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Elon Musk warns of ‘strong inflationary pressure’ as Tesla mulls Bitcoin payments

The world's richest man, whose net worth hit a quarter of a trillion dollars this week, is also unsure whether inflation will ever calm down.

The world faces "strong inflationary pressure" in the short term and it may persist, warns the world's richest man.

In a debate about inflation, some of the best-known names in Bitcoin voiced unanimous doubts about the state of global monetary policy.

Future of inflation great unknown, says Musk

As even the United States Federal Reserve admits that inflation may be here to stay, the topic has become especially perrtinent for Bitcoiners given the cryptocurrency's intrinsically deflationary characteristics.

For Musk, who remains cool when it comes to Bitcoin as a "magic pill" for fiat currency's ills, inflation is no less of an issue. With over $250 billion in net assets as of this week, potential exposure to devaluating currencies is more of a potential problem than ever.

"I don’t know about long-term, but short-term we are seeing strong inflationary pressure," he said in a Twitter debate with Ark Invest CEO Cathie Wood and MicroStrategy CEO Michael Saylor.

All were commenting on a previous tweet from Twitter CEO Jack Dorsey, who described inflation as "happening" and apt to "change everything."

Wood, also a firm BTC supporter, noted that monetary velocity, on the contrary, had been slowing since the 2008 Global Financial Crisis, disguising some of the devaluation impact.

Regardless, when all types of product are taken into account, the true cost of dollar printing far outstrips government claims about how inconsequential inflation really is.

"Inflation is a vector, and it is clearly evident in an array of products, services, & assets not currently measured by CPI or PCE," Saylor wrote. 

"Bitcoin is the most practical solution for a consumer, investor, or corporation seeking inflation protection over the long term."
Federal Reserve balance sheet chart. Source: Federal Reserve

Bitcoin may yet return to Tesla

Musk's Tesla passed $1,000 per share for the first time this week, helping spur a dramatic increase in his net worth.

Related: Tesla hints it may soon resume support for crypto payments

In a filing with the U.S. Securities and Exchange Commission (SEC), meanwhile, the company left the door open to accepting Bitcoin for its products in future.

"During the nine months ended September 30, 2021, we purchased an aggregate of $1.50 billion in bitcoin. In addition, during the three months ended March 31, 2021, we accepted bitcoin as a payment for sales of certain of our products in specified regions, subject to applicable laws, and suspended this practice in May 2021," the 10-Q document reads.

"We may in the future restart the practice of transacting in cryptocurrencies ('digital assets') for our products and services."

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Journalist and Youtuber Tim Pool Believes 1 Bitcoin Will ‘Eventually Be Equivalent to $1 Million’

Journalist and Youtuber Tim Pool Believes 1 Bitcoin Will ‘Eventually Be Equivalent to  Million’The American journalist, Youtuber, podcast host, and political commentator, Tim Pool, has talked about bitcoin on numerous occasions and even more so these days as the crypto asset crossed its all-time price high. After the Proshares exchange-traded fund (ETF) launched on the New York Stock Exchange (NYSE), Pool asked his 897,700 Twitter followers if they […]

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JPMorgan says inflation concerns, not ETFs, driving Bitcoin price jump

JPMorgan strategists say that interest in the newly launching BITO Bitcoin ETF could cool after a week or so.

Bitcoin (BTC) broke its all-time high price level following the launch of ProShares’ Bitcoin Strategy exchange-traded fund (BITO) on Tuesday, but JPMorgan Chase strategists believe the key driver behind the price jump is investor concern over inflation.

The BITO launch, which saw the highest ever first-day natural volume for an ETF, is “unlikely to trigger a new phase of significantly more fresh capital entering Bitcoin,” JPMorgan strategists said in a note.

Instead, JPMorgan believes that as gold failed to respond to concerns over rising cost pressures in the last couple of weeks, Bitcoin’s renewed role as a better hedge against inflation in the eyes of investors is the main reason for the current bull run. The team highlighted that the shift away from gold ETFs into Bitcoin funds is gathering speed since September and “supports a bullish outlook for Bitcoin into year-end.”

JPMorgan strategists exemplified the waning interest after the first week following the launch of the Purpose Bitcoin ETF (BTCC) in Canada, claiming that the initial hype surrounding BITO could also fade after a week.

As the first Bitcoin futures-linked ETF in the United States, ProShares’ Bitcoin Strategy ETF started trading on the New York Stock Exchange on Oct. 19 at an opening price of $40 per share. It enables investors to have direct exposure to cryptocurrency futures in a regulated market.

Related: Bitcoin futures ETF hits $1B AUM in a record-breaking two days

JPMorgan’s comments echo others in traditional finance. Billionaire investor Carl Icahn praised Bitcoin as a great hedge against inflation as the next market crisis looms on the horizon.

Bill Winters, the CEO of British bank Standard Chartered, recently noted the passing of a long period of low inflation, adding that “it’s perfectly reasonable for people to want an alternative to fiat currency.”

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Billionaire investor Carl Icahn thinks Bitcoin may be the best hedge for inflation

His comments were in line with Federal Reserve Chairman Jerome Powell, who mentioned that inflation was rising along with supply issues.

Billionaire investor Carl Icahn warned Tuesday that the next market crisis may be on the horizon, and Bitcoin could be the best hedge against inflation.

With the United States government continuing to stimulate the economy, Icahn stated that he fears the dollar is becoming more devalued and that the price of goods is rising.

“In the long run we are certainly going to hit the wall. I really think there will be a crisis the way we are going, the way we are printing money, the way we are going into inflation. If you look around you, you see inflation all around you and I don’t know how you deal with that in the long term.” Icahn said on Monday with CNBC.

His comments were in line with Federal Reserve Chairman Jerome Powell who mentioned that inflation was rising along with supply issues:

“As the economy continues to reopen and spending rebounds, we are seeing upward pressure on prices, particularly due to supply bottlenecks in some sectors,” Powell said in prepared remarks. “These effects have been larger and longer lasting than anticipated, but they will abate, and as they do, inflation is expected to drop back toward our longer-run 2% goal.”

Icahn mentioned investing billions in cryptocurrencies this year, but still has not added a position in this market — at least not that he has stated publicly. Ryan Adams, founder of crypto investment firm Mythos Capital and Bankless, speculated that Icahn may have a position.

The billionaire still believes there may be an alternative to investing in the stock market, and cryptocurrencies may be worth exploring:

"We got a lot of smart guys working at Icahn & Company, and we just don't understand bitcoin. I'm not saying it's bad or good, I'm just saying we don't understand it. We're not going to invest in something we don't get [...] The jury is really out on whether bitcoin has intrinsic value or acts as a store of value. If inflation gets rampant, I guess it does have value. There are so many variables, it is a very difficult thing to invest in.”

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‘Thank God for Bitcoin,’ Cynthia Lummis says on US debt limit raise

Bitcoin should be there to allow people to save in the event of governments fail, Senator Cynthia Lummis said.

Amid the United States President Joe Biden signing legislation to raise the government’s debt limit to $28.9 trillion, Senator Cynthia Lummis said that Bitcoin (BTC) is a blessing of God.

Republican Senator Lummis gave a speech to the Senate on Thursday, providing her perspective on how digital currencies like Bitcoin could potentially help countries like the U.S. address the looming crisis when the state runs out of cash.

Lummis said that one of the reasons she became so interested in non-fiat digital currencies like Bitcoin is because they are not issued by the government and thus aren’t beholden to the debts that are “run up by governments” such as the United States.

As cryptocurrencies are not beholden to governments and political elections, they should grow and be there, allowing people to save in the event if governments fail, Lummis argued:

“Time and again, presidents of both parties have run up the debt irresponsibly, with no plan to address it. So thank God for Bitcoin, and another non-fiat currency that transcends the irresponsibility of governments, including our own.”

U.S. President Biden officially signed legislation temporarily raising the state’s borrowing limit on Thursday, pushing off the deadline for debt default only until December. The legislation would extend the debt ceiling by $480 billion from the current national debt of $28.4 trillion.

Related: US lawmaker is most concerned about Treasury's response to crypto

A Republican from Wyoming, Lummis has emerged as one of the most vocal advocates of Bitcoin in the U.S. Senate. The senator is known for accumulating significant amounts of Bitcoin, with one of the latest purchases worth between $50,001 and $100,000.

In February, Lummis launched the Financial Innovation Caucus to educate fellow lawmakers about Bitcoin and other cryptocurrencies. The pro-Bitcoin senator is also known for joining a laser-eye flash mob on Twitter earlier this year, projecting Bitcoin to reach $100,000 by the end of 2021.

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CME Bitcoin futures open interest hits 8-month high, greater than when BTC price was at $65K

Open Interest surged to $3.22 billion Thursday to levels not seen since February.

Open interest (OI) for Bitcoin (BTC) Futures trading on the Chicago Mercantile Exchange (CME) inched toward a new record high Thursday as BTC reclaimed its five-month high of $58,550 on BitStamp.

The total number of outstanding derivatives contracts on CME Group's Bitcoin Futures market reached $3.22 billion, according to data provided by ByBt.com, just $40 million below its record high logged in Feb 2021. Nonetheless, the OI came out to be higher than it was at the Bitcoin price's peak in mid-April.

In detail, the Bitcoin Futures OI on CME was $3.02 billion on April 14, the day on which the BTC price—nearly reached $65,000. But on Thursday, the OI was more than 6% higher than the readings from mid-April, even as the BTC price wobbled inside the $57,000-$58,550 price range.

CME Bitcoin Futures open interest. Source: ByBt.com

Traders often use OI as an indicator to confirm trends in both derivatives and spot markets. For example, a rising number of outstanding derivatives contracts gets interpreted as new money coming into the market, irrespective of the bias.

Meanwhile, in the case of Bitcoin, a rising open interest in the futures market appears indicative of accredited investors' wanting to increase exposure to BTC.

Commercial sector increases Bitcoin Futures exposure

The latest OI readings suggest that more institutional capital is entering the Bitcoin market. As a result, investors have been looking more confident in opening new positions in the $50,000-$58,000 price range, with the CME volumes trending higher in the past seven days.

Bitcoin futures — volume and open interest. Source: CME

Analysts see a uniform rise across OI, volume, and price as signs of new buying in the futures market. That also puts the underlying asset in a better position to continue its uptrend. So it seems, Bitcoin is undergoing a similar upside trend.

Prime evidence for a bullish Bitcoin comes from the Commodity Futures Trading Commission's record released on Oct. 5. It notes that the commercial sector — which comprises corporate hedgers — have accelerated their Bitcoin Futures purchases; they now hold a net position of more than 10,000 BTC.

CME BTC Futures exposure changes. Source: CFTC, Forbes

At the same time, however, hedge funds and retail investors have emerged to be net short in the Bitcoin Futures market. Nevertheless, that could be their tactic to offset long positions elsewhere, such as in the spot market.

That is primarily due to a higher annualized premium available on CME Bitcoin Futures prices over spot markets. In recent days, CME Bitcoin futures price has been regularly trading 15% above BTC spot price, compared with around 7.7% on average in the first nine months of 2021.

Bitcoin Futures premium against spot prices. Source: Skew 

Macro fundamentals behind Bitcoin resurgence

The latest bout of buying in the Bitcoin spot market also appeared in the wake of statements coming from U.S. regulators.

For instance, Gary Gensler, the chairman of the Securities and Exchange Commission (SEC), and Jerome Powell, the chairman of the Federal Reserve, discouraged a ban on Bitcoin. Meanwhile, the increasing prospect of a Bitcoin ETF approval by the SEC has also fueled the "buy the rumor" narrative.

Related: Bitcoin analyst ‘highly doubts’ return to $50K — Will the weekly close spark a correction?

Investors also sought exposure in the Bitcoin market as consumer prices continued to soar in the U.S. According to the Labor Department, the Consumer Price Index (CPI) rose to 5.4% year-over-year in September for the first time in thirteen years.

JP Morgan Chase noted in its recent report that higher inflation prompted institutional investors to seek exposure in Bitcoin, with some even seeing the cryptocurrency as a better haven asset than gold. In another report published in Jan 2021, the U.S. banking giant had anticipated the BTC price to reach $140,000 in the long term.

"A crowding out of gold as an ‘alternative’ currency implies big upside for Bitcoin over the long term," it had noted.

"A convergence in volatilities between Bitcoin and gold is unlikely to happen quickly and is in our mind a multiyear process. This implies that the above-$146,000 theoretical Bitcoin price target should be considered as a long-term target, and thus an unsustainable price target for this year.”

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.

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St. Louis Fed’s James Bullard Would ‘Support Starting the Taper in November’ to React to Inflation

St. Louis Fed’s James Bullard Would ‘Support Starting the Taper in November’ to React to InflationSt. Louis Federal Reserve president James Bullard told the press on Tuesday that he thinks the U.S. central bank needs to wind down the buying of $80 billion worth of monthly bond purchases. Bullard says he would support tapering starting as early as November, in order to “react to possible upside risks to inflation next […]

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US Inflation Expectations Highest Since 2013, Gas Prices Skyrocket, Supply Chains Buckle

US Inflation Expectations Highest Since 2013, Gas Prices Skyrocket, Supply Chains BuckleAmericans are still concerned about dealing with inflation, as the cost of goods and services has continued to rise significantly in a short period of time. The Federal Reserve has published the latest Survey of Consumer Expectations report and U.S. households believe inflation will be up 5.3% one year from now. In addition to the […]

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Bitcoin price is correcting, but what does futures data show?

BTC price rejected near $58,000 but derivatives data shows traders positioned in a neutral-to-bullish, leaving sufficient “room” for a new all-time high in 2021.

Bitcoin had been underperforming most altcoins for the past two months, but that trend reversed this week when (BTC's) 20% rally pushed its market capitalization to break the $1 trillion mark on Oct. 6. That shifted investors' attention back to the leading cryptocurrency, and altcoins are currently in the red for the day. 

The current positive momentum could be dangerous if Bitcoin traders become overconfident and abuse leverage to open long positions. To avoid this, traders need to carefully analyze derivatives markets to exclude this risk.

Top 14 coins weekly performance. Source: CoinMarketCap

Notice above how the altcoin market capitalization increased by 5.8% while Bitcoin posted a 20.8% gain in the same period. Sure enough, there were some outliers like Shiba Inu (SHIB) which rose by 200%, Fantom (FTM), which rallied 60%, and Klaytn (KLAY), which gained 36%. However, the aggregate market capitalization from altcoins did not accompany Bitcoin's performance.

Some well-known personalities, such as billionaire Wall Street investor Bill Miller recently expressed their optimism for Bitcoin while raising concerns on most altcoin projects. Miller explicitly mentioned the "big banks" getting involved and referred to "huge amounts" of venture capital money flowing into Bitcoin.

The recent Bitcoin frenzy seems driven by the macro-economic scenario. The United States increased its debt limit by $480 billion to pay off its obligations until early December. The inflationary pressure brought by unending stimulus packages and meager interest rates has been fueling the long rally in commodities.

For example, oil reached its highest level in seven years, and wheat futures recently hit a record high not seen since February 2013. Even the S&P Case-Shiller home price index has presented an annualized 23.3% gain.

To understand if Bitcoin traders got overly excited, traders should analyze Bitcoin's derivatives indicators like the futures markets premium and options skew.

The futures premium shows traders are slightly bullish

The basis rate measures the difference between longer-term futures contracts and the current spot market levels. This indicator is also frequently referred to as the futures premium.

Bitcoin 3-month futures annualized basis. Source: Laevitas.ch

A 5% to 15% annualized premium is expected in healthy markets, which is a situation known as contango. This price difference is caused by sellers demanding more money to withhold settlement longer.

The recent 20% Bitcoin price rally caused the indicator to reach the upper limit of this neutral zone, meaning investors are bullish but not yet overconfident. Whenever buyers demand excessive leverage, the basis rate can easily surpass 25%, as seen in mid-May.

To exclude externalities specific to the futures instrument, one should also analyze options markets.

Bitcoin options signal "neutral" sentiment

The 25% delta skew compares similar call (buy) and put (sell) options. This metric will turn positive whenever "fear" is prevalent because traders expect potential downside.

The opposite holds when option traders are bullish, causing the 25% delta skew indicator to shift to the negative area. Readings between negative 8% and positive 8% are usually deemed neutral.

Deribit BTC options 25% delta skew. Source: Laevitas

The above chart shows that there hasn't been a single instance of options traders becoming overconfident in the past six months, which would signal "greed" because the 25% delta skew dropped below negative 8%. Meanwhile, the indicator has ranged near 0 for the past week, showing balanced risks between the bears and bulls.

Those findings necessarily show a lack of confidence from buyers, but it is quite the opposite. Had Bitcoin bulls already been overly confident at $57,000, there would be little room for additional leverage, increasing the risk of a cascading liquidation if a momentary price correction occurred.

Bulls are modestly confident and even a 20% price correction is unlikely to change the situation because the futures market's basis rate shows a reasonable premium after the recent rally.

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

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5 Countries Will Accept Bitcoin as Legal Tender by End of Next Year, Says Bitmex CEO

5 Countries Will Accept Bitcoin as Legal Tender by End of Next Year, Says Bitmex CEOBy the end of next year, at least five countries will have accepted bitcoin as legal tender, the CEO of cryptocurrency exchange Bitmex has predicted. He cited three key reasons why he arrived at this conclusion. “Developing countries will jump into crypto in 2022,” he said. More Countries Will Adopt Bitcoin as Legal Tender The […]

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