$18K Bitcoin price, eh? BTC market cap may pass Canada’s monetary base

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3 years ago

Bitcoin’s market cap is rapidly surpassing the monetary base of multiple national currencies and it looks like the Canadian dollar is next.

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3:31

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As Bitcoin (BTC) blasted through the $14,000 level its market capitalization surpassed the monetary base of the Russian ruble. This measure includes both physical currency and bank reserves, both of which are usually held by a country’s central banks.

Bitcoin market price inferred to match top global monetary bases. Source: Crypto Voices

The above chart may seem complicated at first glance, but it simply compares gold, silver, Bitcoin, and the remaining global monetary bases. We can see that the U.S. has $4.9 trillion physical notes, coins, and bank deposits parked at the Federal Reserve. By dividing this number by the current 18.5 million outstanding BTC, we reach the $263K stated above.

In order for Bitcoin’s market capitalization to match the U.S. base money figure, the price would need to surpass $263,000. Although this might seem far-fetched, BTC has already eclipsed multiple sovereign currencies like the Brazilian real, the Swedish krona, and the South Korean won.

This move is no small feat for a cryptocurrency that is only 11 years old. According to Fernando Ulrich, the economist behind Crypto Voices, the top 30 base money competitors cover 95% of GDP. Aside from the Euro covering many countries, some of the top 113 peg their currencies to the U.S. dollar.

Researchers at Crypto Voices concluded that:

"So far, the money monopoly 'works' for Central Banks, and for their governments. It's virtually costless: fiat has proven to be nearly 'unconstrained' by the market value of gold."

The researchers elaborated by saying:

"As for #bitcoin, if and when it becomes large enough to be on that chart, and / or held by central banks, then and only then will we have any idea as to what bitcoin 'costs' central banks."

Some might interpret the analysis as bearish, but it's actually the opposite.

The researchers at Crypto Voices infer that, so far, central banks and governments have maintained their ability to print money regardless of their gold holdings. Therefore, there is no pressure to seek a new "gold standard" or anything remotely similar.

As the researchers perfectly summarize, inflation depreciates fiat currencies little by little. This caused Bitcoin to surpass a number of currencies as they succumbed to excessive printing. In fact, 2020 had the most extensive global base money expansion ever registered.

Fiat base money supply. Source: Crypto Voices

As clearly shown above, the global money supply increased by $5.5 trillion in 2020. That's a 28% expansion, while Bitcoin has kept its halving calendar, cutting its issuing by 50%.

Looking forward

The big question on the minds of investors is will Bitcoin's stock-to-flow model prevail? According to some critics, there are several flaws in the assumption that BTC will reach $100K and higher in 2021 and beyond.

The ruble has fallen, as have many other sovereign currencies so now all eyes are on the Canadian dollar. As shown in the fiat base money supply chart, the Canadian dollar’s base money stands at $335 billion which is equivalent to an $18,000 Bitcoin price.

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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WILLIAM SUBERG

54 MINUTES AGO

Bitcoin Cash hits record lows vs. Bitcoin days before hard fork

The embattled spin-off of Bitcoin shows little signs of life prior to its hard fork as Bitcoin vastly outstrips its performance.

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2:47

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Altcoin traders continue to feel the pain as Bitcoin (BTC) gains, with Bitcoin Cash (BCH) hitting new all-time lows.

Data from Cointelegraph Markets and other sources shows that as of Nov. 10, BCH is worth less in BTC terms than ever before.

Bitcoin Cash plunges to new BTC lows

At press time, BCH/BTC traded at 0.017 BTC, comfortably beating its previous record low of 0.0245 BTC seen in December 2018.

The hard fork of Bitcoin has seen little attention this year, as investors focused on Bitcoin and then the decentralized finance (DeFi) phenomenon. The announcement of another hard fork of the Bitcoin Cash network, set for Nov. 15, has done little to buoy the coin’s prospects, data shows.

BCH/BTC historical weekly chart. Source: TradingView

In USD terms, Bitcoin Cash has spent the past three months fluctuating in a corridor between $230 and $280, while Bitcoin itself has increased by a third in value.

Unsurprisingly, Bitcoin proponents took a dim view of the upcoming hard fork, something which has sparked a familiar tussle between businesses opting to support or reject the resulting new coins.

“Hopefully this election drama will clear up before the next scheduled shitcoin drama: T minus 10 days to the next bcash fracture!” CasaHODL co-founder Jameson Lopp summarized on Twitter last week as the hard fork was confirmed.

Litecoin sees lowest ever weekly close

For Litecoin (LTC), price data shows a similar story. LTC/USD traded at 0.0038 BTC on Nov. 10, increasingly close to its extant bottom of 0.003 BTC from March 2017.

On the weekly chart, the pair printed its lowest close in history this month.

LTC/BTC historical weekly chart. Source: TradingView

Noting the lack of performance by both Litecoin and Bitcoin Cash since PayPal confirmed that it would support both assets along with Bitcoin from 2021, one popular Twitter account summed up the mood among those who favor BTC.

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“We think it's a bad business decision and also morally and ethically bankrupt for @PayPal to allow retail customers to purchase BCH and LTC,” it wrote on Nov. 5.

“Many retail investors will be tricked with misleading copy like below into purchasing assets that are completely worthless. It's not right.”

While some traders continue to forecast the return of “alt season” next year, prospects remain bleak for the near term, as Bitcoin’s market cap dominance has reached 64%, its highest since June.

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RAY SALMOND

11 HOURS AGO

Investors are back into Bitcoin but DEXs are still the future of crypto

Bitcoin’s rally to $15.9K stole the limelight from DeFi tokens and decentralized exchanges but the tables could turn rapidly.

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10:12

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Bitcoin’s long-waited bull run and the recent wave of corporate and institutional investors allocating significant portions of their reserves to Bitcoin (BTC) are all signs that the pace of crypto’s mainstreaming is rapidly accelerating: But has the path to mass adoption come at the cost of privacy and decentralization?

Know Your Customer and Anti-Money Laundering laws have forced the majority of cryptocurrency exchanges to become more transparent about who their users are, and those who refused have had to limit the jurisdictions in which they can offer services.

In order to operate legally in many countries, many exchanges have had no choice other than to abide by strict AML procedures, and aside from Monero (XMR), swathes of privacy coins have been delisted from most major exchanges.

Recently, regulators have begun to crack the whip and jurisdictions around the world continue to propagate further measures to ensure investors disclose their crypto holdings and pay taxes on their profits.

And this is all happening as the United States Department of Justice arrested the co-founder of BitMEX and the CFTC charged its owners with running an illegal crypto derivatives exchange.

Roughly a week later, the Financial Conduct Authority, the United Kingdom’s top regulatory watchdog, went as far as to ban investors from derivatives trading at all crypto exchanges.

All of these maneuvers are designed to force compliance on crypto service providers, and while they may eventually assist with furthering mass adoption, many crypto ideologues are looking for alternatives to press their case for financial self-sovereignty.

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Decentralized exchanges may be the solution

A growing number of investors feel that centralized crypto exchanges essentially operate in the same manner as traditional banks. As a response to this, decentralized exchanges such as Uniswap, 1inch, Curve Finance and Balancer grew in popularity throughout 2020.

For more sophisticated investors, decentralized exchanges offering derivatives trading have also become available. Similar to traditional derivatives, crypto exchanges offering the service essentially act as the broker, but the process is marginally different on decentralized exchanges. This is because they utilize smart contracts in place of a broker, and the derivatives contracts are settled when the contract terms have been met.

At the moment, Synthetix is one of the most popular decentralized derivatives exchanges, and in 2020, it saw its total value locked rise to $1 billion before a sharp sector-wide correction led to a drop in TVL and daily active users at the majority of DEXs.

Total value locked in Synthetix. Source: DeFi Pulse

The exchange allows users to create an instrument called a synthetic asset “Synth” that can track gold, fiat and cryptocurrencies. It also allows the creation of assets that track the price of assets inversely.

Platform users can also stake the native SNX token as collateral in order to mint new synths, and similar to Uniswap, those who provide liquidity are rewarded by earning a portion of the exchange’s transaction fees.

Those familiar with DEXs like Uniswap will know that literally, anyone can list a new asset, which, in the case of derivatives, means any underlying asset can be transformed into a derivatives instrument.

These platforms allow users to trade derivatives without the need to deposit funds in any centralized platform, and they are not required to complete any KYC procedures.

While some investors shun KYC and tax compliance, this is a serious matter for crypto service providers. According to Molly Wintermute, an anonymous developer credited with founding Hegic DEX, compliance is more of an issue for centralized crypto service providers, not DEXs.

When asked how DEXs can remain compliant with financial regulators, Wintermute bluntly explained in a unique vernacular that:

“They can’t. this is a new layer of financial infrastructure, not an addition 2 z current financial system. it’s like TCP/IP or FTP, not jst a decentralized crypto exchange. U can’t stop z code or ban internet. unless public blockchain is open & permission-less it’s almost impossible 2 ban decentralized derivatives protocols.”

Wintermute further explained that decentralized derivatives are alluring to a particular subset of investors because:

“Non-custodial trading (protocol/people don’t hold funds as funds r allocated on smart contracts). Verified on-chain settlement (there’s no ability 2 cheaply manipul8 z derivatives & no close source trading algorithms that only exchange owners knows how 2 work/manipul8 with). deeper liquidity (new peer-to-pool/peer-to-contract model might offers lower spreads & better terms 4 users).”

According to Wintermute, the number of investors actually using DEXs is quite small, compared to the total number of crypto investors. To Wintermute, this means the FCA derivatives ban and the recent legal actions taken against BitMEX are completely irrelevant and non-applicable to decentralized finance protocols.

Wintermute said:

“Decentralized derivative is a part of small crypto world. there r 100M+ of crypto holders globally. around 5-10 of them might b actively trading crypto derivatives (globally). i don’t think that FCA ban has opened any new interesting opportunities. nothing has changed.”

After being pressed to elaborate on the chance that the SEC, FCA or other regulators might not attempt to shut down a platform such as Uniswap and arrest its founders, Wintermute said:

“They could probably arrest 1 or 2 CEOs like bitmex founders who have some shady things goin’ on internally but only 2 make everyone else feel fear. they can’t arrest everyone. also compare decentralized derivatives with crypto used 4 dealin’ drugs. these two things r 4from different sides of a spectrum. a toy in case of decentralized derivs & a gun in case of drugs dealers who r usin’ crypto. decentralized derivatives r not a crime.”

Wintermute also appeared to shake off the recent BitMEX scandal, sharply replying that:

“I don’t think that somebody gives a f--- abt DeFi or DEXes. bitmex guys have so many shady things inside that this might b a great target 2 attack while DeFi / DEX protocols have 100% transparency & u can’t take a person 2 jail 4 buidlin’ a website that jst has numbers on it which r transparent 4 everyone else in z world.”

Ultimately, Wintermute believes that “Bakkt/CME & other wall s--- guys r so angry that no one uses their s----- products that they now takin’ crypto entrepreneurs & tryin’ 2 send them 2 jail.”

The anonymous developer then explained that in her view, the “meta game is 2 ban every cool crypto products & try 2 cannibalize on their user base but with compliant s----- products.”

While there may be merit to some of Wintermute’s bold assertions, the arm of the law is quite long, and as we have seen with the now-defunct ICO era, bringing those who violate securities laws takes time.

In 2020, the total value locked in DeFi platforms has risen to $12.6 billion, and data from Dune Analytics shows that Uniswap processed $11.2 billion in volume in October. These massive figures are sure to catch the eye of U.S. and international regulators so it may only be a matter of time before legal action is taken against DEXs.

Decentralized exchanges are a testing ground for layer-two solutions

In addition to addressing privacy concerns and restoring decentralization to the crypto sector, DEXs also provide a sandbox for layer-two developers to play in. As has been thoroughly reported by Cointelegraph, scaling within the Ethereum network has been a persistent challenge.

When the network becomes congested during high demand periods, gas fees increase exponentially, and transaction speeds grind to a halt. With Ethereum 2.0 in perceptual “development,” a number of DEXs have begun to experiment with integrating layer-two solutions to provide users who are willing to forgo the Ethereum network with cheaper, faster options.

Project Serum is probably one of the better-known success stories for a non-Ethereum based DEX.

The decentralized derivatives-based project is built on the Solana blockchain instead of the default Ethereum network that most DEXs operate on, but it is also fully interoperable with ERC-20-based assets and Bitcoin.

FTX CEO Sam Bankman-Fried and his team are the brains behind Project Serum, and according to Bankman-Fried, the project is designed to circumvent the privacy and safety concerns of centralized exchanges by giving users a permissionless method to invest with leverage and swap assets.

The project also provides a cheaper alternative to the high gas fees and slow transaction speeds that frequently plague the Ethereum network during periods of high traffic.

Bankman-Fried said:

“In order to build a product capable of offering fast, cheap order matching, you need a chain with high throughput. This demand increases further for trading nonstandard markets and handling risk or liquidations. Serum chose to build on Solana because the chain has focused on a unique and powerful vision for scaling.”

According to Bankman-Fried, technical issues such as congestion and high fees can make or break an investor. Regarding high fees, he said:

“They’re fatal: You basically cannot have derivatives on Ethereum because of the scaling problems. To the extent that decentralized derivatives have growth opportunities, they’ll either be on a new L1, or on an L2.”

Bankman-Fried also agreed with Wintermute’s claim that hardly anyone is using DEXs, as “the vast majority of derivatives volume is on centralized exchanges,” but he suggested that in theory, “composability and self-custody” should be incentives for more users to join the movement.

One DEX to rule them all

Total value locked in DeFi. Source: Digital Assets Data

Currently, investors have shifted their attention back to Bitcoin as the digital asset pursues a new all-time high, and data from Cointelegraph and Digital Assets Data indicate that DEX trading volume and daily active users continue to decline.

DEX daily active users. Source: Digital Assets Data

While this is likely disappointing to investors, it at least provides developers some quiet time to focus on properly integrating layer-two solutions to DeFi protocols.

The trend of major cryptocurrency exchanges becoming more centralized is unlikely to change anytime soon. This means that the first DEX to successfully provide a platform with low fees, privacy protections and a fast user-friendly interface will rule supreme once investors make the choice to invest in decentralized finance and decentralized derivatives again.

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JOSEPH YOUNG

15 HOURS AGO

3 reasons why Bitcoin price abruptly dropped 6% after reaching $15,800

A strengthening dollar and unexpected stock market rally occurred as Bitcoin price sharply dropped by 6%.

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The price of Bitcoin (BTC) rose to as high as $15,840 before crashing to $14,800. Just five hours after reaching an intraday top, the dominant cryptocurrency dropped over 6%. This massive spike in volatility was likely caused by three major factors.

The three catalysts for the abrupt downtrend were the recovery of the dollar, the decline in gold price as Pfizer announced that its COVID-19 vaccine trials are producing positive results, and whales dumping BTC.

BTC/USD 4-hour chart. Source: TradingView.com

Precious metals and Bitcoin fell in tandem

According to the Associated Press, Pfizer announced that the third phase of its vaccine trials is going well. The pharmaceutical giant said its vaccine is currently proven to be 90% effective in COVID-19 prevention.

To date, Pfizer has tested the vaccine on 44,000 participants, and if it proves effective, the next step would be for the United States Food and Drug Administration to conduct its own tests before approving the vaccine for mass production and distribution.

After the vaccine announcement, the Dow Jones Industrial Average surged 1,000 points, leading to a strong U.S. stock market rally. As the U.S. dollar and stocks triumphed, Bitcoin and gold dwindled simultaneously.

Michaël van de Poppe, a full-time trader at the Amsterdam Stock Exchange, pinpointed the recovery of the U.S. dollar index and suggested that alternative stores of value, like gold and Bitcoin, are priced against the dollar. As such, when the dollar recovers, the price of BTC could fall steeply alongside precious metals.

Van de Poppe explained:

“There we seem to go. $DXY bouncing up as there's more certainties at this point, through which assets like #bitcoin, gold and silver drop down substantially. A correction on $BTC would be tremendous and a great opportunity in general.”

Whales began to aggressively sell BTC

When the drop occurred, CryptoQuant, an on-chain market analysis firm, found that whales were selling Bitcoin.

Traders, like the pseudonymous investor “Byzantine General,” found a similar pattern. As Bitcoin dropped in a whale-induced pullback, retail investors were continuously longing BTC.

Whales had several attractive reasons to sell BTC at $15,800. First, it is a major resistance area right below a pivotal level at $16,000. If the $16,000 level breaks, technical analysts have said BTC would likely position for an all-time high.

When whales sell, the market often sees a strong reaction. Whether whales would begin to take profit on their shorts and attempt to resume the bull trend remains unclear. For now, the pullback has stalled, with BTC recovering above $15,100, indicating a short-term trend reversal to the upside.

Long-term players are holding strong

Despite the heightened level of volatility in the market, cryptocurrency trader Cantering Clark emphasized that long-term investors are unlikely to be fazed. He said:

“This volatility is just fast money funds that play $BTC as a higher beta $GOLD dumping on vaccine news. The players that enter on behalf of the longer-term thesis for Bitcoin are not changing their positioning.”

Short Term Holder MVRV. Source: Glassnode

In addition to the factors mentioned above, analysts at Glassnode noted that the current short-term holder activity is reminiscent of previous bull trends. As such, if BTC recovers strongly from the recent drop, the chances of a rally continuation could increase. Glassnode said:

“#Bitcoin Short-Term Holder MVRV has been holding its positive ratio for the past six months — and bounced off the neutral line yet another time. Historically, holding this support level is indicative for an ongoing $BTC bull market.”

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