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Retail buying through PayPal is likely helping push bitcoin’s price higher while traders are hoping to get into an ether options market with potential volatility similar to March 2020.
Bitcoin’s prices reached all-time highs above $40,000 less than a month after breaking $20,000 for the first time. Since the start of the most recent rally, ostensibly begun in October, its value has increased fourfold.
So for pros and newbies alike, or if you want to be the cryptocurrency expert at your next Zoom party, it’s natural to ask: Why are prices going up, and will bitcoin crash?
Bitcoin (BTC) was just invented 12 years ago as a new type of electronic payment system, built atop an Internet-based computing network that no single person, company or government could control. The reality is that the cryptocurrency’s trading history is so short, with methods for valuing the asset still largely untested, that nobody really knows for sure what it should be worth now, or in the future.
- Demand from institutional buyers, many of them eyeing bitcoin as a hedge against inflation. The cryptocurrency is seen as a hedge against inflation because, under the network’s original programming, only 21 million bitcoins can ever be created; so there’s a contrast with central banks like the Federal Reserve that can decide based on a committee vote to print more money. Big asset managers including Tudor Investment and Guggenheim Partners have announced bitcoin purchases or wagered on prices using futures contracts on the Chicago-based CME exchange. Even old-line Wall Street firms such as Morgan Stanley have weighed in with bullish pronouncements. Analysts for JPMorgan Chase, the biggest U.S. bank, recently predicted a price of $146,000 over the long term.
- The U.S. dollar’s decline in foreign exchange markets. The U.S. Dollar Index, a gauge of the dollar’s value against major world currencies like the euro and Japanese yen, slid 6.8% in 2020 and is down again in 2021. That’s key for bitcoin, since the cryptocurrency’s price is mostly denominated in U.S. dollars. Possible reasons for the greenback’s decline include the Federal Reserve’s $3 trillion-plus of money printing over the past year, which is roughly three-quarters of the entire amount previously created in the U.S. central bank’s 108-year history. Images of protestors storming the U.S. Capitol on Wednesday probably didn’t burnish America’s leadership role on the global stage, and now many economists are predicting that big spending plans under a Democratic-controlled government would lead to new stimulus bills and potentially outsize government budget deficits for years to come. Much of those extra costs could be financed through additional Fed money printing.
The Democratic party narrowly triumphed in Georgia elections held earlier this week, wresting control of the U.S. Senate from the Republicans. As such, the Democratic-controlled House of Representatives now has more freedom to implement its policies.
Analysts at UBS Bank believe the unified government legislature will smooth the path to more fiscal stimulus. According to an Axios report, President-elect Joe Biden is considering a two-pronged stimulus effort in the form of $2,000 checks for Americans and a tax and infrastructure spending package worth $3 trillion.
The new fiscal stimulus is expected to boost inflation, weaken the U.S. dollar and bring more buyers for scare assets such as bitcoin (BTC, +7.79%) and gold.
Market-based measures of inflation have begun factoring in a potential stimulus-driven rise in price pressures in the economy. The 10-year breakeven rate, which represents how the bond market foresees long-term inflation, rose to 2.09% on Thursday, the highest level in over two years, according to St. Louis Federal Reserve.
Bitcoin custodian Bakkt is reportedly going public if a merger with shell firm VPC Impact Acquisition Holdings (VPC) goes through, financial publication Bloomberg said Thursday.
The Intercontinental Exchange (ICE)-owned firm will forego the traditional initial public offering (IPO) route as a result, and instead, trade directly on a public exchange.
VPC is a special-purpose acquisition company (SPAC)—more colloquially a “blank check” firm—or a company designed to take other companies public. SPACs allow retail investors to invest in private equities, and a merger would mean they can trade shares of Bakkt on the open market.
Sources suggested to Bloomberg that the deal would value Bakkt (combined with VPC) in the region of over $2 billion. That would mean a large exit for existing shareholders, who have invested nearly $300 million in Bakkt so far.
Major cryptocurrency exchange Coinbase has acquired the Routefire platform for enhanced trade execution.
In a Jan. 7 blog post, Routefire CEO Jason Victor announced that the team would now be developing its execution services for Coinbase, while thanking users for their support over the last three years.
Routefire started in late 2017 with a mission to enhance trading infrastructure in the crypto market. They developed products that allow traders to automatically search multiple sources of liquidity to find the most favorable rates on both prices and fees.
Following the move, the Routefire team will be developing the Coinbase Prime suite of tools and services. This is aimed at being the premier brokerage platform for financial institutions that wish to trade in the cryptocurrency space.
🗞 Daily Crypto Calendar, January, 8th💰
- Polkadot (DOT)
"$DOT will be listed at @BitHash... $DOT Trading | Available from 8 January 12:00 PM (UTC)"
- NEM (XEM)
"We encourage everyone to participate in POI voting regarding #Symbol snapshot date. It runs until 10.00pm on January 8th 2020 (UTC)."
- Falconswap (FSW)
"FalconSwap Mainnet is launching on 8th January 2021"
- Pundi X (NPXS)
- NEM (XEM)
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