TikTok, It’s a Kodak Moment

Market Recap

Bitcoin continues its bullish trend and briefly climbed above $12,000. Other tops coins outperformed led by XRP which posted a whopping week on week gain of 32.40%. Followed by ETH breaking $400 and BCH surpassing $300. However, the massive spike was subsequently followed by a crash on Sunday Hong Kong morning time 11:00am. [Figure 1] Hundreds of millions of USD worth of long contracts were liquidated resulting in Bitcoin and Ether dropping rapidly. Bitcoin declined from $12,000 to $10,600 within 15 minutes, while Ether crashed from $417 to $300. This move liquidated more than $1 billion worth of futures contracts as reported by Cointelegraph.

[Figure 1: BTC/USD 1-hour chart]

Prior to the drop, the funding rate of Bitcoin was hovering at around 0.0721% per 8 hours at FTX (annualized 211%). The average funding rate of BTC is normally around 0.01%. This massive change were signs that the market was dominated by long contracts.

The market imbalance was even worse for Ether. ETH funding rate was at 0.21% per 8 hours at FTX, which indicates even more significant bullish bias. [Figure 2] But after the liquidations, the predicted funding rate of ETH is still hovering at 0.19%. This suggests that ETH longs are still significant, unlike Bitcoin where funding rate has now normalized.

[Figure 2: BTC Funding rate @ FTX]
(Aug 02, 2020 Top 5 Crypto KPI)

What is Happening?

On the macro side, GDP growth data released last week highlighted the sharpest quarterly downturn on record and worst quarter since the second world war as the US economy shrank by an annual rate of 32.9%. It was driven by shutdown policies aimed at combatting the spread of the coronavirus. The negative GDP growth, however, was better than expected, with stocks finishing the week slightly higher on positive earnings news. Back in Asia, stocks in Japan recorded five consecutive daily declines and posted its worst weekly market return since April. The Nikkei 225 Stock Average fell 1,042 points (4.6%) and closed at 21,710. The widely watched market benchmark has returned -8.2% for the year-to-date. The yen strengthened and ended the week below JPY 105 per U.S. dollar, which has market participants rattled as currency strength will pose a headwind for exporters.

This week in Hong Kong, a top adviser to Hong Kong’s leader has confirmed his account at a US bank was closed earlier this year, with the revelation coming after Washington’s push to sanction Chinese and local officials over the city’s national security law. The banking system is at a brink of disintegration as the tension between China and US continues to escalate. Generally public are re-considering alternatives other than SWIFT.

In the crypto space, The Bank of Japan is reportedly expediting the development of its Central Bank Digital Currency (CBDC). A top official of the Asian giant’s apex bank Takeshi Kimura confirmed this while speaking to Japanese news outlet The Asahi Shimbun. Takeshi said that the bank will begin substantive testing of its CBDC as pressure mounts following the fear of Beijing launching its digital Yuan which he said could pose a national security threat.

According to recent data released by Glassnode analytics provider, the number of Bitcoin millionaires has surged by 38%, which means there are now around 18,000 Bitcoin whales. Glassnode analytics provider recorded a spike of 38% in crypto wallets holding at least $1 million worth of Bitcoin, which indicates that there are now at least 18,000 Bitcoin Whale addresses. Glassnode also has announced that miners have been actively getting rid of their Bitcoins.

Conclusion

We are living in an insane world. Stock price of a zombie company like has-been film-maker Kodak surged 1,000% on announcement that it will start manufacturing ingredients in generic drugs. Why Kodak? Why not other genuine pharmaceutical companies?

Elsewhere, TikTok, an immensely popular social media app with >80M users in US alone was raided by the White House citing “national security implications” as the parent company is Chinese. Tiktok’s CEO is an American.

All this insanity and illogically meted decisions by the powers-that-be will inevitably result in loss of confidence in traditional markets. We anticipate more money to flow into alternative digital asset classes.

Bitcoin should hit a new ATH this cycle.

Good Luck!