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Crypto Chronicle - 19/01/24

By Imperial Wealth

Published 11:14 Jan 21, 2024

Last update 11:22 Jan 21, 2024

5 Min Read

Welcome to the 22nd edition of the Crypto Chronicle, brought to you by Imperial Wealth.

You can listen to todays episode here.

News

El Salvador Approves Legislation Granting Citizenship to Bitcoin Investors

El Salvador recently passed a law granting citizenship to foreigners who donate Bitcoin, building on initiatives like the Bitcoin Freedom Visa aimed at attracting newcomers.

The legislation, supported by Nayib Bukele’s party, fast-tracks citizenship for Bitcoin contributors. Bukele, key in El Salvador’s Bitcoin adoption, sees this law as essential.

There’s no specified minimum donation, and the law is expected to take effect soon. This follows Bukele’s temporary step back from presidency to focus on the upcoming election. The move aligns with various ongoing Bitcoin-based projects led by foreign enthusiasts.

This law arrives after the Bitcoin Freedom Visa, offering residency for $1 million in BTC or Tether.

El Salvador continues to embrace cryptocurrency with these initiatives.

X Plans to Introduce Payment Services by Mid-2024, Elon Musk Announces

Elon Musk plans to launch payment services on his app X (formerly Twitter) by mid-2024, though integrating cryptocurrencies seems less likely.

Musk, in a conversation with Cathie Wood from ARK Invest, expects the launch by the middle of next year pending license approvals.

Bureaucratic delays have slowed the process. Despite Musk’s decreased interest in cryptocurrencies, Tesla holds $148 million in Bitcoin and accepts Dogecoin for purchases, while The Boring Company reportedly accepts Dogecoin for Las Vegas transit.

Musk’s focus on fiat currency over crypto may diminish hopes for further involvement, disappointing enthusiasts eager for Dogecoin integration on X.

Hong Kong Financial Regulator Getting Ready to Allow Spot Crypto ETFs

Hong Kong’s Securities and Futures Commission (SFC) and the Monetary Authority announced on December 22 their readiness to accept applications for spot cryptocurrency ETFs.

The SFC outlined criteria for funds to directly invest in virtual assets available to the public on SFC-licensed platforms.

Cryptocurrency transactions by these ETFs must occur through licensed platforms or authorised financial institutions.

In-kind and in-cash subscriptions and redemptions are allowed for SFC-authorised spot Virtual Asset (VA) ETFs. The SFC emphasised that funds exceeding 10% exposure to cryptocurrencies need prior consultation.

Despite China’s crypto crackdown, Hong Kong actively collaborates with crypto firms, issuing policies and launching a licensing system in 2022.

SEC Attributes Bitcoin ETF Approval Tweet to ‘Compromised’ Account

The SEC’s compromised tweet falsely announcing a Bitcoin ETF approval led to a $1,000 surge in Bitcoin’s value before clarification by Chair Gary Gensler.

Despite the incident, the SEC is expected to proceed with the ETF decision this week, causing concerns of a deadline extension (this didn’t end up happening).

SEC Greenlights Inaugural Bitcoin ETFs

US regulators have approved the introduction of exchange-traded funds (ETFs) focused on spot Bitcoin trading, allowing retail and institutional investors easier access to the cryptocurrency.

Notable institutions, including BlackRock, Grayscale, VanEck, and Fidelity, are among the 11 entities permitted to issue securities tied to Bitcoin’s price fluctuations.

Australian investors can engage with these ETFs listed in the US through local brokerages.

The move eliminates the need for retail investors to handle cryptographic keys, manage Bitcoin wallets, or engage with cryptocurrency exchanges directly.

Analysts anticipate significant inflows, with projections ranging from $50 billion to $100 billion in 2024.

Nigeria’s Central Bank Eases Regulations for Banks Engaging in Cryptocurrency Transactions

The Central Bank of Nigeria (CBN) has reversed its two-year ban on banks engaging in cryptocurrency transactions, citing global demand and acceptance.

In a December 22 circular, the CBN acknowledges the need to regulate virtual asset service providers (VASPs) while establishing standards for banking relationships.

However, banks are still barred from holding, trading, or transacting in cryptocurrency using their own accounts.

Meanwhile, the local blockchain industry urges the government to implement regulations facilitating widespread blockchain integration.

Obinna Iwuno, President of the Stakeholders in Blockchain Association of Nigeria, emphasizes the need for a regulatory framework for blockchain’s broader adoption in various sectors.

BlackRock Unveils Bitcoin ETF Advertisement Targeting Older Investors amid Increased Marketing Campaign

BlackRock’s subdued ad for the iShares Bitcoin Trust ETF (IBIT) is captivating wealthy boomers with its calm and straightforward approach.

The 1:56-minute video, released on January 11, highlights IBIT’s accessibility and credibility under BlackRock’s expertise, avoiding flashy elements.

Bloomberg’s Eric Balchunas praises the ad for signalling reassurance, stating, “It’s okay now, the adults are here.” Chris Dark calls it “so boring it’s brilliant,” targeting boomers effectively.

Amidst heightened competition in Bitcoin ETF marketing, Valkyrie Bitcoin Fund featured on Times Square’s Nasdaq billboard.

Various issuers like VanEck, Invesco Galaxy, and Franklin Templeton showcased their Bitcoin ETFs on their homepages, with reports indicating similar moves by BlackRock and Fidelity Investments.

Read more here: https://imperialwealth.com/news/blackrock-unveils-bitcoin-etf-advertisement-targeting-older-investors-amid-increased-marketing-campaign

BTC Lease Agreement: Landlord and Tenant Execute Bitcoin Rental Contract

In Rosario, Argentina, a groundbreaking rental agreement allows a tenant to pay monthly rent in Bitcoin, facilitated by legal changes by the new presidential administration.

The contract, a first in Argentina, involves a monthly payment equivalent to $100 in Bitcoin. The tenant will utilise Fiwind, a local cryptocurrency platform, for monthly transfers. Both parties are experienced crypto users.

President Javier Milei’s administration, in response to rampant inflation, amended rental laws and other legal aspects.

A December 2023 decree, spearheaded by Minister Diana Mondino, permits cryptocurrency use under specific conditions.

Additionally, a regularisation scheme eases legalising overdue crypto holdings, introducing a tiered flat tax.

Distinguishing Between Spot Bitcoin ETF Custody and Exchange Custody: Exploring the Difference

Ophelia Snyder, co-founder of 21Shares and http://21.co, assures that if Coinbase faces bankruptcy, the underlying Bitcoin in spot Bitcoin ETFs will remain segregated.

With 10 U.S. asset managers trading billions in spot Bitcoin ETFs, questions arise about securing the underlying asset, especially after notable crypto exchange hacks in 2023.

Snyder emphasises differences in Bitcoin custody products used by ETF providers compared to retail users on exchanges like Coinbase.

21Shares enhances security by diversifying custodians and using multiple wallets. In case of bankruptcy, a spot Bitcoin ETF is considered safer, and 21Shares employs stringent authorisation steps for added security.

Legal Battle Between Coinbase and the SEC unfolds in Court

The SEC’s lawsuit against Coinbase, alleging violations of securities laws, was closely examined by a federal judge in Manhattan.

Coinbase sought dismissal, arguing against the SEC’s classification of 13 tokens, including Solana and Cardano, as securities.

The judge probed the Howey test’s application and distinctions between stocks and tokens. SEC accused Coinbase of creating a new test, referencing a Terraform Labs case.

Coinbase differentiated itself, emphasising user utility over investment intent. The SEC cited a judgment on Terraform Labs, supporting its stance.

The debate also referenced Ripple’s 2023 ruling. Coinbase argued against the SEC’s characterisation of anonymous transactions as investment agreements.

Bitcoin Hash Rate Falls by 34% Due to Freezing Temperatures in Texas

The Bitcoin hash rate plummeted by 34% amid a freeze in Texas, compelling miners to cut operations due to heightened demand on the state’s energy grid.

From January 14, freezing temperatures in Texas caused a substantial drop in the total Bitcoin hash rate from over 629 EH/s on January 11 to around 415 EH/s on January 15.

Texas, constituting 29% of the U.S. Bitcoin hash rate, attracted miners relocating from China. Marathon Digital and Riot Platforms, among others, reduced operations to support the Texas grid during sub-zero temperatures.

Despite challenges, ERCOT reported fewer issues with the power grid during the freeze.

Spot Bitcoin ETFs See Success Despite BTC Sell-off After One Week

The introduction of spot Bitcoin ETFs in the U.S. led to a cryptocurrency sell-off, with Bitcoin’s value dropping by 17% to around $41,200 from nearly $49,000.

Despite the initial price decline, analysts note the success of these ETFs in terms of trading volumes, accumulating $10 billion within the first three days.

Grayscale Bitcoin Trust ETF (GBTC) dominated trading volumes, contributing 50% to the combined $10 billion. GBTC experienced significant selling, with net outflows of $1.2 billion in the first three days.

Other spot BTC ETFs increased their holdings, with BlackRock’s iShares Bitcoin Trust rising to 25,067 BTC.

Standard Chartered predicts spot Bitcoin ETFs attracting $50-100 billion in 2024, potentially driving BTC to $200,000 by end-2025.

Technical Analysis

Price action saw Bitcoin (BTC) climb to as high as $49,000/USD odd on approval, but with a “buy the rumour, sell the news” taking place right on the major Golden Pocket upside retracement, Bitcoin has suffered as much as a -17% pullback.

Please see the chart below:

Investors should be aware of the CME gap that exists below around $39k as well as strong support levels around $33,000-$34,000 if the following Bearish Divergence on Bitcoin continues to play out:

Please see the chart below:

The Bearish Rising Wedge on Stoch RSI, bearish cross on MACD and bearish divergence between price and RSI sure has caused a pretty hectic pullback.

Not to fear – any short term to medium movements shouldn’t deterr investors or traders from planning ahead, in which the Halving approaches in April.

The high time frame charts still remain very healthy, please see the chart below:

and please see the chart below:

Hence, as mentioned, don’t let short term to medium term bearish price action shake you out.

Dips are a blessing at the moment! Dollar-cost-average and accumulate. Better prices on the horizon as the market gears up for both the demand and supply shock the halving will bring.

If you need any investment or trading advice, we have a plethora of courses and trading services available, feel free to book a free online consultation here!

Cryptocurrency Mining

BTC pull back has given miners a good perspective to how good rewards are as BTC price drops $5k USD, we are still seeing good returns as well as higher breakeven points for miners. Currently the breakeven point is around 45w/th which is great considering the halving will make this 22w/th even if the price stays the same which may do for a short period but realistically in a years time that won’t be the case.

Block rewards are staying stable around 1 BTC extra for transaction fees which is a strong trend to look forward to a halving as the transactions will spike as we go through the halving and then go boom post halving as people use and trade. The ETFs will also help keep the trend going and there is speculation that post halving then block rewards will be 30-40% made up of transaction fees rather than the current 15%.

Altcoins:

Most coins have been hit with pull back in coin prices with difficulty remaining steady due to this.

Main stand outs are:

Dash – drop of 21% in difficulty which is quite good due to a 7% price of coin drop.
Nervos (CKB) – has seen a 273% jump in difficulty which isn’t ideal.

If you wish to speak to Taylor on any of these machines, feel free to book a free online consultation here!

That’s it for this weeks edition, stay tuned for next weeks!

Thanks!