After a few weeks of tremendous gains across the digital asset sector, the bears have come back to play and we saw some projects come back to earth.
On top of some exciting trends we’ve seen on market fundamentals, there were also a few key pieces of news that drove the changes to digital asset pricing. Its been a busy week in crypto and we have a lot to unpack, so we hope you enjoy this week’s edition of the Digital Asset Digest!
The crypto market had a mixed week last week as momentum from July began to stall. Over the week, Bitcoin was up 5.8% by Monday morning, driven almost entirely by gains on Wednesday. The rally seemed not to extend to other major cryptos, as Ether was mostly unchanged and XRP fell 5.1% over the week.
Equity markets were green across the board. The S&P 500 was up 2.0% for the week, crossing the 3,360 mark, less than 30 points from its historic all-time high. Gains were driven by Energy, while Info Tech returns stalled as Trump chose TikTok as his next target amid the U.S.-China trade conflict.
Silver stole the spotlight this week, as its futures rose 20.0% for the week. Oil was up marginally, with WTI futures ending the week at around $42/bbl. Gold finally crossed the $2,000/oz mark for the first time in history, although analysts contest over whether the momentum will last until the end of the year.
“Bitcoin (BTC) is the most popular cryptocurrency for trading in every region of the world, but North American investors are the cryptocurrency’s biggest fans, a new report says. On Aug. 6, major crypto analytics firm Chainalysis published a report devoted to key trends in the North American crypto market. According to the report, North American investors “disproportionately favor Bitcoin” over other cryptocurrencies like Ether (ETH) or XRP. While Bitcoin is the most traded crypto in the world, North America accounts for 72% of all of the asset’s transaction volume, the report says. In comparison, in regions like Africa and Western Europe, Bitcoin trading activity amounts to 69% and 66%, respectively.”
“Ethereum Classic has suffered its second 51% attack in a week after more than 4,000 blocks were reorganized Thursday morning. Mining pool Ethermine’s parent entity Bitfly and crypto exchange Binance reported the reorganization, announcing all Ethereum Classic payouts, withdrawals and deposits had been suspended due to the attack. The reorganized transaction history is currently the longest chain on the network. However, the majority of Ethereum Classic miners – such as mining pool Ethermine – are continuing to mine on the shorter version of the network. Developers behind Ethereum Classic said in a tweet minutes before Bitfly’s report that exchanges and mining pools are advised to “significantly raise confirmation times on all deposits and incoming transactions” in light of “recent network attacks.””
“Betting against bitcoin has been a losing battle for months with the crypto up more than 200% since its March lows. Benefiting from this rally, moreover, cryptocurrency mining stocks trading on U.S. markets are significantly outperforming the benchmark cryptocurrency. Over the past year, two cryptocurrency mining companies – Riot Blockchain and Marathon Patent Group – have gained 97% and over 128 percent, respectively. Bitcoin is up 3% in the same period. The companies moderately underperformed bitcoin during the Q1 2020, but since mid-April, both took off. The size of both companies mirror the relatively still small size of the crypto space, with neither company reporting a market capitalization above $150 million.”
“In the 13th century, Kublai Khan, the Mongolian emperor who founded China’s Yuan Dynasty, upended monetary convention with a magisterial edict: Accept my money, or die. The threat of execution was not so novel back then, of course. The Khan’s true innovation lay in his refashioning of money itself. The grandson of fearsome Genghis realized he could finance his realm untethered to finite supplies of precious metals… Fast-forward to this century, and China once again is remaking money. Except this time, it is paper currency that’s getting tossed; China is going digital. And while things didn’t end well for the Mongols—they printed themselves into hyperinflation, and lost the throne—China’s current leaders have something far more stable and enduring in mind.”
Cryptocurrency Weekly Performance
Indices & Commodities
“Bitcoin is doing that thing again. After a 50% slump in the cryptocurrency’s price to about $4,000 in mid-March, when Covid-19 panic was gripping the financial markets, it has bounced back to trade at about $11,200. Veteran crypto-watchers have seen this rapid shift from fear to greed many times before, and they know it can have painful consequences. The first time Bitcoin’s price went past five figures, in 2017, it fueled a speculative frenzy that ended almost as soon as it began, leading to an 80% slump over 12 months. And when Bitcoin rose above $10,000 in February this year, any hope for a rally was snuffed out by Covid.”
Source: Trading View
We are bearish on Bitcoin coming into the week. The last time we published a Technical Review, we stated that we were cautiously bullish on Bitcoin and expected the momentum to bring the coin higher. Clearly, this forecast was correct, as the coin temporarily breached (although failed to close above) the $12,000 mark this week. We are now revising to a temporary bearish stance to reflect a short-term pullback we see happening over the next two weeks.
We point to three indicators that support our pullback prediction.
1) RSI is clearly at elevated levels and flutters around the 70 mark. This traditionally signifies overbought conditions and is one of Bitcoin’s most reliable technical indicators.
2) MACD is on track to cross below the zero line, another classic bearish signal that suggests a potential sell-off.
3) Resistance is clearly forming around the 11,900 level. If resistance holds this week, we would consider this a strong confirmation of our thesis.
We continue to be bullish on Bitcoin mid-term and see this as a potential opportunity to jump in at more favourable prices. For now, we are staying put, but we are prepared to allocate back into the coin when conditions look more favourable.
After an eventful two weeks, we are not surprised that technical indicators are pointing to a short-term negative trend. However, we encourage readers to take this as an opportunity to enter the market at more favourable prices. As institutional interest in bitcoin is only continuing, we think taking capital out of the market to realize some small gains would be short-sighted.
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