Last Week Today: Bitcoin & Cryptocurrency Weekly Digest July 1-8

  • Study finds United States leads the world in volume of Bitcoin tweets, with Peru the most positive
  • Nobel Laureate shows poor understanding of cryptocurrencies, calls for them to be shut down
  • Regulatory pushbacks against Facebook’s Libra continue, panic and uncertainty abound
  • Is Bitcoin’s current bullish trend driven by manipulation or real demand?

More people are talking about Libra than Bitcoin on Twitter, but negatively

On July 3rd, social market sentiment analytics platform, TIE, published its report on geographic breakdown of cryptocurrency discussions on twitter. The report revealed some pretty interesting, perhaps even surprising snippets.

According to the study, the US and the UK together account for 49.4% of recent tweets regarding Bitcoin, with 38.9% coming from the US and 10.5% from the UK. Outside of the top two, Canada, Turkey, India and Australia are the next most popular sources of Bitcoin tweets.

With regards to sentiment, which qualified tweets as being either positive or negative, among countries with at least 0.5% of the total volume of Bitcoin tweets, the most positive Bitcoin tweets emanated from Peru, Malaysia, Indonesia, Vietnam and Italy. Curiously, despite record-setting OTC trading volume, Venezuela has recently seen the highest volume of negative Bitcoin tweets (62%).

The report also compares twitter discussions of Libra vis-a-vis Bitcoin and the results are unsurprising. While Libra had a greater proportion of tweets, which were largely positive in the lead up to its announcement in June, sentiment towards Libra quickly shifted in the aftermath. Only 45.2% of Libra tweets were positive following the much-awaited release of its white paper, compared to 61.5% of Bitcoin tweets in the US and 59.8% of Bitcoin tweets globally being “exceedingly positive.”

Given the volume of trading that takes place in Asian markets, it’s rather surprising to find how much Bitcoin discussion on Twitter is dominated by the US and the UK. But it stands to reason that Asians probably don’t use Twitter as much, and Twitter therefore is not the best barometer for Asian market sentiments as perhaps Sina Weibo which is often dubbed the Chinese Twitter and boasts nearly half a billion active users.

Stiglitz won’t care to learn about Bitcoin, but is apt to vilify it

Another day, another Keynesian crawls out from beneath a rock to pipe up hackneyed, poorly informed put-downs on Bitcoin. The statutory nocoiner idiot of the week is none other than renowned American economist, Nobel Laureate and septuagenarian way past his sell-by date, Joseph Stiglitz.

Like all Keynesians, Stiglitz deems it infra dig to even deign to understand how Bitcoin works, but can’t resist an opportunity to condemn it, “the last thing we need is a new vehicle for nurturing illicit activities and laundering the proceeds, which another cryptocurrency will almost certainly turn out to be,” said Stiglitz in an interview this week, speaking of Facebook’s Libra.

“I actually think we should shut down the cryptocurrencies,” he continued, before sputtering some tired old clichés peddled to vilify cryptocurrencies, such as their use in illegal financial activities, such as money laundering, by moving money off “from a transparent platform into a dark platform.”

“There is no need for anybody to go to a cryptocurrency,” argued Joe, “traditional banking sector has become too transparent to be used for money laundering purposes and other illegal activities. Cryptocurrencies are just a new way for inexperienced investors to lose their money.”

Stiglitz obviously didn’t do his research. A report by the US Department of Treasury last year concluded that the role of Bitcoin and virtual currencies in illicit activities and terrorist funding was negligible compared to traditional financial services. The U.S. dollar continues to remain the most popular currency for illicit commerce and money laundering, totalling more than $2 trillion globally.

Stiglitz’s other concern regarding Bitcoin that it’s not ‘transparent’ only proves that he has never made an effort to understand the workings of the currency. With every single transaction being immutably lodged in the Bitcoin ledger, shared and readily accessed by every single node on the network, a more transparent fool-proof financial system has never existed.

How are Japan, China, Russia and the EU going to tackle Facebook’s Libra?

Three weeks after Facebook released the white paper for its cryptocurrency, Libra, which was originally dubbed ‘GlobalCoin’, it is looking increasingly likely that Libra isn’t going to be very global at all.

India has already supposedly banned it, and all other virtual currencies. This week, reports from Japan and the EU followed along the lines of the US. The only neutral response, or perhaps even positive in the current scenario, came from Russia.

India’s Economic Affairs Secretary, Subhash Chandra Garg, said this week, “Design of the Facebook currency has not been fully explained. But whatever it is, it would be a private cryptocurrency and that’s not something we have been comfortable with.”

China, another Asian juggernaut, is concerned about the negative impact on its own economy a dollar-dominated basket of currencies backing the Libra would entail, according to the director of the People’s Bank of China (PBOC)’s research bureau, Wang Xin, “If Libra is widely used for payments, cross-border payments in particular, would it be able to function like money and accordingly have a large influence on monetary policy, financial stability and the international monetary system? If so, it would bring a series of economic, financial and even international political consequences.”

On Sunday, European Central Bank (ECB) urged financial regulators to act fast to prepare for the push by US tech giants such as Facebook into the financial system. ECB’s executive board member, Benoit Coeure warned, “It’s out of the question to allow them to develop in a regulatory void for their financial service activities, because it’s just too dangerous. We have to move more quickly than we’ve been able to do up until now.”

A report from Nikkei Asian Review last week claims that Japan, which has been very welcoming of Bitcoin, is not so enthused by Libra. According to the report, the Bank of Japan (BoJ) has concerns that Libra will be tough to regulate, could bring undue risk to the financial system and that Facebook is linking Libra to more than one national currency to avoid strongly focused regulatory control from a single nation’s regulators.

A little respite for Libra this week came from Russia’s deputy finance minister, Alexei Moiseev, who revealed that Russia plans to deal with Libra as it has done every other cryptocurrency, refrain from special action, “No one is going to ban it. The ruble is our national currency, and all calculations must be made in it.”

Kraken CEO vouches for real demand as the driver for Bitcoin bull run, not Tether

Unlike the parabolic run at the end of 2017, which was driven by unprecedented spikes in interest and activity across social media channels and google search trends, the current bullish price run of Bitcoin is not underpinned by a similar surge of mentions, discussions and activities. Price is up, but not much else has dramatically changed from earlier in the year. Except for the volume of Tether being traded, of course.

So given Tether’s murky history and its disproportionate share of trading volume across markets, it would be easy to assume that manipulation is what’s driving this run. Such an assumption may not be as true as it seems obvious, according to Kraken CEO, Jesse Powell.

In an interview with TD Ameritrade Network last Monday, Powell said, “I don’t have inside knowledge of what’s happening at Tether, but I can tell you that, historically, when you’ve seen growth in the supply of Tether, we’ve seen growth in the supply of U.S. dollars coming onto Kraken. And other exchanges would report the same. Recently, we’ve had massive inflows of fiat currency, so I believe the Tether prints are a result of new fiat coming in.”

Despite sustained positive price action, the difference from 2017 is that this would not be the first time most retailers will have heard about Bitcoin, which explains the lack of interest surge on social media and search trends. Perhaps the real demand this time isn’t coming in the form of retail interest but is taking the shape of hedge funds and investment banks. Bitcoin, having the rare property of being a non-correlative, asymmetric payoff asset, presents a legitimate proposition for the typically diverse institutional portfolios looking for hedge options with a potential economic crisis looming. The theory is further underpinned by the recent surge in gold price, which hit a six-year high last month.

Trading Insights

On the face of it, the end of June and the early part of the first week of July saw bearish sentiments re-emerge as Bitcoin erased over 30% from its 18-month high of $13880 USD on June 26 to trade at $9614 USD on July 2.

But in the bigger picture, this was only a necessary correction representing a spell of profit-taking and redistribution of coins. Bitcoin closed the month of June at $10760 USD, recording the 2nd highest monthly close in Bitcoin’s history – after December 2017. Interesting to note is that June’s high of $13880 USD is also the highest monthly close ever, perhaps justifying the resistance at this level.

Monday’s trading saw a breakout from an inverse head and shoulders pattern in the 4-hr chart, followed by a retest of resistance for support. The next price target from this breakout is $14889 USD.

Momentum from reaction to the breakout in Asian markets will determine how soon the target is realised.

On a slightly bearish note, the daily chart is shaping up for a potential double-top formation. A strong daily close above $12927 USD would invalidate this pattern.

With Bitcoin’s market dominance at a 26-month high of 65%, altcoins across the board continue their odyssey to obscurity, trading at all-time low satoshi valuations. At the time of writing, Ethereum is trading at a 28-month low of 0.0239 BTC, showing few signs of recovery.

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Lamps Toujours
Lamps is a British economist and Bitcoin evangelist with an elusive ken for all things blockchain. A writer by avocation, Lamps' suasive opinions and analyses evince a quenchless passion to promote the integration of blockchain as the new economic and commercial infrastructure on a global scale.

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