Ever since the Great Financial Crisis in 2008 and 2009, major central banks have adopted an incredibly accommodative stance toward monetary policy in order to boost the economy, a strategy that was exacerbated by the coronavirus pandemic. While it was previously not an issue, today we are experiencing surging prices across the U.S. economy as a direct result of the money printing.

And now, to curb soaring inflation for everything from groceries and gas to rent and used cars, interest rates are ticking up. But the Federal Reserve's recent hawkish stance could flip and turn dovish in the not-too-distant future, and this would be an extremely bullish situation for one asset in particular -- Bitcoin (BTC 0.58%).

To be clear, as long as the central bank continues hiking interest rates in order to slow down inflation that's at 40-year highs, I see Bitcoin remaining under pressure. This is because in this environment, investors lean toward safer assets, like Treasury bonds and even cash instead of more speculative financial instruments like growth tech stocks or cryptocurrencies. It helps explain why the Nasdaq Composite, a tech-heavy stock index, has lost 17% in 2022, about double the S&P 500's drop (as of this writing).

A prolonged period of weak crypto prices is known as a crypto winter. During this time, money usually flows out of the space as investor interest wanes. Like bubbles that burst in traditional financial markets, this is when faulty, scam-like, and unsustainable projects and companies get shaken out, and the strongest teams and enterprises will survive. In crypto specifically, developer activity should continue to remain strong regardless of what prices are doing.

Consequently, for someone who has cash sitting on the sidelines that they're ready to put to work, buying Bitcoin, which has fallen 65% from its all-time high last November and is in a major bear market, might be a sound financial decision right now. That's because not only is its long-term potential absolutely massive, but within the next 12 months or so, we could see more favorable monetary policy.

The Federal Reserve's intended objective is to pump the brakes on inflation without bringing the economy into a recession, with what is known as a "soft landing." But some investors don't believe that this is a realistic scenario. The U.S. economy has shrunk for two consecutive quarters, which technically means that we're already in a recession. The Biden administration, on the other hand, has come out with a statement saying how the U.S. is not in a recession, but I think this was done so the public wouldn't panic.

Central bankers point to the strong labor market and 3.5% unemployment rate, but this can be misleading. According to a survey by small-business insurance marketplace Insuranks, 44% of Americans have taken on side hustles to earn extra money. And there are more Americans today who have two full-time jobs than in February 2020, before the pandemic struck down the economy. What's more, consumer confidence is at a record low.

What this means is that as the Federal Reserve keeps setting higher interest rates to stop inflation, it will inevitably lead to a full-blown recession that wouldn't be debated. And at this point, the central bank will probably have to change course and begin cutting interest rates again because they would need to stimulate economic growth. As a result, liquidity will once again be pumped into the financial system to encourage lending by banks and borrowing and spending by consumers.

And when this happens, the investment case for owning Bitcoin will become strikingly clear. Governments around the world need to keep the money printer going, and keep interest rates low, in order to support their colossal debt burdens, again creating an environment for elevated inflation to come back. If only there was a scarce digital store of value that was absolutely finite with no central bank controlling it. Luckily, there is. It's called Bitcoin.

Read the rest here:
Now Might Be One of the Best Times to Buy Bitcoin - The Motley Fool

For traditional market investors, cryptocurrencies can be overwhelming on account of the volatility in their prices and fast-changing sentiments that can result in swift profits or losses.

However, given the rising levels of crypto adoption and the importance of cryptocurrencies in a Web3 future, an increasing number of investors are raring to participate in this asset class.

Exchange traded funds (ETFs), which track a particular index, sector, commodity, or other asset, offer the best of both worlds. A few Bitcoin ETFs that have cropped up allow access to cryptocurrencies without the hassle of storing or securing crypto tokens through an online or hardware wallet.

The concept was introduced by ProShares Bitcoin Strategy ETF (BITO) in October 2021 and attracted investments of almost $1 billion in the first few days.

Actively traded on the New York Stock Exchange Arca network, investors can buy BITO shares through a brokerage or directly from ProShares.

With more than $800 million in assets under management, BITO is by far the largest actively managed BTC ETF that invests in BTC futures contracts, treasury securities and cash.

Shorting approach

The latest addition to the BTC ETF space is ProShares Short Bitcoin ETF (BITI), which was launched in June 2022. BITI adopts a shorting approach by trading in a cash-settled futures market to mimic the inverse of BTCs daily performance. With assets of $62 million, BITI is gaining traction among investors who are more interested in profiting from a decline in BTC prices.

Apart from these two offerings, investors can invest in shares of Valkyrie Bitcoin Strategy ETF (BTF), VanEck Bitcoin Strategy ETF (XBTF), AdvisorShares Managed Bitcoin Strategy ETF (CRYP) or Global X Blockchain & Bitcoin Strategy ETF (BITS).

BTF aims to invest close to all of its capital in BTC futures and currently has AUM of $22 million. Both BTF and BITO are trading at about 70 percent below their listing prices, suffering from an almost equivalent decline in BTCs price from its all-time high of $68,890 in November 2021.

XBTF is structured as a C Corporation, a legal structure for a corporation in which the owners, or shareholders, are taxed separately from the entity.Long-term capital gains or dividends are reinvested into the fund, thereby reducing the tax outgo arising from taxable distributions for some investors.

Boasting of a lower expense ratio, XBTF is similar in size to BTF and has performed slightly better than BITO and BTF.

BITS splits its assets between Bitcoin futures contracts and indirect holdings in blockchain companies that are well-positioned to benefit from increasing adoption of the technology. The fund assumes long positions in BTC futures with the purpose of achieving long-term capital appreciation for its investors.

BITS has AUM of $8.4 million and holds more than 50 percent of its assets in Global X Blockchain ETF (BKCH).

The CRYP ETF has exposure to BTC via BTC futures ETFs, BTC futures contracts, short duration fixed income securities, and cash or cash equivalents. It is the smallest among the six BTC ETFs, with AUM of $172,000 and has only 10,000 outstanding shares available for trading.

Apart from the six BTC ETFs, there are more proposals awaiting approvals from the US Securities and Exchange Commission, which could add to the options available in the Bitcoin ETF space.

By choosing any Bitcoin ETF, investors globally can assume exposure to Bitcoin while benefitting from NYSE Arcas fully automated, transparent open and closing auctions in these ETFs.

While none of these Bitcoin ETFs holds BTC directly due to the SECs concerns over BTC being traded on non-secured cryptocurrency exchanges, they do provide investors with exposure to the cryptocurrencys price movements and potentially benefit from its long-term price appreciation.

Read more here:
Bitcoin ETFs: Passive investing in the worlds premier cryptocurrency - Moneycontrol

The International Monetary Fund (IMF) published a study on the spike in positive correlation with Bitcoin (BTC), Ethereum (ETH), and Asian equities. The financial organization claims digital assets began an accelerated integration with the region during the pandemic as more people traded them looking to generate yield.

From 2020 to its all-time high in 2021, the crypto total market cap increased by over 20-fold which led Bitcoin and Ethereum into price discovery. As seen in the chart below, the total trading volume for cryptocurrencies rose very close to $900 billion from below $100 billion at its peaked in 2021.

The regions with the highest trading volume are the Americas and Europe. The Middle East and Central Asia, EM Asia, and AE Asia are below other regions. However, the IMF claims adoption of cryptocurrencies in Asia could pose a systematic risk for the financial world.

If the price of Bitcoin and the crypto market reclaim their previous levels, and re-entered price discovery, the financial institution believes that there could be negative consequences. If digital assets were to rise and crash as they did over the past year, contagion could spread through individual or institutional investors.

As cryptocurrencies trend lower these investors would allegedly rebalance their portfolios, possibly causing financial market volatility or even default on traditional liabilities, the IMF said. In that sense, the financial institution shared the chart below to show the contrast between the price of Bitcoin and Asian stock indexes.

From 2020 until 2022, this correlation seems to be trending upward with Thailand and Vietnam showing the highest positive correlation. This has translated into similar price action for Bitcoin and traditional equities in these countries.

In India, the correlation between the price of Bitcoin and local equities has increased by 10-fold with a 3-fold spike in volatility correlations. The financial institution believes that if the price of Bitcoin decreases or increases, there could be spillovers of risk sentiment.

The financial institution suggests that these spillovers are already happening in Asia. Therefore, authorities in the region have been working on implementing a regulatory framework to allegedly mitigate risk.

The financial institution failed to mention that Bitcoin has been showing a positive correlation with the performance of major equities indexes across the world, the phenomenon is not limited to Asia. As seen below, the price of BTC has been moving in tandem with the Nasdaq 100 since the start of 2022.

The positive correlation has been attributed to current macroeconomic conditions. These indexes often move-in tandem with macroeconomic events, such as the one the market has experienced since 2020.

Therefore, the positive correlation between Bitcoin and Asia equities could also be attributed to the cryptocurrency reaching high adoption levels rather than a tale sign of potential financial risk.

Read this article:
Why Bitcoin And Ethereum Saw A Spike In Correlation With Asian Equities - NewsBTC

Bitcoin (BTC) recovered modestly on Aug. 20 but remained on course to log its worst weekly performance in the last two months.

On the daily chart, BTC's price climbed 2.58% to $21,372 per token but was still down by nearly 14.5% week-to-date, its worst weekly returns since mid August. Nonetheless, some on-chain indicators suggest that Bitcoin's correction phase could be coming to an end.

That includes Hash Ribbons, a metric that tracks Bitcoin's hash rate to determine whether miners are in accumulation or capitulation mode. As of Aug. 20, the metric is showing that the miners' capitulation is over for the first time since August 2021, which could result in the price momentum switching from negative to positive.

Nonetheless, Bitcoin has been unable to shrug off a flurry of prevailing negative indicators, ranging from negative technical setups to its continued exposure to macro risks. Therefore, despite optimistic on-chain metrics, a bearish continuation cannot be ruled out.

Here are three reasons why Bitcoin's market bottom may not be in yet.

Bitcoin's price decline this week has triggered a rising wedgebreakdown, suggesting more losses for the crypto in the coming weeks.

Rising wedges are bearish reversal patterns that form after the price rises inside a contracting, ascending channel but resolve after the price breaks out of it to the downside, which could result in a drop to as low as the maximum wedge's height.

Applying the technical principles on the BTC chart above presents $17,600 as the rising wedge breakdown target. In other words, the Bitcoin price could fall by approximately 25% by September.

Bitcoin had surged by approximately 45% during its rising wedge formation, after bottoming out locally at around $17,500 in June.

Interestingly, the period of Bitcoin's upside moves coincided with investors' growing expectations that inflation has peakedand that the Federal Reserve would start cutting interest rates as soon as March 2023.

The expectations emerged from the Fed Chairman Jerome Powell's FOMC statement from July 27.

Powell:

Nonetheless, the most recent Fed dot plot shows that most officials anticipate the rates to reach 3.75% by the end of 2023 before sliding back down to 3.4% in 2024. Therefore, the prospects of rate cuts remain speculative.

St Louis Fed president James Bullard also noted that he wouldsupport a third consecutive 75 basis point raise at the central banks policy meeting in September. The statement falls in line with the Fed's commitment to bring inflation down to 2% from its current 8.5% level.

Related:Options data shows Bitcoins short-term uptrend is at risk if BTC falls below $23K

In other words, Bitcoin and other risk-on assets, whichfell into a bear market territory when the Fed began an aggressive tightening cycle in March, should remain under pressure for the next few years.

The ongoing Bitcoin price recovery risks turning into a false bullish signal given the asset's similar rebounds during previous bear markets.

BTC's price rebounded by nearly 100%from around $6,000 to over $11,500during the 2018 bear market cycle, only to wipe-off the gains entirely and drop toward $3,200. Notably, similar rebounds and corrections also took place in 2019 and 2022.

The views and opinions expressed here are solely those of the author and do not necessarily reflect the views of Cointelegraph.com. Every investment and trading move involves risk, you should conduct your own research when making a decision.

Read this article:
3 reasons why the Bitcoin price bottom is not in - Cointelegraph

Bitcoin (BTC 0.18%), the world's oldest and most valuable cryptocurrency, no doubt has the potential to change how people digitally store and exchange wealth. While it's still a long way from achieving any meaningful adoption due to its volatility and lack of scalability, it has produced a stellar return of 450% over the past five years, trouncing the S&P 500.

Despite all of its attractive characteristics, however, Bitcoin doesn't allow for staking, which could turn away income seekers. But even without this feature, I think the top crypto is still worth buying today.

Many crypto followers believe that Bitcoin's consensus mechanism, or the way the network validates and adds transactions to the blockchain, is problematic. Known as a proof-of-work (PoW) system, it requires a large amount of electricity and computational power to solve complex math puzzles in order to confirm new transactions. Detractors argue that it's slow and energy-intensive.

Contrast this with a proof-of-stake (PoS) model, which lets token owners lock up (or stake) their holdings to earn yields while simultaneously securing the network by validating new transactions. Supporters of PoS argue that it's cheaper, faster, and allows crypto networks to scale better, not to mention far more environmentally friendly because it doesn't require so much electricity.

Staking is a good way to earn passive income on crypto holdings, especially if the intention is not to trade frequently. But there are risks. The particular blockchain's native cryptocurrency could drop in value, and it could be some time before the tokens could be unstaked and eventually sold.

What's more, because there are no laws protecting investor interests in cryptocurrencies like there are in other financial markets, stakers are vulnerable to losing their entire balances for whatever reason. Even with these risks in mind, staking could be appealing to dividend-focused investors.

Ethereum (CRYPTO: ETH), the second-most-valuable digital asset, with a market cap of $230 billion as of this writing, is transitioning to a PoS system known as The Merge. And right now, holders of its native ETH on Coinbase's exchange can stake their tokens until a to-be-determined date, earning an annual yield of 3.25%. With the 10-year Treasury note at 2.8% right now, this might not be an adequate return for some, especially when considering the risks.

Nonetheless, in addition to other blockchain networks like Cardano, Polkadot, and Solana, fans of staking are probably encouraged that a top crypto like Ethereum now has this feature, too.

Because Bitcoin operates on a PoW consensus model, it doesn't offer staking rewards. But that doesn't mean investors should completely write it off when allocating portfolio cash to crypto. Bitcoin has its own investment merits that warrant serious consideration.

For starters, it can be viewed as a digital store of value. Some might immediately argue that an asset as volatile as Bitcoin can't be a true store of value, but this is a shortsighted response. When it comes to protecting (and actually increasing) purchasing power, Bitcoin's performance speaks for itself, as its returns have crushed gold over the past decade. Additionally, Bitcoin is more divisible, portable, and easier to transact with than gold is.

And Bitcoin has potential to be a medium of exchange, especially in poorer countries with weak financial infrastructure and inflationary currencies, but only if two things are improved. To upgrade scalability, a layer-2 solution that runs on top of the Bitcoin network, known as the Lightning Network, is being developed to significantly speed up transactions and lower fees. And the hope is that over time, as its price continues rising and more individuals and institutions own it, Bitcoin will exhibit diminishing volatility. An improvement with these two factors would be beneficial for Bitcoin's utility.

Right now, however, Bitcoin can process only roughly five transactions per second, which seriously limits its ability to reach greater adoption. And even worse, the previously mentioned volatility can be a detriment for someone holding Bitcoin for near-term spending needs.

For investors interested in putting some money to work in the crypto market, Bitcoin is probably the safest bet, even without allowing staking. It's the oldest, most reliable, and most durable cryptocurrency, and the financial upside is still absolutely massive.

Neil Patel has positions in Bitcoin, Coinbase Global, Inc., and Ethereum. The Motley Fool has positions in and recommends Bitcoin, Coinbase Global, Inc., Ethereum, and Solana. The Motley Fool has a disclosure policy.

Original post:
Bitcoin Doesn't Allow Staking. Is It Still a Buy? - The Motley Fool