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Retail traders, not hotshots like MicroStrategy, made Bitcoin in 2020

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The twists and turns of 2020 made it arguably the best year on record to be a trader, especially if you were involved in cryptocurrencies. May’s third Bitcoin halving, coupled with the euphoric market volatility that swept global markets, made 2020 a year of gains and opportunities for crypto traders.

By November, it was already clear Bitcoin (BTC) and other major cryptocurrencies had cemented their status as a recognized asset class among retail and institutional traders alike, having outshined all other major asset classes in the world. Bitcoin’s renewed bull run deservedly grabbed the headlines across mainstream finance and made the global retail crypto trader the champion of 2020 in the investment world.

Related: Did Bitcoin prove itself to be a reliable store of value in 2020? Experts answer

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Unlike the gains in mainstream financial markets, crypto’s bull run did not evolve from the massive stimulus packages unleashed by governments and central banks that helped prop up equity and bond valuations. Bitcoin increased organically thanks to a growing global retail base, compelled by the asset’s growing allure as a store of value.

Above all, crypto’s global accessibility meant retail traders across the world were able to have their voices heard beyond the crypto ecosystem. Crypto’s universality provided a growing pool of traders with the means to express their market positions and uncover newfound market opportunities. It is no coincidence then that Bitcoin finished as the best performing asset class of 2020 — in no small part, due to the newfound aspirations, entrepreneurialism and risk-taking of the global retail crypto trader.

The 24/7 nature of crypto plays into traders’ hands

The evolving 24/7 nature of the crypto market allowed traders from anywhere in the world, at any time, to capitalize on the increase in market volatility throughout 2020. In this way, the year’s energetic markets created a unique backdrop to play the markets, assisted by the growing sophistication of new trading products and services. In this evolving market landscape, global crypto retail traders began to capture the headlines in mainstream investment circles once again.

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With Bitcoin’s market capitalization surpassing over $350 billion in November, crypto captured volatility better than many had anticipated. As a result, crypto proved to be a hugely efficient asset for global retail traders to successfully navigate the economic and political uncertainties of 2020 — a trend that should continue into 2021.

U.S. presidential election personifies 2020’s Bitcoin bull run

This year’s global market volatility arose largely from the macroeconomic and political decisions that unfolded in the wake of the COVID-19 pandemic. Perhaps 2020’s market volatility culminated with the U.S. presidential election. The election caused not only a stir in markets but also produced a surge in options contracts tied to the U.S. election.

Crypto played a core role in this development, with decentralized and crypto exchanges offering a plethora of prediction-based futures markets tied to the election. The surge in open interest in Bitcoin futures following President-elect Joe Biden’s nomination reflected the widening appeal of crypto as a tradable asset class. Crypto options can capitalize on that demand even further by leveraging the appeal and ease of prediction markets, with simple, engaging and intuitive products that reflect the market’s instincts and desires of a rapidly growing user base. The 24/7/365 makeup of the crypto market makes this all the more possible.

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Bitcoin’s ability to withstand major macro events, such as back-to-back U.S. presidential elections, Brexit and, of course, COVID-19 are proof of its status as a more mature asset class. As John Authers recently pointed out in an opinion piece in Bloomberg:

“For the time being Bitcoin is showing some signs of growing maturity as an asset class — and it has endured far longer now than the average tulip.”

It is fair to say that cryptocurrencies have lost much of their negative associations of being referred to as “a craze” or more famously by Warren Buffet as “rat poison squared.” Larger industry players are buying Bitcoin and other cryptocurrencies because they are an alternative store of value and gaining recognition as the most complex yet desirable currency to ever exist.

As 2020 drew to a close and traditional markets were looking far more stable than witnessed earlier in the year, investors weren’t necessarily choosing between traditional investing and crypto trading, but rather recognizing how they could co-exist.

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As we have entered 2021 with positivity and hope that the global COVID-19 pandemic will be neutralized, it’s safe to say that traders and investors at all levels, from retail to large corporates, will be keeping a close eye on Bitcoin and other cryptocurrencies this year.

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Ethereum

One Ethereum Competitor Is Showing Strength As Bitcoin Loses Ground, According to Crypto Trader Benjamin Cowen

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Crypto analyst Benjamin Cowen says an Ethereum rival is showing strength as Bitcoin pulls back from its all-time high.

Cowen tells his 576,000 YouTube subscribers that AVAX, the native token for the smart contract platform Avalanche, is “weathering the storm relatively well.”ADVERTISEMENT

The 12th-ranked asset by market cap is trading at $68.28 at time of writing, up over 5% in the past 24 hours and more than 20% in the past week, according to CoinGecko.

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Cowen notes that AVAX is trading well above both its 20-week simple moving average (SMA) and 21-week exponential moving average (EMA). Taken together, the two metrics are what Cowen refers to as the “bull market support band.”

“We also have some wiggle room in the sense that we are above the bull market support band of the AVAX/USD valuation. The 20-week SMA is at $35.85 and the 21-week EMA is at $43.47. What that tells you is that Avalanche has been performing pretty well for the last several weeks. 

A lot of coins are right above their bull market support band, and they haven’t been performing as well recently. A lot of these things can have some type of seasonality as the money ball just jumps around from project to project, and right now, clearly, AVAX is showing a decent amount of strength.” 

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Cowen doesn’t predict that AVAX will have a strong move against Bitcoin “in the next month or so,” but he does say that Avalanche can increase in value in terms of its relationship to the US dollar in the short term.

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This ransomware gang moved $6.8 million in Bitcoin amid regulatory overhaul

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Ransomware groups, Darkside and BlackMatter recently moved multi-million dollars worth of Bitcoin upon getting the news of REvil’s servers getting hacked by a global coalition of law enforcement agencies. According to the authorities, 107 BTC, which amounts to $6.8 million were moved earlier today by splitting the amount into several different wallets.

Furthermore, officials revealed that the gangs were already aware of regulators’ oversight and therefore had prepared the mentioned balance to be laundered or cashed out. According to The Record, officials noted that the breakdown of funds into smaller portions is usually used for money laundering operations as the regulators directly transfer the entire amount of confiscated funds instead of splitting them up.

“Basically, since 2AM UTC whoever controlled the wallet started to break the BTC into small chunks… At the time of this writing, the attackers split the funds into 7 wallets of 7-8 BTC and the rest (38BTC) is stored in the following wallet: bc1q9jy4pq5su9slh56gryydwkk0qjnqxvfwzm7xl6”, Omri Segev Moyal, CEO and co-founder of security firm Profero shared this data with The Record.

It is obvious that the Darkside and BlackMatter were next on the regulatory hitlist as Darkside was the ransomware strain developed by REvil associates that were used earlier this year in the infamous Colonial Pipeline incident of May. This attack indirectly led to fuel supply outages across the US East Coast.

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REvil ransomware group’s website went offline

Yesterday, the Reuters’ report about REvil’s servers being hijacked by the regulators went viral and threw other ransomware groups in a fit of panic. A multi-nation operation against cybercrime group, REvil was implemented and took down the group’s “Happy Blog” website, which was formerly used to leak victim data and extort companies.

“The FBI, in conjunction with Cyber Command, the Secret Service and like-minded countries, have truly engaged in significant disruptive actions against these groups,” said Tom Kellermann, an adviser to the U.S. Secret Service on cybercrime investigations and VMWare head of cybersecurity strategy. “REvil was top of the list.”, he added.

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First Bitcoin ETF in Immediate Danger of Hitting Cap on Contracts Held

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The first bitcoin (BTC) futures-backed exchange-traded fund (ETF), ProShares’ BITO, is reportedly already in danger of breaching a limit on the number of futures contracts it is allowed to hold under current Chicago Mercantile Exchange (CME) rules.

BITO already owns nearly 1,900 bitcoin futures contracts expiring in October, according to Bloomberg data. The number is close to CME’s current rule that a single entity cannot own more than 2,000 front-month futures contracts, Bloomberg reported on Thursday, when BITO had only been live for two full days. 

To get around the limit, the ETF has reportedly started buying futures contracts expiring in November in addition to the October contracts it holds, with 1,400 November contracts amassed so far. At the current pace, however, the fund could also soon reach CME’s cap on holdings for next-month contracts of 5,000 contracts, per the report.

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And while the CME has already said it will increase the limits to 4,000 front-month contracts starting in November, this is also likely to be reached soon by BITO, which already has more than USD 1bn under management.

A major issue faced by ProShares’ ETF is that futures contracts tend to trade at a higher premium over spot prices the further away their expiry date is – a phenomenon known as contango in the futures market.

As such, choosing to get around the maximum limits by buying longer-dated contracts will mean the ETF has to get its bitcoin exposure at prices that are increasingly higher than spot. This could result in high costs when contracts are rolled over at expiry that will eventually be paid by the ETFs investors in the form of lower returns.

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According to Bloomberg’s own ETF expert, Eric Balchunas, some of the pressure on the first ETF to be launched could be alleviated by competing ETFs coming to the market over the next few days and weeks. However, the first-mover advantage that BITO has gotten will still be difficult to challenge, he said.

“The unprecedented early volume in BITO makes it like a snowball rolling downhill, as liquidity and assets begets more liquidity and assets,” Balchunas said, adding that it will be “nearly impossible” for other ETFs to steal significant volume from BITO in the short or medium-term.

Commenting on the possibility of the ETF running into the ceiling, some speculated that the extreme popularity of the futures ETF could eventually pressure the US Securities and Exchange Commission (SEC) to allow a “physically” backed spot bitcoin to launch. 

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That scenario was suggested by Zhu Su, CEO of crypto hedge fund Three Arrows Capital, saying that it could lead to the ETF rising to a “hilarious premium,” leading the SEC to “approve a spot ETF because of public outrage.” 

In a tweet, he also shared a comment from Max Boonen, Founder of electronic market maker B2C2, saying that it is “doubtful” that clearing houses will be comfortable with a single entity holding more than 4,000 front-month contracts.

“What happens when BITO surpasses 4k [contracts] as it surely will?”, Boonen asked.

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A similar idea was also suggested by Eric Balchunas, saying in the Bloomberg report that BITO hitting the limits on how many futures contracts it is allowed to hold could pressure the SEC to allow a spot-based bitcoin ETF.

“That certainly would do the trick in slowing down BITO and providing a release valve for futures demand,” the senior ETF analyst said.

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Meanwhile, the second bitcoin ETF to be approved by the SEC, the Valkyrie Bitcoin Strategy ETF with the ticker BTF, is scheduled to go live on the market today, October 22. BTF will also be backed by bitcoin futures contracts traded on the CME rather than by “physical” bitcoins.

BTF should go live on the Nasdaq exchange when the market opens at 09:30 ET (13:30 UTC).

Following the launch of Valkyrie’s fund today, a third bitcoin futures ETF, the VanEck Bitcoin Strategy ETF (XBTF), is set to go live on Monday on the Cboe BZX Exchange, according to a recent SEC filing.

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