data taken at 9:16am 24/07/2020
Written by: Yves, Head of Trading at Wirex
The Bitcoin price (BTC/USD) breached the psychological $9500 level on July 22nd , peaking at $9690. It is now back around the $9500 level and holding. The price move started on July 21st after the President of the European Council, Charles Michel, announced that a consensus was reached for a European fund stimulus of 750 billion euros, including 390 billion euros in the form of grants. The new fund comes on top of the fiscal stimulus of 540 billion euros that was voted in April. It could double the European budget for 2021 to help countries cope with the economic crisis.
Like the European Union (EU), Central Banks and governments around the world have been expanding their balance sheets, doing everything they can to support the economy: grants, loans, corporate bonds buybacks, liquidity injections by any means necessary. The Fed’s balance sheet increased by nearly $3 billion since March, exceeding the $7 billion level in June . Despite the evident increase in the Fed’s assets, many, Trump included, are criticizing the Federal Reserve Chairman for not doing nearly enough for Main Street. The Main Street Lending Program is hardly used.
It is fair to say that the FOMC’s balance sheet “normalization program” that started in 2017, ended up in oblivion. And this should be the time for cryptocurrencies, the time for a digital gold asset that would hedge savers against inflation. The creation of Bitcoin after the 2008 crisis was meant to counter the control of money supply by a central authority. 21 million Bitcoins is the hard maximum supply limit that shouldn’t be tampered with. The number doesn’t hold any particular significance. Theoretically, it could be changed. but the level has become almost sacred for the community. Garry Kasparov’s interview this week in Forbes is a reminder of these fundamentals. In his words, “ the good thing about Bitcoin is that you know exactly the number - the magic number of 21 million ”. “ The steady rise in popularity of Bitcoin and other cryptocurrencies and blockchain technology as a concept is inevitable, because it’s a response to the shift of power from individuals to states or other institutions that may act on our privacy without our consent ”. Garry Kasparov’s position on Bitcoin contrasts with the new Russian Digital Financial Assets law voted this week that defines a “digital currency”, requires its registration in “a relevant register kept by the Bank of Russia”, but forbids their usage as a means of payment for goods and services.
The Bitcoin price move on July 21st could be a response to the EU’s new fund stimulus, and would comfort Bitcoin as a hedge against inflation, but this could be also a simple technical move after a low price volatility period. The Bitcoin price increased by nearly 2.8% within six hours.
The price confirmed its short term bullish trend the very next day with an increase of nearly 2% within 2 hours. The move followed the publication by the Office of the Comptroller of the Currency (OCC) of a letter that confirms the ability for US national banks and federal savings associations to provide cryptocurrency custody services to their customers. The statement could explain the positive price movement, although in essence, it merely confirms the role of banks as custodians for any asset of value, whether physical, monetary, and now digital.
The Ether cryptocurrency (ETH) was definitely the star of the show this week with a price increase (ETH/USD) of more than 15% . Ethereum is enjoying its incredible recognition in the Decentralised Finance (DeFi) space. I mentioned previously the spectacular growth of the Compound token (COMP), the DAI token, and the growth of the total value locked in DeFi projects. Since my last article published on June 26th, the total value grew from $1.89 billion to $3.5 billion. What is currently happening for Ethereum with the DeFi trend is very much comparable to the golden days of Initial Coin Offerings (ICO) . The growing interest in Ethereum is impressive. The project seems to be renewed continuously with innovative applications that are leveraging its infrastructure and reaching maturity within a few years. The price of the makerDAO governance token (MKR) jumped by nearly 20% on July 23rd from $495 to $600 when Binance decided to list DAI and MKR, before retreating back progressively to $510.
Last but certainly not least, the exciting partnership between Wirex and Mastercard is a strong fundamental step for the integration of the cryptocurrency economy into Main Street . Both Mastercard and Visa are continuously providing options, opening new opportunities to businesses in the crypto space. They could become for crypto businesses the closest intersection between Main Street and Crypto Street. And your Wirex card is the driving license that lets you ride in both streets.
On the retail side this week (the wirexapp), the numbers show that there are more profit takers. The ratio of BTCs bought over BTCs sold is still positive at 1.12, but down from 1.19 last week. The ETH ratio is particularly low at 0.68. The Stellar Lumens (XLM) interest is neutral with a lower ratio at 1.02 as XLM had a price correction of nearly 8%.
The above is an opinion piece and therefore should not be taken as financial advice. Please do your own research thoroughly when looking at Cryptocurrency.