Despite being a trying week for the cryptocurrency market with three major negative news events making media headlines, the price of Bitcoin remained largely unscathed and only ended the week a mere $300 lower, maintaining the key $10,500 support level for yet another weekly close.
Elsewhere in the crypto market, Ripple has launched a new green initiative that has prices following. Finally, outside of the crypto space and into currencies, Aussie traders are watching for the comeback of the greenback to continue on the AUDUSD pair, ahead of tomorrow’s RBA interest rate meeting.
Bitcoin Barely Bats An Eye At Double Dose Of Bad News
Bitcoin price continues to trade above $10,500 after a short dip lower last week on the heels of some extremely negative crypto market news. The lack of a deeper selloff with such significant news breaking could be a sign that Bitcoin is building for a move higher.
Kicking off the first of three major negative news events, last week, reports of a competitor cryptocurrency exchange being hacked of about $200m worth of crypto assets – primarily Ethereum-based ERC20 tokens – caught a bit of attention, but it barely dented the price of Bitcoin nor other crypto assets. It could be due to the fact that half of the stolen assets were already frozen and therefore could not be accessed by the hackers, or that traders have gotten more rational and are no longer panic selling in response to such events.
The second major storm to hit the crypto world happened on Thursday. News broke that an alternative Bitcoin derivatives exchange, and its directors, had been indicted by the US Commodity Futures Trading Commission. Even this negative news for the industry failed to cause any significant selloff in Bitcoin – traders merely transferred their stash of BTC to other exchanges or cold storage – yet another sign that the still-young cryptocurrency market is showing signs of maturity. This behavior is in stark contrast to 2017-2018 when any negative event would trigger a large selloff.
Trump Contracting COVID Takes Down Crypto, But Bitcoin Shows Resilience
Over the weekend to close out what was already a brutal week news-wise on Bitcoin and other assets, came the news of United States President Donald Trump contracting COVID19. Initially, stock futures sold off around 1% but recovered later in the day. The price of BTC however, remained relatively unchanged, shaking off yet another big negative news event.
These negative events only put a small damper on the price of Bitcoin. Altcoins, however, sold off more sharply, cementing Bitcoin’s status as the most resilient crypto asset. As can be seen from the heatmap below, in the 24 hours post negative news breaking, most crypto assets sold off between 2-10%, while BTC moved less than 1%.
BTC’s strong price performance could be due to dip-buying by institutional funds as many fund managers saw the indictment as a positive to the Bitcoin ecosystem. In fact, whispers of a possible Bitcoin ETF approval started making its rounds again as the indictment would remove what analysts claim to be “price manipulation” from the crypto market. Price manipulation was the most important factor cited by the SEC when it repeatedly rejected Bitcoin ETF applications in the past. Will this indictment pave the way to an eventual approval?
Quarterly Finish, Adoption Metrics Show BTC HODLing Is Spreading
Last week also saw the end of Q3 2020, where Bitcoin finished its 2nd best Q3 on record with a gain of 18%. Its best Q3 performance was during 2017’s bull run, with a gain of 81%. Traditionally, Q3 has been the worst quarter for Bitcoin, but now, even three consecutive bad news events can’t bring down the price of BTC. This shows great price resilience possibly attributed to institutional investors accumulating with each retest of lows. For example, it was reported that Grayscale added another around 17,000 BTC to its holdings during this time.
In addition to increased institutional buying, more new entrants coming into the crypto space buying BTC may also be contributing to its resilience. The chart below shows that the number of non-zero BTC wallet addresses has been steadily climbing since 2019 and has bypassed the high reached at the peak of 2018. The number of non-zero BTC wallets is almost 30m now, compared with just 20m in 2019 – an increase of 50% in just over a year.
Even though the increase in new entrants is stark, a recent study estimated that there are currently only 101 million crypto users worldwide. With a world population of 7.8 billion, a 100 million userbase only accounts for around 1%, which means the potential for growth remains very substantial.
One other reason for the lack of volatility in Bitcoin price action may be due to falling Open Interest in the BTC Options Market. Ever since the record number of options expired on 25 September, Open Interest has tapered off over the last week.
Ripple Aims For Green In More Ways Than One
In other interesting crypto news, Ripple (XRP) claimed it is 61,000 times more energy-efficient than BTC and announced that it will achieve net-zero carbon emission by 2030. Ripple expects this sustainable architecture would make XRP transactions grow by more than 1000% by 2025.
Claims aside, XRP did have some positive adoption news through one of its partners. SBI eSports (under SBI Holdings) has announced that it would be paying its eSports players in XRP instead of in fiat currencies. This move obviously is to increase usage and liquidity of XRP, as well as raise visibility of the crypto asset. However, in the short term, such news is not expected to have any material impact on the price of XRP as the monthly regular dumps by its pioneer team members are making traders hesitant to hold XRP.
XRP is still moving in a downtrend, with near term support around 0.22 and resistance at around 0.24, drifting along with not much volatility. However, its descent seems to be slowing down since September and we will be watchful for a break above 0.25 which may signal a break out of its current downtrend to try for a higher level between 0.28-0.30.
Traditional Market Wrap: Golden Week Lowers Volatility, Aussie Slides Against The Dollar
Outside the cryptocurrency space, traditional markets were also stuck with not much action, even failing to react to Trump’s positive COVID19 test news. Perhaps this was because Vice President Mike Pence and Presidential Candidate, Joe Biden, both tested negative. US Averages merely chopped around 1-2% for the week.
Contributing to the lack of volatility overall was also the fact that it was an overlapping holiday week for most parts of Asia, with the mid-Autumn and Chuseok Holidays in Hong Kong and Korea, coinciding with the week-long Golden Week Holiday in China. Chinese market and traders will not be back until 8 Oct, resulting in lower trading volume and reduced volatility in all markets.
A muted non-farm payrolls report on Friday also failed to provide any impetus for the markets to take any sort of committal movements. We may have to wait till Wednesday night’s (7 Oct) FOMC Meeting Minutes to find some clues as to how USD may move and how markets will react. AUD traders should take note that Tuesday, 6 Oct, will be the next RBA interest rate meeting.
Looking at the AUDUSD chart, although the Aussie seems to be starting to trade in a downtrend, the price looks likely to be contained between 0.70 and 0.72 for this rate meeting. We personally do not think this meeting will spring too big a surprise in terms of price movement as the consensus estimate is quite even, with a 67% chance of a cut of 0.25% to 0.00%.
Information provided in Swift Expert Trades’s market report includes information provided by Kim Chua, Lead Market Analyst for Swift Expert Trades, in addition to charts from various data sources.
About Kim Chua, Swift Expert Trades Market Analyst:
Kim Chua is an institutional trading specialist with a track record of success that extends across leading banks including Deutsche Bank, China Merchants Bank, and more. Chua later launched a hedge fund that consistently achieved triple-digit returns for seven years. Chua is also an educator at heart who developed her own proprietary trading curriculum to pass her knowledge down to a new generation of analysts. Kim Chua actively follows both traditional and cryptocurrency markets closely and is eager to find future investment and trading opportunities as the two vastly different asset classes begin to converge.
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The information provided does not constitute, in any way, a solicitation or inducement to buy or sell cryptocurrencies, derivatives, foreign exchange products, CFDs, securities, and similar products. Comments and analysis reflect the views of different external and internal analysts at any given time and are subject to change at any time. Moreover, they can not constitute a commitment or guarantee on the part of Swift Expert Trades. The recipient acknowledges and agrees that by their very nature any investment in a financial instrument is of a random nature and therefore any such investment constitutes a risky investment for which the recipient is solely responsible. It is specified that the past performance of a financial product does not prejudge in any way their future performance. The foreign exchange market and derivatives such as CFDs (Contracts for Difference), Non-Deliverable Bitcoin Settled Products and Short-Term Bitcoin Settled Contracts involve a high degree of risk. They require a good level of financial knowledge and experience. Swift Expert Trades recommends the consultation of a financial professional who would have a perfect knowledge of the financial and patrimonial situation of the recipient of this message and would be able to verify that the financial products mentioned are adapted to the said situation and the financial objectives pursued.
