Bloomberg reports on growing faith in Bitcoin among investors who fear a U.S. default

Investors would prefer Bitcoin to the dollar as a means of saving capital in the event of a U.S. government debt default. This is evidenced by the results of a survey Bloomberg Markets Live Pulse. Which was conducted May 8-12 with 637 respondents. 7.8% of professional and 11.3% of retail investors will choose the first cryptocurrency as a protective asset. And while the U.S. dollar will be relied on by 7.8% and 10.2% of investors from the two groups, respectively.

At the top of the list of defensive assets is gold. Despite the fact that the price of the precious metal is currently near its historical maximum ($2,000 per ounce). And it was chosen by about half of surveyed investors from both categories. On the other hand, the report notes the current shortage of alternative assets to gold for hedging.

The second most popular asset to buy in case of default were U.S. Treasury securities. Journalists see a certain irony in this, because it is these debt securities that will probably default. But even pessimistic analysts think. That holders of treasuries will be paid, albeit late, as the article says, which explains the choice of this asset. It will be bought in case of default by 14-15% of respondents.

In third place is Bitcoin, followed by the U.S. dollar, the Japanese yen and the Swiss franc. At the same time, more than 55% of respondents said that a default or even its approach would have a strong negative impact on the dollar as the global world currency. Also, our experts note that another 13.6% of respondents said that significant damage to the U.S. national currency has already been done and it can only increase further.

Marathon Digital and Zero Two plan to launch two cryptocurrency mining platforms in Abu Dhabi this year at a total cost of $406 million

One of the largest U.S. miners, Marathon Digital, and developer Zero Two announced the creation of bitcoin mining platforms in Abu Dhabi (UAE). According to a press release, the Abu Dhabi Global Markets (ADGM) joint venture will begin building two mining centers under equipment with a total capacity of 250 MW.

Also Marathon Digital is one of the largest U.S. public companies. Which is engaged in cryptocurrency mining. It has tens of thousands of mining devices in Texas, North Dakota. And other states.  according to BitcoinTreasuries, the company ranks second behind Microstrategy in terms of Bitcoin ownership. It owns 12,200 BTC ($335.5 million).

Also Abu Dhabi-based Zero Two develops Web3 infrastructure solutions and digital assets in the emirate.

The site for 200 MW of mining equipment will be located in the “eco-city” Masdar. Another 50 MW platform will be built in the port area of Mina Zayed. Electricity will be supplied to the complex from the general power grid of Abu Dhabi.

Marathon’s share in ADGM will be 20%, Zero Two’s share – 80%. Capital investment by the companies in proportion to their shares will be about $406 million. The digital assets extracted will also be distributed according to each company’s shares twice a month.

The companies have developed a special immersion solution for ASIC-mainer cooling (liquid cooling) to operate the equipment in the desert climate. And they implemented new software for performance optimization. The new solutions were successfully tested during the pilot project.

It is expected that the mining centers will be launched by the end of 2023, their total hashing speed. Also according to the companies’ calculations, will reach 7 EH/s. Our experts note that according to BTC.com, the total global Bitcoin network hash rate as of May 10 is about 337 EH/s.

Our experts named the reasons for the large “queue” of transactions in BTC network. And described the ways to solve this problem, as well as its impact on the price of the leading digital asset.

At the beginning of May, the daily number of transactions in Bitcoin network renewed its historical maximum at 685 thousand. This happened amid a surge of activity associated with the issue of bitcoin-NFT or Ordinals.

The ability to issue tokens on the Bitcoin network appeared in late January. And since then more than 4.69 million of them were created. More than 789 BTC ($21.9 million) were spent as commissions.

As of May 8, there are still more than 455,000 transactions waiting to be confirmed in the first cryptocurrency blockchain. Which is a record high. Experts told what the formation of such a queue could lead to.

Reasons and solutions

Queuing is a fairly typical situation for PoW blockchains. And many factors can affect it, but the main reason is always associated with a sharp increase in interest in intra-network transfers.

Our experts say that the problem develops further very quickly. As the queue generates an even bigger queue, similar to the traffic jams that form from traffic jams when people try to avoid them. In blockchains, users start to raise fees. And all new transactions get stuck, while old ones may stay in the mempool (transaction queue, mempool) for weeks until the load is reduced.

There is no direct solution to this situation, says our expert. In general, the “scalability problem” is the main reason to criticize the consensus mechanism Proof-of-Work (PoW), on which Bitcoin works. But our expert noted that there are local ways around this problem. For example, such as “replace-by-fee” or “child-pays-for-parent” mechanisms.

“Replace-by-fee” allows you to directly change the amount of commission in a transaction already sent to the waiting list. But very few wallets support this feature. And to enable it, it should have been provided for in advance: the transaction should have been sent with the parameter enabled. Which allows you to replace the commission already after the transaction has been sent.

The “child-pays-for-parent” function implies sending a new transaction from a wallet. To which the change from the previous transaction with the knowingly overrated commission must come. This is such that it would be profitable for miners to process two transactions at once.

The problem of scalability is partially solved by the use of L2 solutions. For example, there is a Lightning Network superstructure for Bitcoin, which does not load the main blockchain. The widespread implementation of this technology will help prevent queues in the future.

Impact on Bitcoin price

The current significant queue in the BTC network is unlikely to affect the value of the asset in the moment. But it does create a number of questions for what is happening around the Bitcoin blockchain.

If before the BTC network seemed to market participants something fundamental, stable, which is very difficult to change. And, as a consequence, difficult to deteriorate in its parameters. After the emergence of projects like Ordinals, Bitcoin no longer seems to be a cryptocurrency ” constant.

The fact that thousands of enthusiasts in the Bitcoin network can now create NFT using the experimental script BRC-20. This expands the capabilities of the project, but creates no additional value for BTC. Our expert noted that the Bitcoin blockchain has never been known for scaling as it is. And in times of stress and strong movements of the cryptocurrency market, transactions in the network, compared to other blockchains, were very slow at all.

Now, against the backdrop of a growing number of transactions. And at the moment the number of transactions “in the queue” exceeded 400 thousand, the network’s fees have also increased, which adds to the negativity.

Thus, over time, the perception of Bitcoin as the first asset of the market may shift towards other projects. Which will offer reliable, fast and profitable transactions. Thus, the events of today may lead to a decrease in interest and capitalization of BTC in the long run.

However, there is no clear competitor at the moment. Therefore, market participants will continue to use Bitcoin. Current price movements are unlikely to be affected by these processes. But in the long term, such an “evolution” of the Bitcoin network raises questions.

Our experts have analyzed the situation on crypto market. And told how it can change for Bitcoin in the short term

Last week started not the best for Bitcoin. When against the background of weak Chinese statistics and the fall of the S&P500 index, the pair BTC/USDt fell to $27,666. It seemed that the situation would only worsen, but since May 2, the phase of recovery began thanks to the fall of the dollar index. And support from the U.S. Treasury Secretary Janet Yellen. Bitcoin has risen to $28,879.

However, there are still dangers to the U.S. economy. If Congress does not approve an increase in the national debt ceiling, the government will not be able to borrow additional funds. And it could find itself in a very difficult position. Since 1980, the U.S. government has shut down several times due to the inability to raise the national debt ceiling. Including closures in 1990, 1995-1996, 2013 and 2018-2019. Democrats and Republicans aren’t particularly worried about this.

After the publication of data on the labor market in the United States on May 4, the pair BTC/USDt rose to $29,677. However, investors remain generally quiet as buying activity in the cryptocurrency remained low.

The scenario of continuation of sideways movement on cyclic analysis is still confirmed. The beginning of a new rally on it falls on June 1.

According to BitRiver estimates, buyers have to fight for the level of $31,000. They need to pass it to make the price pattern on the daily timeframe “bullish”. Otherwise, the scales will start tipping to the sellers’ side.

Mining company Bitdeer expects to build a 100 MW power plant in Bhutan for carbon-free cryptocurrency mining. Crypto-Upvotes expert review

The investment arm of the Kingdom of Bhutan and mining company Bitdeer Technologies plan to find investors for a $500 million fund.

Fundraising will begin as early as the end of May. The purpose of the fund is to launch a carbon-free Bitcoin mining center. Which uses hydroelectric power, the two companies said in a joint filing with the U.S. Securities and Exchange Commission (SEC). According to the document, Bitdeer expects to build a 100-megawatt power plant in Bhutan. And its construction will begin in the second quarter and be completed in July-September.

Mining will be the least risky way for Bhutan to take advantage of cryptocurrency opportunities. And for now, the country will only focus on Bitcoin, said Ujjwal Deep Dahal, head of the investment arm of local firm Druk Holding & Investments, in a commentary for Bloomberg. Druk began mining cryptocurrencies as part of an experiment when bitcoin was still worth about $5,000, he said.

The kingdom of Bhutan

The Kingdom of Bhutan is located between China and India. And it has a population of about 800,000 people. The local economy relies heavily on revenues from hydropower. Druk manages public investments in traditional areas. These include stocks, bonds, technology, energy and real estate. It also mines cryptocurrencies and invests in what the company calls a “future-oriented” strategy.

The Bitdeer company is registered in Singapore and is owned by Chinese businessman Jihan Wu. And acts as one of the leading players in the cryptocurrency mining market in terms of aggregate capacity. Wu previously served on the board of directors of Bitmain, a leading manufacturer of mining equipment. And owned the BTC.com mining pool until February 2021.

Bitdeer went public on the NASDAQ exchange through a SPAC deal in April, and its shares trade under the ticker BTDR. The company owns one of the largest cryptocurrency mining centers in Texas. In the United States, rising electricity prices have led to the bankruptcy of several major cryptocurrency players. And on May 2, the presidential administration again raised the issue of imposing a 30% tax on miners.

Our experts told us how the banking crisis in the U.S. affects the prices of cryptocurrencies. And why they are perceived as an alternative investment asset amid uncertainty.

On Monday, May 1, regulators closed the troubled American bank First Republic. The bank went under the external management of the U.S. Federal Deposit Insurance Corporation (FDIC). The collapse of First Republic set another anti-record. This bank was the third largest of the collapsed financial companies since the 2008 crisis.

At the opening of trading on May 2, shares of three more American banks – PacWest Bancorp, Western Alliance and Metropolitan – collapsed by almost 30%. Because of the volatility, exchanges suspended trading in shares of all three financial institutions. At the same time, bitcoin gained 2% in price, rising to $28.5 thousand after its recent fall.

Banking crisis is just starting

The banking crisis has not yet shown itself on the world stage. But the fact that regulators have to figure out how to put out the blazing fire is evident in their comments, according to our experts.

In general, the banking crisis as a crisis of confidence in the banking system helps cryptocurrencies. But it would be too reckless to expect such a straightforward correlation, our experts say. Bitcoin exchange rate, takes into account other factors. For example, regulatory uncertainty, the state of financial stability or problems of stabelcoin issuers. It also takes into account inflation, approaching halving or expiration of Bitcoin futures contracts.

In the last week of April, bitcoin’s price rose on the back of First Republic’s problems. When there was still no news of its final collapse. However, cryptocurrency trading was quite unstable. Because in addition to the impact of the banking crisis on the cryptocurrency rate, investors were guided by the inflation figures. And also on the policy of the U.S. Federal Reserve (Fed), the possibility of recession and the weakening of the dollar.

First Republic became the fourth U.S. bank to collapse this year. Silvergate and Signature closed in March. Which largely focused on crypto-industry customers. And also Silicon Valley Bank, the collapse of which also hit the rate of the second most capitalized USD Coin (USDC) stabelcoin. If in the case of the first two there was a clearly visible dependence on the crypto market. First Republic Bank seems to have collapsed without any connection to digital assets. According to reports studied by journalists of specialized publications, the bank lacked any cryptocurrency capital.

Linking the U.S. banking crisis to the rise of Bitcoin

The link between the U.S. banking crisis and the rise of Bitcoin is that both events are indicative of the instability of the banking system. And they are alarming for investors. Cryptocurrencies act as an alternative investment asset that is not subject to control by central banks and does not depend on financial institutions. The collapse of banks could increase interest in cryptocurrencies. As many people are looking for safe places to invest in times of economic instability, our experts believe.

As banks face insolvency, their depositors try to withdraw money from their deposits en masse. Any collapse provokes the depositors to withdraw money from other banks as well. Which also run the risk of liquidity shortages. As long as the money is in the bank, the bank actually owns it. Cryptocurrencies, on the other hand, give a tool for owning value with full control of its owner.

However, we should not forget that the cryptocurrency market is also subject to fluctuations and instability. Especially in light of strict regulation by governments and central banks. In addition, cryptocurrencies can be subject to fraud and cyberattacks. And this can cause investors to lose money. Thus, any investment, including cryptocurrencies, should be made after careful risk analysis.

Crypto-Upvotes experts told about profitable trading strategies for the medium and long term

The crypto market switched to a bearish trend in the short term on the horizon of a couple of weeks. Bitcoin failed to consolidate above $30,000. And following the largest cryptocurrency, other crypto-assets also went to the decrease. Crypto-Upvotes experts believe that now the best strategy will be to wait for optimal conditions to increase positions in selected digital assets. The overall picture remains generally positive. And we should expect an uptrend in the medium to long term.

Buying Bitcoin is worth considering in case its rate drops below $26.5K. The price of the first cryptocurrency in the coming week may show high volatility ahead of the Fed meeting on the key rate. Our experts consider a comfortable level for increasing positions in BTC at $25.5-26 thousand.

The same approach applies to Ethereum or BNB. Both cryptocurrencies quite well worked off the bullish trend in previous weeks. And now the pullback in the medium term has expectedly begun. This means that it is not worth to enter these assets now. It’s more effective to wait and buy when their rates reach the support level of $1700 and $300 correspondingly.

Also in the medium term, on the horizon of several months, all cryptocurrencies mentioned above are likely to show growth. And the main wave of the bullish cycle will start in the second half of the year ahead of the bitcoin halving in the spring of 2024.

Halving is the code’s embedded halving of miners’ rewards for a found block in the bitcoin blockchain. On May 11, 2020, the network’s reward dropped to 6.25 BTC. The next reduction to 3.125 BTC is expected in April-May 2024.

Other trusted cryptocurrencies from our Crypto-Upvotes experts

In addition to the cryptocurrencies mentioned above. It is also worth following the movement of cryptocurrencies from “second-tier” networks. These are such as Cosmos (ATOM) and Arbitrum (ARB).

The Cosmos interconnect ecosystem continues to be successfully filled with liquidity. And interest in products from this ecosystem is clearly growing. The potential in ATOM, (the Cosmos blockchain cryptocurrency) suggests that there is a 3-5x growth opportunity here by the end of 2023.

As for Arbitrum, it is an asset that can now be considered for purchase. The coin’s price already takes into account the negative effects of the blockchain management scandals. That said, the total locked-in value in Arbitrum’s smart contracts continues to rise. And that’s a good sign for long-term investors.

Disclaimer:

Crypto-Upvotes does not provide investment advice. This material is published for informational purposes only. Cryptocurrency is a volatile asset that can lead to financial losses.

Our experts told us what factors affect the Bitcoin price. And what dynamics can be expected from it in May

Bitcoin and other cryptocurrencies historically have not maintained the classic “sell in may and go away” trend. Only four times in the last ten years has Bitcoin fallen in May. And the average decline has been lower than the increase in May of other years. This suggests that it is not statistically correct to expect cryptocurrency prices to fall in May. However, this does not mean that the market cannot decline.

At the beginning of the month, we are waiting for the Fed meeting, which will decide on the interest rate and further steps to change monetary policy (MP). Market expectations lay another 0.25% hike and a pause in rate hikes thereafter.

Some analysts believe the Fed could begin loosening monetary policy. Especially in view of recession risks and developing problems in the banking sector. At the same time, if by the results of the FRS meeting on May 3 the Open Market Committee will not designate the prospect of transition to easing of the monetary policy. It will create pressure on both stock markets and cryptocurrencies.

Our experts do not expect crypto-asset prices to rise significantly in May. And continue to wait for major bull events in the crypto market in the third and fourth quarters of this year. An ideal scenario in May would be Bitcoin’s correction to the $25K level. That decline would have provided an opportunity to enter the market at bargain prices in anticipation of further growth.

Fed plans could send signals to investors

The cryptocurrency market continues to be influenced by the dynamics of U.S. stock indices, the dollar index, the actions of the U.S. Federal Reserve. As well as news on the U.S. debt ceiling.

The volume of the U.S. national debt has already reached too much. And the issue of its repayment becomes more and more urgent. This could lead to a change in U.S. economic policy, including the Fed’s monetary policy.

The Fed meeting could be a key moment for the cryptocurrency market. As Jerome Powell’s speech will affect both the dollar exchange rate and the demand for cryptocurrencies. A rate hike, which is likely during the meeting, has already been factored in by the market. But further Fed plans could give new signals to investors. The trading price regime could be adjusted after Powell’s speech. And assessment of the latest news on US GDP and government debt. To account for changes in economic policy and make a decision to buy or sell cryptocurrency.

According to the latest CME Group data, there is an 82.8% chance of a rate hike to 5.25% at the May meeting. On April 27, the U.S. Commerce Department’s Bureau of Economic Analysis released GDP data. The U.S. economy grew 1.1% year on year in the first quarter against the previous value of 2.6%. Economists had expected growth of 2.0%. The economic growth slowdown may change Jerome Powell’s rhetoric and the Fed will end its rate hike cycle at the June 14 meeting to prevent a recession.

BTC/USD is trading at $28+k. We might predict a trading price range of $26.5-31k for May. Our experts think that the price will stay in that range not only till the Fed meeting. But also for some time and will leave it after June 1, 2023. If suddenly the news background will form in such a way that the buyers will be able to pass the level of $31 th. Then there will be a level of $35k on horizon. Decrease in price below $26.5k will lead to Bitcoin falling to $25k.

Our experts explained why the market is reacting to rumors about the sale of Bitcoin by the bankrupt Mt.Gox exchange. And how it could actually affect the price of the cryptocurrency.

Bitcoin dropped sharply by 8% on rumors that wallets holding Mt.Gox coins were making transactions. It quickly became clear that the information was caused by a technical error. But this incident clearly demonstrated the market reaction to the possible sale of thousands of coins of the bankrupt exchange.

Mt.Gox was one of the largest cryptocurrency exchanges in the world. It operated from 2010 until it declared bankruptcy in 2014 after a series of hacks. At its peak, Mt.Gox accounted for about 70% of total Bitcoin trading volume. The 2014 hack resulted in 850,000 bitcoins stolen from Mt. Gox, worth $17.8 billion at current exchange rates.

The bankruptcy of the exchange led to a 7.5-year legal battle. Before a solution in the form of a plan to rehabilitate the affected users was developed in 2021. Since not all of the stolen coins could be recovered. They will be compensated only a part of the original amount – about 200 thousand BTC. The deadline for payment is set for September 30. $1.7 billion, 141 thousand BTC and 142 thousand more Bitcoin Cash (BCH) coins will be distributed under the civil recovery plan. Which is designed for 10,000 customers worldwide.

In the afternoon of April 26 bitcoin rate exceeded $30 thousand. However, in the evening the value of the asset began to decline sharply and fell to $27.6 thousand. By the morning of April 27, the price of the asset has recovered to $29 thousand. In the cryptocommunity bitcoin decline was associated with rumors of bitcoin sales Mt.Gox.

However, later analytics platform Arkham Intelligence. which initially sent out such warnings, reported that the data had been misinterpreted.

“Mt. Gox Bitcoins” have been a hot topic for retail traders for years

This is largely due to the fact that trading robots react to headlines of this kind. As the April 26 incident showed, the mere mention of an exchange’s name is enough for the market to react. In this case, even if the assets are not directly related to the wallets where Bitcoins of hacked users are actually stored.

The system of payments is “rather confusing”, and does not provide some kind of one-time payment to all victims. In addition, it may be profitable for the fund manager to delay the process. At the same time making sure that the payment of compensation does not happen quickly and at one time.

Some of the affected users have chosen compensation in cryptocurrency. And the other part of them chose to receive a bank transfer at a rate several times lower than the current market rate. Some chose to get a smaller amount at an early date. And others chose to get a larger amount within a few years, and so on. Thus, it is impossible that the entire mentioned amount of 140 thousand BTC will somehow be sold at one time on the exchange, our experts explain.

Payments to affected users

In February 2014, when Mt.Gox went bankrupt, Bitcoin was trading at about $550. Given the payouts at the current rate, customers could theoretically get their coins back at a high profit. But given that the affected users will receive payouts in installments. How they will use them is a big question. It is not the fact that they will decide to sell them at once. And not to take advantage of the OTC-platforms without affecting the open market.

Fears about selling cryptocurrency confiscated by the U.S. government should be perceived in the same way. Such coins are sold at auctions. And, as a rule, afterwards, they do not go directly to the exchange glass. For the amounts of such an order and there is a market OTC, explains our expert.

The first official buyer of confiscated Bitcoins is investor Tim Draper. In 2015, he managed to win an auction to distribute Bitcoins to Silk Road, the first ever illegal online marketplace. Draper has never disclosed at what rate he got the coins. He is an outspoken supporter of cryptocurrencies and predicts the first cryptocurrency will rise to the $250,000 mark in 2024.

The collapse of a major crypto exchange FTX cleared the market of “toxic leverage” and showed investors the importance of self-storage of digital assets

Analysts at investment firm Bernstein believe that the collapse of FTX was the catalyst for a new bullish cycle in cryptocurrency markets, CoinDesk reported, citing a report from their company. The collapse of a major crypto exchange cleared the market of “toxic leverage.” And showed crypto investors the importance of decentralization and self-storage of digital assets.

Macroeconomic factors are supporting Bitcoin. Such as the weakness of regional U.S. banks and the continued outflow of deposits to money market funds. And the “big four” U.S. banks (Bank of America, Citigroup, Wells Fargo and JPMorgan Chase) reflect investor concerns about the “centralization of money,” according to Bernstein.

“Any potential shocks, in the credit sector or from the government <…> make Bitcoin an ideal safe haven asset alongside gold,” the analysts wrote.

Since the beginning of the year Bitcoin’s rate grew more than 80% – from $16.5 thousand to $29.8 thousand only in March on the background of bankruptcies of American banks (Silvergate Bank, Silicon Valley Bank (SVB) and Signature Bank) price of the first cryptocurrency grew from $23 thousand to $28 thousand.

Bernstein’s experts also pointed out that fees on the Ethereum network tripled after the FTX collapse. Which reflects the growth of user activity and interest in the asset itself. Ethereum has risen 75% since the beginning of the year, from $1,200 to $2,100.

Our experts note that at the end of March, analysts Bernstein noted that now there are “ideal conditions” for the growth of the crypto market. Problems in the U.S. banking sector could lead to a decentralized financial system as an alternative to traditional banks.