Articles

Bitcoin to Face a Downward Break | Crypto Markets

October 2, 2019


Hi, everyone. Today we have our traditional
crypto markets with Mati Greenspan. I hope
you missed Mati as we did. How was your vacation,
Mati?
Oh, it’s fantastic. Thanks a lot.
Great. So, before we start, let me remind
you that on Friday we announced the competition.
We asked you to guess the Bitcoin’s price
today at 7:00 a.m. Eastern Time. And we have
a winner. So the Bitcoin’s price at 7 a.m.
on Coin360.com was $10,256 and the user with
a nickname Big On Crypto guessed it would
be $10,254.01. So please contact us by email
in about section to claim your prize, which
is $50 credit on Cointelegraph merch store.
Good job, Big On Crypto, you are really big
on crypto.
Mati, Bitcoin has been stuck in the mid low
$10,000 range for about a week. Can you give
us an overview of the current market situation?
Is it still possible to see an ascending pattern?
So the pattern that I pointed out on Twitter
this morning is actually, unfortunately, a
descending pattern. We can see that huge rally
up from the beginning of the year and it has
stalled, as you mentioned. Right now, we have
support just below $9,500. And the resistance
here is actually going down. We can see that
the highs are getting lower. This is a descending
triangle formation in technical analysis.
The base case or the most likely scenario
as of downward break. Luckily enough, we do
have a nice indicator right below, which is
this blue line over here. This is the 200-day
moving average. We’ve discussed that 200-day
moving average many times in these interviews.
And it is a key indicator for Bitcoin. And
I believe that that could, if we do see that
scenario play out or we see a downward break,
I believe that that blue line is very likely
to cause some sort of a support.
Awesome, and what about altcoins? What’s the
situation at the moment?
I think that altcoins are still following
Bitcoin for the most part. We had some nice
movement in EOS over the last 24 hours, though
it’s not really clear exactly why, but for
the most part we’re looking at Bitcoin as
the leader and altcoins just kind of following
in the wake.
So last week, Ripple apparently transferred
500 million XRP from its escrow wallet, which
is quite enormous sum. Given that XRP price
has been in downtrend, many in the community
are worried about company continues dumping
of the token. The company, in turn says that
they are investing in firms that could help
the ecosystem grow. What is your stance on
this issue?
On the one hand, Ripple has an advantage that
they have an enormous treasury chest that
they can use to invest in the future of Ripple.
On the other hand, is every time that they
take some of that treasury out, they’re actually
hurting the price because they’re not holding
US dollars on the side. They’re holding billions
of XRP tokens. Every time they take half a
billion tokens out, they have to then sell
those on the market. And that reduces both
the value of XRP and in turn, their treasury
chest. So overall, this is basically a downward
pressure, especially in the short term. I
mean, if you’re thinking about long term,
if they gain worldwide adoption and are seen
as the de facto way to transfer or to do settlements
between two banks, that you know, that’s a
very long term bullish scenario. However,
in the short term, every time that they take
some money out of XRP in order to invest in
the future, they are going to pull down the
price a bit.
Last week, Fred Wilson, the co-founder of
venture capital firm Union Square Ventures,
expressed criticism towards Ethereum. He said:
“Ethereum has shown the way to so many important
things: smart contracts, programmable trust-free
computing, potentially proof of stake, and
a lot more. But it remains hard to build on,
scaling issues abound, and many developers
are looking elsewhere.” Also, not long ago
Vitalik Buterin admitted that Ethereum blockchain
is almost full. What do you think of these
criticisms? Do you still see the potential
of Ethereum?
I definitely see the potential of Ethereum
in the long term. Ethereum is probably one
of the biggest places where people are able
to do decentralized fundraising. And that’s
an amazing thing. And as our friend said,
that opens up the way for new business models
and new models for raising capital. I do believe
that it has, obviously, if the blockchain
is almost full, that means that a lot of people
are still using it, right. So let’s not lose
sight of what’s happening in real time. Obviously,
they do have scaling issues. I do believe
that they will get over those scaling issues
eventually. However, when we’re talking about
decentralized networks, this is right now
the gold standard of them. What worries me
as far as investing in Ethereum, very similar
to what we saw in XRP, is a very high rate
of inflation at the moment. We’re seeing about
13,000-13,500 new ETH is created on a daily
basis. And I don’t think that the demand from
developers is just that strong at the moment.
So right now what I see for Ethereum, especially
at this point in time, is a strong rate of
inflation after the huge run up in price that
we saw in 2017. Obviously we saw a huge rise
in the usage of the network which translated
into higher value per token. I don’t think
that we’re seeing that same level of the network
growth at the moment to support that high
level of inflation.
Can you see the same issues affecting Bitcoin
at the moment? Or you think these are just
problems belonging to Ethereum?
Well, Bitcoin at the moment has a much lower
rate of inflation than Ethereum does. And
I think that Bitcoin actually has shown very
strong fundamentals lately. So first of all,
we can point obviously to the hash rate, which
is about six times higher than it was at the
height of the all-time high in 2017. As well,
I mean, even if we’re looking just at the
short term, this is the estimated USD transaction
volume on the Bitcoin network is right now
$1.4 billion per day approximately. And that’s
about as high as it’s been since July. So
we can see that people are still using Bitcoin
for its intended purpose of transferring value
from one person to another.
In an analysis on stablecoins released by
JPMorgan, the company pointed out some risks
which a global cryptocurrency like Facebook’s
Libra would pose. In particular, their analysis
says the network could fail in periods of
stress. Quoting JP Morgan: “The risk of payment
system gridlock, particularly during period
of stress, could have serious macroeconomic
consequences.”
What do you think about this risk? Is it existing?
It’s not an existing risk until there’s an
existing currency. I mean, right now it’s
a very hypothetical situation. How would they
even know how much usage is going to see and
how will they even know how much usage that
that blockchain could handle at the moment?
There are two things that are very far. Let’s
see them get the regulatory approval that
they seek. Let’s see them get that out. Let’s
see them put the blockchain up and then they
can talk to me in about, you know, scaling
issues or whatever. Right now, it’s just way
too early to even be talking about that. Even
going further down that path, why are we even
talking about, you know, Libra coin at all?
It’s very difficult right now to be investing
in it. It’s a stablecoin first of all, an
asset backed stable coin. So at the moment,
I mean, we’ve set up on eToro Libra portfolio,
which is basically tracking public companies
that have committed to being the master nodes
of the Libra blockchain. But short of buying
those stocks, it’s a very difficult investment
opportunity to be discussing right now.
So another risk pointed out by JPMorgan is
related to the possibility of negative yields
on the Libra’s fiat currency reserves. This
scenario becomes even more likely if we consider
the global trends are going towards further
monetary easing policies. So do you share
these concerns?
I find it very funny that JPMorgan is bashing
Libra. Obviously, we know that JPMorgan is
coming out with their own JPM stablecoin,
which is backed to the US dollar. Perhaps
Libra’s model of having an asset backed stablecoin,
rather than having it pegged to a specific,
specific currency is that they have, you know,
more stability so that they’re not only exposed
to one currency. On the other hand, I myself
have raised questions about how that asset
backed platform is going to work. What it
seems to me is that actually opposite of what
JPMorgan is saying in your quote is that the
people who are managing that fund actually
have a larger incentive to seek out higher
yielding investments, because the yield on
those investments actually go to the people
who are managing the fund. As from an asset
managers perspective, their incentive is always
to seek out the highest possible yield. Now,
JPMorgan is talking about a world where or
a trend where we see yields on assets, generally
speaking, going down and some are even negative.
I find it very hard to believe that we’ll
be in any sort of world where they will not
be able to pick out some high yielding assets
from all of the global assets that are out
there.
So these were the latest market updates with
senior market analyst Mati Greenspan. Thank
you for watching and see you next week. And
always remember to like, subscribe and hodl.

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