Report: The Oldest Bank in America, BNY Mellon Can Now Custody Bitcoin and Ethereum

October 11, 2022 Bitcoin.com

US Treasury yields are soaring, but what does it mean for markets and crypto?

September 29, 2022 Coin Telegraph

bonds

The 10-year U.S. Treasury yield recently hit its highest level in 12 years, but how might this impact investors’ sentiment toward stocks and cryptocurrencies?

Across all tradeable markets and currencies, U.S. Treasuries — government bonds — have significant influence. In finance, any risk measurement is relative, meaning, if one insures a house, the maximum liability is set in some form of money.

Similarly, if a loan is taken from a bank, the creditor has to calculate the odds of the money not being returned and the risk of the amount being devalued by inflation.

In a worst-case scenario, let’s imagine what would happen to the costs associated with issuing debt if the U.S. government temporarily suspended payments to specific regions or countries. Currently, there is over $7.6 trillion worth of bonds held by foreign entities and multiple banks and governments depend on this cash flow.

The potential cascading effect from countries and financial institutions would immediately impact their ability to settle imports and exports, leading to further carnage in the lending markets because every participant will rush to reduce risk exposure.

There are over $24 trillion in U.S. Treasuries held by the general public, so participants generally assume that the lowest risk in existence is a government-backed debt title.

Treasury yield is nominal, so mind the inflation

The yield that is widely covered by the media is not what professional investors trade, because each bond has its own price. However, based on the contract maturity, traders can calculate the equivalent annualized yield, making it easier for the general public to understand the benefit of holding bonds. For example, buying the U.S. 10-year Treasury at 90 entices the owner with an equivalent 4% yield until the contract matures.

*U.S. Government Bonds 10-year yield. Source: TradingView*

If the investor thinks that the inflation will not be contained anytime soon, the tendency is for those participants to demand a higher yield when trading the 10-year bond. On the other hand, if other governments are running the risk of becoming insolvent or hyperinflating their currencies, odds are those investors will seek shelter in U.S. Treasuries.

A delicate balance allows the U.S. government bonds to trade lower than competing assets and even run below the expected inflation. Although inconceivable a few years ago, negative yields became quite common after central banks slashed interest rates to zero to boost their economies in 2020 and 2021.

Investors are paying for the privilege of having the security of government-backed bonds instead of facing the risk from bank deposits. As crazy as it might sound, over $2.5 trillion worth of negative-yield bonds still exist, which does not consider the inflation impact.

Regular bonds are pricing higher inflation

To understand how disconnected from reality the U.S. government bond has become, one needs to realize that the 3-year note's yield stands at 4.38%. Meanwhile, consumer inflation is running at 8.3%, so either investors think the Federal Reserve will successfully ease the metric, or they are willing to lose purchasing power in exchange for the lowest risk asset in the world.

In modern history, the U.S. has never defaulted on its debt. In simple terms, the debt ceiling is a self-imposed limit. Thus, the Congress decides how much debt the federal government can issue.

As a comparison, an HSBC Holdings bond maturing in August 2025 is trading at a 5.90% yield. Essentially, one should not interpret the U.S. Treasury yields as a reliable indicator for inflation expectation. Moreover, the fact that it reached the highest level since 2008 holds less significance because data shows investors are willing to sacrifice earnings for the security of owning the lowest risk asset.

Consequently, the U.S. Treasury yields are a great instrument to measure against other countries and corporate debt, but not in absolute terms. Those government bonds will reflect inflation expectations, but could also be severely capped if the generalized risk on other issuers increases.

The views and opinions expressed here are solely those of the author and do not necessarily reflect the views of Cointelegraph.com. Every investment and trading move involves risk, you should conduct your own research when making a decision.

Bitcoin holds $19K, but volatility expected as Friday’s $2.2B BTC options expiry approaches

September 28, 2022 Coin Telegraph

<div>Bitcoin holds K, but volatility expected as Friday's .2B BTC options expiry approaches</div>

Bitcoin Price

Traders expect an uptick in volatility due to the possibility of September’s $2.2 billion options expiry putting pressure on BTC price near a critical support level.

This week the $20,000 resistance is proving to be stronger than expected and even after Bitcoin price rejected at this level on Sept. 27, BTC bulls still have reasons to not give up.

According to the 4-month-long descending triangle, as long as the $18,500 support holds, Bitcoin price has until late October to determine whether the downtrend will continue.

*Bitcoin/USD 1-day price index. Source: TradingView*

Bitcoin bulls might have been disappointed by the lackluster price performance as BTC has failed multiple times to break above $20,000, but macroeconomic events might trigger a rally sooner than expected.

Some analysts point to the United Kingdom's unexpected intervention in the bond market as the breaking point of the government’s debt credibility. On Sept. 28, the Bank of England announced that it would begin the temporary purchase of long-dated bonds to calm investors after a sharp yield increase, the highest since 1957.

To justify the intervention, the Bank of England stated, "were dysfunction in this market to continue or worsen, there would be a material risk to U.K. financial stability." Taking this measure is diametrically opposite to the promise of selling $85 billion in bond holdings within 12 months. In short, the government's credibility is being questioned and as a result investors are demanding much higher returns to hold U.K. debt.

The impact of the government's efforts to curb inflation are beginning to impair corporate revenues and according to Bloomberg, Apple recently backed off plans to increase production on Sept. 27. Amazon, the world's biggest retailer, is also estimated to have shuttered plans to open 42 facilities, as per MWPVL International Inc.

That is why the $2.2 billion Bitcoin (BTC) monthly options expiry on Sept. 30 will put a lot of price pressure on the bulls, even though bears seem slightly better positioned as Bitcoin attempts to hold on to $19,000.

Most of the bullish bets were placed above $21,000

Bitcoin's rally toward the $22,500 resistance on Sept. 12 gave the bulls the signal to expect a continuation of the uptrend. This becomes evident because only 15% of the call (buy) options for Sept. 30 have been placed at $21,000 or lower. This means Bitcoin bears are better positioned for the expiry of the $2.2 billion in monthly options.

*Bitcoin options aggregate open interest for Sept. 30. Source: CoinGlass*

A broader view using the 1.49 call-to-put ratio shows a skewed situation with bullish bets (calls) open interest at $1.26 billion versus the $850 million put (sell) options. Nevertheless, as Bitcoin currently stands near $19,000 and bears have a dominant position.

If Bitcoin price remains below $20,000 at 8:00 am UTC on Sept. 30, only $37 million worth of these call (buy) options will be available. This difference happens because there is no use in the right to buy Bitcoin at $20,000 or $21,000 if it trades below that level on expiry.

Bears could pocket a $350 million profit

Below are the four most likely scenarios based on the current price action. The number of options contracts available on Sept. 30 for call (bull) and put (bear) instruments varies, depending on the expiry price. The imbalance favoring each side constitutes the theoretical profit:

Between $18,000 and $19,000: 500 calls vs. 19,800 puts. The net result favors bears by $350 million.
Between $19,000 and $20,000: 2,000 calls vs. 16,000 puts. The net result favors bearish bets by $270 million.
Between $20,000 and $21,000: 5,900 calls vs. 12,700 puts. The net result favors bears by $135 million.
Between $21,000 and $22,000: 10,100 calls vs. 11,300 puts. The net result is balanced between bulls and bears.

This crude estimate considers the call options used in bullish bets and the put options exclusively in neutral-to-bearish trades. Even so, this oversimplification disregards more complex investment strategies.

Regulatory pressure could complicate matters for Bitcoin bulls

Bitcoin bulls need to push the price above $21,000 on Sept. 30 to balance the scales and avoid a potential $350 million loss. However, Bitcoin bulls seem out of luck since the U.S. Federal Reserve chairman called for "crypto activities" regulation on Sept. 27, alerting "very significant structural issues around the lack of transparency."

If bears dominate the September monthly options expiry, that will likely add firepower for further bets on the downside for Bitcoin price. But, at the moment, there is no indication that bulls can turn the tables and avoid the pressure from the 4-month-long descending triangle.

‘The bond market bubble has burst’ — 5 things to know in Bitcoin this week

September 26, 2022 Coin Telegraph

Bitcoin

A time tunnel to November 2020 opens on BTC price action as the U.S. dollar lays waste to currencies and equities alike.

Bitcoin (BTC) starts a new week staring down a wild macro environment after sealing its lowest weekly close in nearly two years.

As risk assets across the global economy take a hammering and the U.S. dollar surges, the largest cryptocurrency is on a limp footing.

September, having started out on bulls’ side, is now living up to its informal crypto market nickname — “Septembear” — and BTC/USD is currently down 6.2% since the start of the month.

The bad news keeps coming for hodlers, who are clinging to dormant coins in increasing numbers as the dollar runs rampant and mainstream appetite to diversify into riskier plays continues to evaporate.

With macro set to remain the key focus for everyone this week, Cointelegraph takes a look at what might lie in store for BTC price action.

In economic conditions that rival any major period of historical upheaval seen in the past century or more, here are some factors to take into account when assessing where Bitcoin could head next.

Weekly close sends BTC/USD back to November 2020

While not matching the previous week’s losses (3.1% versus 11%), the past seven days nonetheless managed to spark Bitcoin’s lowest weekly close since November 2020, data from Cointelegraph Markets Pro and TradingView shows.

As the downside keeps coming, Bitcoin has thus turned back the clock to before the breakout, which took it beyond its prior halving cycle’s all-time high.

*BTC/USD 1-week candle chart (Bitstamp). Source: TradingView*

The sense of deja vu is unwelcome to the average hodler — the vast majority buying and cold storing over the past two years is now underwater.

“$BTC just made the lowest weekly close in this zone,” popular Twitter analyst SB Investments summarized after the close.

“Looks bearish with stocks looking to break support as well. But on the other side this is what everyone expects.”

Whether the markets could pull a surprise “max pain” move to the upside, liquidating short bias, is a key alternative argument for Bitcoiners. For popular trader Omz, the weekly close price of $18,800 even represents a convincing local bottom.

The RSI divergence has not gone unnoticed elsewhere, with trader JACKIS flagging its arrival last week.

“We only got two touches of the oversold territory in the past & they have always marked the exact bottom as well,” he tweeted at the time.

Fellow trading account IncomeSharks also maintained that a reversal could accompany the U.S. midterm elections in early November, but stopped short of saying that the bottom was in.

“Elevator down, stairs up,” it commented on the 4-hour chart on the day.

“Keep on building double bottoms and new supports, Midterm Rally remains on the table. Break this structure, remove these targets, and find a new bottom.”

*BTC/USD 4-hour candle chart (Bitstamp). Source: TradingView*

Dollar wrecking ball costs stocks, fiat

Monday has barely started and the turmoil that accompanied last week is already back with a vengeance on macro markets.

An unstoppable U.S. dollar is laying waste to key trading partner currencies, with the Bitcoin pound sterling making headlines on the day as it plunges 5% to come within a few percentage points of USD parity — its lowest levels against the greenback ever.

GBP/USD would follow the euro becoming worth less than $1, while the misery forced Japanese authorities to prop up the yen exchange rate artificially last week.

*GBP/USD 1-day candle chart. Source: TradingView*

EUR/USD briefly fell below $0.96 before a modest rebound, while USD/JPY remains near its highest since the 1990s despite Japan’s intervention.

At the same time, alarm bells are sounding for global bonds, which have fallen back to 2020 levels. Markets commentator Holger Zschaepitz warned alongside Bloomberg data:

“Looks like the bond market bubble has burst. The value of global bonds has plunged by another $1.2tn this week, bringing the total loss from ATH to $12.2tn.”

Stocks are set to fare no better, with futures down on the day prior to the Wall Street open. Brent crude oil fell below $85 per barrel for the first time since the start of 2022.

“Global bonds are collapsing in their fiat currencies, which are collapsing against the dollar, which is fast losing purchasing power,” Saifedean Ammous, author of the popular books, “The Bitcoin Standard” and “The Fiat Standard,” reacted.

“It will be months & years before the average fiat user realizes just how much they're getting ruined financially. The ‘new normal’ is poverty.”

With crypto still highly correlated with stocks and inversely correlated against dollar strength, the outlook for Bitcoin is thus less than positive as the status quo looks set to remain.

Euro Area Consumer Price Index (CPI) is due this week, expected to show inflation still increasing, while the U.S. Personal Consumption Expenditures Price Index (PCE) print should conversely continue the U.S. downtrend which began in July.

The U.S. dollar index (DXY) meanwhile shows no sign of reversing, now at its highest since May 2002.

*U.S. dollar index (DXY) 1-month candle chart. Source: TradingView*

Hodlers in classic bear market mode

Amid such mayhem, it comes as no surprise that Bitcoin hodlers’ conviction is increasing and long-term investors refuse to sell.

Stubborn hodling is a hallmark of Bitcoin bear markets, and the latest data shows that that mindset is firmly back this year.

According to on-chain analytics firm Glassnode, Bitcoin’s so-called Coin Days Destroyed (CDD) metric is setting new lows.

CDD refers to how many dormant days are erased when BTC leaves its host wallet after a given period. When CDD is high, it suggests that more long-term stored coins are now on the move.

“The total volume of Bitcoin coin-days destroyed in the last 90-days has, effectively, reached an all-time-low,” Glassnode commented.

“This indicates that coins which have been HODLed for several months to years are the most dormant they have ever been.”

*Bitcoin 90-day Coin Days Destroyed (CDD) annotated chart. Source: Glassnode/ Twitter*

The news follows weeks of various hodl-focused metrics showing a commitment to keep the BTC supply under lock and key for better days.

Glassnode meanwhile additionally noted the increasing prevalence of coins hodled for at least three months as a proportion of the USD value of the BTC supply.

“Bitcoin HODLers appear to be steadfast and unwavering in their conviction,” it agreed.

An accompanying chart showed Bitcoin’s HODL Waves metric — a depiction of the supply broken down by coin dormancy.

*Bitcoin HODL Waves annotated chart. Source: Glassnode/ Twitter*

Whales still dictate support and resistance

While old hands walk away from the “sell” button, Bitcoin’s largest-volume investors are on the radar of analysts when it comes to spot price moves.

The current trading range represents a zone of interest due to the extent of trading activity involving whale money in the past.

Large buys lend additional weight to a specific support price while the same is true of resistance levels, and according to on-chain monitoring resource Whalemap, BTC/USD is currently stuck between the two.

“Holding 19k-18k is key for $BTC,” the Whalemap team summarized late last week.

An accompanying chart showed whale resistance levels capping relief for Bitcoin and limiting it to within the $20,000 zone.

*Bitcoin whale resistance annotated chart. Source: Whalemap/ Twitter*

Nonetheless, separate figures from research firm Santiment confirm that whales’ BTC exposure overall has fallen to two-year lows.

*Bitcoin whale ownership annotated chart. Source: Santiment/ Twitter*

"Extreme fear" enters second week

In a familiar return to 2022 norms, crypto market sentiment has now been in "extreme fear" mode for more than a week.

As per the Crypto Fear & Greed Index, which measures aggregate crypto market sentiment, the average investor could not feel much more uneasy about the outlook.

As of Sep. 26, Fear & Greed recorded a score of 21/100, with 25/100 the boundary for "extreme fear.

Cold feet is nothing new to the market this year, which saw its longest-ever stint in "extreme fear" at over two months.

*Crypto Fear & Greed Index (screenshot). Source: Alternative.me*

A potential silver lining could lie in social media interest, which saw a rebound over the weekend, Santiment noted.

"Among crypto's top 100 assets, $BTC is the topic in 26%+ of discussions for the first time since mid-July," it revealed in part of Twitter comments this week.

"Our backtesting shows 20%+ dedicated to Bitcoin is a positive for the sector."

*Bitcoin social dominance annotated chart. Source: Santiment/ Twitter*

‘Investors Are Running out of Havens’ — Erratic Behavior in US Bond Markets Points to Deep Recession, Elevated Sovereign Risk

September 22, 2022 Bitcoin.com

Roth IRAs: The ideal long-term cryptocurrency investment?

September 20, 2022 Coin Telegraph

Bitcoin Price

Considering investing in cryptocurrencies for the long run? Roth IRAs and other tax advantages investment vehicles are worth considering.

As the cryptocurrency market matures, more governments throughout the world introduce legislation to tax proceeds from crypto-related activities, with traders often triggering taxable events that can lead to future complications.

Avoiding paying taxes is illegal, but there are legal ways to dodge triggering taxable events while hodling onto one’s cryptocurrency holdings: Roth IRAs. These are individual retirement accounts (IRAs) with a special type of tax-advantaged system.

Using IRAs to avoid triggering taxable events with cryptocurrency investments is a strategy that has been considered for some time, with North American mining and hosting firm Compass Mining offering a solution for BTC users to mine directly to their IRAs last year.

Before diving deeper, it’s important to point out that Roth IRAs are only available in the United States, although other countries often have their own form of tax-advantaged investment vehicles. Often, stocks with significant exposure to Bitcoin — such as MicroStrategy — have to be used as a proxy for some of these vehicles.

What are Roth IRAs?

A Roth IRA is a type of individual retirement account to which investors contribute after-tax earnings. What makes Roth IRAs stand out is that what investors place in these savings accounts can grow tax-free and be withdrawn without any other taxes being owed after they’re aged 59 ½, if the account has been open for at least five years.

Essentially, a Roth IRA considers that since taxes have been paid on the funds being contributed into the account, investors do not need to pay any further tax as long as they meet the specific conditions outlined above.

Roth IRAs can be funded in various ways beyond regular contributions, which have to be made in cash. Assets permitted into Roth IRA accounts include stocks, exchange-traded funds, money market funds, bonds, mutual funds and cryptocurrencies.

The Internal Revenue Service (IRS) does not allow for direct cryptocurrency contributions into these accounts, but these are various Bitcoin IRA solutions that are designed for investors to save cryptocurrencies in these accounts. It’s worth pointing out that yearly contributions to Roth IRAs are limited based on IRS specifications and that investors can keep Roth IRAs as long as they please, as there are no required minimum distributions.

Is it a good idea to add crypto to a Roth IRA?

Cryptocurrencies are known for being extremely volatile, which means they aren’t for every investor out there. More conservative investors will likely be happier holding bonds, mutual funds and exchange-traded funds, while investors with a larger risk appetite may consider allocating to crypto.

The growth potential of cryptocurrency holdings in a portfolio is enough to lure in investors who believe cryptocurrencies will keep on growing in popularity as the infrastructure around them boosts accessibility and new crypto-related products and services are created. This growth potential, it’s worth pointing out, comes with heightened risk.

As tax-free withdrawals from Roth IRAs require accounts to be at least five years old, cryptocurrency investors looking to take advantage of them should always be prepared to hold onto their funds for a long time.

Chris Kline, co-founder of cryptocurrency IRA platform Bitcoin IRA, told Cointelegraph that there are no tax benefits on contributions to Roth IRA accounts, but there are tax benefits on distributions:

“If you have a longer time horizon in Bitcoin and crypto, a Roth IRA could be an appealing choice for those looking to take advantage of the long-term promise digital assets offer.”

To Kline, cryptocurrencies are going to “disrupt the very fabric of our everyday lives in ways like the internet disrupted communication and email disrupted the post office.” The co-founder of Bitcoin IRA added that while real estate and gold were premier examples of diversification in the past, crypto has “asserted itself as an alternative in the modern economy.”

Recent: The Metaverse is becoming a platform to unite fashion communities

Kline added that cryptocurrencies can offer an “alternative path forward for people of all ages” and that there’s been a surge in interest in investing in crypto assets for diversification.

Kunal Sawhney, CEO of equity research firm Kalkine Group, seems to disagree with Kline’s approach. Speaking to Cointelegraph, Sawhney said that if a person has “spent time and labour to earn money, it should ideally not go into extremely risky assets like cryptocurrencies.”

Otherwise, he added, it “defeats the idea of investing for retirement.” Sawhney cautioned that cryptocurrencies aren’t just Bitcoin (BTC) and that betting on these increases the risk that investors fall prey to Ponzi schemes.

As an investment category, he said, cryptocurrencies “might not be so bad” as these assets may become the “biggest contributor to the overall amount in the Roth IRA when the contributor retires and plans to withdraw.” Once again, their potential outsized performance is weighed against their risk.

For long-term investors expecting these outsized returns, placing cryptocurrencies in a Roth IRA lets them realize their capital gains without getting taxed, although they’ll have to stomach the ups and downs for a while.

Portfolio diversification

The extreme volatility of cryptocurrencies makes them a not-so-easy investment when talking about retirement, with the jury being out on whether including cryptocurrencies in a 401(k) retirement plan is sound financial planning or gambling with the future.

To Sawhney, investors need to have a pre-determined strategy for their Roth IRA. The CEO noted that a 60/40 portfolio, with greater exposure to stocks than to bonds, was “long considered balanced and financially rewarding” but suggested cryptocurrencies are changing things:

“Now that there is an option available to hold relatively the most volatile asset, cryptocurrency, a new strategy, say 50/40/10, might be considered. Here 10% could go to the new asset class comprising cryptos. Investors should have the option to change the allocation share per their risk appetite.”

Recent: Does the Ethereum Merge offer a new destination for institutional investors?

Due diligence, Sawhney concluded, is crucial as Roth IRAs are often “viewed as one of the best investment vehicles for young and low-income earners.”

Speaking to Cointelegraph, Kevin Maloney, interim CEO at crypto retirement account provider iTrustCapital, said that volatility is actually “one of the main reasons why many investors prefer using a Roth IRA or any other type of IRA to invest in crypto.” He added that even day-traders could benefit:

“For those who want to ‘day-trade’ due to the volatility of crypto, an IRA still represents a solid option because they won’t be paying yearly taxes on their gains so long as they aren’t taking distributions.”

Whether investors are looking to add cryptocurrencies to their Roth IRA accounts, it’s important note that crypto assets are only available for these accounts through custodians, which may charge hefty trading fees.

It’s up to every investor to analyze what type of investment vehicle best suits their situation and risk appetite. Roth IRAs may be extremely beneficial for long-term investors, as, since 2014, the IRS has taxed cryptocurrencies as property, and capital gains taxes can be owed on depreciated assets.

The views and opinions expressed do not necessarily reflect the views of Cointelegraph.com. Every investment and trading move involves risk, you should conduct your own research when making a decision.

Rome’s Financial Volatility to Shock the Eurozone — Hedge Funds Bet $39 Billion Against Italian Debt

September 4, 2022 Bitcoin.com

El Salvador Bitcoin bond delayed due to security concerns: Tether CTO

September 2, 2022 Coin Telegraph

Bitcoin Price

The Bitcoin bond was announced in November last year and was initially expected to launch in the first quarter of 2022.

El Salvador, the Central American nation that adopted Bitcoin (BTC) as a legal tender in September last year, has delayed the launch of its billion-dollar Bitcoin bond again.

The Bitcoin bond, also known as the "Volcanic bond" or Volcanic token, was first announced in November 2021 as a way to issue tokenized bonds and raise $1 billion in return from investors. The fundraiser will then be used to build a "Bitcoin City" and buy more BTC.

The bond was set to be issued in the first quarter of 2022 but was postponed to September in the wake of unfavorable market conditions and geopolitical crises. However, earlier this week, Bitfinex and Tether chief technology officer Paolo Ardoino revealed that the Bitcoin bond will be delayed again to the end of the year.

Ardoino, in an exclusive conversation with the Cointelegraph, revealed that the current delay in the launch could be attributed to the internal security issues where the nation’s security forces have had to confront the scourge of gang violence in the country. This has diverted the focus of government resources, and "The delay in the launch of the Volcano Token has to be viewed in this context.”

Bitfinex is the key infrastructure partner of the El Salvador government responsible for processing transactions from the sale of Volcanic tokens. However, Bitfinex must acquire a license of issuance from the government first, which would be granted after the passing of the digital securities bill slated for September.

Ardoino confirmed that the final draft of the bill is ready, and they are expecting the bill to be passed in the next couple of weeks, given President Nayib Bukele’s party holds a majority. He said:

We are confident that the law will obtain approval from Congress in the coming weeks, assuming that the country has the necessary stability for such legislation to pass."

Bitfinex Securities El Salvador, S.A. de C.V. "will apply for a license to operate under the El Salvador digital securities regulatory framework once this is passed into law," he added.

While several reports and market pundits have blamed waning investor interest and the current downturn in the crypto market, Ardoino believes the idea behind the Bitcoin bond would garner investors' interest irrespective of the market conditions.

He added that the Bitcoin bond has the potential to accelerate BTC adoption. He cited the example of meme coins and explained:

“When you consider that the meme coin, Dogecoin, was able to obtain a market capitalization of US$48 billion, there is clearly enough investor appetite in the digital token economy to support a $1 billion Volcano.”

After making BTC a legal tender on Sept. 7, 2021, El Salvador accumulated over 2,301 BTC for roughly $103.9 million. During the bull market, the profit from the investment was even used to build schools and hospitals, however, with the current downturn in the market, that BTC holding are worth about $45 million currently.

Why September is shaping up to be a potentially ugly month for Bitcoin price

August 26, 2022 Coin Telegraph

Bitcoin

Bitcoin has closed its previous five months of September in losses and could suffer similar pains if history repeats.

Bitcoin (BTC) bulls should not get excited about the recovery from the June lows of $17,500 just yet as BTC heads into its riskiest month in the coming days.

The psychology behind the "September effect"

Historic data shows September being Bitcoin's most worst month between 2013 and 2021, except in 2015 and 2016. At the same time, the average Bitcoin price decline in the month is a modest -6%.

*Bitcoin monthly returns. Source: CoinGlass*

Interestingly, Bitcoin's poor track record across the previous September months coincides with similar downturns in the stock market. For instance, the average decline of the U.S. benchmark S&P 500 in September is 0.7% in the last 25 years.

*S&P 500 performance in August and September since 1998. Source: Bloomberg*

Traditional chart analysts have dubbed this annual drop-off as the "September effect."

Analysts argue that investors exit their market positions after returning from their summer vacations in September to lock gains, or even tax losses, ahead of the year's close.

Meanwhile, they also note that individual investors liquidate their assets in September to pay for their children's annual school costs.

Bitcoin's correlation with the stock market has been largely positive during and after the coronavirus pandemic. Therefore, in addition to the September effect, these mirroring price trends could also increase BTC's likelihood of dropping high in the ominous month.

So expect low volume, chop & random violent moves in either direction. The point of this post isn't to fearmonger anyone. Always a green markets somewhere. I'm sharing insight on what to expect to save newer retail traders from excruciating pain. Be patient and embrace the suck
— Seven V. Matos (@Sevenvmx) August 22, 2022

Fed eyes 75bps rate hike

Bitcoin's losses in 2022 were drawn from fears of the Federal Reserve's rate hikes and the complete unwinding of its $120 billion monthly bond-buying plan to tackle rising inflation.

But the market's narrative shifted to hopes that inflation had peaked. The belief strengthened after the July U.S. consumer price index (CPI) came at 8.5% versus 9.1% in the month prior, leading to speculations that the Fed would tone down its tightening plans.

It coincided with Bitcoin and S&P 500 recouping small portions of their yearly losses, as illustrated below.

*BTC/USD versus S&P 500 (SPX) daily price chart. Source: TradingView*

But several analysts believe that Bitcoin's recovery could be a bull trap, a "relief rally " that will trap investors who think the market has bottomed.

The psychology of a relief rally

Price gets just bullish enough to fool you that this rally is the real deal.

There could be an end to the pain.

Then BLAMO, the market rugs you shattering your hopes.

Expect this a few more times during the bear!#bitcoin #crypto
— Lark Davis (@TheCryptoLark) August 22, 2022

Moreover, most Fed officials still favor raising by 75 basis points at their next meeting in September, given their pledge to bring inflation down to 2%.

As a result, Bitcoin and S&P 500 risk continuing their prevailing correction trend in September, eyeing more yearly lows.

Bitcoin technicals hint at drop to $17.6K

From a technical perspective, Bitcoin will decline toward $19,250 by September if it breaks out of its current "bear flag" pattern. The bearish continuation setup is illustrated in the four-hour chart below.

*BTC/USD four-hour candle price chart featuring "bear flag" setup. Source: TradingView*

Meanwhile, on the daily chart, BTC has been breaking down from its rising wedge pattern since Aug. 19. The bearish reversal setup's profit target comes to be near $17,600, as illustrated in the chart below.

*BTC/USD daily price chart featuring rising wedge breakdown setup. Source: TradingView*

Overall, September looks like it could once again be a red month for Bitcoin based on technical, fundamental and macro factors.

Bitcoin likely to transition to a risk-off asset in H2 2022, says Bloomberg analyst

August 8, 2022 Coin Telegraph

Bitcoin Analysis

As the global economy moves into a recession in the second half of 2002, Bitcoin will likely rally alongside gold and treasury bonds, according to Mike McGlone, a senior commodity strategist at Bloomberg.

Bitcoin is likely to transition from a risk-on to a risk-off asset in the second half of 2022, as the macroeconomic environment is rapidly shifting towards a recession, said Mike McGlone, senior commodity strategist at Bloomberg, in a recent interview with Cointelegraph. McGlone predicted:

“ I see it transitioning to be more of a risk-off asset like bonds and gold, then less of a risk-on asset like the stock market.”

According to the analyst, the crypto market has flushed out most of the speculative excesses that marked 2021 and it is now ripe for a fresh rally. McGlone also pointed out that the Fed's aggressive hiking of interest rates will lead the global economy to a deflationary recession, which will ultimately favor Bitcoin:

“I fully expect we're going to have a pretty severe recession globally, which probably will make Bitcoin shine [...] along with gold and U.S. Treasury long bonds."

Don't forget to check out the full interview on our YouTube channel and don't forget to subscribe!

bonds

Treasury yield is nominal, so mind the inflation

Regular bonds are pricing higher inflation

Most of the bullish bets were placed above $21,000

Bears could pocket a $350 million profit

Regulatory pressure could complicate matters for Bitcoin bulls

Weekly close sends BTC/USD back to November 2020

Dollar wrecking ball costs stocks, fiat

Hodlers in classic bear market mode

Whales still dictate support and resistance

"Extreme fear" enters second week

What are Roth IRAs?

Is it a good idea to add crypto to a Roth IRA?

Portfolio diversification

The psychology behind the "September effect"

Fed eyes 75bps rate hike

Bitcoin technicals hint at drop to $17.6K

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