Fresh data shows big institutions are stacking sats like there’s no tomorrow
It’s no secret that institutional interest in bitcoin has transitioned from clear skepticism to downright hoarding as everyone under the sun is looking to stack satoshis amidst a backdrop that’s almost picture perfect for bitcoin’s narrative. In this issue, we’ll dive into fresh data from Fidelity on institutional adoption, the probability of looming global negative interest rates and their significance as well as good old fashion fundamental and technical bitcoin analysis. Sit back and whip out your reading specs as you’ll want to hear this.
Fidelity: Institutions are stacking sats
Big institutional investors are coming around to the idea of cryptocurrencies, with Fidelity just revealing that over 36% of American and European funds own cryptocurrencies like bitcoin and ether. In the US, 27% of institutions admit to own some form of another of cryptocurrency — a number which has soared to a whopping 45% across Europe. In this context, institutions often refer to pension funds, hedge funds, and family offices.
Given that Europe has been plagued by negative interest rates far longer than the United States — which is just getting a taste of what’s to come — it’s no surprise that European entities are further ahead in the adoption curve than their American counterparts. The survey found that a quarter of respondents who are actively holding cryptocurrencies are exposed to Bitcoin, while about 11% own Ether. Given recent events, one would expect these numbers to be much higher today, as BTC and ETH are the most liquid cryptocurrencies and together represent 75% of the cryptocurrency market.
The survey was conducted by Greenwich Associates between November 2019 and March 2020, which means that it started pre-covid and ended right in the thick of it. Since then, rampant money printing by central bankers, in particular by the US Federal Reserve, has become a more widely understood phenomenon, so much so that Stocks are rallying on the back of an exponential increase in the money supply. Given the complete disconnect between stocks and the US economy, one can only reasonably estimate that institutional bitcoin interest has only surged since then — making this data inaccurate (in all probability).
Are countries sliding into negative interest rates?
The unprecedented monetary and fiscal policies which have been deployed these last few months appear to be just the beginning of a long-term trend. In fact, many economies are now seriously considering negative interest rates, most notably due to the lack of tools to combat this economic recession. Historically, central banks are able to cut interest rates in order to stimulate growth in the economy. But today, most major economies have already implemented significantly low rates or none at all.
While this is the universally accepted model, reality is proving to be more complicated as economies head into uncharted territory. Indeed, white and black swan events and all the tail-end scenarios that could and would eventually occur given enough time aren’t accounted for in today’s economic model, and the current situation warrants skepticism as to whether these monetary and fiscal tactics will work in a notably different era with changing demographics, interests and consumer behaviours.
Having said that, negative interest rates aren’t at all uncommon or unheard of. In fact, the first country to implement negative interest rates was Sweden back in July 2009, where Riksbank cut its overnight deposit rate to -0.25%. It turns out that this was a prelude to a more widespread phenomenon as the European Central Bank (ECB) followed suite in June 2014, lowering its deposit rate to -0.1%. Similarly, Denmark, Switzerland and Japan’s BoJ also implemented negative rates.
The resulting outlandish state of affairs becomes evident when one removes the United States from the global IG index, which shows a whopping 43% of the global bond markets trading at negative yields. This is an incredible statistic given that bonds are seen as the crème of the crop safe-haven asset. In fact, it’s arguable that a misallocation of capital is currently underway, as who would knowingly invest in a negative-yielding asset unless to find alpha in short term bond-price appreciation?
At the time of writing, Australia, New Zealand, Canada and The United Kingdom are all seriously considering negative rates, which would at the very least make consumers rethink the idea of parking cash in a bank with negative yields.
Check out the full story here for all the details.
Miner selling pressure subsides
A recent tweet from analytics firm Glassnode has shown that miner selling pressure has eased off quite dramatically over the months, suggesting that the highly-feared “miner capitulation” is over — at least for the time being.
How much $BTC is flowing in and out of miner wallets?
What is the number of incoming/outgoing#Bitcoin transactions to/from miner addresses?
— Miner outflows and inflows
— Miner netflows
— Miner outgoing and incoming transactionsCharts now live 👇 https://t.co/yWO636u9i2 pic.twitter.com/a0tQh3Cyzv
- glassnode (@glassnode) June 9, 2020
Of course, one cannot be absolutely certain of what miners will do if bitcoin revisits $8,000 or $7,500. However, if the past is any indicator of future prospects, then the trend is suggesting that miners won’t be selling en masse any time soon, so much so that until now, selling pressure has moved in one direction since February.
Technically speaking
Lower Time Frame (LTF) 1-hour paints a mixed picture
Bitcoin continues to move in a sideways fashion after having bounced from a TD-sequential ‘9’ on the 1-hour chart on the 7th of June. Since then, bitcoin has largely respected the setup trendline at $9,689 with price action floating around this region. The area to watch for a bullish break out is the $9,884 level while a break below $9,570 would signal a bearish break towards lower levels. Otherwise, one can expected continued sideways movement within this range until the next build-up of momentum allows for a major break to one side or another.
However, this setup is showing that bitcoin is trading in marginally bullish territory as it gets supported by both the 50 & 200 1-hour EMAs, as well as the TD-sequential setup trendline. The RSI is showing a bearish divergence as bitcoin hits a lower high in price and a higher high on the RSI (denoted in green). At the same time, it appears as though bitcoin is about to develop a bullish divergence on this same timeframe within the next half hour.
Higher Time Frame (HTF) daily leans bearish
On a daily timeframe, bitcoin is leaning bearish on the RSI and its accompanied price-action. A bullish divergence had developed in late May (26th), but this was subsequently over-ruled by a failed rally with a notable bearish-engulfing candle. Of course, this rally could be attributed to outside forces — such as Coinbase locking its users out of their accounts (one of the leading exchanges in spot volumes). But from a technical perspective, this was a clear rejection of $10,000 prices. However, if the failed rally was to be given less significance due to Coinbase’s 11th consecutive failure, then bitcoin’s price structure would turn out to be an ascending triangle (see dotted line), which is a bullish continuation pattern for all intents and purposes. This narrative is also supported by the fact that bitcoin is hugging the resistance zone at $9,800 on the daily timeframe. The more a resistance area is tested, the more likely it is to be broken.
Having said that, while the fundamental case for bitcoin is overwhelmingly bullish, the technical perspective is still leaning bearish until proven otherwise. A decisive break above $10,500 would open the door to further upside to $11,000 and beyond.
When putting it all together though, it’s clearly becoming highly risky to get caught offside as a bear given the more or less universal agreement that the time for bitcoin to dominate has come.
p.s. ( Bitfinex) is undergoing scheduled maintenance at the time of writing.
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Read More: Are economies drifting towards negative rates?
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