The month of August was a low volume grind for the overall crypto market. The beginning of the month saw Bitcoin rally to 12,200 off the mid-July 9,100 lows against an increasingly unstable macro backdrop before meeting heavy resistance and eventually ending the month at 9,650at declining 5% for the month. While Bitcoin is down over 30% from its June 26 high, its retracement and current consolidation is quite normal for this asset, especially after such a strong run to start the year.
As the price of Bitcoin continues to consolidate, its price is putting in a series of lower highs and higher lows, squeezing into a bearish descending triangle that should reach a decision point towards the middle to end of the month. With momentum currently bearish, BTC needs to be able to break through the top side of the descending triangle and close above 11,200 on the daily, signifying a break of bearish momentum and a resumption of the bullish uptrend and higher prices to follow. However, if Bitcoin gets rejected again below 11,000 and its current downtrend line, price will likely be drawn towards the bottom end of the current range, with another test of support in the mid 9,000’s. The bottom end of this range is critical for Bitcoin to hold. Should Bitcoin break support as illustrated below, and price falls below 9,000 we would consider this a break in market structure and believe a larger correction will likely follow.
Should a bearish break in market structure occur, it would NOT change our long term outlook for Bitcoin. Our view is that Bitcoin is a long term hold and its best days are ahead. We advise all of our clients who work with us to always take a cautious and long term view, understanding and accepting its volatility and looking at any opportunities to buy lower as something to take advantage of, not fear. We believe we are in the beginning stages of a new cyclical bull market and any break in market structure would likely result in a short-term correction down to the 7,500-8,500 range with a potential wick or further downside pressure to 6,500 driven by capitulation in altcoins. This would still be within the range of historical pullbacks in an overall cyclical uptrend for BTC when looking at past cycles.
That being said, the case for Bitcoin continues to grow stronger and more necessary by the day against monetary and fiscal irresponsibility of central banks and governments. The checklist of conditions continues to accelerate that only strengthens the need for Bitcoin, a non-sovereign, hard-capped supply, global, immutable, decentralized, digital store of value.
Argentinian peso devalues 26% alone in August
Negative yielding government debt eclipses 16 trillion,
Central banks continue to lower rates and debase
US on a path to lower to 1% by the end of 2020,
the ECB expected to pull out a bazooka in mid September, introducing more exotic policies to boost growth through accommodative stimulus and QE
US-China Trade wars continue to wreak havoc on markets
People's Bank of China (PBOC) surprised markets with three consecutive devaluations of the yuan renminbi or yuan (CNY)
Brexit has wreaked havoc on the pound
Siemens issued $1.6bn in bonds with a 0 coupon priced at a -0.315% yield, the lowest yield ever priced for a primary corporate bond offering.
Germany issued €824mm of 30-year bonds with a 0 coupon at a -0.11% yield, the first time a Germany 30-year primary has ever priced negative
Danish bank began offering 10-year mortgages at a -0.5% interest rate, meaning you pay the bank back less than you borrowed to buy a house.
The SEC continues to postpone Bitcoin ETFs (as of writing, the VanEck one of the ETF sponsors has announced a regulatory workaround to the ETF and is launching a product for large institutional investors, likely admitting no ETF is coming anytime soon)
PBoC(China) announces plans to launch its own state-backed cryptocurrency- we see any onboarding ramp into digital assets as a benefit but this likely fosters in a new era of surveillance state for the Chines people
Bitcoin's hash rate reached all-time highs this month- rising hash rate means that forward-looking miners are investing vast amounts of resources to expand their operations, i.e. betting on Bitcoin’s value to increase in the future. Additionally, the higher the metric, the more secure the Bitcoin network is,
Bakkt Receives Final Regulatory Approval for Sept 23rd Launch - Bakkt offers the first physically delivered Bitcoin futures market in the US.
Square Announces $125mm of BTC Bought by Customers in Q2
NY Supreme Court Rules it has Jurisdiction Over NYAG/Bitfinex Case - we see this as something to keep an eye on. Bitfinex is one of the oldest exchanges for Bitcoin and well know to be involved in market manipulation and money laundering.
Coinbase purchased Xapo, a bitcoin custodian wallet company, and instantly ballooned their AUM to become the largest custodian in the space.
The UK Central Bank Chief Mark Carney says that a central bank-supported digital currency could displace US Dollar as Global Reserve. At the same time says Facebook's proposed Libra is project is an example --- Rumor has it that Carney will soon be taking a high profile position with Facebook Libra Project..With China pushing out their cryptocurrency regulators may have not choice but to approve the Libra and back it in order to stand ground against the Chinese coin.
Libra Facing EU Antitrust Probe - Facebook has not even launched the project and the commission is concerned that Facebook’s planned digital payment system could unfairly lock out competitors. The realization that the coin will benefit users and reduce governments' ability to control is putting pressure on some core Libra members and making them consider quitting.
We believe exciting times are ahead for Bitcoin and look forward to advising you along the way. We have a number of new developments, including products and services we are working on that we hope to announce in the months ahead. We believe DAiM offers the best value to investors looking to get into Bitcoin in a safe and secure way. We’re both excited and proud to be the first licensed Registered Investment Advisor for Bitcoin and Digital Assets and continue to build the pipes to allow everyday investors access to this emerging asset class through traditional brokerage and qualified accounts.
Lastly, please enjoy our first research report: “Get Off Zero: The Case for Bitcoin and Why a 1-6% Portfolio Allocation Should Be Considered” which you can access from our website. Please feel free to share the link with anyone you know that might be interested. .
To that end, the best appreciation of our services is to recommend and/or refer friends, colleagues or business partners to us as they look to Get Off Zero and make their first investment.
Digital Asset Investment Management is a licensed Registered Investment Adviser specializing in Bitcoin for 401k's, IRA's and Traditional Brokerage accounts. Learn more at www.daim.io