Zug, 2 July 2019
Bitcoin bulls continued their parade and breached the psychologically important $10,000 level, possibly fuelled by the Federal Reserve’s FOMC statement to leave target rates unchanged at 2.25-2.5% and “closely monitor” developments – a wording which signals potential rate cuts in the future.[i] The Bitcoin price then continued its parabolic ascent towards the $14,000 level, during which records were set: On 26 June Bitcoin derivatives exchange BitMEX’s perpetual swap (its most liquid product) achieved a daily trade volume of over $13.5 billion, with open interest reaching $1 billion.[ii] After scratching $ 13,900, the price sharply reversed and dropped 14% in only 15 minutes, breaking the parabola. The drop was amplified by a cascade of liquidations of over $250 million in long positions on the perpetual swap. Bitcoin found support at the $10,300 level, at the lower end of the $10,300 – $11,000 range that attracted trader interest on the way up. Bitcoin’s volatility (based on daily returns for the last 30 days) also rose sharply to 5.39%, its highest level since the beginning of the year.[iii] At the time of writing, Bitcoin is trading at $10,600. Bitcoin dominance, the largest cryptocurrency’s share of the total market cap of all cryptocurrencies, has reached pre-2018 crash levels, rising to over 65%. These levels were last seen in early December 2017 when Bitcoin was trading around $17,500. The strength of Bitcoin in comparison to small cap coins may also be indicative of increased institutional interest, since Bitcoin is the most liquid cryptocurrency and also the most accessible one through traditional exchanges. In fact, CME futures open interest increased by 630 contracts (5 BTC per contract) in the past week.[iv] Facebook’s Libra faces regulatory headwinds In our last market update, we reported[v] that Facebook is entering the cryptocurrency space. Since then, the official Libra website and documentation have been published, and several regulators have voiced their concerns about the project. Shortly after the details about Libra were published, US regulators called for a “freeze” of the Libra project and requested congress hearings on 16 July (Senate Banking Committee) and 17 July (House Financial Services Committee).[vi] M. Carney, governor of the Bank of England, mentioned that Libra would immediately be “systemically relevant” if successful.[vii] Also, the central bank would keep an “open mind, but not an open door”. France has initiated the formation of a G7 task force that will investigate the role of central banks with respect to Libra, especially concerning topics such as anti-money laundering and consumer protection laws.[viii] Meanwhile, several of Libra’s partners and alleged founding members of the Libra Association stated that they would “decide whether to join the association and make the payment after there is more clarity on how Libra will work”.[ix] Hence, it remains to be seen if Facebook can actually attract and get the full commitment (including a $10 million payment to the Libra Reserve) of 100 founding members by their planned launch in Q1-2 of 2020. Written by Dr Raffael Huber, Research, and Sandro Huwyler, Trade Desk of Bitcoin Suisse AG [i] https://www.federalreserve.gov/newsevents/pressreleases/monetary20190619a.htm [19/6/2019] [ii] https://twitter.com/BitMEXdotcom/status/1144049870178848768 [28/6/2019] [iii] https://bitvol.info/index.html [01/07/2019] [iv] https://www.cftc.gov/dea/futures/deacmesf.htm [01/07/2019] [v] https://www.tradersinsight.news/traders-insight/securities/crypto/bitcoin-suisse-facebook-updates-its-status-to-crypto/ [18/6/2019] [vi] https://edition.cnn.com/2019/06/25/tech/facebook-libra-hearings/index.html [01/07/2019] [vii] https://www.cnbc.com/2019/06/21/bank-of-england-mark-carney-on-facebooks-libra-uk-digital-economy.html [01/07/2019] [viii] https://www.reuters.com/article/us-facebook-crypto-france/france-creates-g7-cryptocurrency-task-force-as-facebooks-libra-unsettles-governments-idUSKCN1TM0SO [01/07/2019] [ix] https://www.nytimes.com/2019/06/25/technology/facebook-libra-cryptocurrency.html [01/07/2019]
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