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Bakkt is going live with testing in July

Crypto has changed forever, and the future is going to be very interesting.

 

After months of delays, Bakkt will finally go live – with user acceptance testing, but still live – on 22 July.

 

This is a big step, and the company has made a lot of it in their recent blog post. With more than a nod to the moonboy crypto community, they note that it’s two days after the 50th anniversary of the first landing on the moon, and call their platform a ‘moonshot’. While it’s ‘no small step’, in their words, they also make it clear that Bakkt is a grounded and down-to-earth solution.

 

They’re right about that. Bakkt is a big deal. It’s going to be the best way for institutional money to come into bitcoin. Institutional investors have already started to buy bitcoin, recognising the huge opportunity that lies in crypto. We have seen recent analysis that shows ‘Firm-sized accounts’ of 1-10k BTC picked up 450,000 BTC since the December 2018 bottom, clearly accumulating in anticipation of an ongoing bull market. But these are not the ‘institutions’ Bakkt is targeting.

 

The difference of Bakkt is that it offers an end-to-end regulated solution, including custody – actual storage of bitcoins. It’s fully compliant in every respect. That means any institution can use it without fear of the legal grey areas that plague other solutions. Think about it: if you’re a company looking into buying crypto, where do you go? There are a handful of semi-compliant solutions, but they’re not particularly accessible, the fees can be high and liquidity low, and they may not be workable for US-based firms. Bakkt will change that forever.

 

There’s an interesting dynamic about Bakkt that hasn’t been talked about much. It will pull supply off the market, but it won’t put much (if any) back on, not for some time anyway. Bakkt will access bitcoins from miners and the wider market – making sure they know exactly where they come from – but existing bitcoin holders won’t be able to sell their coins on Bakkt. Add that to the fact that the institutions using Bakkt will be first-timers who want a chance to get into bitcoin and can’t sell their BTC until they actually buy them on Bakkt in the first place, and you can see that there’s going to be a lot of net demand for bitcoins.

 

All of which means that 22 July may very well be the day bitcoin’s rocket launches, even if not when it actually lands on the moon.

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Friday Inferno market update

Fundamentals and technicals are both looking bullish, folks!

 

Bitcoin faltered earlier this week and it looked like we were set to break support and head down to the next level, potentially a fall to around $6,800. In the event, though, bitcoin held the 23% fib level and support at $7,700, and then ultimately reclaimed the $8k line. It is now trading above $8,200. Ignoring the short blip to $9k, this looks a lot like the ceiling on a rising wedge stretching back a month, and breaking it would likely mean BTC saw $9k again.

 

Looking at the 1-day chart, the bullish picture becomes clearer. Bitcoin is trending upwards, holding a rising support line established at the beginning of May, when BTC went parabolic. While the parabolic run appears to have topped out, we’re still respecting that line and in solid uptrend.

 

Daily RSI is now neutral and gently moving higher – we’re not yet seeing the wild swings that so often result in violent reversal. So far, this is measured and sustainable. (Breaking $8,200 convincingly might change that picture, of course.) It’s worth noting that earlier this week, when RSI dropped to 47 – still not oversold – it was at its lowest since February. Our key moving averages – 50, 100 and 200-day – are rising to meet the price, with the 50-day now around $7,300. That should further strengthen support as it catches up.

 

On the weekly, RSI is reading overbought again, having only seen one red week in the past seven. But RSI can stay overbought on the weekly for a long time with bitcoin, as the previous bullrun shows.

 

On the fundamental side, there is the news that Big Money has been accumulating crypto on a large scale, with ‘Firm-sized’ accounts of 1-10k BTC picking up around 450,000 BTC since the December bottom. This is extremely bullish, since it indicates that smaller retail holders have barely started to buy yet.

And finally, and also bullishly, at long last we have news of Bakkt. The company will start testing bitcoin futures on 22 July, opening the way for institutional investors over the second part of this year.

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Big money has been accumulating crypto

Institutional investors have been scooping up ‘massive amounts’ of digital assets at depressed prices.

 

It’s been a rollercoaster ride for BTC, with April’s shock reversal leaving traders little time to pick up BTC at low prices. But it turns out that large investors – institutions, big money, smart money, call it what you want – has been accumulating crypto on a grand scale. As one analyst puts it:

 

According to a recent report for diar – a data analysis company which provides expert insights into the global digital currency industry, Bitcoin supply holdings have shifted ever since reaching the recent bottom. The most significant pattern that has emerged is that of Institutional investors scooping up massive amounts of digital assets at these discounted prices.

 

The transparent nature of the blockchain means it’s possible to track where bitcoins are moving, and the size of the wallets holding them. The report includes four charts that show the recent dynamics.

 

Firstly, the largest accounts – exchanges’ cold storage – have shed over 600,000 BTC since the December bottom. While small ‘Retail’ accounts of up to 100 BTC have collected some of these, the largest gainers have been the ‘Firms’ with between 1,000 and 10,000 BTC. They have added more than 450,000 BTC to their books overall.

 

Secondly, Firm-size addresses began piling in money at the end of last year, which showed up in the growth of larger addresses a few months back.

 

Thirdly, since the start of the bear market in January 2018, there has been a 26% increase in addresses with 1-10k BTC. Big money accumulates when the price falls, and sells when it rises – exactly the opposite of what retail traders tend to do.

 

Lastly, while Retail holders have held steady at around 38% of total BTC, exchange holdings have dropped from 20% to 16%, and Firms have picked up all of this 4%.

 

There are a couple of take-home messages from this.

  1. The rally has not been driven by Retail demand. Retail investors haven’t got back in yet – they probably won’t until at least $10k.
  2. Exchanges are distributing coins. What happens when their supply starts to dry up but Retail demand is increasing?

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Five things you can do with crypto

Critics say that cryptocurrency is a solution without a problem, but the reality speaks for itself. Here are five real-world use cases for crypto.

 

  1. Payments

Many online and bricks-and-mortar retailers accept cryptocurrency payments. You pay using a mobile phone app, making it almost as fast and convenient as paying with a card or cash.

 

In order to acquire cryptocurrency to make your payment, you will need to sign up to an exchange, submit two forms of id and wait typically 7-10 days for verification, before making a bank transfer to the exchange and buying your crypto. You can then withdraw this to your wallet to spend anywhere you like (so long as the retailer accepts crypto)! Costs including bank transfer fees, exchange rates, trading fees and mining transaction fees will typically be no more than 5-10% of the total amount.

 

  1. Trade to make money!

Cryptocurrency trading can be incredibly lucrative. There are huge sums of money to be made by calling the markets right, especially if you use leverage to magnify your gains.

 

Warnings on popular trading sites suggest that 85-90% of day traders lose money, so you will need to make sure you are one of the 10-15% who don’t get it wrong. (This may take some years of training and practice.)

 

  1. Mix your funds to ensure your anonymity

You can send your bitcoins to a mixer to ensure that no one knows who owns them. Mixers combine your funds with many other people’s bitcoins, then pay them out to new addresses so that it is difficult or impossible to find out where they came from. Sometimes they pay them out to addresses owned by the mixer, rather than to their users, and occasionally Interpol raids them and shuts them down because their users are involved in money laundering. Assuming this doesn’t happen to you, you will be able to make completely anonymous transactions (until you cash out your crypto and need to give an exchange your personal details for KYC).

 

  1. Send encrypted messages on the blockchain

Blockchains aren’t just for cryptocurrencies! Some have advanced functionality that allows you to send encrypted messages to other users, meaning you can communicate in private.

 

Although the user experience isn’t quite as polished as existing encrypted messaging apps like WhatsApp or Telegram, it doesn’t take long to learn. The only real difference to the user is that you pay for sending a message using the blockchain.

 

  1. HODL

The easiest thing to do with your crypto is HODL it – in other words, buy it and do nothing with it for many years. Ideally you will simply forget about it.

 

In fact, forgetting about your crypto is good because if you lose your private keys you will not be depressed in 5 years time when BTC is worth $1 million.

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Tuesday Inferno market report

TL;DR consolidating above the 23% fib – for now…

 

When bitcoin failed to hold $9k, it was clear that the parabolic advance was over. Many analysts have cautioned that bitcoin is due a heavy correction. Parabolic rises are unsustainable, often giving up the majority of their gains. In this instance, that could mean a fall back to around $6,000.

 

There are many reasons why $6k is of interest:

  • The parabolic rise started in earnest just below this level
  • $6k is the zone of strong support established in 2018
  • The 100-day moving average is now approaching this area
  • It marks the 50% fib level, from the low of December 2018 to the recent high of $9,100.

 

Overall, $6k should prove excellent support, with multiple converging signals suggesting that price – if it goes this low – will have a tough time breaking lower. In other words, it may – may – be a good buying opportunity.

 

So far, though, this hasn’t happened. Instead, bitcoin appears to be consolidating above the 23% fib level, which lies at $7,700. We have bounced off this line multiple times on the daily. At the same time, bulls are struggling to push bitcoin above $8k. There is a narrow range within which BTC is trading and when it breaks – one way or the other – it will likely break hard.

 

To the upside, we’re looking at $9k+ and the recent high, ideally looking to break that and continue the rally higher. To the downside, we have $6,800 (the 38% fib and top of the 2018 support zone) and then $6,000.

 

The 50-day MA is advancing higher, and after our Golden Cross earlier this year we would expect a retest of that. It may help provide further support. The fall may never happen – and remember, when ‘everyone’ thinks something is going to happen in a market, the opposite happens. However, the picture as things stand is broadly bearish, in the medium term.

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Sunday Inferno roundup

Welcome to the weekend once again! As ever, we’ve had plenty of interesting developments in the crypto space this week, with bitcoin showing its signature volatility once again. Here are the highlights from Inferno:

That’s all! Enjoy what’s left of your weekend and we’ll be back with more next week.

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10 tips for starting out in crypto

Cryptocurrency is a bewildering sector. If you’re just getting started, it can be overwhelming. Here are a few tips from people who have been here a while and bear the scars.

 

  1. Don’t keep funds on exchanges. Seriously. Just don’t.
  2. Don’t keep funds on exchanges (just in case you missed it the first time). It’s one of the best ways to lose money.
  3. Back up your private keys. Keep them somewhere safe, offline. Learn about cold storage for large accounts. Never break those rules, even once.
  4. Don’t enter your private keys online – anywhere. Especially not in a hurry, and especially not in a hurry because you need the funds to take advantage of a deal that’s too good to be true. Also especially not anywhere at all. JUST DON’T DO IT.
  5. Get on Discord. It’s where the action happens. And Telegram, if you can face it.
  6. Ignore trolls. You’re going to meet them. A lot of them. None are worth your time.
  7. Get used to shills. They will try to get you into their special coin. It will probably be XRP most of the time.
  8. Cultivate cynicism – if it’s too good to be true, it might be. This is crypto, so sometimes it won’t be. But be cynical all the same.
  9. Learn about computer security. And cryptography. And economics. And markets, technical and fundamental analysis, and group psychology.
  10. Ignore anyone selling a great new ICO token that’s a ‘Bitcoin killer’, ‘Ethereum killer’, ‘the next Facebook/Uber/anything’ or that claims it will ‘bank the unbanked’.

 

Can you explain why OneCoin is not a cryptocurrency? Well done, you have graduated!

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Inferno Friday market report

Bitcoin has steadied after its recent falls. We explore what might happen next.

 

There’s no denying that bitcoin has had an outstanding year. After 2018 proved so miserable, this year has been quite the opposite, with bitcoin almost tripling from its December low to hit $9,097 (Bitstamp) last Thursday.

 

However, $9k was immediately rejected, with bitcoin crashing lower in two waves – the first to the support zone at $8,000 and then, after a recovery, a further drop to a local low of $7,433. At the time of writing, bitcoin has again stabilised around $7,800.

 

Volumes have dropped off and RSI is neutral on the 1h, 4h and 1-day. On the weekly, it is still only just coming out of the overbought zone – several weeks of strong action has that effect.

 

Looking at the 1-day, BTC has found support at the $7,600 region. The 50-day moving average is also moving upwards quickly, currently around $7k. That tends to act as support in a bull market. (The 200-day MA is still far down below $5k, but has started to curve upwards.) Having seen our golden cross at the end of April, a retest of the 50-day MA would be reasonable. That may not require further falls in BTC; it may be enough to hold the current range while the MA continues to rise.

 

The question is whether bitcoin is now consolidating before recovering $8k – and beyond – or whether this is a temporary pause before another fall, likely down below $7k. The next major support is around $6,800. This was the top of the band where BTC traded for months in 2018, and lines up with the 38% fib level from the December low to the May top. Fibonacci levels overall line up very well with known support; the 23% fib coincides with $7,600, where we recently found support, and the 50% fib lines up with $6,100, at the bottom of that zone of activity, and where BTC flash-crashed in May.

 

A larger pullback might be expected, since parabolic rises almost always give up the majority of their gains. However, sentiment is stronger about bitcoin than it has been for almost two years. All we can say at this point, is that if BTC breaks one zone of support, the next one should be clear thanks to the multiple different indicators that come together: $7,600, $6,800, $6,100.

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Bitcoin is the canary in the coal mine

Peter Boockvar, well-known goldbug and bitcoin watcher, says BTC is an early warning for major events.

 

Traders are always watching the news and the markets for hints about where the price of different stocks and commodities will go. The currency markets are driven by rumours about interest rates, economic growth, and geopolitical unrest or uncertainty. Now, Peter Boockvar, a goldbug and exec from wealth advisory firm Bleakley Advisory Group, has added bitcoin to his list of early indicators.

 

Boockvar doesn’t hold bitcoin; he’s a card-carrying goldbug and, he says, would rather just buy that instead. But he has noted the correlation that bitcoin apparently has with gold, and is using that to inform his strategy. ‘I watch bitcoin as a signal, as an indicator, not because I want to own it as I’d rather own gold as an alternative currency,’ he told CNBC.

 

As a safe haven asset, gold is a key commodity to watch in the developing US-China trade war; if the world’s investors believe that this will be harmful to economic growth, they will pull money out of stocks and put it into gold as a hedge. And bitcoin, says Boockvar, is a good early warning for gold itself.

 

‘Over the last couple of weeks, we’ve seen this sharp rise in bitcoin and to me that was saying something in terms of what markets were thinking, about what the Fed was going to do, the turmoil created by the threatened tariffs,’ he explains.

 

Bitcoin has always been used by a minority of traders to park funds in times of trouble – fulfilling its reputation as digital gold – and to circumvent capital controls, most notably in China. But Boockvar’s analysis suggests that it is now used widely enough to factor into traders’ broader decisions, sending hints about where the market is heading.

 

In other words, bitcoin acts as a kind of hypersensitive warning signal for the markets – the ultimate canary in the coal mine when it comes to economic slowdown, downturn or recession.

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Warren Buffett to have lunch with TRON founder

Will rat poison squared be on the menu?

Here’s a fun development. TRON founder and BitTorrent CEO Justin Tron has paid over $4.5 million to sit down to a steak lunch with legendary investor Warren Buffett.

 

The prize of a meal with the world’s most famous investor was part of a charity auction for the Glide Foundation, which helps the poor, homeless and those with various addictions. Buffett has been involved with the charity for many years, and this is the twentieth year he has agreed to have lunch with whoever stumps up the most cash. So far so good. But here’s the really cool bit.

 

Buffett does not like bitcoin. He really, really hates it – though he has started to come around to the idea of blockchain potentially providing some useful service to society. Here are some of the things he has said about bitcoin and crypto in the past:

  • It’s nothing more than a ‘gambling device’.
  • It has ‘no unique value at all. It doesn’t produce anything. You can stare at it all day and no little bitcoins come out. It’s a delusion basically.’
  • It’s ‘rat poison squared’.
  • ‘Cryptocurrencies will come to bad endings.’

 

Buffett has admitted he doesn’t know much about how cryptocurrencies work. And Justin Sun has said he’s a big fan of Warren’s long-term value investment approach. So when he and seven of his crypto-industry friends sit down to a steak – presumably without rat poison – it’s going to be an interesting opportunity to educate the world’s most successful investor about blockchain.

 

In a Medium post, Sun writes:

The long-term value investment strategy and cryptocurrency, in my eyes, are one and the same. We in the community know we have a long road ahead of us to educate the mainstream on blockchain’s value and proper use cases. Rather than trying to get rich quick, we aim to counsel everyone that investment should be about vision and execution.

I look at the upcoming lunch with Buffett as an opportunity to seek mutual understanding and growth. To aid in the conversation and support the overall cryptocurrency and blockchain community, I will invite several industry leaders — with your input — to accompany me to New York City for the lunch.

 

From one perspective, it looks like Sun just paid $4.5 million for him and his mates to spend a couple of hours trolling Warren Buffett on bitcoin. From another, it’s an olive branch from a successful blockchain company to an insanely successful but skeptical investor.

 

We’re looking forward to seeing how this one turns out.

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