Bitcoin Breaks 200-day MA
After bitcoin crossed the 200-day moving average line, recognized as one of the most important technical indicator, last week, some analysts believe that this could be the dawn of a long-lasting upward trend. Tom Lee of Fundstrat Global Advisors, for example, thinks this break means that bitcoin now is ‘back in a bull market’, and that the price has historically rallied by a larger percentage in the next six months whenever it breaks above the 200-day MA, than when it breaks below it. He also believes that 2020 is ‘shaping up to be [a] great year for bitcoin’.
Also Mati Greenspan, founder of Quantum Economics, thinks that the break roughly coincided with the break-out from a downward-facing trading channel that has lasted for months. ‘Both of these barriers have now been completely pulverized,’ he noted, adding that ‘several have already pointed out to me that we’ve recently seen several false breakouts and so it’s possible that this will be reversed too. However, I would argue that it’s a lot less likely this time. Simply for the fact that unlike the late-October Xi-boom, for example, this move has happened more gradually, allowing the market to really give a proper timely test of the relevant price levels’.
He added: ‘I’ve seen it happen several times in my career, where a large move was widely anticipated by the market but is really taking its time. Then, when the technical breakout finally occurs there’s a moment, or a day, or even a few days of shock and disbelief to see it’s really happening’.
Bitcoin enters historically favorable February with a bullish tone
As we wrote above, Bitcoin has entered a bullish trend, and this happens in the historically favorable month of February. Its price has risen from below $7,000 on January 3 to three-month highs close to $9,570 last January 30, according to CoinDesk’s Bitcoin Price Index. At the January 31 closing price of $9,389, bitcoin is up +30,0% on a monthly basis, its best January performance since 2013.
But others almost record performances are coming, as Bitcoin recordered a double-digit monthly gain for the first time since June 2019, when prices had rallied by +26,0%. And January’s rally is its best monthly performance since May 2019, representing a sharp reversal higher from a six-month downturn that saw prices collapse from $13,880 to $6,425. With the bulls still leading the price action, February may turn out to be a good month for the cryptocurrency once again.
Crypto lenders record booming growth
According to Bradley Keoun (Coindesk.com), Genesis, a U.S. trading firm that lends cash alongside cryptocurrencies reported that its loans rose by +21,0% during 4Q 2019 to $545M, driven by demand from big investors as well as aggregators of smaller loans in Asia and Europe. That is more than 10 times the JPMorgan’s growth, the biggest U.S. bank, whose loans rose by +2,0%.
Only a few lenders can be found in the decade-old digital asset industry, and they are starting from a smaller base. There’s also a dearth of competition from established banks for loans to crypto traders and businesses, due to conservative risk-management policies and restrictions imposed by regulators. Since a cryptocurrency can be a highly volatile collateral for loans, traditional lenders avoid the business.
But crypto lenders are seeing strong demand from borrowers who want loans denominated in bitcoin, cash or stablecoins, digital tokens like tether and USD Coin whose price is linked to the dollar or other government-issued currencies. There are many investors willing to pledge cash to lenders like Genesis in exchange for interest rates of 7,0 or 8,0%.
BlockFi, a big crypto lender, planned to add five to 10 new assets to its platform, including litecoin and a dollar-pegged digital token, USD Coin. It is also planning to launch a credit card that offers rewards in bitcoin. Celsius Network, another crypto lender, said large institutional clients were becoming an increasingly key contributor to the platform’s loan growth.
“Obviously the crypto sector is not even a beauty mark right now compared with the banking sector, in terms of the size and maturity,” Genesis CEO Michael Moro said. “But there is rapid growth in this new market, and there are other companies trying to accomplish similar things.” Genesis said a new source of demand for cash loans in 2020 could come from mining companies that need capital to build, expand or upgrade data centers used to process transactions on the bitcoin blockchain. “We will likely see miners leverage their existing balance sheet and treasury to source the cash necessary to invest in their operation,” according to the report. “Those unable to source cash will be stuck mining on old-generation machines and might face serious profitability issues if the price of bitcoin doesn’t rise substantially.”
Silvergate Capital, one of the few banking companies serving crypto-related businesses, said it added 48 digital currency customers during the period, bringing the total to 804, while transactions on its digital Silvergate Exchange Network rose by +17,0% from third-quarter levels. The company will allow customers to obtain dollar-denominated loans collateralized by bitcoin.