Mine Digital Newsletter - The Mob
February 27, 2020
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Mine Digital Newsletter – The Mob

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Thomas Kuhn, CFA

Operations and Trading Manager

Bitcoin goes risk-off with the animals spirits of traditional markets

It’s been a big drop in Bitcoin overnight. The cryptocurrency had been perceived to trade as a risk-off asset on the coronavirus recently, as digital-gold; but with gold supporting itself overnight and mild weakness in the equity market it began a parabolic shaped move downwards. It may not have hit the low yet, having come off around 6% so far.

Yesterday’s trading volume was huge in the spot market, the largest volume trading day in the last month – perhaps related to CME Futures settlement due this week.

Key Points

  • Bitcoin moving with risk-off equity weakness
  • Asset is approaching the longer-term trend line
  • The space is developing strong momentum and is further validated by global events
  • The short to medium term will be dominated by the animal spirits of the mob

Other major assets have been hit hard, with Bitcoin Cash, Bitcoin SV, Litecoin, EOS, Cardano, Tron, Eth. Classic, Dash and Neo all top 20 coins with double digit+ down-moves.

Staking coins have been beaten up of late, likely due to having overperformed in the rally. Staking is emerging as an important part of the ecosystem in 2020 as suggested by some commentators in their 2020 predictions.

In our last newsletter we considered that there could be unforeseen consequences for crypto in the event of major risk-off in traditional markets, particularly to do with the relationships between digital asset firms and the traditional finance space and financing arrangments for crypto services however the price weakness looks like it is purely following the wider space as risk-off at this point.

The coronavirus driving the markets lower has continued to spread, with cases of the virus ex-China increasing day by day. One Harvard epidemiologist suggested that 40-70% of the world would likely end up infected. The reaction from the Trump white-house bordered on bizarre, with the White House Economic Advisor Larry Kudlow giving financial advice to ‘buy the dip’ before it dipped another 4%. Thanks Larry, we’ll bid in just below the high.

For whichever reason it is, and potentially that it was the result that would prove his superiority over Hillary Clinton, but Donald Trump is very attached to higher asset prices as part of his re-election bid. It would be very interesting to see the Communist Bernie Sanders take on Trump in a weak global economy. There must be some terrified business leaders in the land of the American dream, moon landings and Atlas Shrugged.

It is not a wild idea to suggest that some direct action would be encouraged by the White House, especially in the event of another significant down-day.

The currency space worldwide looks like it is heating up, with serious moves being made by Russia, China and Japan to look at new currency solutions. With cryptocurrency proving itself over the last decade, some type of digital currency is likely to be developed and encouraged in the process. Recent Gold appreciations look like they could become wildly out of control quickly, on reports over the last couple of years of massive gold buying from Russia and China as well as Kazhakstan, Turkey.

Find a summary of Central Bank Digital Currency (CBDC) projects from China, Cambodia, Thailand, France, Sweden, Turkey, United States and Japan here.

Similarly in regulatory updates, a new crypto-bank ‘Avanti’ has been announced by the Blockchain legislative champion and Wall Street veteran Caitlin Long.

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