El Salvador purchases first 200 BTC, President Bukele confirms

El Salvador is the first country in the world to recognize Bitcoin as legal tender. Despite opposition from local groups, the government believes cryptocurrency will be a net positive for the economy and society.

El Salvador president Nayib Bukele confirmed Monday that his government has purchased its first 200 Bitcoin (BTC) ahead of the Sept. 7 rollout of a new law set to make the cryptocurrency legal tender. 

“Our brokers will be buying a lot more as the deadline approaches,” Bukele said, referring to the Sept. 7 timetable for fully implementing the new BTC legislation.

The purchase is part of a new $150 million Bitcoin fund passed last week by El Salvador’s Congress. The fund will be used to facilitate conversions from BTC to United States dollars in the lead-up to the new law being implemented. At current prices, the BTC purchase was worth just over $10.36 million.

In June of this year, El Salvador became the first country in the world to recognize Bitcoin as legal tender. Although the decision was met with praise by the Bitcoin community, detractors from the World Bank and International Monetary Fund warned that the new strategy isn’t a good idea. More recently, internal opposition, especially among retirees, saw hundreds across the country protest against the new Bitcoin Law.

Recent: El Salvador president announces infrastructure already being built ahead of country’s Bitcoin adoption

Perhaps surprisingly, Bank of America recently outlined at least four potential benefits to El Salvador accepting Bitcoin. In a report published in July, the bank said the country’s adoption of BTC could streamline remittances, promote financial digitization, provide greater consumer choice and open the country to foreign investors.

The new Bitcoin Law gives Salvadorans the ability to hold Bitcoin as part of a long-term investment strategy or withdraw it in cash at any of the 200 ATMs installed across the country. The country is also building infrastructure to support a state-issued Bitcoin wallet, dubbed Chivo. The Chivo wallet will have its own ATM that allows citizens to withdraw cash 24 hours a day without paying commissions.

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Gold, bond portfolios are ‘naked’ without Bitcoin, Bloomberg strategist asserts

The declaration appears as Bitcoin pops back above $50,000, with its addition in a Gold-Bond portfolio outperforming the S&P 500 index.

What is protecting an investment portfolio from potential stock market volatility? As per Bloomberg Intelligence’s Mike McGlone, a merged exposure of Bitcoin (BTC), gold, and government bonds.

The senior commodity strategist, who sees BTC heading to $100,000, pitted derivatives in a new report representing the three safe-haven assets against the performance of the S&P 500 index, finding that the trio has been outperforming the benchmark Wall Street index at least since the start of 2020.

Bitcoin-Gold-Bonds performance against the S&P 500 index. Source: Bloomberg Intelligence

The Bitcoin-Gold-Bonds index took data from the Grayscale Bitcoin Trust (GBTC), SPDR Gold Shares (GLD) and iShares 20+ T- Bond ETF (TLT). The three funds enable investors to gain exposure in the market without requiring to hold/own the physical asset.

Bitcoin more profitable than gold and bonds

McGlone noted that Bitcoin did some heavy lifting in making investors’ risk-off strategy successful, adding that their portfolios “appear increasingly naked” without the flagship cryptocurrency even if they remain exposed to gold and bonds.

The statement took cues from the performance of Bitcoin, gold, and the 10-year US Treasury yield against the prospect of rising quantitative easing and debt-to-GDP levels. Since March 2020, Bitcoin has risen almost 1,190%, which comes to be extensively better than spot gold’s 25.93% spike.

BTC/USD weekly price chart. Source: TradingView.com

Meanwhile, the U.S. 10-year bond yield has jumped from its record low of 0.33% to 1.326% in the same period.

However, despite a healthy spike, the returns on the benchmark government bond have come to be lower than the core U.S. inflation of 5.4%, suggesting that investors who hold bonds as safety against risky equities are making an inflation-adjusted loss.

US consumer price inflation rose to 5.4% in July. Source: Forex Live

As a result, lower yields have created avenues for corporates to borrow at meager rates for expansion, thus giving equities a boost. Additionally, investors in the secondary markets have started moving their capital into non-yielding assets like Bitcoin and gold, anticipating higher payouts.

Yield rebound ahead?

Former bond investor Bill Gross, who built Pimco into a $2 trillion asset management firm, noted that bond yields have “nowhere to go but up.”

The retired fund manager said that the 10-year U.S. Treasury note yields would rise to 2% over the next 12 months. Therefore, bond prices will fall due to their inverse correlation with yields, resulting in a loss of about 3% for investors who bought debts all across 2020 and 2021.

Federal Reserve purchased 60% of net US government debt issuance over the past year with its $120 billion a month asset purchase program to boost the US economy. However, in August, the U.S. central bank announced that it would slow down its bond-buying by the end of this year, given the prospects of its 2% inflation rate target and economic growth.

“How willing, therefore, will private markets be to absorb this future 60 per cent in mid-2022 and beyond,” questioned Gross, adding that the US bond market would turn into an “investment garbage.”

“Intermediate to long-term bond funds are in that trash receptacle for sure.”

Rising rates could threaten to draw capital out of overvalued U.S. stocks. At the same time, as a risk-off trade, funds could also start flowing into the Bitcoin market. Julian Emanuel, the chief equity and derivatives strategist at brokerage firm BTIG, shed light on the same in his interview with CNBC in February. Excerpts:

“This is the environment where that catch-up trade is going to show its ability […] You’re coming from such a low absolute level of rates that higher rates actually is likely to be supportive for alternatives like Bitcoin.”

Related: 3 reasons why a Bitcoin ETF approval will be a game changer for BTC price

To McGlone, the capital inflow into Bitcoin and the rest of the cryptocurrency market, including Ethereum, would be about finding the next-best investment opportunity. He said that digital assets may represent the “higher-beta potential,” adding:

“We see Ethereum on course toward $5,000 and $100,000 for Bitcoin.”

The views and opinions expressed here are solely those of the author and do not necessarily reflect the views of Cointelegraph.com. Every investment and trading move involves risk, you should conduct your own research when making a decision.

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Bitcoin weekly outlook: Why a $50K-retest is likely ahead of Friday’s US jobs data

Bitcoin bulls remain pressured under $50,000 in the week that would shed more light on the Federal Reserve’s taper outlook based on non-farm payroll numbers.

The heavy selling in the U.S. dollar market at the end of last week assisted Bitcoin (BTC) to climb above $49,000. However, BTC struggled to extend its climb above $50,000, a psychological resistance level, as investors remained cautious about the Federal Reserve’s taper timing

Bitcoin corrects after logging its week-to-date high of $49,667. Source: TradingView.com

In detail, the Fed chairman Jerome Powell delivered a mildly dovish outlook during his speech on Friday at the annual Jackson Hole symposium. At one point, he refrained from providing hints regarding when the Fed would start unwinding its $120 billion a month asset purchasing program.

Powell noted that they would begin tapering sometime by the end of 2021, albeit admitting that the fast-spreading Delta variant of the Covid-19 could play spoiler.

“We will be carefully assessing incoming data and the evolving risks,” he said.

“Timing and pace of taper will not be intended to carry a direct signal regarding the timing of interest rate liftoff.”

At the same time, the U.S. Bureau of Economic Analysis reported that annual Core Personal Consumption Expenditures (PCE) Price, which the Fed considers its preferred inflation metric, remained unchanged at 3.6%, about 1.6% higher than the central bank’s intended target.

Things to focus on next week

The first half of the week has no major macroeconomic events that could directly or indirectly impact Bitcoin and the rest of the crypto market.

But on Sep. 1,  the Automatic Data Processing (ADP) Research Institute will reveal August’s private sector employment data. Additionally, investors will likely watch the ISM Manufacturing PMI for its Prices Paid component. In doing so, they could gauge input price pressures in the manufacturing sector to determine inflation.

On Friday, the Non-farm Payroll (NFP) data expects to show that the U.S. economy added 763,000 jobs in August, about 19% lower than July’s print of 943,000. As a result, disappointing job data could delay the Fed’s decision to taper its asset purchase program and help boost the price of risk assets, including Bitcoin.

Technical setup

Technically, Bitcoin has been trending inside a short-term ascending channel, hinting at a move towards the lower trendline (near $47,000) for a potential pullback towards the upper trendline (above $50,000).

Bitcoin 4-hour price chart featuring ascending channel pattern. Source: TradingView.com

An extended sell-off below the Channel’s lower trendline could risk crashing the BTC/USD exchange rates towards the 200-4H exponential moving average (200-4H EMA; the yellow wave) at near $44,600.

Related: Bitcoin in line for ‘phenomenal’ weekly close if BTC price holds $49K

The downside target appears closer to the one visible on the weekly chart.

Bitcoin weekly price chart setup. Source: TradingView.com

The BTC/USD exchange rate has been testing the 0.786-line (near $50,779) of the Fibonacci retracement graph following a 75.36% bullish move. As a result, an extended pullback move from the said price ceiling brings Bitcoin’s next downside target near the 0.618-Fib line (around $43,886).

Conversely, a neutral RSI reading (below 70) may assist the bulls to reclaim $50,000 for a bullish breakout move. In doing so, they could target levels near $60,000 as their next upside target.

The views and opinions expressed here are solely those of the author and do not necessarily reflect the views of Cointelegraph.com. Every investment and trading move involves risk, you should conduct your own research when making a decision.

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Wealth managers gain exposure to Bitcoin via Grayscale, according to new SEC filings

The Grayscale Bitcoin Trust, which trades under the ticker symbol GBTC, is being snatched up by institutional managers looking for more traditional exposure to digital assets.

New filings with the United States Securities and Exchange Commission, or SEC, reveal that four wealth management companies have acquired shares of Grayscale’s Bitcoin Investment Trust, offering further evidence of institutional adoption of digital assets. 

As first reported by MacroScope, a Twitter feed devoted to institutional trading and asset management, the firms disclosed their GBTC holdings in new filings for the period ending June 30, 2021.

Clear Perspective Advisors, an Illinois-based wealth manager, revealed direct ownership of 7,790 GBTC shares on Friday.

Ohio-based Ancora Advisors scooped up 13,945 shares of GBTC as of June 30. While that’s a small position for the multi-billion-dollar asset manager, it reflects an important strategic move given that the company has a long-term investment perspective.

Meanwhile, two additional firms added to their GBTC holdings for the June 30 reporting period. Boston Private Wealth, which had previously reported 88,189 GBTC shares as of March 31, increased its exposure to 103,469 shares. Ohio-based manager Parkwood boosteits holdings to 125,000 shares from 93,000 at the end of March.

Related: GBTC premium matches Bitcoin price crash levels as unlocking fear fades

Major firms are finding new and diverse ways for gaining exposure to Bitcoin and other virtual assets. As Cointelegraph reported, tech giant Intel recently disclosed a sizable position in Coinbase stock, which provides direct exposure to the digital currency market.

Institutions are likely to increase their exposure to digital assets in the coming months — provided that the bullish narrative continues to play out. Many crypto observers subscribe to four-year cycle theory, which attempts to explain and forecast Bitcoin’s price from one cycle low to another. With the crypto asset class returning above $2 trillion this week — representing a $700 billion recovery from the local bottom — it appears that the next phase of the bull cycle is gaining traction. 

Related: Bitcoin’s off-chain data points to more upward momentum for BTC price

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Bitcoin price drop to $37K has analysts wary of calling a ‘trend change’

Bitcoin price sold off below $37,000 shortly after topping $40,500, leading analysts to caution that bears still have a few tricks up their sleeves.

Bull market optimism returned to the cryptocurrency market on July 26 after Bitcoin (BTC) price rallied above the $40,000 level for the first time in over six weeks.

Today’s rally to $40,581 was a continuation of the July 25 breakout which saw BTC price rocket to $48,110 at Binance af a short squeeze resulted in nearly $500 million in shorts being liquidated in just two minutes. 

Data from Cointelegraph Markets Pro and TradingView shows that BTC spiked to an intraday high at $40,581 on Monday before pulling back to $37,500 as bulls look to flip this resistance zone back to support in preparation for a further move higher.

BTC/USDT 4-hour chart. Source: TradingView

While the move higher has the mark of a trend change and has prompted some analysts to proclaim the bull market is back on track, on-chain data and the perpetual funding rates do not fully concur with this point of view. Especially when one considers that the current breakout may have only been the result of a massive short squeeze.

Factors that could reignite the bull market

According to Élie Le Rest, partner at digital asset management firm ExoAlpha, the recently denied rumor that Amazon would accept cryptocurrency payments have the potential to have a similar effect as the 2020 revelation from PayPal that it would integrate cryptocurrencies. Le Rest said that if the Amazon news turns out to be true, this “could be the catalyst to ignite a bull run in H2 of 2021.”

As Bitcoin price pushed above the $35,000 level on July 25, “more than a billion dollars of shorts got liquidated in the past 24 hours, with the bulk of the liquidation occurring in less than 1 hour” according to Le Rest, who also said, “the current market move could be sustained during the week by volumes coming from players having waited for a more directional trend on Bitcoin since the end of May.”

Le Rest said:

“To validate this directional trend, Bitcoin has to break out of the $30,000-$40,000 range it has been stuck into for 2 months. Maintaining Bitcoin over the $40,000 level would signal that the “bear market” is over and the bull-run may resume.”

If Bitcoin is able to maintain its current momentum, Le Rest said “as many expect, Bitcoin could get back on track with the Stock to Flow model and reach the $100,000 mark by year-end.”

On-chain data is not so bullish

Caution is warranted against being overly bullish and data from Glassnode suggests that several bearish threats remain valid. 

When analyzing the directional bias of the futures markets, Glassnode found that “perpetual funding rates have continued to trade negative,” which “indicates the net bias remains short Bitcoin.”

Bitcoin futures perpetual funding rate for all exchanges. Source: Glassnode

Glassnode said:

“This metric in particular helps us identify that Monday’s price rally is likely associated with an overall short squeeze, with funding rates continuing to trade at even more negative levels despite price rallying +30%.”

Glassnode also pointed to Bitcoin on-chain activity and highlighted that “in direct contrast to the volatility in spot and derivatives markets, the transaction volume and on-chain activity remains extremely quiet.”

Bitcoin entity-adjusted total transfer volume. Source: Glassnode

Overall, how on-chain transfer volume responds to the recent price action in Bitcoin will provide better insight into where the market is headed, but as noted by Glassnode, “it remains to be seen whether on-chain volumes start to pick up in response to recent volatile price-action.”

Related: DeFi tokens book double-digit gains after Bitcoin rallies above $39,000

Altcoins follow Bitcoin’s lead

Daily cryptocurrency market performance. Source: Coin360

Bitcoin’s recovery above $40,000 also helped spark strong rallies in most altcoins.

Ether (ETH) gained of 11% to hit a daily high at $2,433, while Dogecoin (DOGE) posted a 7% gain and trades at $0.208.

Other notable gainers include a 64% gain for Strike (STRK), a 55% rally in Venus (XVS) and a 20% breakout in VeChain Thor (VTHO) and Ankr (ANKR).

The overall cryptocurrency market cap now stands at $1.46 trillion and Bitcoin’s dominance rate is 47.4%.

The views and opinions expressed here are solely those of the author and do not necessarily reflect the views of Cointelegraph.com. Every investment and trading move involves risk, you should conduct your own research when making a decision.

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