US Treasury mulls over $1 Trillion stimulus as BTC difficulty hits record uptick!
In today’s newsletter, we’ll sift through the deluge of noise and non-events out there to focus on four things:
- Jesse Powell is extremely bullish on bitcoin after US Treasury announcement
- The US Treasury’s doubling-down on infinite stimulus is music to hodler ears
- Bitcoin’s network difficulty just broke a 2-year record change
- Technicals look great but follow-through is needed
Let’s dive right in!
Kraken CEO Jesse Powell tells Bloomberg that BTC could trump gold
In an interview with Bloomberg (30:00), Kraken exchange CEO Jesse Powell made a number of statements about bitcoin’s not-too-distant future and laid out his expectations of what’s to come.
Comparing bitcoin with the US Dollar, Powell explained: “pretty soon, all of the technology behind Bitcoin will just disappear and it’ll be just like the U.S. dollar where no one really understands how it works but everyone uses it.”
Powell went on to say that layer 2 solutions won’t require that everyone necessarily owns bitcoin, but that bitcoin will be the underlying asset which would be used as collateral. In effect, Powell is referring to Decentralised Finance and custodial solutions. He said: “just like gold, you don’t need to have physical bitcoin — you don’t need to transfer it on the blockchain, you have these layer two solutions just like with Cash — Paypal, Venmo. Not everyone is moving cash around in physical form and not everyone will move bitcoin around on the blockchain.”
The interview then took a turn towards talk of inflation and US equity markets, the latter of which arguably dodged a bullet just as the US Federal Reserve announced its intention to begin buying individual stocks on Monday. Reacting to this news, Powell slammed the Fed for effectively buying “junk bonds” from “failed US corporations.”
He then went on to say that he expects inflation to go through the roof as the largest central bank pumps trillions of dollars into publicly-traded stocks.
“You can’t price anything in dollars anymore. The inflation is going to be out of control very soon here. I would be buying Bitcoin as a hedge against that inflation.”
A number of factors are slowly inching towards the private and public mainstreams painting a bleak scenario for the US Dollar, with two major elements proving to be significant threats to the hegemony of today’s USD standard.
One such factor is the fresh support by the United States Treasury Secretary, Steve Mnuchin, of a plan to add another $1 trillion to the Fed’s ever-expanding balance sheet. The quantitative easing and low interest rate programs are set to be maintained all throughout 2022, painting a bleak future for today’s USD standard.
According to the CIO of Guggenheim Investments, Scott Minerd, one dirty little secret of the 2008 crisis is that the Federal Reserve’s QE programs funded the US Treasury and kept interest rates from skyrocketing at the time.
Minerd is not alone in expecting a repeat of this same policy. Just this week, the US government confirmed further stimulus moving forward. In doing so, the government confirmed it will need as much money it can get its hands on in order to fight the economic fallout from this crisis.
Each month, the Treasury issues over $170 billion of debt via treasuries, says Minerd. However, the Fed is only absorbing about $125 billion a month, creating a discrepancy in the figures. According to Minerd, the difference is simply Fed asset purchases, adding more government-backed-securities to its parabolic balance sheet.
Analysts, investors and hedge fund legends Paul Tudor Jones and Ray Dalio, have publicly criticized the Fed on numerous occasions, and while they may be two of the most outspoken multi-billionaire dollar macro investors out there who have offered insights on the matter, you can bet that other finance firms are thinking along the same lines.
Bitcoin difficulty increases dramatically
It appears as though the elusive “miner capitulation” — both feared and anticipated by many analysts — hasn’t materialized as yet, and might even leave those expecting it in permanent disbelief!
Indeed, a whopping 14.95% advance in bitcoin’s difficulty level has just been accounted for as miners appear to have found the sweet spot to balance increased costs while remaining profitable. The figure effectively reverses the negative increments in the past two adjustments (-9.29% & -6% respectively), and paints an interesting picture of bitcoin’s network strength.
Needless to say, profitability and mining difficulty hang in a delicate balance, and big upticks in difficulty can have knock-on effects for miners in terms of cost. A higher difficulty could theoretically cause miners to sell in order to protect profitability.
Hash rate echoes 2017 fundamentals
Along with the difficulty level recovery, bitcoin’s hash rate has also remained above 100 EH/s following a significant downturn earlier in the year.
Since then, bullish signals bearing a similar resemblance to the $20,000 run up in 2017 have returned.
Here’s what portfolio manager Blockfolio had to say about this on Twitter!
Bitcoin’s mining difficulty just increased by 14.9%.
What does that mean?
Even after the mining subsidy was cut in half a month ago, more hashrate has joined the network than ANY TIME since the historic 2017/18 market bull run.
- Blockfolio (@blockfolio) June 16, 2020
Lower Time Frame (LTF) eyes $9,800 — $10,000
Bitcoin broke out of the falling wedge pattern from a low of $8,918 to just under $9,600, with its breakout target being the top of the formation at $9,800. Should bulls follow through, an offshoot above $10,000 could spark even more buying pressure that would send bitcoin to that elusive $10,500 mark.
At the time of writing, bitcoin has found support just above the 4-hour 50-EMA as it sits exactly on the ascending triangle trendline present since late April. While this is a bullish formation, bitcoin is quickly approaching a deciding moment that will take it outside of this formation one way or another.
A break above $9,800 opens the door to $10,500 and another retest of the lower-trendline at $9,000 would signal a higher likelihood of a bearish break on higher time-frames. Bitcoin could form a triple bottom and bounce from the 4-hour 200-EMA at $9,352 before making another push to the upside, but anything less than a decisive move above $10,500 within the next 2 weeks would suggest weakening bullish momentum.
Separately, my gut feeling is that bulls need to reinvigorate the narrative, otherwise they risk exhaustion in this continued sideways trading, which would in turn increase the risk of revisiting sub $8,000 levels. Naturally, from a hodler perspective, this would be an incredible opportunity to stack more sats, and saving capital for such a prospective scenario makes a lot of sense as nobody wants to get caught offside with no capital to pick up some relatively cheap satoshis in the event that this happens. Either way, any bearish downturn — which will eventually come — is only temporary.
The best case scenario for the bulls would be to print a solid higher high on the monthly chart before letting the bears take over for a period of consolidation. Depending on where you include wicks in measuring this, a higher high would constitute a full-bodied candle closing at $11,000, and possibly topping out at around $15,000. Having said that, please know that these scenarios are rational projections and not crystal ball insights.
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Originally published at https://mailchi.mp.