The joint report is among the most promising CBDC studies conducted by central bank authorities
Central banks from two of the most powerful economies in the Middle East released a report today on a yearlong joint central bank digital currency (CBDC) project — and results speak glowingly of blockchain technology.
First announced in January of 2019, Project Aber was a joint effort between the United Arab Emirates and Saudi Arabia to establish a “proof of concept” designed to “contribute in the body of knowledge in CBDC and DLT technologies.”
The combined effort of two central banks in such a study is among the first of its kind. To this end, the report notes that the choice of name in “Aber” spoke to the core mission of the project:
“The name Aber was selected because, as the Arabic word, for “crossing boundaries”, it both captures the cross-border nature of the project as well as our hope that it would also cross boundaries in terms of the use of the technology.”
Broken into three distinct phases that progressively expanded the scope of the trial to six different commercial banks, the report notes that the project used a digital currency backed with real money in order to force “greater consideration” of issues surrounding security and existing payment systems.
The report concludes that a dual-issued CBDC was “not only technically viable” for cross border payments, but that CBDCs present “significant improvement over centralized payment systems in terms of architectural resilience.”
Ultimately, the Project Aber cleared all hurdles: “The key requirements [...] were all met, including complex requirements around privacy and decentralization, as well as requirements related to mitigating economics risks, such as central bank visibility of money supply and traceability of issued currency.”
The report recommends a number of next steps for research and policy, including adopting DLT to improve the security of existing systems, “offering a DLT-based payments rails,” and expanding the scope of future Project Aber trials to include more geographically dispersed partners as well as the settlement of other assets, such as bonds.
Bitcoin might see a spike in volatility when the new weekly and monthly candles open, especially after a large short-term correction.
The price of Bitcoin (BTC) faces two crucial events on Dec. 1 right after the weekly and monthly candles close. The upcoming weekly candle close is particularly noteworthy because it could mark the first red weekly candle since late September.
The monthly candle will be significant since it would mark the highest close in Bitcoin’s history if the price remains over $13,791.
Bitcoin realized volatility. Source: Cointelegraph Markets, Digital Assets Data
There are three key factors that could cause the volatility of Bitcoin to spike upon the weekly and monthly candle close. The factors are general uncertainty around the BTC price, record-high futures trading activity and open interest, as well as the overextended weekly chart.
Meanwhile, traders have turned cautious anticipating a pullback in the near term despite the rebound in price from around $16,500 on Nov. 28.
There are two key trends that could be fueling the recovery of BTC. First, Guggenheim Investments, a global asset management firm with over $233 billion in assets under management, secured the right to invest $500 million in the Grayscale Bitcoin Trust.
In the U.S., where a Bitcoin exchange-traded fund (ETF) does not exist, the Grayscale Bitcoin Trust is the first point of entry for most institutional investors. Deribit reported that the news triggered significant buying activity in the options market. The firm said:
“Reports of Behemoth Guggenheim Macro Opps fund seeking to designate $500mn, promulgated over the weekend, caught shorts +TA pullback allocators by surprise as BTC bounced 2k from lows. The quiet wknd options market was ignited. Dec Calls bought, funded by Puts; hedges unwound.”
Second, high-net-worth investors and whales might be buying the dip in anticipation of Monday. In recent weeks, as quantitative traders pointed out, most of the buyer demand came from the U.S.
Some speculate that the demand is coming from Time-weighted Average Price (TWAP) algorithms, typically used by institutions and funds. Since TWAP algorithms would get activated again on Monday, this could add to the buyer demand for BTC.
Traders are generally uncertain about BTC price direction
There is a high degree of uncertainty in the cryptocurrency market at the moment as traders are divided on where the price will go next.
Some are confident that BTC likely bottomed during the weekend due to market trends. For instance, Avi Felman, the head of trading at BlockTower, said that on Coinbase the recent pullback caused BTC to transfer to stronger hands.
Sell-offs during a bull market can become overextended, especially because traders often look for reasons to sell. As such, overleveraged buyers get caught at local tops, leading to cascading liquidations. But BTC frequently tends to recover right when traders expect more downside and market sentiment reaches a low point. Felman explained:
“Decent and extended Coinbase selling at the local bottom for the first time this rally suggests to me that retail is slowly picking up. Fairly obvious transfer from weak hands to strong hands over the last 48 hrs. Pullbacks in bull markets always hand you a silver platter of reasons to sell.”
Additionally, various technical indicators signal that Bitcoin is neither overbought nor oversold across lower timeframes.
On the daily chart, as an example, the Relative Strength Index (RSI) of BTC is at around 55. An asset is considered oversold on the RSI indicator if it drops below 35. Hence, Bitcoin is in an awkward position because high time frame charts, like the weekly chart, remain overbought.
This has led traders to predict a potential correction to the $13,000 to $14,000 support range could soon occur. This high level of uncertainty in the market could cause volatility to increase as the new weekly and monthly candles open.
The open interest across futures exchanges would likely increase again, raising the probability of big price movements.
Whales becoming more active in BTC futures
Throughout the rally of Bitcoin in recent weeks, the trading activity on major BTC futures exchanges has continuously increased. Despite the recent drop, the open interest on top futures trading platforms remains above $1 billion. When the open interest is high, the likelihood of a short or long squeeze increases, which may result in large spikes in volatility.
Bitcoin futures volumes. Source: Cointelegraph Markets, Digital Assets Data
The Chicago Mercantile Exchange (CME), in particular, has seen a noticeable increase in Bitcoin futures trading activity. Interestingly, Arcane Research reported that large traders who hold a minimum position of over 25 BTC more than doubled on the CME in 2020.
The researchers at Arcane explained that this trend shows increased institutional demand for Bitcoin. The heightened trading activity on CME, which tailors to accredited and institutional investors, can cause short-term volatility to increase due to the large sizes of trades. The researchers said:
“Large traders hold at least 5 futures contracts, equaling a minimum of 25 BTC (5 BTC per contract). The average in 2019 was 45 large traders without any notable growth throughout the year. However, this number has more doubled in 2020 and we saw a new record of 102 large traders two weeks ago. This is perhaps one of the best indications of increased institutional demand for bitcoin exposure and we already know that investors like Paul Tudor Jones is a part of this growing group on CME, currently the second largest futures market for bitcoin.”
Although the institutional demand for Bitcoin has been rising, the futures market remains a major factor driving volatility.
Cointelegraph reported earlier this week that when BTC fell from $19,400 to $16,200 largely due to cascading liquidations, over $400 million worth of futures contracts were wiped out on Binance Futures alone.
New weekly candle is a big variable
Bitcoin will see a new weekly candle emerge in the next 48 hours, but the variable remains the overbought nature on the weekly time frame.
The RSI of the weekly chart is at 88, and when the RSI of an asset surpasses 75, it is considered overbought. The weekly candle is also significantly above short-term moving averages (MAs), namely the 5-day, 10-day and 20-day MAs.
Traders have been anticipating a correction because the weekly chart is overextended. It would make a more sustainable rally if BTC consolidates above short-term MAs, as it would give time for the derivatives market and spot buyer demand to catch up.
Furthermore, the monthly candle chart of Bitcoin is even more overextended than the weekly chart. The 5-day, 10-day and 20-day MAs are at $13,129, $10,778, and $9,685, respectively, and significantly below the current market price.
But whether technicals alone would cause BTC to correct in the foreseeable future remains uncertain. If institutional buyers, like Guggenheim, continue to make headlines by entering the Bitcoin market, it could attract additional buyers and retail interest in the near term.
Historical Bitcoin volatility. Source: Highcharts
To boot, December has historically been highly volatile for the price of Bitcoin. Though December 2019 recorded a relatively low level of volatility, the end of 2017 and 2018 saw wild price swings including the all-time high BTC price of nearly $20,000 and the bear market bottom, respectively.
If a similar pattern emerges, BTC price could see a spike in volatility as it heads towards the end of the year.
from Cointelegraph.com News https://ift.tt/3mjLtxX
The price of Bitcoin reclaimed $18,000 but traders remain cautious of a weekend bull trap.
The price of Bitcoin (BTC) surged above $18,000 on Nov. 29, reaching as high as $18,209 on Binance. However, traders are turning cautious despite BTC’s weekend rally.
Bitcoin currently faces resistance at around $18,200, which is also the 10-day moving average (MA) on the daily chart. As Cointelegraph reported yesterday, some traders still anticipate BTC to see another drop in the near term before the rally can continue.
A pseudonymous trader known as “Crypto Capo” predicted Bitcoin would see a relief rally to $18,000 as it dropped to the $16,000 region.
On Nov. 27, when the price of Bitcoin was still hovering at around $16,700, the trader said he is ready to short $18,000.
He added that he is now starting to hedge at $18,100 with plans to cut the hedge if the trend reverses. In the near term, the trader noted that the first confirmation of a correction would be a drop to $17,400. He said:
“Starting to build a hedge position. I don't want to sell some alts bags because the entry was very good, so hedge is a better option here. Invalidation for the hedge is clear.”
If Bitcoin continues to drop below $17,400 and eventually $16,800, the trader said a drop to the $14,000 region would become likely.
But, if Bitcoin rises above $18,400 and consolidates at around $18,200, that would invalidate the bearish structure. Crypto Capo also noted that consolidation above $19,000 would completely invalidate the bearish setup.
Potential Bitcoin bearish and bullish scenarios. Source: Crypto Capo
Another pseudonymous trader known as “Loma,” who discussed a bullish structure for Bitcoin at $17,500, said he has cut half of his long position.
The trader emphasized that BTC is nearing resistance as it looks to close its weekly and monthly candles. Considering that the $18,200-$18,400 area remains a resistance range, the trader said:
“Closed half of long at $18,080~ Not looking to be too overexposed into resistance coming into the weekly m/monthly closes. Lots of buying opportunities if we do break $18.4~ Not a lot of selling opportunities if we don’t.”
There is a counter bullish scenario for BTC
A technical analyst called “CryptoBirb” said that Bitcoin typically faces two types of correction: 15% and 30%.
The analyst said that he expects a pullback to $14,000, but also noted that this is not guaranteed. He pinpointed various technical indicators, including BTC being in oversold territory for the first time since the rally began. He wrote:
“There are two major $BTC correction types: -15% & -30% declines. While anticipating~14k region, I noticed it's the first return to the mean and first oversold bullish momentum cross since the rally started - VERY strong signal. Wouldn't mind ATH before Christmas. Who's with me.”
The bullish scenario for Bitcoin would still require BTC reclaiming $18,400 and consolidating above it to confirm the new support levels.
Popular trader filbfilb, meanwhile, said that he is currently in cash as market uncertainty is calling for increased risk management.
"In the event of a breakdown below $15K and a flip of previous support into resistance, that may present a straightforward short opportunity," he wrote on Sunday in his weekly newsletter.
from Cointelegraph.com News https://ift.tt/2Vc5w5x
The sector has a long way to go in terms of accessibility if DeFi really wants to challenge traditional financial institutions.
As the COVID-19 outbreak wreaks havoc on the United States’ economy and abroad, investors grapple with a second economic downturn in just over a decade. While the 2008 financial crisis and the coronavirus pandemic are very different, both events have produced market volatility and allowed for new technologies to emerge.
The economic disruption wrought by the pandemic also highlights the importance of serving people who are currently outside the financial system, both in developing and developed economies. Today, there are 1.7 billion unbanked individuals worldwide, according to the World Bank.
Since the financial downturn, people have begun questioning established companies and traditional systems such as banks. With more than half the world’s population aged under 30 and 55% of the world’s 7.7 billion citizens now online, seeking alternative solutions to the financial structures in place has become much more than a niche. Twelve years after the 2008 financial crisis, people still seem wary of banks. According to a household survey from the Federal Deposit Insurance Corporation, outside of high fees and minimum balances, the unbanked have pointed to a lack of trust and privacy when dealing with banks as reasons for their not owning a checking or savings account. When combined, the lack of trust (16.1%) and lack of privacy (7.1%) account for almost a quarter (23.2%) of the main reasons why unbanked people do not have an account.
The lack of trust for banks created demand for alternative financial services, leading to an increasing quantity of such alternatives where people can put their money. One popular option was technology companies. This idea really took off after the introduction of the iPhone in 2007 and its App Store the following year. Not only did Apple open up opportunities for products and services but it also created a new way to quickly distribute software while keeping the world connected via the internet.
Multiple groundbreaking startups were born from economic downturns. Instagram, WhatsApp, Uber, Airbnb, Twilio, Dropbox and Slack are just a handful of the successful startups founded during the last recession. Not only were multibillion-dollar brands built in the years following, but fintech startups like Kabbage, LearnVest and Betterment started popping up around Silicon Valley and making major inroads toward the digitization of banking. These fintech apps have not only taken out some of the intermediaries but also drastically changed the way people interact with money on a daily basis.
Uncertain times pave the way toward a better world as people look to more reliable alternatives to the financial institutions that have failed them. Just as the 2008 recession forced successful startups out of the rubble, 2020’s COVID-19 pandemic is doing the same. Today, we’re seeing the unemployment rate rise due to COVID-19. This fall, the United States Bureau of Labor Statistics reported that long-term unemployment, or those that have been out of work for 27 weeks or more, jumped to over 2 million — the highest thus far in the coronavirus pandemic-induced recession. Though some people have returned to work, data shows a marked increase in unemployment rates over the past seven months.
With anxiety at an all-time high, both consumers and businesses are looking to banks and credit unions for financial relief, access to government aid, and guidance on how to cope with the ongoing economic storm. However, institutions are failing, and unfortunately, the systems put in place to protect us such as healthcare, testing, protective equipment and supply chains have crumbled from poor leadership and delayed reactions. Just like in 2008, consumers are turning to technology for solutions.
An opportunity for DeFi
This represents a massive opportunity for fintech today, specifically decentralized finance, as it has the ability to provide most of the population access to financial services. As the hot, new cryptocurrency trend of 2020, DeFi cuts down intermediaries such as banks, thereby adding to the speed of transactions. Total value locked on DeFi platforms has risen by approximately $12 billion in the span of one year, according to industry site Defi Pulse. During a time when central banks are slashing interest rates with a benchmark rate sitting close to zero, investors are on the hunt for new returns and are now ready to explore DeFi.
Over the years, raising funding has been challenging for fintech firms, particularly early-stage ventures, as investors typically focus on established startups with clear business models. However, the economic slowdown has significantly changed the narrative around Bitcoin (BTC), DeFi, stablecoins, privacy and more. The value locked into DeFi projects continues to surge, but a milestone less discussed is the industry having crossed $500 million raised in venture capital funding.
According to data collated by CB Insights on the fintech space in the third quarter of 2020, 60% of all capital raised by financial technology startups came from just 25 rounds worth $100 million or more. Adding to the trend of growing venture capital funds, the report noted that fintech investment from $100 million rounds grew 24% compared to Q2, while investment in the space from smaller deals fell 16% over the same timeframe. Overall, fintech deal volume dipped 24% compared to Q3 2019, totaling 451 global deals. However, dollars invested into fintech startups edged up once again to $36.5 billion in Q3 2020, the largest result thus far in 2020 and the second-best, single-quarter result since year-end. Notably, the number of smaller venture rounds — those marked “seed” or “angel” — grew by 20% compared to Q2 2020.
With all eyes on DeFi, it’s time to understand that it’s less about the insane returns offered to yield farmers and more about the democratization of finance. While still in the sector’s early years, DeFi projects are already unpacking inefficiencies in the current system by increasing financial inclusion, increasing liquidity and reducing costs. Since the start of Q3 2020, “deposits by cryptocurrency enthusiasts into DeFi projects have swelled to more than $10 billion from $2 billion.”
Beyond finance, there is a growing interest in DeFi and its potential to improve existing current systems and infrastructures. It’s no longer acceptable for industry players to promote an “incredible tool for inclusion” while no work is being done on the usability front. Despite the sector’s incredible promises, the level of complexity for users is still a major barrier to mass adoption.
The views, thoughts and opinions expressed here are the author’s alone and do not necessarily reflect or represent the views and opinions of Cointelegraph.
Tim Frost is the founder of Yield, a fintech app making DeFi accessible to everyone. Specializing in early-stage blockchain startups, Frost helped accelerate blockchain companies at the likes of QTUM, NEO, Paxful, Polymath, Selfkey and Everex. He was also a founding member of the Wirex, a digital banking platform, and helped grow EQIBank. His expertise in banking, blockchain and technology has played an influential role in helping develop the tools and products for Yield.
from Cointelegraph.com News https://ift.tt/3lfOA8V
The $275 billion company has filed an SEC amendment to allocate over $500 million from the Macro Opportunities fund to Grayscale's GBTC
An SEC filing on Friday indicates that the next Wall Street institution to take a public position in Bitcoin may also be among the largest yet: the $275 billion financial services firm Guggenheim Partners.
The Guggenheim filing allows the Macro Opportunities fund to purchase GBTC, a publicly-traded Bitcoin investment vehicle from Grayscale, at an indeterminate point in the future.
“The Guggenheim Macro Opportunities Fund may seek investment exposure to bitcoin indirectly through investing up to 10% of its net asset value in Grayscale Bitcoin Trust (“GBTC”),” the filing reads.
According to independent ratings firm Morningstar, the Guggenheim Macro Opportunities fund currently has $5.3 billion in assets under management and sports a four-star rating “based on risk-adjusted returns out of 270 Nontraditional Bond funds.”
Guggenheim describes the overall fund strategy for the institutional-grade shares (ticker: GIOIX) as a product of the investment team's “highest-conviction ideas.” If the fund were to take the full 10% stake in GBTC, it would be worth north of $500 million.
The filing also notes a long list of potential investor risks associated with cryptocurrencies, which it refers to as “digital assets designed to act as a medium of exchange.” Risks include lack of cryptocurrency exchange regulation, GBTC’s historical “significant premium” to net asset value, and uncertainty regarding tax laws and regulations, among others.
This rolling snowball of institution interest may quickly become an avalanche, as noted by one prominent voice in crypto journalism:
2016: The institutions are coming!
2017: The institutions are coming!
2018: The institutions are coming!
2019: The institutions are coming!
2020: The institutions are here!
2021: Dammit, the institutions bought all the #Bitcoin
