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Bitcoin, Ether lose ground as Twitter CFO rules out crypto investment, Dollar Index hits 16-month high

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, ether, and other major coins face selling pressure as anti-crypto comments from Twitter’s chief financial officer soured the market mood. The continued strength in the dollar index likely added to bearish forces.

Bitcoin was trading 4.3% lower on the day near $60,800, while ether was nursing a 5.3% loss at $4,320 at press time, according to CoinDesk data. Litecoin, Binance coin, Polkadot’s DOT token, and prominent decentralized finance coins flashed bigger losses.

The selling began during early Asia hours after Wall Street Journal quoted social media giant Twitter’s CFO Ned Segal saying that investing cash holdings into crypto assets like bitcoin “doesn’t make sense” right now.

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Segal cited price volatility and the lack of accounting rules for these assets as critical factors stopping the company from diversifying into .

While there was never any expectation of Twitter announcing crypto investments, Segal’s comments likely provided a reason for traders to take some risk off the table in the wake of the rising dollar and controversial crypto tax reporting requirement introduced by the $1 trillion bipartisan infrastructure bill signed by the U.S. President Joe Biden on Monday.

The infrastructure bill requires brokers to provide the Internal Revenue Services with information about traders transacting an amount of over $10,000. The crypto industry is worried that the definition of the word “broker” may be open-ended, bringing miners and node operators under the tax hammer, and creating tax reporting challenges for investors.

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Few companies like Square, Tesla, and MicroStrategy have acquired bitcoin as a reserve asset, widespread corporate adoption remains elusive to date. On Monday, analysts told CoinDesk that bitcoin’s relatively high price volatility is delaying its transition to haven asset from a risk-on or speculative investment.

The dollar index, which tracks the greenback’s value against major fiat currencies, reached a fresh 16-month high of 95.50 early today on lingering fears that Federal Reserve may resort to early interest rate hikes to contain inflation. Interest rate hikes are generally bullish for domestic currencies and weigh over perceived inflation hedges like bitcoin and gold. Like gold, bitcoin is also priced in U.S. dollars. So, a rising dollar is considered bearish for the cryptocurrency.

China’s National Development and Reform Commission said on Tuesday that it would consider “punitive electricity prices” for some crypto mines in the next stage of its crypto mining crackdown. China stepped up its crackdown on mining in May and declared bitcoin, ether, and tether as illegal in the third quarter.

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Analysts said bitcoin could suffer a deeper drawdown in the short term.

“We have noticed some larger sales occur on Bitfinex as well as openings of new short positions,” said Matthew Dibb, COO and co-founder of Stack Funds. While liquidations [forced closure of long positions] so far are quite low by historical standard and funding rates are approaching flat, we could see a further cool-off in BTC for the short term as momentum is beginning to stall.”

Martin Cheung, an options trader from Pulsar Trading Capital, said the downward move represents a healthy correction and could extend further to $60,000 or possibly to $55,000.

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“We have been seeing bearish flows in the options market from late last week,” Cheung told CoinDesk in a Telegram chat. “Put-call skews have flipped bearish.”

Put-call skews measure the cost of put options or bearish bets relative to calls or bullish bets. Positive values indicate increased demand for puts or downside protection.

Skew

The one-month put-call skew has risen to a four-week high of 5% from -2% on Monday, according to data provided by the crypto derivatives research firm Skew. While the one-week gauge has increased from 1% to 6%.

A deeper drawdown may be seen later on Tuesday if the U.S. retail sales number beat estimates and Fed officials start to sound the alarm over inflation, bolstering rate hike fears and adding to the dollar strength.

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According to FXStreet, retail sales scheduled for release at 13:30 GMT are likely to show consumer spending in the world’s largest economy rose 0.7% month-on-month in October.

Atlanta Fed President Raphael Bostic, Richmond Fed President Thomas Barkin, Philadelphia Fed President Patrick Harker, and San Francisco President Mary Daly are scheduled to speak during U.S. hours.

China’s President Xi and U.S. President Biden met on Monday evening at a virtual summit. As markets still await readouts from the meeting, the initial reports appear to be positive.

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Also on Tuesday, Reserve Bank of Australia’s governor Philip Lowe reiterated that the latest data and forecasts do not warrant an increase in the interest rate in 2022.

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VanEck Filed for Digital Assets Mining ETF

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Global investment manager VanEck, with more than $60 billion assets under management, has filed an application to establish an exchange-traded fund that will track the price and yield performance of the Global Digital Asset Mining index.

Fund’s investment principles

The Global Digital Asset Mining index is being used to track the performance of companies that are somehow engaged in digital assets mining activities, including Bitcoin or altcoin mining operations. Additionally, companies that provide various services like software development, as well as hardware suppliers, also fall into the category of mining operations providers.

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The fund will invest at least 80% of its total assets in securities in the DAMC but, at the same time, the company is not allowed to invest in digital assets by using derivatives products like options or futures. Hence, the fund is not going to track the price movement of any cryptocurrency.

The VanEck ETF will be able to provide exposure to companies that are in fact operating with digital assets or holding them on their balance sheet and are also being presented in the Global Digital Assets Mining index.

Risks for investors

The application also contains a section related to the risks behind the digital assets mining industry. According to the filing, the main risks for investors are technological obsolescence, supply chain issues and certain issues with obtaining new hardware.

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Additionally, the fund agrees that most digital assets mining companies are exposed to the issue of relying on third-party companies that are located and functioning overseas.

Bitcoin Daily Chart
Source: TradingView

In addition to risks tied to hardware wearing, digital assets miners generate revenue from selling their assets on various cryptocurrency exchanges, and the price of their assets is a subject of high volatility that could lead to the value loss of their holdings.

While most cryptocurrency miners remain in high profit from their operations, rapid change of assets like Bitcoin may potentially lead to additional losses of those companies and, therefore, losses for investors that receive direct exposure to the aforementioned index.

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Bitcoin Senator Rallies For Support Against Powell’s Renomination As Federal Reserve Chair, Here’s Why

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Popular Bitcoin Senator, Senator Cynthia Lummis is reportedly soliciting for the support of her fellow Republicans in her stance against Jay Powell after the latter got renominated to chair the Federal Reserve.

Bitcoin Senator Wary of Crypto-unfriendly Nominees

As reported by Decrypt who first broke the news, a source in Lummis’ office says her reasons border on her belief that there is an unlawful treatment of crypto-based institutions in her home state, Wyoming.

Meanwhile, the Bitcoin senator is not only against the nomination of Powell. The source still claims that Senator Lummis is also asking her Republican colleagues to help block Leal Brainard’s nomination as well. Brainard is another nominee of President Biden’s for the Fed positions.

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Lummis’ skepticism might be as a result of the Special Purpose Depository Institutions or SPDIs as they are otherwise called. They are a new type of crypto-based bank that Wyoming lawmakers granted a special operational license to, just last year.

Two crypto-based companies that received the license in 2020 include Kraken exchange and Avanti — the stablecoin issuer. However, the Federal Reserve’s decision to not approve their applications for central bank-issued accounts has placed a hold on their banking ambitions.

Speaking about the Federal Reserve’s delay in a Wall Street Journal feature article by Lummis on Wednesday, she says it is an intentional and unlawful obstruction. She added that the Fed’s reasons are ambiguous at best. According to the Bitcoin Senator, Lummis claimed that the Wyoming entities have met all requirements for being a bank under the Federal Reserve Act.

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Lummis insists that Powell and Brainard are only avoiding their legal obligations in their continued treatment of SPDIs and like many other U.S lawmakers, she wants to know why.

Could Lummis’ Pressure Affect Powell’s Confirmation?

As Lummis continues to apply even more pressure on her colleagues, the possible extent to which this pressure can truly go in affecting the confirmation process of both Powell and Brainard, remains to be seen.

But with the chair of the Senate Banking Committee, Sherrod Brown, reportedly holding a vote on the pair sometime this month, both of them could be confirmed.

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Also, there’s a possibility of a potential tight vote now that some progressive Democrats — most notably Elizabeth Warren — are saying they will not be voting for Powell.

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PlanB’s Floor Model First Miss: Bitcoin Price Closed Way Below $98K In November

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PlanB’s floor model was wrong about BTC’s November closing price. The stock-to-flow model, though, is still on track.

Bitcoin’s closing price for November below $60,000 meant that PlanB’s floor model, which was particularly accurate until now, was finally broken.

At the same time, though, the analyst confirmed that the more popular stock-to-flow model was still valid as BTC is on track towards $100,000.

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PlanB’s Floor Model Fails

PlanB is among the most popular analysts in the cryptocurrency space, predominantly known for the Bitcoin stock-to-flow model, which he published in early 2019. However, he also posted another model, which he referred to as the “worst-case scenario,” in July this year.

Also known as the floor model, it’s based on technical aspects, such as the 200-day moving average, and saw BTC closing August at $47,000, September at $43,000, and October at $63,000.

The first two months were spot on. BTC closed in October at $61,000, which was still very near to the model’s predicted price, and PlanB said it was “good enough” for him.

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However, November’s closing actual closing price of way below $60,000 was quite different from what the model envisioned – $98,000. As such, the analyst admitted that this was the model’s first miss after nailing the previous few months.

S2F on Track

As mentioned above, the floor model works separately from the stock-to-flow model, which sees the stock as the size of existing reserves (or stockpiles) and the flow as the annual supply of new bitcoins to the market.

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It’s actually even more bullish as the original version sees bitcoin tapping $100,000 by the end of the year. The upgraded stock-to-flow cross-asset model, which introduced different phases of bitcoin’s development, predicted a price tag of $288,000 until 2024.

Although bitcoin still struggles below $60,000 at the time of this writing, PlanB believes that the original S2F hasn’t been broken as the asset is on its way towards $100,000. If BTC is indeed to go into a six-digit price territory, it would have to increase its USD value by more than 66% in the next 30 days.

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