Welcome back to the tenth edition of ‘The Digital Asset Digest’. In the last edition, we reported on a welcomed recovery in the crypto market. This week, we saw some resistance in the market once bitcoin attempted to cross the notorious $10,000 marker.
On top of the crypto volatility, equities continued to bounce out of the corona bubble, a welcome sign as the rest of society slowly and carefully starts to re-open.
For more market updates and technical analysis, keep reading.
We hope you enjoy this week’s edition of ‘The Digital Asset Digest’!
Digital Assets – Bitcoin closed at $9,692 Monday morning, more or less unmoved from last week on light news flow. The cryptocurrency saw a surge on Monday at around 7 pm ET, crossing the $10,000 mark for the first time since mid-February, although gains were short-lived as Bitcoin faced a massive sell-off the next morning. Ether beat Bitcoin, up 1.8% for the week, while XRP closed down 1.4%.
Indices – Global equity markets had a phenomenal week last week, with the S&P 500 up 5.9% and the S&P/TSX Composite up 4.8% for the week by Monday close. Energy stocks were in the spotlight, as the rally in oil futures boosted O&G names across the board. Airlines were also in focus as improved traveller throughput data from the TSA and American Airlines announcement that it would return to 55% of its domestic schedule drove returns.
Commodities – WTI July futures rose 11.6% for the week as increased optimism surrounding the economy’s trek to normal propped returns. Brent August futures rose slightly behind, at 10.4%. The big story in the space was OPEC’s Saturday virtual meeting, where allied nations agreed to extend the production cut until July. China also announced that oil demand in the nation had risen to 90% of pre-COVID levels, improving sentiment for energy traders.
“As the tension between the U.S. and China eases and the hefty fee is reduced, the U.S. housing market is likely to see increasing demand from foreign buyers like other international markets. A surge in appetite for American properties from investors in China would also mean that the Asian economy is strengthening. Such a trend is likely to fuel a rally for gold and Bitcoin, which are increasingly being perceived as stable stores of value and a hedge against inflation.”
“Bitcoin has just got easier to mine. At block height 633,024, reached on 12:30 UTC Thursday, the Bitcoin blockchain adjusted its mining difficulty to 13.7 Trillion with a 9.29% drop and reached the lowest level since January this year. According to data compiled by CoinDesk Research, today saw the eighth largest negative difficulty adjustment in Bitcoin’s history and the eighth instance of two or more consecutive negative adjustments. The Thursday adjustment also follows a 6% drop recorded on May 20, which was the network’s first difficulty change after Bitcoin’s quadrennial halving event.”
“Bitcoin (BTC) miners are setting up a bullish trend despite large sell-offs around the halving, a new data metric suggests. According to Glassnode’s Miner Outflow Multiple (MOM), outflows from mining pools compared to their one-year moving average are nearing all-time lows. MOM calculates coins leaving mining pools and compares them to the yearly moving average as a ratio. As of June 3, that ratio was 0.534 — less than half its value one day before the halving on May 10. By comparison, December 2018 saw mass upheaval due to BTC/USD hitting $3,100. This produced a ratio of around 0.28.”
“In early 2020, researchers predicted the cost to mine Bitcoin will be at around $12,000 to $15,000 after the block reward halving in May. But, it is now much cheaper to mine BTC than the initial estimates. The low breakeven price to mine Bitcoin may leave it vulnerable to a correction. Bitcoin has become more affordable to mine in recent weeks due to two main factors: difficulty adjustments and cheaper electricity in Sichuan, China due to the rainy season. A low breakeven price of Bitcoin can raise the probability of a price pullback because miners have more incentive to sell BTC, which may increase selling pressure in the short-term.”
PIVX is a Proof of Stake coin launched in January 2016 as a code fork from DASH. PIVX describes itself as the “fastest and lowest cost privacy-focused digital currency” and aims to be one of the world’s leading digital currencies in both adoption and technological advancement. The organization argues that PoW protocols are fundamentally defective given their scalability issues and defends PoS as the way forward for cryptocurrencies. Two features power PIVX: 1) The Zerocoin protocol and 2) SwiftX technology. The Zerocoin protocol guarantees total anonymity to its users through a built-in coin mixing service using zero knowledge proofs. This allows users to remain private while transacting with the coin, unlike larger projects like Bitcoin. SwiftX drives PIVX’s transaction speed, as each transaction is guaranteed by the network of masternodes. Instead of waiting for multiple confirmations to verify the validity of a transaction, SwiftX allows PIVX to verify transactions securely in seconds, contrasting heavily with other projects in the space.
PIVX is primarily community driven, although the project was founded by James Burden back in 2015. Burden began focusing his attention on a new project called VEIL in 2018 and officially stepped down from his position at PIVX in 2019. Today, PIVX trades for $0.42 at a market cap of $23.6 million.
Cryptocurrency Weekly Performance
Indices & Commodities
“It takes approximately the same amount of energy to mine a dollar’s worth of cryptocurrency as it does to mine a dollar’s worth of certain metals. Cryptocurrencies such as Bitcoin have raised environmental concerns because ‘mining’ virtual coins requires energy-intensive computer calculations. But quantifying the environmental impact of cryptocurrency production is difficult. Independent researchers Max Krause and Thabet Tolaymat calculated that it takes about 17 megajoules of computer power to generate US$1 in Bitcoin, even when the energy used for peripheral activities, such as cooling computers, is not factored in. By comparison, it takes 5 megajoules to mine US$1 in gold and 7 megajoules to mine an equivalent value of platinum.”
Technical Review – Resistance in the Market
We continue to be bullish on Bitcoin this week. During last week’s Digital Asset Digest, we argued that Bitcoin’s momentum was likely to continue and that closing above $10,000 would confirm our thesis. While we were correct directionally (Bitcoin closed up for the week), we were wrong to assume that we would see a breakout once Bitcoin crossed resistance. Two points support our bullish sentiment this week: 1) Bitcoin continues to trend higher and resistance at $10,000 has been clearly established and 2) the 21-day EMA has historically acted as dynamic support/resistance. We believe that if Bitcoin can successfully break out of consolidation, we will see momentum drive returns over the weeks ahead.
It’s troubling to see bitcoin face so much resistance at the $10,000 level. However, crypto and equities markets alike, have rebounded admirably. Rumours that some summer sun has shifted the consumer sentiment is one of the many catalysts behind this rebound. However If this is true, we encourage readers to look at the markets with some skepticism. As fear of a second COVID-19 outbreak would erase any of the improvements made in consumer sentiment.