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The coronavirus outbreak is causing steep turbulence in the global markets with commodities and stocks underperforming due to an expected slump in China’s projected growth. In an effort to counteract the decline in valuations, the Chinese central bank announced a liquidity injection of about $175 billion into the market. To wrap your head around how significant that liquidity injection is, it is equal to the current market cap of bitcoin.
We opined last month about the potential monetary stimulus by China to support growth and drive consumption in a world of liquidity driven growth in asset valuations. To quickly recap, recessions after 1985, such as the Asian crisis, the post-dotcom hangover, or the real estate bubble leading up to 2007 are all explained more easily by looking at the capital markets and banking flows. All recessions since 1985 have followed a cycle of increasing liquidity, asset price run-ups and the inevitable implosion.
Liquidity injections help kickstart a faltering economy by putting more money in the hands of people and driving up consumption. That being said, liquidity injections more often than not lead to a surge in asset valuations as access to cheap credit engenders speculative behavior and fuels the rise in asset prices.
Despite the blanket ban on cryptocurrency trading in China, it remains one of the biggest markets for cryptocurrencies with vibrant p2p and OTC markets for dealing in cryptocurrencies. In that respect, the liquidity stimulus could bode well for BTC prices.
If anything the Corona virus dampened animal spirits traditionally associated with the Lunar New Year in Asia. Now that those fears have been mostly priced into the market, we expect BTC to rise again. We stick to our prediction from earlier this year of BTC hitting 20k at some point this year. Indeed as we print this newsletter, BTC has had a nice run up to the 9700s. Many market observers believed that BTC would peak and start a downward reversal once OI (Open Interest) hits 1 billion, but this time momentum is still bullish, due to the macro factors mentioned above.
Meanwhile in Crypto Wonderland...
“Nervos Network Sets Up A $30 Million Grant Fund”
Nervos Network has set up a $30 million public grant fund to sponsor external developers building on its blockchain infrastructure. Announced Thursday, the fund will pay developers in the combination of cash and CKByte tokens, and all submitted projects will be made public to source feedback from the broader community, Nervos co-founder Kevin Wang told CoinDesk. Individuals, teams and companies can begin submitting applications for improving the firm’s layer one blockchain Common Knowledge Base (CKB).
“Bill Seeking Exemption of Personal Crypto Transactions In Congress”
A bill seeking to exempt personal cryptocurrency transactions from taxation for capital gains has been reintroduced in the Congress of the United States. Called “The Virtual Currency Tax Fairness Act of 2020,” the bill would establish an exemption for virtual currency expenditures that qualify as personal transactions. Users would then not have to report instances when they spent crypto whose valued had changed relative to the U.S. dollar on day-to-day expenses. Existing tax law struggles to cope with cryptocurrencies, as they sometimes behave as investments, sometimes commodities, and sometimes just like other currencies. It is to this last type of transaction that the bill looks to simplify for crypto traders and users.
“Bux Acquires Blockport”
Bux, the Amsterdam-based fintech that wants to make investing more accessible, has acquired the European “social” cryptocurrency investment platform Blockport. Terms of the deal remain undisclosed, although Bux says the move paves the way for the company to launch its own branded cryptocurrency investment app. Dubbed “BUX Crypto,” it will be available in the nine countries in which Bux operates, and is planned to go live in Q1 this year. In addition, we are told the founders and core team members of Blockport will join Bux and “take ownership” of the Bux cryptocurrency offering.
“NBA Team Launches Blockchain-based App”
Many people think that cryptocurrencies only serve as an alternative payment option. While there are coins that fit this bill, there are other cryptocurrencies that can perform a host of other functions. The NBA can be considered an early adopter of crypto. In 2014, the Sacramento Kings became the first NBA franchise to accept bitcoin as payment for store products and season tickets. Four years later, the same team began mining Ethereum. Recently, Nets guard Spencer Dinwiddie tokenized his contract to get a lump sum payment and reward token holders. Now, the Kings are once again ahead of the curve in combating fake NBA merchandise.
Crypto Twitter Pick
10:23 PM - 4 Feb 2020
What We Are Reading / Listening To
The Dream of the 90’s is Alive in Cryptocurrencies by Kate Sills
How Blockchain is Transforming Cross-Border Payments with Michael Dunworth
Overnight Performance of Top 10 Currencies
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