The price of bitcoin has been hovering around $35,000 for a while now. Price-wise, the days of fraud and bankruptcies are behind us. And in the real world, the consequences are taking shape. This week, a key player was in the spotlight. How so? That, and more, in this Weekly!
This weekly in brief:
The price of bitcoin has fluctuated around $35,000 over the past week. With that, it is now two weeks above $32,000, the upper limit of the price range of the previous seven months. If this breakout is sustained, it is of considerable significance.
Therefore, we examine whether other figures support or contradict the price rise. Last week, we mentioned trading volume and capital inflows into crypto funds as supportive. On-chain indicators and the derivatives market also showed increased activity and optimism. The picture has remained positive over the past week.
Therefore, our base case is that we have entered a new phase in the market cycle. Below is a schematic representation of this cycle, characterised by the alternation of optimism in bull markets and pessimism in bear markets.
You see this dynamic in every financial market and also for hundreds of years. Just as the wind leaves a recognisable pattern of waves and hills in the sand of the dunes, this pattern becomes visible when you put people together in a marketplace. With bitcoin, and in its wake the rest of the crypto market, this cycle has so far had a length of about four years.
Exactly a year ago, with the fall of FTX, we were in the middle of the dark red. People sold their crypto in panic and at a loss. This was followed by despondency. Tourists left, only the real perseverers remained.
Determining where we are in the market cycle helps us in two ways.
First, it makes us aware of the huge difference from a year ago. Back then, the mood was subdued and the outlook bleak. Bitcoin was dead and the haters couldn't believe their luck. That sentiment is now very much in the rear-view mirror.
Secondly, it shows that we are far from being in the heated part of the bull market, the phase of excitement, sensation and euphoria. That is the period when large numbers of new users and investors pour in and bitcoin's price rises well above its previous all-time high.
Let's see what that looks like on the chart. Below we have depicted bitcoin's weekly chart, along with its RSI. This is a momentum indicator that says something about the strength of the trend.
That RSI rose above 70 this week for the first time since April 2021. In the short term, that is a signal that a correction is warranted, but in the long term it is a signal of strength.
In previous cycles, the first time the RSI rose above 70 was also the point when the bottom of the bear market was clearly behind us, and most of the bear market was still ahead.
Last week, we argued that the breakout to $35,000 unlocked the price range between $32,000 and $48,000. That fits perfectly with the positioning in the market cycle as well as the timing based on the weekly chart below.
The final word has been sounded in court: former FTX foreman Sam Bankman-Fried has been found guilty by a jury on all seven charges of extensive fraud. This followed a three-week intensive trial, with the jury reaching a unanimous decision after just five hours of deliberations.
The sum of sentences for these crimes could put Bankman-Fried behind bars for life, with a maximum term of 115 years. The judge will have the final say on this on 28 March 2024. Bankman-Fried has expressed its intention to challenge the ruling, although there is no official confirmation of it yet.
The exact sentencing is not a matter of intuition; the judge follows specific guidelines for each charge. Experts foresee a long prison sentence for Bankman-Fried, given the seriousness of the crimes.
Bankman-Fried's vice has broken the illusion for many who saw him as a generous pioneer in the crypto world. The deceptive reality that became visible put regulators and politicians worldwide on edge. They too have been caught off guard.
It is therefore not surprising that US authorities went all out to quickly catch Bankman-Fried and bring him to justice. "This is what ruthlessness looks like," Damian Williams, the top federal prosecutor in New York, spoke at the post-verdict press conference. "This trial moved with lightning speed. That was no accident, but a choice."
Congratulations on the 15th anniversary of the bitcoin whitepaper. The nine-page paper published by Satoshi Nakamoto in 2008 may have changed the world more far-reaching than he dared to dream at the time. Over the years, bitcoin took on many faces. The most important is the birth of a system that removes the need to trust third parties. Bitcoin may not yet have reached the stage of mass adoption, but it fulfils its most essential function with verve: a lifeline for those who need it!
Hong Kong considers admission spot crypto ETFs. The city-state wants to restore its luster as a pioneering financial centre. One way it is doing so is with rules favourable to digital assets, which were given the green light by the government earlier this year. According to Bloomberg, the government is now open to allowing private investors to access crypto markets through spot ETFs. In doing so, it seems to be responding to the United States, where the first spot bitcoin ETF is expected to open its doors soon.
Ethereum's next upgrade will 'only' come next year. Following the switch to Proof-of-Stake, Ethereum developers have been working on new improvements. The Cancun-Deneb upgrade, shortened to Dencun, will see major scalability improvements. Projects waiting for it will have to be patient a bit longer: its launch has been pushed back at least a quarter.
At the end of August, macro analyst Lyn Alden published her book Broken Money. She used that as the occasion for a podcast tour in which she explains its common thread. What is money? How is new money created? What parallels are there with emerging technologies? And is the era of fiat money on its last legs? You can hear Lyn's answers in this podcast:
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