Despite a very poor three months, there have been increasing amounts of articles arguing that Bitcoin may be a tipping point where it moves higher. However, Bloomberg has published a piece saying it is at a so-called death cross. The cryptocurrency’s 50-day moving average has dropped to its nearest point to its 200-day moving average in nine months, a move which spells doom for technical analysts. If it crosses below the 200-day threshold, it would signal the “death cross”.
FINSUM: While this does seem significant, we would argue that technical analysis is not as relevant in Bitcoin. The reason why being that the fundamentals of the market (e.g. a sound regulatory environment) are unstable, and there is little trading history from which to weigh technical indicators.
Allianz, the global financial firm, says that Bitcoin is worthless and that the bubble is about to burst. While the firm may be better known in its native Europe, Allianz is a major player speaking out against the cryptocurrency. “In our view, its intrinsic value must be zero … A bitcoin is a claim on nobody – in contrast to, for instance, sovereign bonds, equities or paper money – and it does not generate any income stream”, says Allianz, Europe’s largest insurer.
FINSUM: We thought the bitcoin bubble had already burst! Allianz really seems to think it will go to zero. We do not, as we believe it will slowly develop into a digital value store as the regulatory regime surrounding it gets harmonized.
So everyone knows that Bitcoin suffered a huge plunge earlier this year. The fall amounted to around 60% at its peak before stabilizing recently. However, what many are not aware of is how much total trading volume fell during the volatility. While stock market losses are often associated with increasing trading, that did not happen with bitcoin. Volume is stuck at about half its peak from December, and touched its lowest level in two years in February. This has many wondering if the currency is waning in popularity.
FINSUM: This piece was interesting to us because it contrasts with what you hear about the explosion in popularity of cryptos.
Bank of America just put out a weird warning that caught our eye. The bank—the largest retail bank in the US—said that it may face “substantial costs” as it deals with cryptocurrencies. In its SEC filing, the bank warned that cryptos were one of its risk factors for investors. The bank elaborated, saying “The widespread adoption of new technologies, including internet services, cryptocurrencies and payment systems, could require substantial expenditures to modify or adapt our existing products and services”.
FINSUM: Was this reference to some future risk of business disruption, or does BofA have some exposure to cryptos that is not well understood? Certainly something to pay attention to.
While all the focus is understandably on stocks, Bitcoin is continuing to see a huge exodus of buyers. The market is now down to around $6,000, or about 70% from its peak of near $20,000. Bitcoin, and crypt currencies generally, have been brutalized by a number of regulatory announcements which seek to reign in the currencies. These include in South Korea—one of cryptocurrencies’ biggest markets, as well as by the SEC in the US, where chairman Jay Clayton has become a staunch enforcer.
FINSUM: We have been saying for months that there was simply too much regulatory risk to sustain the high valuations. That prediction has certainly proved right and we think it has further to run.
There has been hype for several years about the chances for the growing tech industry to absorb and dominate some of the domain of the finance sector. Examples already abound, such as tech companies taking market share in currency transfers or in every day payments. Amazon is providing payment services and financing to merchants, for example. Now big banks are fighting back, pushing regulators to subject tech companies to the same rules and scrutiny to which they are forced. They argue that not doing so will hinder transparency and threaten the global financial system.
FINSUM: This just seems like another of the many areas where a regulatory push is mounting against tech.