Bitcoin Updates in the Time of the Coronavirus

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At a time of unprecedented upheaval in the traditional markets due to the worldwide coronavirus pandemic, is Bitcoin plunging as well or is it a safe haven? Would are Bitcoin investors to expect from cryptocurrency in the uncertain future to come? Perhaps a result of the political fallout and economic tumult, decentralization is to play a stronger role in the world post-coronavirus. While tourism, restaurants, travel, and many others are being pummeled, this is a time of great opportunity for the likes of healthcare and health technology. Whether Bitcoin is a safe haven at this time is a matter of whether the factors affecting its rise and fall are seen as forces of detriment or opportunity.

Panic sell

For those investors who have recently bought into cryptocurrency and who do not hold a great deal of it, this is a moment in which many may panic-sell and return to more traditional holdings. Similarly, some investors must sell in order to convert their crypto holdings to pay for living expenses at a time when most individual’s incomes have suddenly ground to a halt. These types of sales do drop cryptocurrency prices. 

Since cryptocurrency is only a tiny share of the overall financial market, it is inevitably affected by enormous upheavals such as the one in play now; however, because Bitcoin is of a finite supply that is unwavering regardless of traditional financial markets, it is a safer bet. Interestingly in the past few weeks, institutions in both India and Korea have opened freer pathways forward for the crypto industry. 

Print money

In some of the bailout situations occurring around the world and in the US, long-term problems will follow the current stopgaps, which may result in governments just printing more money. The depreciation of fiat currencies is obviously problematic when your assets are held in those currencies. Obviously in that case, Bitcoin is a safer bet.

The beauty of decentralization at times like these is that the teams powering blockchain technology are dispersed throughout the world. Therefore, while this pandemic is worldwide, it does not affect all areas simultaneously or equally, allowing for growth opportunity in areas where teams are able to continue working. 

To conclude, we may see some currency fluctuations, as a result of panic-selling or of sales that are necessary for investors to cover living expenses while traditional economies are paused. However, the likely effect of government bailouts will be the devaluations of fiat currencies, which cannot occur with the likes of Bitcoin, the quantity of which is finite. Therefore, the financial world post-coronavirus is headed toward decentralization. Cryptocurrency investment is the long game, and to truly see results and the fruits of investment, one must be in it for a stretch far longer than this crisis looks to be.


When is it time to buy Bitcoin?

We are continuing to see a slight drop in the value of the Bitcoin today. However, today shows that Bitcoin is not tied to the dollar, oil price or anything else. Bitcoin is a free-standing cryptocurrency that can hold its own weight. In another massacre where we saw the oil price drop over 12% and the dollar racing against other European currencies the Bitcoin is down to around 5400 USD. This is of course much lower than what we saw at its peak, at around 20000 USD. 

Bitcoin has shown today that it can hold itself over 5000 USD for now, but that it is having a tough time breaking through or stabilizing at 5500 USD. If you are a day trader of cryptocurrency it might be a tough day to make the choice to buy. However, are you a trader that sits long, now might be the time to investigate how long you can sit and at what cost you can start picking up Bitcoins. In the big picture, we are looking at a price four times less what we saw at its peak. 

Most countries around the world are pumping money into the economy in an effort to restart the financial markets. The U.S. Federal Reserve delivered an emergency rate cut of 100 basis points early Monday. The Feds also announced new quantitative easing in the form of at least $700 billion in asset purchases. We have also heard much talk yesterday and the day before about helicopter money, where President Trump would send out as much as 1000 USD to every American. That would be part of a $1 trillion stimulus program.  

These talks of efforts and efforts seem not to work quite yet. The stock market is falling, and many say we are heading into a recession. The corona virus is not helping causing too much panic among investors and no place to hide. Looking at the current exchanges there are no obvious stocks that sticks out as safe heavens. Instead, investors are flocking to the dollar. 

It is therefore hard to predict when the value of the Bitcoin will stabilize and can again be a place for investors to place value. The global economy is seeing a double crisis in the virus placing the world economy in a global lock- down, as well as the oil price war between Russia and Saudi-Arabia over market shares is flooding the market with too much oil. The combination of these two crises are causing a huge liquidity squeeze in the market leading to a shortage of cash being placed in Bitcoins, and instead pulled out of the markets. That said, Bitcoins are a great alternative to the markets when the stocks are being out of control.  Bitcoin is currently consolidating, showing indecision in the marketplace.

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Bitcoin in a historically attractive zone

Bitcoin is a cryptocurrency that fluctuates in value. We have seen dramatic changes in the last 12 months, from 10,200 in mid-February to 12-month lows below $4,000 last week. Such a drop unfortunately makes it hard to believe in a huge really before the May 2020 mining reward being cut by 50%. 

However, with the price reduction there is hope in sight. There is a key indicator called the “Puell Multiple” that is important and worth paying attention to. This Multiple looks at the supply side of Bitcoin’s economy, which means that the Multiple loos at bitcoin miners and their revenue.

The Puell Multiple is calculated by dividing the daily issuance value of Bitcoins in USD by the 365-day moving average of daily issuance value.

The important part for our purposes, Coinmarket, and Bitway is that the Multiple explores market cycles from a mining revenue perspective. When you are a Bitcoin miner you generally have to sell your Bitcoins to cover you cost. In this way you are always a seller. Bitcoin miners’ revenue stream can therefore influence price over time.

To understand why we are moving into a time of buying we need to understand the historical standards. Bitcoin has declined to very low levels. The levels are so low that the value of newly issued bitcoins is also low compared to earlier issued Bitcoins from mining. This indicates that Bitcoin is now undervalued.

2018 bear market

It is always interesting to look back in time when trying to assess what the future will bring. Bitcoin peaked back in December 2017 with a price of $20,000. Within a year the price was very low at near $3,200 in mid-December 2018. When the price was that low the Puell Multiple indicated that the cryptocurrency was undervalued and the price started to rise again. 

If we take a look a bit longer back in history, the Bitcoin went through similar things. Bitcoin experienced a then high of $1,100 in November 2013, which fell back to a low of $150 in January 2015. The Puell Multiple also bottomed out near the current level as today before raising again. 

Is the bear market over?

If we have a look at the Multiple, the worst is behind us. However, the Puell Multiple has not dropped to the same level as we saw twice before rebounding. We therefore expect a bit of rough seas before we are in the clear. 

If we use history, we may see one more bout of selling, which could give us prices at around $4,000-$5,000. We have experienced better prices in the earlier parts of the month. Currently, however, the Bitcoin is trading around $6,500. That is quite a bit higher than the possible $4,000 low. Prices hit a high of $6,907 early Friday, which indicates that the currency has juice to start a climb.


A Venezuelan Coin under Dictatorship: Part Three

Following the Petro debacle, Gabriel Jimenez was scapegoated by Venezuela’s left and right, with his startup, The Social Us, struggling to attract clients. By July, he was under investigation for “treason against the homeland”. He soon moved in with his mother, unable to afford even the rent on his apartment, and having sold his 2007 Toyota Autana by April 2019 for a plane ticket to the US, he resolved to leave Venezuela. Upon arrival, he moved in with his father, who was soon to begin an unrelated prison sentence for a Caribbean money-laundering scheme. 

Jimenez then applied for asylum within the US, claiming that as the originator of the Petro, he was under attack by the Venezuelan dictatorship. As his father left to prison, Jimenez was left alone in a deep depression, unable to work while awaiting the result of his asylum application. In the meantime, numerous nations and entities, such as China and the European Central Bank began discussing the development of personal cryptocurrencies. The Petro, though relaunched several times over, floundered and ended up a token given to pensioners, lacking all of the open features that Jimenez had envisioned. 

In October 2019, Jimenez was granted asylum by the United States and launched into another cryptocurrency project, assisting Venezuelans in sidestepping the bolivar. Though he has no money, he was able to borrow space, food, and a couch to sleep on from a San Francisco Bay Area crypto start-up. 

On March 26, 2020, President Nicolas Maduro was charged by American courts with participation in a many decade-spanning narco-terrorism scheme and for cocaine trafficking, through a vicious drug cartel that followed him into power. The US, along with many Western nations, has now long recognized Juan Guaido, the leader of the opposition, as Venezuela’s rightful ruler. 

While the failure of his vision for the Petro is doubtlessly rife with loss and regret for Gabriel Jimenez, his alienation from the Maduro government a year ago was undoubtedly fortuitous, considering the charges that the US now alleges against Maduro and numerous associates. Cryptocurrency itself has carved out an enormous role on the African and South American continents, in part due to unstable local currencies. In Venezuela in particular, well-established cryptocurrencies have gained an unshakeable foothold. 

The Petro, as Jimenez argued, did not have sound economic reasoning, varying from an oil bond to a crony-government token in its various incarnations. Perhaps a better national cryptocurrency is on the horizon, but the truth is that digital currency cannot be tied to a nation-state’s interests, nor hard assets, if it is to coexist with the likes of Bitcoin. The attractive aspects of cryptocurrency: the decentralization, lack of instability through the same forces that plague local currencies, the eradication of government interference, are the very reasons why a truly successful national digital coin that is competitive on the world digital marketplace looks unlikely. 


A Venezuelan Coin under Dictatorship: Part Two

The proposal for the Petro was exactly in line with Jimenez’s vision: a cryptocurrency which, similarly to Bitcoin, would move unhindered by government entities across an open network. Though Jimenez didn’t invest much hope in the idea actually coming to fruition, Maduro soon announced the new national cryptocurrency. Jimenez was soon in contact with the vice president, Mr. El Aissami, who was widely known as the second-most brutal man in Venezuela. El Aissami was deferential, assuring Jimenez that the project was his own and peppering him with questions, such as whether the Petro could be mined like Bitcoin. 

Jimenez’s employees were skeptical, with one quitting on the spot, but Jimenez saw himself as indispensable to the birth of the Petro. Jimenez elected to model his creation upon Ethereum, Bitcoin’s main contender, with plans for the Petro to trade in a publically visible market unlike anything otherwise permitted within Venezuela. He was soon taken to meet Maduro himself, to whom Jimenez presented the plan of an initial issuance of $200 million. To this, the finance minister lobbed a protest, requesting that the Petro be backed by oil reserves worth billions. This caveat would hinder the Petro’s future free trade, and in essence, it would act as a bond that always reflected the oil price, which sanctions had made illegal for purchase by Americans. 

With opposition members calling for a coup and hyperinflation gobbling up 90 percent of the value of the bolivar, Maduro continued to publically tout the Petro as a magic pill. Though he employed some lingo that he had gathered from his meeting with Jimenez, Maduro announced that the Petro would indeed be irrevocably tied to the oil reserves, beyond its initial offering. By mid-January 2018, economic advisers at the ministry of finance pushed for the Petro to have a stable, government-controlled value, tied to the price of the oil reserves, against which Jimenez pushed for oil to set a minimum price from which the open market would drive the Petro’s value. 

With any pushback from Jimenez, whose project grew starkly different from his early vision day by day, he began to receive overtures of threats from the likes of the vice president. Somehow a murky Russian group with little cryptocurrency knowledge got involved in the effort, which resulted in Jimenez coding through the night under the eye of an armed guard as the launch date of February 20, 2018 loomed ahead. Subsequently, he was summoned by Maduro to the presidential palace, where he hesitantly stated that a version of the Petro was ready to go. On live television, Jimenez was forced to sign a contract, which he had resisted throughout, relegating him to the role of sales agent for the Petro with the Russians taking the wheel. Immediately, Maduro announced that he had already gathered $725 million from investors in the Petro. 

By March 19th, 2018, US President Trump signed an executive order banning American use of the Petro, nipping the new currency in the bud. Following a news report documenting his involvement, Jimenez’s former employer, the congresswoman Ileana Ros-Lehtinen, asked the Treasury Depertment whether Jimenez himself qualified for sanctions. 


A Venezuelan Coin under Dictatorship: Part One

In early 2018, the vice president of Venezuela excitedly announced that the nation would be first in selling its own cryptocurrency, known as the Petro. Gabriel Jimenez was its chief architect, scrambling to make it operational despite a delay on even the most basic of decisions. He was soon forbidden to leave his office overnight, along with his chief programmer, or to communicate with the outside world. At only 27 years old, his coming audience with Venezuela’s tyrant Nicolas Maduro would have been inconceivable only months before. In fact, he had vocally protested the regime, which had not only plunged the nation into economic ruin but had murdered and tortured many of its own citizens through its reign of terror. However, as opposed as Jimenez was to the Maduro regime, he was equally passionate about cryptocurrency and eager for the opportunity that came his way when approached by the administration to usher in its first digital coin. Jimenez envisioned this as a means of fighting hyperinflation while freeing Venezuelans from the iron fist of central banks and corrupt institutions. 

2017 and 2018 saw much turbulence for cryptocurrency overall, as multi-billion dollar fortunes were made and lost through the skyrocketing and crashing of Bitcoin prices. For Jimenez, cryptocurrency was both a lifeline he could throw his nation at a time of economic ruin, and ultimately what drove him into exile. A child of eight when a similar strongman, Hugo Chavez came to power, Gabriel Jimenez grew up in a nation steeped in authoritarian rule. Jimenez’s education was comprised of college in Caracas and several years in the US, during which he interned for a congresswoman from Miami who vocally disavowed Venezuela’s politics; however, he returned home in 2015 when he saw an opening to reforms. Though the nation was on the brink of ruin, Jimenez founded a startup called The Social Us, which sought to fill American companies need for cheap tech labor with Venezuelan programmers. 

As is the case for many wealthier individuals in nations with volatile, hyper inflated currencies, he kept his own money in dollars but was perpetually forced to exchange it at the daily rate for basic goods and services, compelling Jimenez’s interest in cryptocurrency. Though digital currency is widely known to be volatile, it was far more stable than Venezuelan bolivars, so Jimenez began to pay his employees in crypto currency, which was also free from fluctuations caused by the regime’s economic tantrums. Bitcoin could be bought on the street, as others recognized the promise of a decentralized currency. Though this decentralization was initially seen by the regime as a threat, it quickly realized cryptocureencies potential in sidestepping sanctions imposed by the likes of international organizations and the US. This was how the idea of a Venezuelan coin, tied to the oil reserves, came about. Bitcoin itself derives from a mathematic algorithm, not from concrete objects or measures of wealth, but the government was desperate for a hail Mary. 

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Cryptocurrency Regulation Under Coronavirus Quarantine

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Though over a decade old and having evolved from fringe hobbies to a multibillion dollar asset class, cryptocurrencies have thus largely evaded the attention of regulators. Though in the US, the IRS and SEC have proactively hunted down taxpayers who neglect to report cryptocurrency trades, as well as businesses who skip the registering of tokens as securities, they have largely failed to outline and update guidance on the value of specific crypto transactions and which initial coin offerings qualify as security offerings. The recently-introduced Cryptocurrency Act of 2020 aims to elucidate consumers by categorizing cryptocurrencies as well as delegating regulation and enforcement to specific agencies. 

An example of governing in the time of coronavirus, Arizona congressman Rep. Paul Gosar introduced the Cryptocurrency Act of 2020 while under quarantine, though he initially brought it forth in December 2019, following a joint statement from the SEC, FinCEN, and the CFTC that those engaging with digital assets must actually observe laws. A specific point was adherence to anti-money laundering and counter-terrorism financing obligations as defined in the Bank Secrecy Act (BSA). Therefore, all institutions using cryptocurrency are obliged to report suspicious activity and maintain record-keeping practices. This fell short though of outlining who it falls upon to regulate and enforce these requests. 

In order to designate enforcement and regulation, the Cryptocurrency Act of 2020 has divided cryptocurrencies into three designations. Crypto Currencies are defined as any currencies or synthetic derivatives within a blockchain or a cryptographic ledger, such as Bitcoin, Litecoin, or even stable coins. Crypto Commodities, on the other hand, are exemplified by Bitcoin futures contracts, and are economic goods or services treated by markets in regard to their producer, resting in a blockchain or decentralized ledger. Finally, Crypto Securities are initial coin offerings, or debt, equity, or derivative instruments resting on a blockchain or decentralized ledger. It is vital to note that the Cryptocurrency Act of 2020 is still a bill and therefore does not hold the force of law; however, if it passes, the following agencies will regulate these three categories. Normally tasked with regulating banking and money service institutions, FinCEN, the Financial Crimes Enforcement Network, would regulate what are defined as Crypto Cureencies. The SEC, or Securities Exchange Commission, would regulate Crypto Securities, since it typically watches over the securities markets. Lastly, the CFTC, or Commodity Futures Trading Commission, the usual watchdog of commodities and futures markets, would regulate Crypto Commodities as well. In addition, the Federal Digital Asset Regulator would be responsible for maintenance of all licenses, certifications, and/or registrations employed in creating, issuing, or trading digital assets. FinCEN, working with the Security of the Treasury, would develop sets of comparable rules for tracing crypto transactions by traditional financial institutions. 

Many aspects of the Cryptocurrency Act of 2020 read as anathema to those attracted to cryptocurrency in the first place, in that it will be regulated and watched over by centralized authorities and traditional banking institutions. Its very existence though is also a testament to the prevalence and staying power of cryptocurrency. 


Bitcoin in the Time of Coronavirus

March 9, 2020 saw the worst tumble that the S&P 500 has seen in over a decade, to the point of triggering the “circuit breakers” instituted in 2013 for the first time, and halting trading. At fault is the lightning-fast spread of the coronavirus and the economic monsoon that the virus threatens to herald. With fears of a looming global recession, consumers are flying, driving, and consuming less and factories are shuttering during quarantines, decreasing a demand for oil. Two of the world’s more ornery oil giants, Saudi Arabia and Russia, fell into an unexpected spat when they could not come to an agreement over the quantity of oil to produce and offer on international markets. Without a consensus, Saudi Arabia announced that it would ramp up production, flooding the market with cheap oil and dropping prices over 20 percent in a single day, oil’s sharpest drop since the first Persian Gulf War. Many world currencies are tied to the price of oil, sending them into a tailspin also.

For fans of cryptocurrency, times like these demonstrate the advantage of a de-regulated currency that is not tied to a central bank. When the economies of major nations are in a state of dread and uncertainty, those of smaller, poorer countries are doubly so. This is why especially in markets with unstable local currencies, cryptocurrencies are the far more promising option for investment. However, cryptocurrency itself is only a decade old and known to be volatile. Bitcoin, as the oldest, most well-known cryptocurrency is a bit more of a sure bet. At moments of uncertainty, platforms like Coinmarket truly demonstrate their worth. A free cryptocurrency tracking and portfolio management platform, it offers up-to-the-minute prices for several cryptocurrencies, as well as changes over a 24-hour span, the marketcap, volume of trading in 24 hours, and the supply. Since the situation with the world economy promises to become more, not less combustible in the near future as infections skyrocket, Coinmarket is a site for any cryptocurrency enthusiast to bookmark and check several times daily. 

How has the economic panic affected the cryptocurrency and bitcoin market? February 26th, 2020 already ushered in a mass headache with a price plunge that shaved $25 billion off the entire cryptocurrency market. Since then, most digital currency trading patterns have shown triangular consolidation. Though every market has felt the wrath of the world economic downturn, including safe bets such as precious metals, over the last 90 days, BTC is up 18%, and over the last 12 months, up 123%. There has been some selloff on the cryptocurrency market since February 26th, which coronavirus fears may worsen. However, Bitcoin, while not independent of the world, is largely disconnected from Wall Street. It is an unrelated asset and often grows during Wall Street downturns; this turn though may be for the worse. Bitcoin’s price has fallen since Monday morning, but not nearly to the extent of traditional investments and safe bets like gold.