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Daily Bitcoin and Crypto Analysis

Daily BTC Analysis: The Weekender

October 18, 2021

Matt Blom

The Securities and Exchange Commission (SEC) greenlighted bitcoin futures ETFs in a first for the industry on Friday, after the regulator’s five commissioners met on the issue.

Welcome to the Weekender: Your weekly round-up of the news stories driving the crypto world, as voted by our readers' clicks! This week, the top spot…. Bitcoin ETFs! Who could have guessed.

The Securities and Exchange Commission (SEC) greenlighted bitcoin futures ETFs in a first for the industry on Friday, after the regulator’s five commissioners met on the issue. ProShares, which filed for its Bitcoin Strategy ETF this past summer, may be the first to launch next week.

The company filed a post-effective amended prospectus on Oct. 15, stating its filing is expected to launch on Monday, Oct. 18, though the fund may not begin trading immediately.

Proponents of a bitcoin ETF believe the product will be more widely accessible for individuals interested in bitcoin than the actual cryptocurrency by giving investors a regulated alternative to the underlying digital asset. The first product will track bitcoin futures, rather than the price of bitcoin directly, however. SEC Chair Gary Gensler indicated he believes futures-based products might provide stronger investor protections due to the laws under which they operate.


The SEC has, in the past, explicitly rejected bitcoin ETF applications, but it does not need to formally approve one. Under federal law, the SEC can just allow an application to become effective, rather than make a formal announcement.

Institutional investors piled $225 million into Bitcoin products, while Ether products saw outflows of $13.6 million this past week.

Institutional investors are continuing to pile into Bitcoin (BTC) despite prices pushing up to a five-month high.

According to CoinShares’ Tuesday “Digital Asset Fund Flows Weekly” report, more than $226 million in capital flowed to institutional Bitcoin products this past week. Bitcoin products dominated inflows for the third consecutive week, posting a week-over-week increase of 227%.

The surging activity surrounding Bitcoin has seen the combined assets under management (AUM) of institutional crypto products push up to $66.7 billion last week — with CoinShares estimating the total is just 5% shy of the sector’s record AUM from May.


Meanwhile, across the corridor, the U.S. sanctions watchdog is honing in on the crypto industry.

On October 15, the Treasury's Office of Foreign Asset Control (OFAC) released a new brochure with crypto-specific guidance on navigating U.S. sanctions.

The actual contents of the guidance are not especially revolutionary, but largely push the idea that OFAC expects virtual currency operators to shoulder the same responsibility for avoiding sanctions violations as other financial institutions. The guidance reads:

"As a general matter, U.S. persons, including members of the virtual currency industry, are responsible for ensuring they do not engage in unauthorized transactions or dealings with sanctioned persons or jurisdictions."

OFAC names a range of actors that must develop risk-assessment programs, including "technology companies, exchangers, administrators, miners, and wallet providers, as well as more traditional financial institutions that may have exposure to virtual currencies or their service providers."

And finally, in what has been a very US centric week of positive news, the United States is now the epicentre for Bitcoin Mining, accounting for 35.4% of the global hash rate at the end of July 2021, according to a Cambridge Centre for Alternative Finance study published on Wednesday.

The increase is more than double the U.S. global hash rate since April 2021. In April of 2021, the U.S. controlled 17.77% global hash rate, while China still had 43.98%.

After China’s mining ban, in July of 2021 the hash rate in the U.S. rose to 35.40%, and that of China fell to virtually zero.  China’s mining ban and renewed Bitcoin crackdown has lost it the global dominance it maintained due to mining Bitcoin on cheap electricity produced from coal and hydro power plants.

According to the same Cambridge study, China has dropped from nearly 75% of global hash rate in September 2019, to zero. Although it is highly unlikely that all of the Bitcoin mining in China has stopped, the lion's share of it has dropped out of major mining pools. Bloomberg even speculates that the recent rise in the hash rates of Ireland and Germany are in part due to covert miners in China using VPNs or proxy servers.


Have a great Sunday!


Technical Analysis

 

30 Mins

Bitcoin has tried across the weekend to push towards the ATH of $64,850 but failed just short of $63,000.

Markets were overbought on short indicators and are now pulling back.

Support is currently at $60,500 and below that the congestion zone from last week.  


Support:      $60,500 and $58,300   

Resistance:  $62,500 and $64,850


Daily

Bitcoin has completed an 88.6% retracement X-A-B-C-D correction at a PCZ (pattern completion zone) Target 2 hit at $61,250.

The on-chain analysis and technical analysis, have been in sync for some time, so its quite possible,  Bitcoin keeps rallying to the $64,850 ATH, above which there is no resistance until $87,000. However, the only people who should be worried are those who have bought bitcoin above $60,000.

Remember how bad the sentiment was at $40,000 and $30,000, many people calling for $20,000 and $10,000.


Support:      $58,300 and $52,800      

Resistance:  $64,850 ATH and $87,000

MA:              50-day $49,010, 100-day $44,864, 200-day $45,103

RSI:              70.4% - bullish / toppy?

MACD:         positive momentum – bullish but waning


Weekly

The RSI and MACD oscillators are in the bullish control zone.


Support:      $52,800 and $48,125

Resistance: $64,850 ATH and Fib extension Target $87,000

RSI:              66% - bullish

MACD:         positive momentum building - bullish

MACD:         positive momentum - bullish



This Weekend's Coffee Reading!


Crypto ETFs explained


There was a lot of buzz around cryptocurrency exchange traded funds (ETFs) over the past week, amid reports and rumours that the US Securities and Exchange Commission (SEC) was set to approve the launch of one or more bitcoin ETFs.

On Thursday, Bloomberg reported that the SEC was set to allow the first US bitcoin futures ETF to begin trading next week, in what would be a “watershed moment” for the crypto industry.

The next day the SEC’s investor education office tweeted: “Before investing in a fund that holds Bitcoin futures contracts, make sure you carefully weigh the potential risks and benefits.” Those 20 words caused the price of bitcoin to break $60,000 for the first time in six months, close to an all-time high of $64,895.

But what are crypto ETFs and why is this all such a big deal?


What is a crypto ETF?

To answer that, we need to back up a little. An exchange traded fund, or ETF, is a financial instrument that tracks the value of a particular asset or a collection of assets. Its main benefit is that it allows investors to diversify their holdings without actually owning any of the assets themselves. For example, a gold ETF would track the value of gold reserves it represents. Similarly, a crypto ETF would track the value of one or more crypto assets and a bitcoin ETF would track the value of just bitcoin.

Importantly, ETFs are traded on traditional market exchanges rather than crypto exchanges.

Bitcoin ETFs already exist in some countries. Many such funds have been launched in Canada, Brazil, Europe and Dubai just this year. But approval from the SEC represents the holy grail for cryptocurrency enthusiasts — one that would spur the adoption of crypto ETFs worldwide and give further legitimacy to cryptocurrencies in the process. SEC approval is crucial not just because the US is the world’s largest and most sophisticated financial market. It now also accounts for the largest share of the world's bitcoin mining as China has been cracking down on crypto miners and traders since May.


How do crypto ETFs work?

The main appeal of crypto ETFs is that they work exactly like ETFs backed by traditional assets. They come in two forms:

■ Physical-backed: To create this type of crypto ETF, an asset management company must buy some actual coins from the market, just as it would buy shares for a traditional ETF. It can then set up a fund that represents the value of the crypto assets it holds and list it for trading on the stock exchange. If the value of the fund’s digital coins increases, so does the value of your investment.

■ Futures-backed: In this type of ETF, shares in the fund aren’t based on actual coins but on crypto futures contracts. A futures contract is simply an agreement to buy or sell an asset at a predetermined price at a specified time in the future. These are less risky than physical-backed ETFs because there are no physical assets to be protected. This is the type of bitcoin ETF the SEC is reportedly set to approve.

Pros of crypto ETFs....


You can access the full report by clicking here.

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