Daily Bitcoin and Crypto Analysis

Daily BTC Analysis: The Weekender

June 13, 2021
Welcome to the Weekender: Your weekly round up of the most viewed stories of the week, as voted by you, our readers. This week has seen the negative news flow replaced with tales of adoption, it appears the central bankers, country leaders, and the financial institutions have all agreed: Digital finance is here to stay.

Delivering some common sense on the subject, the SEC’s Hester Peirce has warned against stifling crypto innovation.

“You can have pretty effective self-regulation,” Peirce said in an interview with the Financial Times.

“I am concerned that the initial reaction of a regulator is always to say ‘I want to grab hold of this and make it like the markets I already regulate’,” Peirce told the FT. “I am not sure that’s going to be great for innovation.”

Peirce has been a longtime advocate of a calibrated approach in regulating crypto. During CoinDesk’s Consensus21 last month, she said custody rules in the U.S. should be updated to accommodate digital assets.

The Bank of England released a second discussion paper exploring new forms of digital money including stablecoins and a potential U.K. central bank digital currency (CBDC).

The paper published this week follows a previous discussion paper published in March 2020 that highlighted the broad risks and opportunities in launching a CBDC.

The new paper focuses on the implications that adoption of private stablecoins could have for the cost and availability of lending, and the difficulties this could present for monetary policy. New forms of digital money could offer benefits of cost and functionality, while a CBDC could enhance the effectiveness of monetary policy by shortening the timescales for clearing and settlement.

"But these opportunities can only be realized if new forms of digital money are safe," the paper said. "They could be privately provided – in the form of stablecoins. Or they could be publicly provided – in the form of a CBDC."

The Hong Kong Monetary Authority (HKMA) is to begin a study on the use cases of a central bank digital currency (CBDC). Hong Kong's central bank is aiming to "future-proof" the financial center for the growth of CBDCs as part of its "Fintech 2025" strategy, announced Tuesday.

The HKMA has been working with the Bank for International Settlements to research retail CBDCs. It will now study the benefits and risks of a retail digital Hong Kong dollar, or "e-HKD."

In CBDC parlance, "retail" refers to a digital currency issued to consumers and businesses directly by the central bank without commercial banks or other entities as intermediaries. In this sense, it would be comparable to digital cash.

State Street, a U.S. custody bank that oversees about $40 trillion in assets, has launched a cryptocurrency division.

The new unit, State Street Digital, will be led by executive vice president Nadine Chakar, who will report to Lou Maiuri, the bank’s chief operating officer, State Street said in a press release Thursday. State Street said it is expanding its digital reach to include crypto, central bank digital currency, blockchain and tokenization, and will upgrade its existing GlobalLink platform into a multi-asset digital trading system.

El Salvador has become the first country in the world to officially classify Bitcoin as legal currency. Congress approved President Nayib Bukele's proposal to embrace the cryptocurrency, with 62 out of 84 possible votes on Tuesday night.

The president said the government had made history, and that the move would make it easier for Salvadoreans living abroad to send money home. Bitcoin will become legal tender, alongside the US dollar, in 90 days.

The new law means every business must accept Bitcoin as legal tender for goods or services, unless it is unable to provide the technology needed to do the transaction.

"It will bring financial inclusion, investment, tourism, innovation and economic development for our country," President Bukele said in a tweet shortly before the vote.

 And finally, Bitcoin Taproot upgrade finally locked-in, activation is set for November after achieving the 90% critical consensus mark among mining nodes. You can read more on this in the coffee reading section below.

Technical Analysis

This week's sideways price action has continued the range bound theme for Bitcoin. However, we have seen a lower low, and a lower high, so the focus this week for the bulls will be to push BTC above $39,500, to relieve downward pressure. Will still require Bitcoin to break above $41,000 to suggest the range moves higher, so until then, sideways is the most likely outcome.

Failure to print above $39,500 will see Bitcoin trade back towards $33,600. The bears will need to build momentum to retest this weeks low of $31,013, as the rejection from this level will now ensure buyers appear at the $33,600 area.

Another week spent between $33,600 and $38,600 is on the cards.

This Weekend's Coffee Reading

Bitcoin just got its first makeover in 4 years 

The first bitcoin upgrade in four years has just been approved by miners around the world. It is a rare moment of consensus among stakeholders, and crypto experts tell CNBC it’s a pretty big deal for the world’s most popular cryptocurrency.

The upgrade is called Taproot, and it’s due to take effect in November. When it does, it will mean greater transaction privacy and efficiency – and crucially, it will unlock the potential for smart contracts, a key feature of its blockchain technology which eliminates middlemen from even the most complex transactions.

“Taproot matters, because it opens a breadth of opportunity for entrepreneurs interested in expanding bitcoin’s utility,” said Alyse Killeen, Founder and Managing Partner of bitcoin-focused venture firm Stillmark.

Unlike bitcoin’s 2017 upgrade – referred to as the “last civil war” because of the contentious ideological divide separating adherents – Taproot has near universal support, in part because these changes are fairly incremental improvements to the code.

What’s changing?

Bitcoin’s makeover has to do with digital signatures, which you can think of as the fingerprint an individual leaves on every transaction they make.

Right now, the cryptocurrency uses something called the “Elliptic Curve Digital Signature Algorithm,” which is created from the private key which controls a bitcoin wallet and ensures that bitcoin can only be spent by the rightful owner. Taproot will switch over to something known as Schnorr signatures, which essentially makes multi-signature transactions unreadable, according to Alejandro De La Torre, Vice President at Hong Kong-headquartered major mining pool Poolin.

In practice, that means greater privacy, because your keys won’t have as much exposure on the chain. “You can kind of hide who you are a little bit better, which is good,” said Brandon Arvanaghi, previously a security engineer at crypto exchange Gemini.

It won’t translate to greater anonymity for your individual bitcoin address on the public blockchain, but it will make simple transactions indistinguishable from those that are more complex and comprised of multiple signatures.

 Read the rest of the review here.

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