Weekly update 6 - 12 January

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2020 has been an excellent year for Bitcoin (BTC) so far: a combination of technical and fundamental factors has led to the price of Bitcoin rising to $8,400 over the past ten days.

This 'bullishness' showed some signs of stagnation on Friday, January 10, but since then bulls have been able to deter the bears and hold the cryptocurrency in the lower area of $8,000, which previously represented a substantial region of resistance for BTC.

However, it has been a volatile week for the cryptocurrency market. Bitcoin (BTC) began on Monday, January 6 at $7,342 and reached a "two months high" on Wednesday, January 8, worth $8,464. Bitcoin thus won more than 15% of its value in less than three days. In the middle of the week, however, the tide changed, and BTC dropped below $8,000 to trade back at $7,660 on Friday.

At the time of writing, BTC/USD is trading at $8,020 with a profit of almost 2.7%. The average daily trading volume of Bitcoin is quoted at $25 billion, while market dominance fell to 68.4%.

BTC/USD technical analysis

Technically, BTC/USD tried to break out of descending wedge formation but failed to get sufficient dynamics. The failure created more downward pressure and pushed the rate below a critical limit of $8,000. BTC/USD did manage to stay above the SMA50 weekly (currently $7,690) and then returned to the area above the SMA100 daily ($7,950), which is a good signal.

At the time of writing, BTC/USD is trying to settle above $8,000. If the outbreak continues, we'll see a further recovery and a new attempt at the above-mentioned critical resistance being created by a wedge formation.

On the other hand, if the $7,650 support collapses, the sell-off may accelerate. This support area is being created by the SMA50 daily. Moreover, it's a former resistance that limited the BTC recovery of late December. Once it is out of the way, the downward dynamics are likely to gain momentum with the next focus on $7,150 (61.8% Fibo retracement) and the psychological $7,000.

The Iran & U.S. conflicts, as well as other events

Whether Bitcoin is a safe-haven or not is this week's main topic of conversation. After the American air raids on Iran and the assassination of Iranian military leaders, the crypto market is in sync with assets such as gold and Japanese Yen, which gave rise to the idea that Bitcoin has become a safe haven. This theory was confirmed later in the week when the de-escalation in the Middle East led to strong growth in equity markets and triggered Bitcoin's downward correction.

While the correlation between Bitcoin and risk seems to be clear, some cryptocurrency experts do not buy this safe-haven story. They note that Bitcoin is too volatile and unpredictable to be used as a store of value, especially during periods of high uncertainty. This perspective is shared by a prominent cryptocurrency analyst, Alex Kruger, who pointed out that Bitcoin fell immediately after the attacks and only began to gain ground a few hours later.

In addition to the airstrikes, several other factors could have caused Bitcoin's price increase, such as the sudden growth of the Tether-market cap and the announcement of the Chinese blockchain.

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The SEC Examination Office is very detailed about their Crypto priorities in 2020

The SEC's Office of Compliance Inspections and Examinations (OCIE) has recently published its list of investigation priorities for 2020, in which digital assets and service providers have been highlighted as areas for attention.

This year, OCIE intends to address investment suitability, trading practices, fund safety, pricing and the effectiveness of compliance programmes. It will also examine transfer agents (entities that act as intermediaries in securities transactions) that "develop blockchain technology" or provide services to issuers of digital assets.

The OCIE also wrote that "the market for digital assets has grown rapidly and poses different risks, including for retail investors who may not understand the differences between these assets and more traditional products".

Illinois legalizes blockchain contracts

The State of Illinois has become the last state to recognize smart contracts and other blockchain-based records as legal instruments under the Blockchain Technology Act, sponsored by Republican Keith Wheeler.

This entered into force on January 1, introducing several potential new legal scenarios for blockchain-based contracts, as it is now allowed as court evidence and is seen as a viable alternative to paper-based records and is free of local taxation. Part of the law says that "a smart contract, record or signature may not be refused because a blockchain was used to create, store or verify the smart contract, record or signature".

Canadian technology company DMG Blockchain Solutions has installed 1,000 new Bitcoin (BTC) mining rigs for U.S. customers.

A press release on January 6 revealed that Canadian technology company DMG Blockchain Solutions had installed 1,000 new Bitcoin (BTC) mining rigs at its Christina Lake mining-as-a-service facility in British Columbia. The 27,000 square meters crypto-mining facility occupies an area of 34 hectares and is probably one of the largest in North America. The company purchased the new miners from the Chinese mining giant Bitmain, and now has a total power consumption of about 1.5 megawatts. The machines will help a new U.S. customer, whose name was not disclosed in the press release.

DMG COO Sheldon Bennett explained:
"attracting large-scale hosting customers as profitable crypto-mining is a feature to create cost efficiency, and our mining facility is well suited to industrial miners".

Lagarde of the ECB: We want to develop digital currencies, but will not discourage private initiatives

In her first public remarks of the new year, the President of the European Central Bank, Christine Lagarde, confirms that the ECB continues to analyze the risks and benefits associated with the issuance of a digital currency by the central bank.

In a new interview with the French publication Challenges, Lagarde describes how the central bank reacts to changes in the habits of mobile Millennials and companies demanding the ability to make direct transactions.

"Payment innovation is in full swing thanks to the growing demand for faster and cheaper payments, especially cross-border payments. The Eurosystem in general and the ECB in particular, are ready to participate, rather than to act as observers of a changing world merely.

In 2018 the Eurosystem set up an infrastructure to enable pan-European direct payments with direct settlement in central bank money (TIPS, i.e. TARGET Instant Payment Settlement). This enables banks to process payments between themselves in a few seconds, 24 hours a day, 365 days a year, across Europe.

"This not only meets the preferences of the younger generations, who want to pay around the clock with their smartphones but also of companies, who want to optimize the payment and supply chain processes".

Lagarde agrees that the pursuit of a CBDC is a legitimate objective for the ECB, but it does not rule out competitive solutions from private companies developing platforms to use digital currencies for cross-border and domestic transactions.

Ant financial wants to launch its enterprise blockchain platform this month

The financial subsidiary of China's e-commerce giant Alibaba, Ant Financial, will launch its business-oriented "Ant Blockchain Open Alliance" platform this month. On January 8, local Chinese news agency Bihai123 reported that Ant Financial Group's Vice President Jiang Guofei revealed that the network has gone live in beta since November 2019, and will soon be launched as a fully operational chain.

Jiang added that it would be the 1st open Alliance-chain to share platform usage rights, allowing small and micro enterprises and developers to enter the blockchain industry at a lower cost to develop and launch their own applications. Guofei introduced the project as early as September 2018 as an initiative to improve the company's own technologies and "accelerate the commercialization of blockchain applications".

China's national BSN Blockchain Network will be officially launched in April 2020

China's national blockchain network, the Blockchain-based Service Network (BSN), is scheduled to be launched six months after the test in April 2020. In the internal testing phase between October 2019 and March 2020, the BSN network, as reported, will attract a total of 400 enterprises and 600 developers. BSN is tested for the first time in the city of Hangzhou, with the primary objective of reducing the technical and economic costs associated with the development of the blockchain adoption.

The project, which is supported by the Chinese policy group State Information Center (SIC), aims to provide a scalable and reliable infrastructure to support new blockchain projects and for the development of smart cities and the digital economy. The Chinese finance-oriented publication Sina Finance reported on January 7 that the news was announced at the China Urban Regulation Innovation Forum in early January by the deputy head of SIC's Smart City Development Center, Tang Sisi. The establishment of a new national quality network for blockchains will be an important milestone in China's approach to strengthen the adoption of blockchains and increase expertise.

Source: trade.be
Tim Broekmans
Jan 14, 2020
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