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- Crypto Saving Expert Newsletter - Issue 116
Crypto Saving Expert Newsletter - Issue 116
Good afternoon! Bitcoin started the week strong and could be gearing up to challenge its previous highs, potentially entering a new phase of price discovery. Let's dive in for a closer look at what is going on behind the scenes with bitcoin and the overall Web3 market. 👇
This week's issue will feature technical analysis of bitcoin, MSTR and SEI, as well as important dates and key news stories.
Table of Contents
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Bitcoin Sets Up For Expansion
Bitcoin could be lining itself up for a test of the highs, which may lead to price discovery in the coming weeks.
Bitcoin Outlook
Bitcoin is beginning to push towards the $66,000 region, a place where resistance was found in late September.
Bitcoin must break above this level to open the door to a test of the $69,000-$70,000 zone.
Above there, billions of dollars in liquidations lay after the numerous failed attempts to break above it over the last seven months.
If bitcoin can garner this type of momentum and strength, a new all-time high is possible, likely leading to an explosive expansive move.
MSTR Looking Ahead
MicroStrategy (MSTR) has already broken out of its elongated range after Friday, which witnessed a big upside push.
This has followed on to today, with MSTR up by over 5% pre-market.
MSTR may be moving before bitcoin and depicting a possible eventuality for bitcoin’s price.
If MSTR is front-running the bitcoin move, the latter could see the rally continue and a move towards $80,000 already underway.
SEI
SEI is battling to flip a vital S/R zone on the daily time frame.
This would be key to SEI’s structure as the zone previously acted as string support before flipping to resistance. If overcome, SEI would have a strong base to build a rally from towards $0.58, a 15% upside move.
Above there, SEI could undergo a further 21% rally into the supply zone.
Fear & Greed Index
The Fear and Greed Index remains Neutral and scores 48.
Despite bitcoin’s sign of strength last week, investors appear to remain sceptical about the rally’s sustainability.
Still, a push towards $70,000 could see the Index spike into Greed as the market would begin to look much healthier.
Important Dates
Thursday 17 October, 12:30 UTC - US Retail Sales
The retail sales data is published by the Census Bureau and comprises two pieces of data: the month-over-month (MoM) and the control group.
The MoM figure measures the monthly changes in retail sales, demonstrating consumer confidence to spend money in the economy. This figure is forecast at 0.3%, with the previous figure at 0.1%.
The second figure is the control group, which measures the entire industry sales and estimates the personal consumption expenditures (PCE) for goods. The control group data is not forecasted, but the previous data came in at 0.4%.
Gainers
Losers
How Does MicroStrategy Buy Their Bitcoin?
MicroStrategy made headlines in 2020 with the announcement of their purchase of bitcoin. Since then, they have continued adding to their stack.
A case study conducted by Coinbase into MicroStrategy’s bitcoin strategy allows us to glean more insight into how and why MicroStrategy has taken the choices that they have in procuring bitcoin.
Over the past four years, MicroStrategy and their executive chairman, Michael Saylor, have become a posterchild for adopting cryptocurrencies as an alternative store of value.
Upon their announcement of adopting their bitcoin strategy, Michael Saylor said, “Our investment in bitcoin is part of our new capital allocation strategy, which seeks to maximise long-term value for our shareholders. This investment reflects our belief that bitcoin, as the world’s most widely-adopted cryptocurrency, is a dependable store of value and an attractive investment asset with more long-term appreciation potential than holding cash.”
The Process of Adopting Bitcoin
In June 2020, company employees approached Coinbase, expressing interest in investing in bitcoin. The company was drawn in by the properties that may make it an effective hedge against inflation, allowing it to outpace other companies as their capital is eroded by continuing inflation.
The company was also interested in learning about Coinbase’s institutional expertise, including its experience with corporations, its security standards, and its customer services.
MicroStrategy tasked Coinabse with producing a solution for acquiring bitcoin that did not influence the market and could cope with large liquidity sets.
The stage was set for Coinbase. They returned to MicroStrategy with a plan that incorporated two main ideas: smart order routing and trading algorithms.
Using smart order routing, Coinbase were able to service large institutional orders for bitcoin, utilising the liquidity from multiple avenues to find the best prices with the least market impact.
Their trading algorithms were also tailored to MicroStrategy’s needs. Orders were submitted over long periods. This further ensured a limit to their impact on the market, allowing MicroStrategy to obtain the best price for the bitcoin. Their algorithms could be customised to the urgency of the acquisition, ranging from very passive to very aggressive.
For example, their Time Weighted Average Price (TWAP) algorithm would be completed over a preset period, with the main order being broken down into smaller orders, which are sent to different liquidity pools by the smart order router. The MicroStrategy order equated to 100 human set orders being split into almost 200,000 actual orders, where the fill size was less than 0.3 bitcoin.
In the case study, Coinbase learned more about the process. Discovering that randomising the size and timing of the orders would cause even less of an impact on the market as a whole.
The $250m Purchase
Once the logic was worked out, Coinbase began the process with a small test transaction before initiating the larger transaction.
The larger trade was set using the TWAP algorithm to complete over five days. They remained in close contact with MicroStrategy, allowing the team to take advantage of any weakness in the price of bitcoin to increase the buys, while slowing the transactions down when the price got too high. This significant transaction would eventually lead to the purchase of $250m worth of bitcoin.
Every day began with a 9 am call to discuss the purchases from the previous day and work out a plan for that day. These calls would continue throughout the day with updates on the buy price.
MicroStrategy went on to invest an additional $175m in bitcoin following the success of the first trade, and they have continued to purchase it ever since.
Crypto Ownership Among Retail Investors Soars Since 2020: Key Insights from IOSCO Report
Crypto ownership has surged among retail investors since 2020, with up to 30% of investors in some regions holding crypto. Learn about key risks, demographics, and the need for better investor education.
According to a report from the International Organization of Securities Commissions (IOSCO), retail ownership of cryptocurrencies has increased significantly since 2020.
Despite the growth, their findings stress the growing need for improved investor education as the space rapidly evolves.
As of October 2023, 15 out of 24 surveyed jurisdictions reported that at least 10% of retail investors now own crypto. In some regions, ownership of digital assets has reached as high as 30%. The data notes a markable rise from 2020, when between 1% and 5% of investors held digital assets.
The data also shows that general interest in crypto assets has been increasing since 2020. The number of jurisdictions that rated themselves as ‘very interested’ in digital assets has quadrupled over the years. Despite the increase, the vast majority rated themselves as ‘moderately interested’ or ‘somewhat interested’.
Rising Crypto Investment Despite Market Volatility
Since 2020, the crypto market has faced substantial volatility, ranging from the highs in March and November 2021 to the lows the following year. The volatility has continued this year, with new highs posted in March before another drop-off. Despite these challenges, emerging and advanced economies have seen consistent retail investment in crypto assets.
The IOSCO report outlines several risks associated with this trend, such as market volatility, insufficient regulatory oversight, fraud, and a general lack of investor knowledge.
These concerns mirror issues highlighted in their 2020 report. Still, the growing scale of the market has brought increased challenges, particularly with high-profile crypto bankruptcies, large protocol exploits and numerous scams.
Crypto Market Risks and the Call for Stronger Regulations
The surge in retail crypto investments has not been without complications. Since 2020, the market has seen increased hacks, investor losses, and scams, which has led to more aggressive regulatory and enforcement actions globally.
However, despite these risks, retail investor interest remains robust. Over the past four years, reports and studies have consistently indicated that younger investors are particularly drawn to the crypto market, contributing to the overall growth in ownership.
Who Are the Retail Crypto Investors?
The majority of retail crypto investors are younger, typically under 40 years old, and predominantly male.
For instance, in the United States, three out of five investors under 35 have either considered or already invested in cryptocurrencies. Furthermore, the report reveals that 44% of Gen Z investors in the U.S. (aged 18-25) started their investment journey with crypto.
Key Drivers Behind Retail Crypto Adoption
According to IOSCO, there are several key drivers behind crypto adoption amongst retail investors. These factors include; fear of missing out (FOMO), the low barrier to entry, speculative opportunities, and advice from social media and friends.
The report highlighted that these factors underscore the need for stronger investor protection and regulatory frameworks to safeguard inexperienced investors.
Conclusion: The Need for Enhanced Investor Education
As retail interest in cryptocurrencies continues to rise, the IOSCO report stresses the importance of comprehensive investor education to help mitigate the risks associated with the volatile crypto market. While the space offers potential opportunities, the associated risks require investors to be better informed before diving in.
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