Tether float flashes positive signs for Bitcoin. Square buys Bitcoin. Heated emotions around DeFi camps. Click here for the video edition.
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The Bitcoin Economic Calendar:
Week of Monday October 12th to Sunday October 18th.
Bitcoin: Bitcoin had a great week blasting through $11k and closing the week at $11,374 up 6.59% on very strong momentum. Last week worldwide markets got off to a strong start on Monday after president Trump's health appeared to have improved and he was released from the Walter Reed Medical Hospital on Monday afternoon. After a knee-jerk reaction down on Tuesday it was off to the races on Wednesday again. The big news for Bitcoin came on Thursday when Square Cash, Jack Dorsey's company, announced that it had purchased $50 million worth of Bitcoin. We'll be covering this in detail in this week's market trends section. Alongside a very important chart - the historical relationship between the market capitalization of Tether vs. Bitcoin price.
S&P 500: Equity markets worldwide had a strong week on the back of the U.S. president's health and what this may mean for world economies. After coming out of the hospital, Mr. Trump renewed a push for a new USD $1.8 Trillion stimulus package which has sent the markets roaring. There seems to be a clear stance to keep economies open and provide any and all economic stimuli that might be necessary. As for what can move the markets this week - Its banks earnings week, we'll cover this on our "what's ahead" section.
Gold & DeFi: Gold behaved as expected after a strong week in the equity markets and talks of a fresh stimulus package out of the U.S.. It closed the week 1.62% higher at $1,929.40.
The DeFi index did make new lows this week but it bounced back to close the week slightly higher up 1.81%. There seems to be a clear change in the tides on DeFi and drama continues to unfold. It has recently come to light that professional trading groups like FTX have taken short positions on tokens with vibrant DeFi communities like YFI. The fact that these professional trading firms see blood in the water means that the downward pressure may continue. People may have realized that there is no real point to owning some of these tokens other than "new money coming in". The new money has stopped flowing in and now the questions and losses are starting to mount. We expect to see continued pressure on the sector as a whole.
What’s ahead for the week:
It's banks earnings week, and although attention has been focused on the tech sector, it is very possible that banks post impressive numbers given all of the stimulus that was distributed. Positive earnings and outlooks could continue pushing the market higher. We're also going to be paying attention at the performance of Silvergate, a popular crypto-friendly bank, as well as general guidance from the major banks as we head to a prolonged low-rate environment. As always, we will share any relevant information throughout the week through our twitter account @hodlwithLedn.
Corporate Balance Sheets and Tether Market Capitalization:
The news that Square was purchasing $50 M worth of Bitcoin was consistent with what we had been expecting. As we mentioned on September 21st, we did not believe MicroStrategy would be the last company to add Bitcoin to its balance sheet - and that it may not just be retail buying the next dip. Further, on last week's BEC we highlighted how Bitcoin had held up better than in prior cycles.
We expect for this Corporate Balance Sheet trend to continue. Looking deeper into Michael Saylor's comments - he mentioned that similar companies would take about 6-12 months to execute a purchase. This leads us to believe that Square was working on this purchase well before the MicroStrategy announcement. There may be a few more companies that have similar announcements under their cards and if Bitcoin continues to show positive price action, validating the actions of these corporate boards, we expect a real trend to emerge in around Q1-Q2 next year.
Additionally, if these companies' decisions are validated by the equity markets, the level of Corporate Balance Sheet FOMO might push bitcoin into other balance sheets such as pensions, insurance companies, and eventually, governments. Likely a small country with either a very strong or very weak democracy will lead the way as it will see opportunity to not just holding it, but building bitcoin-friendly regulation.
Now, we also saw the tether market capitalization explode as of early September and it has not stopped since. While historically this had gone almost directly into Bitcoin as evidenced by the chart, there seems to be a lagging factor as of recently. This may reflect Tether going into other asset classes or simply investors seeing value in maintaining a crypto-dollar format. While we do expect this to benefit Bitcoin's price in the long term - it is also very likely that crypto-dollars start remaining in that format for convenience as it represents a significant evolution over the the legacy financial system.
Lastly, not has much changed on the difficulty front - still at 19.28 TH and due to adjust approximately Friday evening. It's currently signalling for a small adjustment down at 19.15 TH.
Last Week’s Content:
[Last Week’s Issue] Last Week’s Economic Calendar - Click here
Bitcoin Hashrate and Network Difficulty:
Current Difficulty: 19.28 TH
Estimated Next Adjustment: 19.16 TH -0.76%
Time to next Difficulty Update: 5 days (Friday October 16th, 2020)
Difficulty All-time-high: 19.31 TH
Canadian Central Banking Updates:
Current Target Interest Rate: 0.00 - 0.25%
Current Overnight Money Market Rate: 0.23%
U.S. Central Banking Updates:
Current Fed Interest Target Rate: 0.00 - 0.25%
Current Effective Federal Funds Rate: 0.09%
JP Morgan, Citibank, Charles Schwab report before the bell
Bank of America, Goldman Sachs, Wells Fargo report before the bell
Signature bank and Morgan Stanley report before the bell