This week on Planet Bitcoin - 7 July 2016

Friday 08 July 2016

TL;DR - big developments in bitcoin and global affairs have brought volatility

The bitcoin market has faltered, with traders evidently unimpressed at its performance ahead of the halving on Saturday. For most of the week BTC has oscillated around $670 - pushing over $700 at one point, if only briefly.

Chart

The promising-looking rise proved unsustainable and was followed by a $50 plunge. After recovering back to the $670 level, we then saw another drop back down to the $640 line.

Two days out from the halving it looks like people have panicked, believing we would hit new highs as the drop in supply loomed. It could still happen and may well do over time as the ongoing effects of reduced block rewards kicks in; as things stand, risk-averse traders have booked gains and minimised losses. We’ll see where it leads since it will have cleared plenty of positions out of the order books and paved the way for the next big move.

It’s worth noting that bitcoin is still sitting somewhere near its all-time-high in terms of market cap; back when the price soared over $1,000 supply was much lower and the reduced price offsets the greater number of bitcoins in existence now. Plus, volatility was always going to be an issue at this point. Markets have a way of doing what the majority of people don’t expect. There will be smart traders who have made a lot of money in the recent fluctuations.

On the global stage, there’s a lot going on. The Yuan is looking like a poor prospect, likely bringing renewed Chinese interest in bitcoin as a safe haven or exit route from CNY despite capital controls. Brexit is starting to bite, with Sterling dipping below $1.30 for the first time in 30 years. Some of the more conservative analysts think $1.20 is a possibility in the near future; the more bearish put it at parity or even below. The stock markets have rallied after Bank of England governor Mark Carney put lower interest rates and more QE back on the table - though of course, this has hit the pound. There is concern around the state of UK-based property funds as the sector grinds to a halt.

The Economist paints the following bleak picture, highlighting the plight of Italy’s banks as the next financial crisis waiting to happen in the Eurozone. 

INVESTORS around the world are extraordinarily nervous. Yields on ten-year Treasuries fell to their lowest-ever level this week; buyers of 50-year Swiss government bonds are prepared to accept a negative yield. Some of the disquiet stems from Britain’s decision to hurl itself into the unknown. The pound, which hit a 31-year low against the dollar on July 6th, has yet to find a floor; several British commercial-property funds have suspended redemptions as the value of their assets tumbles. But the Brexit vote does not explain all the current unease. Another, potentially more dangerous, financial menace looms on the other side of the Channel—as Italy’s wobbly lenders teeter on the brink of a banking crisis.

It’s not a pretty picture, but forewarned is forearmed. Crypto has never been more relevant.


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