protect investors.
In a hearing before the Houses financial services committee earlier this month, Gensler said neither the SEC nor the Commodity Futures Trading Commission, which he used to head, has a regulatory framework for trading on cryptocurrency exchanges yet. He said he thought Congress would ultimately have to address it because theres really not protection against fraud or manipulation.
Its a mystery. Bitcoin was launched in 2009 by a person or group of people operating under the name Satoshi Nakamoto. Bitcoin was then adopted by a small clutch of enthusiasts. Nakamoto dropped off the map as bitcoin began to attract widespread attention. But proponents say that doesnt matter: The currency obeys its own internal logic.
Associated Press Reporters Matt Ott, Ken Sweet and Stan Choe in New York contributed.
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Bitcoin is up, then down. But exactly how does it work? - USA TODAY
MORNING BID-Bitcoin and Belarus in the headlines – Reuters
May 24 - A look at the day ahead from Danilo Masoni.
Taper talk is not going away and nor is Bitcoin volatility. But the global economy continues to steam on and COVID-19 infections are dropping, seemingly having peaked even in India.
So as the last full week of May kicks off, markets dont look eager to move beyond well-trodden trading paths, perhaps reflecting investors wariness but also holidays in many parts of Europe.
Stock futures in Europe are up and Wall Street too looks set to hold ground after Fridays a mixed show. The dollar is languishing just off three-month lows and, at 1.62%, 10-year U.S. yields are at the midpoint of their 11-week range -- bond investors may keep powder dry ahead of a series of Treasury auctions and Fridays U.S. core PCE inflation reading.
But there are several Fed speakers to look forward to on Monday, most notably Lael Brainard who is due to speak on central bank digital currencies against the backdrop of the bitcoin storm. There is also a virtual CoinDesk gathering, which will feature Ray Dalio and Cathie Wood.
Crypto enthusiasts might hope Wood will be able to soothe crypto markets; remember her prediction last week of bitcoin at $500,000? Currently though, the worlds biggest crypto coin is licking its wounds after falling as much as 17% on Sunday.
Cryptocurrency miners, including HashCow and BTC.TOP have halted their China operations after Beijing on Friday vowed further crackdowns on bitcoin mining.
Finally, Belarus dollar bonds are down as much as 0.7 cents after the government forced an airliner to land on Sunday, arresting an opposition-minded journalist on board and drawing condemnation from Europe and the United States.
Key developments that should provide more direction to markets on Monday:
* BOJ Governor Kuroda speaks
* Emerging market: central bank meetings in Indonesia, Nigeria, Ghana
* Auctions: U.S. 6-month and 3-month t-bills
* Fed speakers: Lael Brainard on CBDCs, Cleveland Feds Loretta Mester, Atlanta Feds Raphael Bostic, Kansas Citys Esther George
Reporting by Danilo Masoni; editing by Sujata Rao
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MORNING BID-Bitcoin and Belarus in the headlines - Reuters
Recovery rally takes bitcoin back above $40k; Treasury proposal weighs on gains – Reuters
A rebound in bitcoin held strong on Thursday, even as the U.S. Treasury Department called for new rules that would require large cryptocurrency transfers to be reported to the Internal Revenue Service and the Federal Reserve flagged the risks cryptocurrencies posed to financial stability.
The comments from U.S. officials come one day after a brutal sell-off on concerns over tighter regulation in China and unease over the extent of leveraged positions among investors sank the world's biggest cryptocurrency to its lowest level since late January. read more
Bitcoin was recently up more than 4% at around $40,000, after earlier jumping more than 10%. Thursdays gains brought the currencys price to approximately where it traded in early February. Smaller rival ether was up around 14% after Wednesdays 28% tumble.
The rally in cryptocurrencies Thursday came after prominent backers such as Ark Invest's (ARKK.P) Cathie Wood and carmaker Tesla's (TSLA.O) Elon Musk indicated their support on Wednesday.
Wood said in an interview with Bloomberg that she was still sticking to her $500,000 forecast. Musk reiterated that Tesla was holding onto its bitcoin investments. read more
"It's too early to say if the rebound we've seen off the lows in crypto has legs," said Chris Weston, head of research at brokerage Pepperstone in Melbourne.
"I question if we will get a chance to catch our breath or is there more volatility in store?"
Weston pointed to how $9.13 billion of cryptocurrency positions had been liquidated across exchanges over 24 hours, and $532 billion in total volume transacted.
Wednesday's declines in both digital assets were one of their biggest daily percentage moves in more than a year, with investors rushing to exit trades that until recently were outperforming traditional markets such as stocks and bonds.
Wednesday's volatility fuelled record turnover. Data from CME showed volumes on bitcoin futures soared to 32,356 contracts, more than three times the average volumes for May.
While turnover on Thursday declined from the frenzied volumes seen overnight, May contracts still showed more than 6,000 contracts traded. Similar trends were observed on CME's micro bitcoin futures where nearly 95,000 contracts were traded on Wednesday.
The catalyst was a statement by Chinese financial industry bodies banning the use of cryptocurrencies in payment and settlement. China also prohibited institutions from providing crypto-related products or exchange services between cryptocurrencies and the yuan or foreign currencies. read more
"A defining factor for China's decision is also likely to be their strong push towards a central bank digital currency solution," said Alexander Ruchti, next-generation research analyst at Julius Baer.
"The past week's steep and rapid decline once more underpins how susceptible the segment is towards sentiment swings."
Bitcoin had been under pressure after a series of tweets last week by Musk, a major cryptocurrency backer, chiefly his reversal on Tesla accepting bitcoin as payment.
The slide forced some investors to close out leveraged positions in cryptocurrency derivatives, which caused prices to fall further, traders said.
Still, some analysts saw Thursday's gains as a sign that investor sentiment remains bullish.
"People consider this as a 'buy-the-dip' moment, and many consider this as 'the last chance to buy bitcoin cheap'," said Ruud Feltkamp, chief executive at crypto trading bot Cryptohopper. "The next few months will show if the bull market will continue or if it's the start of the end of its run."
CROWDED ETHER
Coming off a six-fold jump on the back of rising usage in non-fungible tokens on digital art platforms, ether's sell-off was far more damaging, with the digital currency trading 39% below its record highs.
James Quinn, managing director at Q9 Capital, a Hong Kong-based cryptocurrency private wealth manager, said the selling reflected huge crowded positions in ether.
Ether is still up more than 270% so far this year, however, outperforming bitcoin's year-to-date gain of 37%.
"This can also be the moment when bitcoin starts reclaiming the market momentum from ether and other altcoins that have had room to outperform BTC in the last four months," said Ulrik Lykke, executive director at crypto hedge fund ARK36.
While some retail traders saw missed opportunities in the slide, others saw the rout as a chance to pick up digital assets on the cheap.
"There has certainly been a change in tone in the market after the sell-off. But this also a market that has shown extraordinary returns over the last year to 18 months," said Seth Ginns, managing partner and head of liquid investments at CoinFund.
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Recovery rally takes bitcoin back above $40k; Treasury proposal weighs on gains - Reuters