Hopes for Bitcoin Rally as Americans Prepare for Second Coronavirus Stimulus

Steven Mnuchin was one of the biggest catalysts behind the Bitcoin rebound last week.

The US Treasury Secretary, known for having an ill-opinion about the cryptocurrency, sat alongside his knee-shaking buddy, the Federal Reserve Chairman Jerome Powell, before the Senate Banking Committee on Thursday. He testified about the coronavirus’s impact on the US economy and how his office is planning to handle the situation by vouching for more stimulus.

That Long-Delayed Aid

Stimulus, as all of our readers know already, is an aid–a financial help–offered by the government or the central bank to people who need it the most. The coronavirus pandemic has pushed many small and medium scale firms out of business. As a result, the joblessness in the US is now lurking at record levels. People have rents to pay, but they don’t have access to money.

The US government in late March had stepped in with a $2 trillion relief. The package helped American adults with $1,200 checks. It further gave families an additional $500 per child under 17.

But the aid is running out of steam. The unemployment rate is near-steady, which means that the US economy is not adding or recovering any jobs. On the other hand, the coronavirus pandemic is threatening to rise again as the winter season kicks in. It would mean more lockdowns, more business failures, and more unemployed Americans.

Mr. Mnuchin realizes that one hundred percent. The White House official committed to resuming negotiations with the US Congress to release the second coronavirus stimulus on Thursday.

His statement injected the Bitcoin market with enthusiasm. The cryptocurrency rose more than 4 percent on that day, breaking away from losing momentum at the beginning of the same week. BTC/USD kept rising through the weekend thanks to another accidental bull called Nancy Pelosi.

The House Speaker told CNN that she is hoping for a deal as the Democrats and Republicans sit for a one-to-one on Friday. She said:

 “I’d rather have a deal to put money in people’s pockets than to have a rhetorical argument.”

Democrats have reportedly prepared a new proposal that demands $2.4 trillion in aid for Americans. The new bill would return improved unemployment benefits, direct payments to qualified Americans, the Paycheck Protection Program for small-business loan funding, and airline aid. It could be ready for a vote by Oct. 2.

Pelosi’s statements came on Sunday. Bitcoin added another 3.41 percent following the event.

The Bitcoin Outlook Now

Bitcoin bulls love anything that is or rhymes with the word ‘stimulus.’ Their narrative is pretty simple: House passes the aid, more dollars enter the US economy, the US dollar index falls, investors run for cover in riskier assets, and Bitcoin rises.

It has happened before in March. Bitcoin was able to come out of a deadly bear-led crash only after the Federal Reserve announced an infinite bond-buying program and slashed its interest rates to near zero.

Read more: Bitcoin, Wall Street, And The End Of Their Social Distancing

The US Congress further fueled the Bitcoin price rally after announcing a $2 trillion stimulus package. That all happened as the US dollar lost its value and fell to a 27-month low just at the start of this September.

Bitcoin, at the same time, surged by more than 200 percent.

Bitcoin is looking to close towards $11,500 this week. Source: CoinStats

Just recently, the Fed committed to keeping interest rates near zero until 2023. The US central bank also said that it would raise inflation above its 2 percent target. That further made investors bullish about Bitcoin for the long-term.

How is it possible that #Bitcoin price will never be above $20,000 again?

I mean something crazy has to happen to $BTC stays under its previous ATH forever.

Ask yourself.

— Narek Gevorgyan (@narek_gevorgyan) September 27, 2020

CoinStats founder has gone totally bullish on Bitcoin.

The only missing key, in the currentt scenario, was a stimulus package. Americans have already absorbed the last aid. They want more. And the US government has to give its citizens what they want especially if they don’t want to see their anger in the next presidential election in November.

Read further: No $20,000 Bitcoin Until Us Presidential Election 2020

With Mnuchin and Pelosi committing to restart negotiations, people can expect Bitcoin to stay steady or bullish for this week. The cryptocurrency might close above $11,000 after all. But its next price action course entirely depends on whether or not the US Congress passes the stimulus bill.

If they don’t, expect Bitcoin to fall back towards $10,000.

Since you’re here, feel free to check out the CoinStats cryptocurrency portfolio management app to track and manage your Bitcoin and altcoin investments.

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No $20,000 Bitcoin Until US Presidential Election 2020

For months, the Bitcoin price rose this year – regardless of a fast-spreading pandemic, the resulting economic turmoil, and poor evaluations by the mainstream media houses. Then, in September, the cryptocurrency came crashing down.

It was March 2020 all over again, minus severity. Bitcoin established a year-to-date high near $12,500, started correcting lower on profit-securing sentiment, but accelerated its bearish momentum alongside a similar correction in the stock and gold markets.

Bitcoin is maintaining support above $10,400. Image Source: CoinStats

The narrative goes like this: equities fall hard; the loss-making traders start selling their gold and bitcoin investments at their local tops to cover losses; the US dollar rises, and repeat.

One also has to remember that traders dumped their Bitcoin positions against a very bullish macro outlook. The Federal Reserve committed to keeping interest rates near zero up until 2023. Their chairman Jerome Powell vowed to push inflation higher above the normal 2 percent target. And the US Congress hoped to inject more dollar liquidity into the economy through a second stimulus package.

Read also: Bitcoin Investors Should Prepare For A Stormy Second Half Of 2020

But Bitcoin fell, nevertheless, because one of the main catalysts did not play out as planned: the stimulus.

A Political Circus

This month’s market turbulence came amid growing concerns about the US Congress’s failure to pass a new coronavirus stimulus package. Earlier this month, the Republican side attempted to pass a smaller bill. But as the relief did not include a $1,200 check, the Democrats rejected the proposal entirely.

Still, the Democrats pushed back on the stimulus checks during a hearing with the Fed chairman Jerome Powell and Treasury Secretary Steven Mnuchin this Tuesday.

Mr. Powell clarified to the committee that the Congress will have to intervene with the second stimulus package if they don’t want to stall the ongoing US economic recovery. He noted that the Fed cannot assume the responsibility of distributing checks to Americans all by itself.

“The risk is that over time [the unemployed] go through those savings . . . their spending will decline, their ability to stay in their homes will decline, so the economy will begin to feel those negative effects at some time,” he told the Democrats. “I think that it is likely that more fiscal support will be needed.”

But with the ongoing standoff, observers believe it is now very unlikely for Congress to pass the stimulus deal. The chances have diminished also by political tensions ahead of the US presidential election on November 3, 2020.

Both Democrats and Republicans will attempt to score political mileage over each other to score votes out of frustrated Americans. That said, one can expect no stimulus bill until the US votes for its next president: Donald Trump or Joe Biden.

The US Dollar and Bitcoin

The absence of a stimulus package is trimming gains all across the financial market, including that of Bitcoin. But what is benefiting out of the political uncertainty is the US dollar.

The greenback jumped to its eight-week high as investors treated it as their safest haven asset. The lack of a stimulus bill ensures that there would be less dollar liquidity in the market. Therefore, investors may have decided to lock their profits in the cash until further clarity.

Bitcoin has shown a strong inverse correlation with the US dollar since March 2020. The cryptocurrency could therefore continue plunging as the greenback rises against the stimulus backdrop.

– S&P500 is signaling a short term bearish reversal continuing the Macro bearish reversal

– NASDAQ may lead the market down, FinTech stocks are over-leveraged

– U.S. Dollar Index now breaking out into new local highs

– GOLD testing support

– #Bitcoin bearish setup

— Kevin Svenson (@KevinSvenson_) September 23, 2020

That ensures that BTC/USD is not hitting $20,000 – let alone its 2019 high of $14,000 – until the US presidential election. At best, it could hold support above $9,000 while anticipating a jump after the political battle is over.

Let’s hold the bullish bets for the Q1/2021.

Since you’re here, feel free to check out the CoinStats cryptocurrency portfolio management app to track and manage your Bitcoin and altcoin investments.

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Bitcoin Stands Tall Ahead of FOMC Meeting This Week

On Sunday, Bitcoin experienced a brief pump-and-dump.

The BTC/USD exchange rate was able to break above $10,400, a resistance that capped the pair’s upside outlook for almost two weeks. Bitcoin eventually formed a session top above $10,500 only to find later that the area was full of profit-taking traders.

A pullback ensued and the cryptocurrency fell back below $10,400, reclaiming the level as its resistance all over again.

The seesaw price action came just ahead of the Federal Open Market Committee’s September meeting this week. On Tuesday and Wednesday, the committee expects to shed more light on how its recent decisions affect its monetary outlook in the near-term.

Two weeks back, the Federal Reserve Chairman Jerome Powell announced a new framework to iterate their views on rate-setting in the wake of inflation. The updated policy allowed to shoot the inflation rate above its settled target of 2 percent. It thereby reduced the urgency for the central bank to raise interest rates.

However, Mr. Powell did not give any framework that could explain how his office would achieve higher average inflation, specifically after failing at it since 2013. The FOMC September meeting expects to reveal THE strategy.

Brewing Bitcoin Rally

The Federal Reserve’s balance sheet has ballooned by over $3 trillion in only three months. It eventually peaked at $7.17 trillion on June 10 but has since gone calm.

Fed balance sheet. Source: FRED

A rising balance sheet coincided with a supersonic price rally in the Bitcoin market. The cryptocurrency logged a 200-percent bull run. But after the Fed balance sheet plateaued over the last few weeks, Bitcoin reacted with a downside correction from its $12,500ish-top to below-$10,000 low.

Bitcoin is finding it hard to break above $12,000. Image Source: CoinStats

The cryptocurrency’s uptrend above $12,000 also stalled as traders anticipated that the Fed would fail to hit a 2 percent inflation target based on its track record in recent years. That said, the central bank’s meeting this week to discuss average inflation targeting raised hopes for Bitcoin bulls.

It is because of higher jobless claims and an unemployment rate of 8.4 percent. The Fed will have to intervene to achieve its “maximum employment and price stability goals” also as the US Congress fails to finalize the second stimulus package.

The Democrats want the Republicans to launch a $2.2 trillion aid to help the American households and individuals in the aftermath of the coronavirus-induced lockdown. Nevertheless, the Trump administration has clarified that it won’t go anywhere above $500 billion.

That leaves the Fed holding the stick for the US economy for an unforeseeable future. Therefore, the next FOMC meeting may have broader discussions about the next stimulus package. It would mean a more ballooned balance sheet.

Conclusion

To that end, Bitcoin looks poised to climb back towards $12,000. It is partially because of the underlying stress in the US dollar. Also, investors should pick riskier assets as safer investments like the long-term bond market remain unattractive due to near-zero lending rates.

Since you’re here, do check out the CoinStats cryptocurrency portfolio management app to manage all your crypto traders right from one place.

Photo by Frederick Warren on Unsplash

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Beware of What Comes after a Strong Bitcoin Rally

Bitcoin fell below $10,000 this weekend even as a majority of crypto warriors on Twitter were expecting a supersonic price boom towards $13,000, $14,000, $15,000, $20,000, and beyond.

That was obvious for most of us. Bitcoin had every ingredient to dish out a delicious bull run.

A central bank that committed to raise inflation rates beyond its normal targets. A plethora of analysts and strategists that suggested an extended period of lower interest rates. And a market that was looking to suck more US dollars as they came to life in the form of government-sponsored aids.

But despite every positive fundamental, Bitcoin slapped its $10,500-something top and rose atop bears to fall below $10,000 this Saturday. Traders sold the most bullish asset of this year. But why?

Bitcoin against US Economy Recovery

There are no exact reasons. But there are theories that surround the answer. One of them is the US economy itself. Last week, Uncle Sam released two data: one concerning the manufacturing, and the other, unemployment.

Both were like two-scoop ice cream for investors who wanted some sugary updates, after all. The ISM Manufacturing PMI surged from 54.2 to 56 in August, the highest reading since January 2019. Meanwhile, the labor market healed as the number of people collecting unemployment benefits decreased by 1.24 million to about 13.3 million for the week ended Aug. 22.

The news relaxed at least those who were planning to inject more liquidity into the US economy to help those who lost jobs and households. That suggested that there would now be lesser-than-expected US dollars in the market. In turn, there will be less money available to continue an otherwise pumped up Bitcoin, stock, and gold market.

The result was a stronger greenback. The US dollar index, which pits the dollar against a set of foreign currencies, rebounded 0.73 percent last week. Earlier before, the index had plunged to its 27-month low.

DXY’s rebound shakes risk-off and risk-on markets. Source: TradingView.com

At the same time, the US bond yields rose, suggesting that there were now better returns available in the bond market. Also, Treasuries were cheaper to buy.

All that happened because investors thought there is still a possibility of a full-fledged economic recovery, after all.

A Sandbox-Like Experiment

The last week’s Bitcoin plunge against an improving economic outlook in the US serves as a reminder that the cryptocurrency is allergic to good macroeconomic events.

It is like a sandbox experiment that shows how Bitcoin traders sell-off their holdings for near-term profits despite a long-term inflation outlook.

They tend to forget that the federal budget deficit may exceed $3.3tn by the end of this year. They also ignore that the US government debt could already outrun the size of its economy, with its debt-to-GDP expecting to go above 107 percent by 2023.

All that would require more stimulus measures from the top brass. It means the injection of more US dollars into the economy – an inflationary exercise, overall. But Bitcoin still falls below $10,000, perhaps because of a small bunch of weak but influential hands in search of short-term gains.

That nevertheless reminds of their inherent need to have cash first, Bitcoin later. Money is something that all of us need to purchase stuff, be it a safety-pin or an airplane. No matter how much the US dollar falls, it has utility.

Meanwhile, Bitcoin works as something that protects people from a depreciating US dollar. It is kind of a saving deposit that promises to hold your dollars for a longer timeframe and return better yields for doing it.

That makes Bitcoin a supply-and-demand game. Its price goes higher as long as there is money to enter its market via “whatever it takes” policies. But it also risks plunging harder than ever whenever demand shifts to cash.

The mainstream financial market is the best example to explain that. Countries like Japan, South Korea, and Taiwan in the 80s and Thailand, Malaysia, the Philippines, and Indonesia in the 90s experienced asset bubbles. But then it followed a long period of downsides.

As CoinStats also discussed earlier, China’s CSI 300 also pumped higher after the 2008 financial crisis after their central bank intervened with huge stimulus aids. But the rally fizzled in 2015. Today, the index sits a tenth below its all-time high.

It is because of the capital reallocations that are always happening around us. People sell one asset for another based on their personalized needs. One day, they may need Bitcoin. But on the other, they might want to sell the token for Yuan so they could buy a Beijing real estate with the money.

What is Bitcoin’s Worth Then?

Certainly, not a million dollars. But the cryptocurrency is worth more than where it trading presently.

In one aspect, the possibility of disappointing Bitcoin performance over the coming months cannot be dismissed, given how fast it has rallied since March 2020 – 161 percent, at the time of this writing.

Bitcoin slips towards $10,000. Source: CoinStats

Traders have pumped BTC/USD based on plenty of expectations. And the market needs more investors to ensure that the upside sustains. But given the underlying volatility risks, regulatory uncertainty, and fears of price manipulation, not all people have the stomach to ride the Bitcoin rollercoaster.

That shows in the Google Trends result for the keyword ‘Bitcoin.’ Not many people are looking for the cryptocurrency even amidst one of the scariest financial crisis. Gold is doing better there.

Gold-Bitcoin trend comparison over the last 90 days. Source: Google Trends

Meanwhile, in other aspects, Bitcoin needs more time to establish itself as a hedging rival to established assets like gold. But don’t let it fool you with million-dollar price prediction articles; even the precious metal, against the always weakening fiat currencies, had logged bear cycles.

Bitcoin is no less than any other asset if one takes out the “revolutionary” tag.

So beware if BTC/USD falls back to $6,000 on a stronger dollar sentiment, a working coronavirus vaccine, and a V-shaped economic recovery. But stick to it if you are in for a longer timeframe so to ensure that you beat inflation and fiat depreciation with one masterstroke.

Believe that Bitcoin’s appreciation has to with the dollar’s demand, not value. Even gold bulls had to wait nine years to reclaim their top levels.

Since you’re here, do check out the CoinStats cryptocurrency portfolio management app to manage all your crypto traders right from one place.

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The Top Three DeFi Tokens of 2020 So Far

The cryptocurrency market is experiencing a deja vu, thanks to DeFi, a backronym for decentralized finance.

The performance of every token listed under the said brand name is looking insanely bullish in 2020. It is very similar to how native tokens of a long string of initial coin offering (ICO) projects appeared in 2017. People saw potential in ICOs and bought their cryptos to realize that more than 90 percent of them were backing worthless vaporware projects.

But DeFi appears different. The industry has raised funds after delivering a working product, unlike the ICOs that were attracting billions of dollars worth of investment at the ideation stage. That serves as one reason why traders are still adamant about rising the crazy DeFi rally – they see real potential.

CoinStats has compiled a list of top decentralized finance tokens based on their market performance between January 1, 2020, until August 31, 2020.

#1 Aave

Aave is an open-source, non-custodial protocol that enables users to earn interest on deposits. The project also allows people to borrow assets based on a variable or stable interest rate.

It further enables people to obtain ultra-short duration flash loans without requiring collateral.

Aave had a different name at the time of its launch. As ETHLend, it was a product of the ICO craze but became one of the few projects that lived up to its promise to deliver a working product.

Its team raised $16.2 million via crowd sales to create a decentralized lending platform. Later, the protocol became part of Aave, a company that backed multiple crypto products, including Aave Lending, Aave Pocket, Aave Custody, Aave Clearing, and Aave gaming.

Aave’s native token LEND surged 4,115% in 2020. Source: CoinStats

Aave has now about $1.8 billion worth of cryptocurrencies locked inside its liquidity pool. That shows that the protocol can handle more requests for lending and borrowing.

Meanwhile, Aave’s governance token, LEND, has surged by almost 4,115 percent in value in 2020, its upside following a greater demand among traders to participate in proposing, voting, and deciding on new additions, features, assets on the Aave protocol.

The LEND/USD exchange rate was $0.749 at the time of this writing.

#2 Melon Protocol

Melon Protocol aims to reconstruct traditional investment vehicles by removing hurdles that add unnecessary costs to the operations. It enables asset managers to develop their own tokenized investment vehicles and define the key parameters, including fee structure, trading exchanges, risk management, compliance costs, etc.

Asset managers to get to write these rules into a self-executable computer code, known as smart contracts, while each outcome out of these contracts is stored on a blockchain. The process removes the need or writing contracts in a fund prospectus. It leads to cost, time, and operational savings.

Each process involved in the Melon Protocol relies on its native token MLN. Asset managers need to burn the cryptocurrency to set up a fund, seek investments from investors, approving an investment request by a third-party.

Melon Protocol’s MLN token’s performance in the last six months. Source: CoinStats

That means that each MLN holder receives compensation for holding the token against the rising number of funds’ creation. The Melon Protocol has assisted in creating 375 funds already, which has brought about $23,000 into the system.

Meanwhile, MLN/USD exchange rate has surged by 2,521 percent in 2020, becoming the second-most profitable token on a year-to-date timeframe. The pair was trading at $79.21 at the time of this writing.

#3 Ren

Ren backs a decentralized dark pool known as RenEx. The project is using its technology to create, deploy, and run privacy-centric applications using zkSNARK on its secure multiparty computation protocol (sMPC).

Meanwhile, Ren’s main product is RenVM, a decentralized custodian that brings interoperability to DeFi. It does so by holding users’ assets as they move between different blockchains using zero-knowledge proofs over an sMPC-based protocol.

The entire process remains hidden from everyone, including the Darknodes that power it.

The REN token, meanwhile, is used as a bond to run the Darknode. Each node operator deposits 100,000 REN to register and run the said obfuscation tool.

REN price up more than 750 percent YoY. Source: CoinStats

The REN/USD exchange rate has surged 1,475 percent so far in 2020.

Other Top DeFi Performers include…

…Airswap (1,005%), Loopring (890%), Kyber Network (876%), Bancor (666%), and others.

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