Bitcoin’s Impressive 2019 Run Could Be Over After Trump Critique

July 18, 2019
“The stock market is a device for transferring money from the impatient to the patient”
― Warren Buffet

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Bitcoin’s Impressive 2019 Run Could Be Over After Trump Critique

Bitcoin is ‘based on thin air’ and ‘facilitates unlawful behavior’... according to the President of the United States, Donald Trump. Trump tweeted his opinion of Bitcoin last Thursday, causing speculation throughout the Bitcoin world that his comment is connected to the recent Bitcoin correction. Bitcoin has seen its price go from a peak of nearly $14,000 in late June to a low of $9,000 on Wednesday. Despite the bad news, Bitcoin is still up 8.98% month-over-month, compared with the majority of top altcoins, which have lost anywhere from 17 to 30%.

So is Trump responsible for the price loss? Not by a long shot. He may be responsible for giving the price a bit of a boost. Bitcoin is still peanuts compared to established securities such as equities and bonds, so at this stage, any publicity is good publicity. Additionally, the Bitcoin market is more insulated from Presidential influence than stocks or bonds. While the US president can start trade wars and initiate large spending projects for the government, there’s comparatively little he can do to affect the price of Bitcoin directly.

What about altcoins? Those have fallen as well, but for reasons wholly unrelated to Donald Trump. Altcoins have been doing poorly ever since the 2019 bull run began, due to a combination of decoupling from the Bitcoin price and stronger fundamentals for Bitcoin. Litecoin, initially considered an outlier for overperforming other alts, has lost 30.44% this month alone. Though Litecoin’s upcoming halving has already seen the price rise by 20% yesterday, and will likely push Litecoin even higher.

So why is everything falling? Well, it depends on your perspective. Compared with the start of the year, Bitcoin is up 155.55%, Ethereum gained 54.7%, Litecoin up 194.58%, with only Ripple losing 14.11%. These gains are all great news if you’re a HODLer. For short-term traders, on the other hand, they may be at the mercy of the economics of Bitcoin production. According to this theory, miners are incentivized to keep the price low pre-halving, then boost the price to a new high after. 

Wut We Think: There’s no need to listen to Chicken Little just yet - while some critical technical indicators, such as the moving average convergence divergence, have fallen below zero for the first time since December 2018, other, such as a prospective golden crossover. As a history lesson, the last golden crossover in Bitcoin’s price was seen just before the start of the bull run in February 2016. That, coupled with Bitcoin’s improving fundamentals and public attention, may signal that the current downtrend is unlikely to last for too long.

Concern over Facebook’s cryptocurrency “Libra”

Facebook’s new Libra token seems to have hit a speedbump...if the recent questions at a US Congressional hearing are anything to go by. On Wednesday, Facebook exec David Marcus faced five hours of questions about Facebook’s new crypto project, Libra. Libra is intended to be a new global currency, according to a whitepaper released last month, but the hearing did not signal good thoughts for Libra. Instead, as one US Representative stated, “I don’t think you should launch Libra at all.”

What’s with all the fuss? A lot of the concerns around Libra stem from Facebook’s reputation as a whole. There’s a real risk that Facebook may become too powerful if allowed to create and run a cryptocurrency in addition to everything else it does. As Representative Alexandria Ocasio-Cortez noted, Facebook“is a publishing platform, an advertising network, a personal telecommunications network, a surveillance corporation, a content distributor, now also wants to establish a currency and act through its wallet as–at a minimum–a payment processor.” 

Is any of that justified? These are real concerns. While Libra’spurported benefits- banking the unbanked, instant monetary transfers, and so on - are great, that comes with the risk of increased surveillance and data collection.It lacks some of the core privacy features that make traditional cryptocurrency appealing. Unlike Bitcoin, Libra would be highly centralized, with Facebook and the Libra governing committee able to call the shots, and crucially, be the only ones with access to the ledger(unlike most cryptocurrencies, where the blockchain is and must be public for the system to work at all.)

What about Facebook’s stock? Facebook has lost about 1.25% since the hearings Tuesday and Wednesday, and there’s a good chance it’ll dip further as the Libra fight drags Facebook’s name through the mud. On the other hand, reputational concerns like these are usually only small ripples for Facebook. After all, it is still the largest social and ad network in the world, and that fundamental is unlikely to change. And, if Libra is launched, Facebook will suddenly have access to data that ad networks have only dreamt about. Not only will it have preference and click statistics, but it will also be able to see how those preferences translate into actual purchases

Wut We Think: Ironically, in terms of facilitating criminal behavior and darknet markets, Libra is less susceptible than traditional crypto. Because of its centralized nature, and the membership of its Libra Association, it’s unlikely that the firms compromising it will expose themselves to legal liability by allowing illegal transactions. However, because Facebook may very well be able to bootstrap Libra into the first mass-adopted digital currency, and then be almost exclusively positioned to take advantage of the data generated by that, it bears close watching. Of course, with the recent hostile mood in Congress, and warnings issued at the highest levels, such as the G7, Facebook may have bitten off more than it can chew.

Pound Sinks to Lowest Since 2017 on Threat of No-Deal Brexit

The venerable pound sterling may soon hit rock bottom...meaning parity with the US dollar thanks to fears that Brexit may quickly result in a no-deal. It’s already reached the lowest level since April 2017, and considering the current state of the UK government, it may fall even lower. The Brexit deadline of October 31st may signal a new low not seen since 1985 for the British currency, especially if no deal is reached.

Have we started to play Deal or No Deal with national currencies? It’s not very far off. To summarize, Brexit, or the withdrawal of the United Kingdom from the European Union, was triggered by a referendum in which No Deal scraped a win. The Brexit process has been brought with difficulties and has caused two UK Prime Ministers to resign already. The latest leadership battle is between hard Brexiter Boris Johnson, former Tory mayor of London, and Jeremy Hunt, a former Remain campaigner and Member of Parliament. No deal means that the UK would leave the EU without any specific agreements regarding trade (and a host of other things). No deal also means that everything would revert to non-beneficial WTO rules.

So that’s bad, right? It is if you’re a British citizen. The economic costs of no-deal Brexit are expected to be extreme, wiping out 2% of GDPand catapulting the country into recession. A recent conference by the Office of Budget Responsibility conducted a stress test in the case of no-deal Brexit and found that the GBP and Euro would be trading at parity or years after Brexit. And worse, that isn’t even a worst-case scenario.

What about the effects now? They’re already pretty disappointing. GDP growth has already been underwhelming, according to the UK’s May Inflation Report. UK GDP grew only 0.5% in Q1 and is expected to be flat in Q2, with projections further out squeezing that number further as we approach the Brexit deadline. As a result, a rate cut by the Bank of England is expected. That, combined with the strengthening US dollar, has already pushed the pound to a 27-month low and is expected to drop further.

Wut We Think: Despite the good news on the wage-and-employment front, with wage increases and jobs added higher than expected, no-deal is still dominating the headlines and thoughts of traders. With how fractious the Brexit process has been so far, and the combative personalities of the people involved in the leadership fight, it’s unlikely that a Brexit transition will be smooth or well-managed. Coupled with rising trade tensions thanks to the US’ trade war and outright military tension with Iran, there’s not a lot of positivity on the horizon for the pound sterling, and indeed the UK as a whole. 




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