1. Market Wrap: Bitcoin Stabilizes Around $49K After Two Extremely Volatile Trading Days
There are signs some of the excessive leverage had been wrung out of the market, implying the potential for a fresh more to the upside, analysts said.
Bitcoin has reversed its biggest two-day loss since March 2020, as prices returned to as high as above $51,000 on Wednesday after the derivatives market calmed down from an over-leveraged condition.
Bitcoin (BTC) trading around $49,119.46 as of 21:00 UTC (4 p.m. ET). Gaining 3.17% over the previous 24 hours.
Bitcoin’s 24-hour range: $47,032.52-$51,445.67
BTC trades below its 10-hour and 50-hour averages on the hourly chart, a bearish signal for market technicians.
Bitcoin’s heavy losses earlier this week represented a retreat from price levels that some analysts characterized as euphoric.
But as prices stabilized around $49,000 on Wednesday, signs emerged that some of the excessive leverage had been wrung out of the market, implying the potential for a fresh more to the upside, analysts said.
2. US Central Bank Explains ‘Preconditions’ for a Digital Dollar
The U.S. central bank is grappling with how to proceed on a potential “digital dollar” project.
Hours after U.S. Federal Reserve Chairman Jerome Powell declared 2021 to be a pivotal year in consulting the public on the digital dollar, his underlings issued a paper describing what that consultation might look like.
In a Wednesday FEDS Notes, Fed Reserve Senior Counsel Jess Cheng, Payments Specialist Angela N. Lawson and Technology Lab Manager Paul Wong said the onus would be on broadly engaging the public regarding the pros and cons of a U.S. central bank digital currency (CBDC).
Privacy issues, ease of use, security access and delivery mechanisms should all be on the table as Fed officials work to “sharpen” a digital dollar with the public’s help, the paper said.
3. Planning to Short Bitcoin? Better Check China’s ‘Tether Premium’ First
Bitcoin analysts say this week’s quick market rebound might be due to Chinese retail buyers buying the dip, using the stablecoin tether.
Bitcoin’s rapid recovery from the biggest two-day sell-off in almost a year shows the power of a recently overlooked factor in cryptocurrency markets: demand from Chinese retail traders.
Prices for the largest cryptocurrency were higher on Wednesday, stabilizing around $49,000, after tumbling 15% in the prior two days.
The sudden demand for bitcoin (BTC) from Chinese traders, possibly motivated by the price drop, can be viewed through a hitherto largely ignored metric: the “tether premium” — or the difference between prices quoted in yuan on the dollar-linked stablecoin tether (USDT) by over-the-counter cryptocurrency traders, and the implied yuan-denominated price for tether based on the prevailing rate in global markets.
4. MicroStrategy Bets Another $1B on Bitcoin
MicroStrategy turned a veritable mountain of zero-interest debt into its single-largest bitcoin allocation yet.
MicroStrategy announced the purchase of another $1.026 billion in bitcoin Wednesday, turning mountains of zero-interest debt into one of the single largest (dollar-denominated) bitcoin investments ever executed by a publicly traded company.
CEO Michael Saylor’s business intelligence firm bought the 19,452 BTC at an average price of $52,765 per coin. It now holds 90,531 BTC (+0.39%) worth $4.78 billion at press time, almost certainly bolstering its perception among Wall Street types as a de-facto bitcoin exchange-traded fund, albeit one wildly overpriced.
The latest buy, MicroStrategy’s single-largest dollar investment in the crypto, is second only to Tesla’s $1.5 billion investment on the list of (known) bitcoin allocations by a U.S. company. MicroStrategy was already and will likely remain the non-crypto firm with the biggest bitcoin bags as CEO Michael Saylor continues to pursue a coin acquisition strategy now codified in the business intelligence company’s mission.
Led by Saylor’s increasingly creative bitcoin evangelism (the longtime tech CEO now reframes famous cultural and historical quotes through crypto-colored lenses) MicroStrategy has become the chief proponent of corporate investments in bitcoin.
Saylor has fully steeped himself in bitcoin’s swirling meme culture. He added laser eyes to his Twitter profile in apparent unity with the #LaserRayUntil100K movement last week. On occasion he trolls gold as an inferior reserve asset. He has shown a penchant for Lord of The Rings content, liking memes in praise of the “One Coin to Rule Them All” and retweeting videos in which he is Gandalf, leading the Rohirrim into battle against evil, evil fiat.
5. Bank Analysts Clash on Square Price Targets After Q4 Results
Analysts with Royal Bank of Canada and Goldman Sachs gave divergent estimates for the bitcoin-friendly payments firm.
At least two major banks walked away from Square’s Q4 earnings report with diverging viewpoints on which direction the payments company’s share price, which was at about $256 at the time of the company’s earnings release Tuesday afternoon, will head next, according to investor notes viewed.
Analysts at Royal Bank of Canada (RBC) gave 19% upside for SQ and upgraded its price target to $305 from $257, predicting the company would “outperform” (roughly equivalent to buy). But their peers at Goldman Sachs, which rates SQ a “neutral,” took the opposite perspective, notching a 4% downside that would put SQ at $246 this time next year.
(Goldman’s rating actually was a slight upgrade from a Feb. 23 “first-take” investor note that targeted SQ at $216.)
RBC noted “management’s commitment to bitcoin as the currency of the internet” and was bullish on Square’s capitalization of a “multi ecosystem opportunity.” It estimated a 69% jump in 2021 bitcoin revenue that would generate Square $7.75 billion. Goldman was largely mum on the bitcoin upside, downgrading bitcoin revenue estimates for 2021 to $7.23 billion from $7.43 billion.
Even so “the margins on bitcoin revenues has continued to expand,” Goldman’s analysts wrote.
Square’s Cash App generated $4.57 billion in bitcoin revenue in FY2020, contributing $97 million to gross profit.
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February 25, 2021