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Bitcoin Price Surges Amid Stock Market Bull—But This Could All Collapse if China Repeats its 2015 Stock Market Bubble

Bitcoin price saw a slight surge at the start of this week, while China’s stocks soared as no new local coronavirus cases were reported. US stocks also followed and saw an upward tick as investors focused on news related to the new COVID-19 vaccine and treatments.

According to market analyst Jim Wyckoff, Bitcoin bulls “have the overall near-term technical advantage,” and that the recent collapse in volatility could lead to a bigger price move.

China told its citizens to buy stocks—a possible stock market bubble?

The Shanghai Composite Index has seen its biggest one-day percentage gain since the summer of 2015 when the stock market bubble burst. The index saw a 5.7 percent surge on July 6, following a state-owned publication in China advocating for a “healthy bull market” in the country for post-pandemic recovery.

However, stocks in the Asia Pacific were mixed on July 7 as investors await the Reserve Bank of Australia’s interest rate decision. Mainland China continued on July 6’s gains, as the Shenzhen component jumped 2.842 percent and the Shanghai Composite rose 1.32 percent.

In a front-page editorial in the state-owned China Securities Journal, the publication said investors should look forward to the “wealth effect of the capital markets.” Retail investors have been playing a role in the recent bull market, along with professional traders.

There has been speculation about whether the trading circles and with the retail investors rushing in with the effect of the publication had anything to do with a possible stock market bubble forming in China. With the recent rapid surges, traders compared to the stock market bubble in 2015, with stocks trading at nearly 5,200, while July 6’s close was at 3.332.88.

Mark Williams, the Chief Asia Economist at Capital Economics said:

“There’s quite a long history of policy makers using the media to drive up the market. It doesn’t always end very well. We saw that back in 2015, exactly the same statements then. They tried to push the market higher. It worked for a while and then the market collapsed.”

Kenny Wen, wealth management strategist at Everbright Sun Hung Kai said:

“It may be too early to say it is a bubble, as in terms of valuation, A shares are still reasonable. The transaction volume has increased sharply. We see both domestic retail investors and global investors rushing into A shares.”

Bitcoin and the stock market

Following the Asian stock market, US stocks jumped as well amid the second wave of surging coronavirus cases in the country.

The stocks on Wall Street saw an uptick as well, while the Dow Jones Industrial Average jumped 1.8 percent, and the S&P 500 rose 1.6 percent, and the Nasdaq Composite hit an all-time high, surging 2.2 percent to close at 10,433.65.

Bitcoin showed signs of a slight bullish uptick in its first session in July and maintained a short-term positive correlation with the S&5 500.

Bitcoin and stocks investors are waiting for the next big decision that could drive a new rally—whether or not the Federal Reserve would expand its stimulus operation before it expires in July.

The recent Bitcoin price rally was ignited by China’s record stock market gains on July 6. As the United States has vast exposure to world’s second-largest economy, the US stock market simply followed suit.

Goldman Sachs: Yuan crash forecast

Goldman Sachs is expecting the Chinese yuan to fall to its lowest since 2008 in the coming months due to the existing US-China trade war, and now the US potential sanctions on China over its feud over Hong Kong and the implementation of the National Security Law.

The yuan has been forecasted by Goldman Sachs to fall to 7.25 per dollar during the next three months before recovering to 7.15 per dollar over six months, then to 7 per dollar in the next year. As the firm sees the yuan falling to its 2008 low, the potential for Bitcoin to experience an explosive price rally has been raised.

“Disputes between the two countries now cover a range of issues that are unlikely to be resolved soon,” wrote Goldman strategists, including Zach Pandl. Due the tolerance from the Chinese central bank on gradual currency depreciation, the strategists added, “As a result, we expect ongoing capital outflow pressures to weigh on the exchange rate and are revising our dollar-yuan forecasts higher.”

Image source: André François McKenzie via Unsplash

DeFi Bubble Burst: SushiSwap and Uniswap Lead the DEX Token Crash, Reaching New Lows

Uniswap’s UNI token reached a new low at $2.478 today, dropping by 83.48% from $15 of a record high on Sept. 17, the first day it launched. The record low on its first day of launching was $0.30.

Source: TradingView, Uniswap chart

SushiSwap’s SUSHI reached a record low of $0.55 recently, dropping by 96.56% for the past 40 days. On Sept. 1, SushiSwap’s SUSHI token reached a record high, on the first day of its launch. SUSHI is currently trading at $0.60.

There seems no signal of reversal yet. Technically, both Uniswap and SushiSwap tokens have been always selling since their launches. The 5-day and 10-day moving averages (MA) have been strong resistance levels since the first day of trading.

Source: TradingView, SushiSwap chart

Unlimited supply of decentralized exchange tokens

SushiSwap is a fork of Uniswap, and creating a SushiSwap was a piece of cake. Uniswap’s founder Hayden Adams has expressed the effortless creation of SushiSwap by saying that the DEX is a one-day’s effort by any competent developer at most.

Related: 4 Reasons Why Sushi Token Price Dropped Below $1

Although SushiSwap has taken the DeFi industry by storm, SushiSwap and Uniswap tokens and services have an unlimited supply. The only challenge is how to exchange the token for fiat money or other more stable cryptocurrencies like stablecoin and Ether by marketing, and potentially scams.

Scam and ICO concerns

The real identity of Sushiswap’s founder, “Chef Nomi” is still unknown. On Sept 5, the SushiSwap founder converted his SUSHI tokens to Ether, which prompted scam and fraud accusations from the wider crypto community. On Sept 6, SushiSwap founder Chef Nomi transferred the control of the project to CEO of FTX, Sam Bankman-Fried. On Sept 11, Chef Nomi returned $14M worth of Ether (ETH) back to the SushiSwap’s project fund.

A decentralized exchange token offering is much like an initial coin offering (ICO). There are many concerns about whether or not the SEC will define decentralized exchange tokens as ICOs, thus as one type of securities offerings, especially after the rapid plunge of the DeFi token prices.

Other DeFi tokens are suffering steep corrections as well. Bancor reached a record high of $2.40 on Aug. 6. It is now trading at $1.057. Balancer reached a record high of $38.13 on Sept 1. It is trading at $13.84 at press time.

Is the Crypto Market about to Burst? Mark Cuban Compares Crypto Downtrend to Internet Stock Bubble

After undergoing an incredible surge, with the market capitalization of the crypto market crossing the $1 trillion mark, many cryptocurrencies have considerably dropped in value. This has served to flush out more than $200 billion in market value as Bitcoin (BTC), the largest cryptocurrency by market cap, dropped. It is now trading at around $35,819.00 at the time of writing, down approximately 6% in the last 24 hours after hitting a record high of $40K at the end of last week.

Along with BTC trading lower, most cryptocurrencies have followed suit. Ethereum, the second-largest cryptocurrency by market cap, is also down 10% in the last 24 hours, although it has still managed to stay above the $1000 critical support level.

BTC and ETH will beat the crypto bubble

Shark Tank entrepreneur and NBA Dallas Mavericks owner Mark Cuban commented on the cryptocurrency market’s downtrend and hinted that the current situation was indicative of a stock bubble, in which asset prices massively crash after riding on highs for a sustained period of time. Cuban said:

“Watching the cryptos trade, it’s EXACTLY like the internet stock bubble. EXACTLY. I think btc, eth, a few others will be analogous to those that were built during the dot-com era, survived the bubble bursting and thrived, like AMZN, Ebay, and Priceline. Many won’t.”

Cuban hints that Bitcoin (BTC) and Ethereum (ETH) will likely thrive despite the current bubble territory that seems to have hit the cryptocurrency sector, just like some tech stocks who beat the dot-com bubble in the late 1990s, namely Amazon, Ebay, and Priceline. During that period of time, many tech-related stocks rose considerably in value due to excessive speculation, but the stocks quickly went bust by the end of 2001, resulting in a market crash and steep losses for investors.

Being the largest cryptocurrency by market cap, Bitcoin has been largely backed by institutional support and will likely continue to rise in value in the long run. The same is likely to happen for Ethereum as well in 2021, as there have been talks that ETH futures will be rolled out in 2021 by CME Futures, given that the demand for Ethereum is growing.

Crypto and other investments driven by perfect sales pitch

Cuban said that the reason behind cryptocurrency price surges was the same as that behind gold – according to him, it was simply a question of supply and demand. The likes can be influenced by a perfect sales pitch that tugged on investors’ FOMO (fear of missing out) strings – that the asset was scarce, and one must therefore have it before it was too late. For Cuban, it is as simple as that. The Shark Tank personality said:

“As during the dot-come bubble ‘the experts’ try to justify whatever the pricing of the day is. Crypto, much like gold, is a supply and demand driven. All the narratives about debasement, fiat, etc are just sales pitches. The biggest sales pitch is scarcity vs demand. That’s it.”

Cuban is not the only bull who thinks that Bitcoin is caught in bubble territory. Jeffrey Gundlach, the CEO of the DoubleLine Capital LP, also shared his views and said that Bitcoin looked like it was about to plummet at any moment.

Cuban said that the best way to go about investments was to “learn how to hedge.”

Peter Schiff remains skeptical about crypto

Gold bull Peter Schiff, on the other hand, has long been critical of the real value of cryptocurrencies, having previously proclaimed that Bitcoin was not unlike a pyramid scheme, and artificially inflated. The investor much preferred conventional stocks like gold and silver to hedge, rather than digital assets. He now hit Cuban back with a comment, saying:

“The difference is that some of those early internet stocks actually had real value. So they survived and ultimately thrived. None of the cryptos have any real value so there will be no winners. They will all lose.”

Tesla Bull and ARK Invest CEO Cathie Wood Thinks more Tech Companies Will Eventually Buy Bitcoin

As Bitcoin has gained recognition among Wall Street veterans and Silicon Valley with its surge to new all-time highs in recent months, many renowned investors have increasingly turned to view the digital asset as the ideal hedge against inflation.

Recently, Bitcoin doubled its old all-time high of $20,000 set in 2017, by soaring to hit more than $41,500. It has since pulled back, trading around the $31,000-$33,000 level. Currently, it is trading at $31,605.25 on CoinMarketCap, and is down a near 10% in the past seven days. Although it is currently consolidating, many investors have predicted that Bitcoin will continue to rise in price.

Tesla bull makes predictions on Bitcoin

Among the many seasoned traders backing Bitcoin is Catherine “Cathie” Wood, the CEO and CIO of Ark Invest, a major investor in Tesla. Wood is among one of the most reputed figures in Wall Street, having called bullish price targets for Tesla while many others were skeptic.

Wood now disclosed her predictions for Bitcoin, touting the cryptocurrency’s potential as a hedge in an interview with Yahoo Finance. The Ark Invest CEO explained that the wave of institutional support backing Bitcoin is far from finished, and that Silicon Valley was likely to become a major investor in the future.

Wood said:

“I think we’re going to hear about more companies putting this hedge (Bitcoin) on their balance sheet…particularly tech companies who understand the technology and are comfortable with it.

She added:

“I believe there is no better hedge against inflation than bitcoin.”

Like many other seasoned investors, Wood is bullish on Bitcoin. She disclosed that many corporate companies have asked her whether it was a good idea to invest in cryptocurrencies. In tandem with Wood’s remarks on Bitcoin, Ark Invest’s recent research report indicated:

“If all S&P 500 companies were to allocate 1% of their cash to bitcoin, its price could increase by approximately $40,000.”

Institutional interest in Bitcoin escalates

Last year, the underlying narrative of Bitcoin shifted, as institutional supporters increasingly embraced the asset and added it to their treasury reserve. From hedge fund manager Paul Tudor Jones to Gemini co-founders Cameron and Tyler Winklevoss, Bitcoin was touted as the best way to beat inflation, following an unprecedented period of economic turmoil triggered by the pandemic and the Federal Reserve’s stimulus package plans. This resulted in many seeking out hedges to store their wealth, as the dollar depreciated with the Fed’s drastic money printing measures.

MicroStrategy was among one of many to start hedging with Bitcoin, followed by Square and Stone Ridge Asset Management. The largest Bitcoin whale out there, Grayscale Investments, has also contributed in driving up the institutional adoption of Bitcoin. The rising popularity of Bitcoin even prompted MicroStrategy’s CEO, Michael Saylor, to advise Tesla founder Elon Musk to hedge with the crypto.

Ark’s team said:

“Square and Microstrategy, both with balance sheet investments in Bitcoin, are showing the way for public companies to deploy bitcoin as a legitimate alternative to cash.”

The investment firm also predicted that Bitcoin’s price will skyrocket and hit anywhere between $1 trillion and $5 trillion in the next five to ten years. This is up more than $600 billion from today’s value.

Are Bitcoin and crypto caught in bubble territory?

Although many have predicted that Bitcoin will eventually hit higher price marks in the future, some remain skeptic, calling Bitcoin’s exponential growth a bubble.

Previously, Mavericks owner Mark Cuban had said that he thought that the current cryptocurrency market was stuck in bubble territory, similar to the internet stock bubble in the late nineties. Although he suggested that Bitcoin and Ethereum will likely thrive, among with a few other leading cryptocurrencies and beat the bubble, the seasoned investor predicted that even more crypto projects will fail.

As cryptocurrencies are relatively nascent as an industry, it may be too early to pinpoint exactly where Bitcoin’s valuation will lead to in the future.

Profit Reaped by Bitcoin Addresses Dips to a 3-Month Low amid a Week-Long Price Correction

The number of Bitcoin (BTC) addresses in profit plunged to a 3-month low as the price of Bitcoin has remained in the bearish zone for days.

Per Glassnode data, the number of Bitcoin addresses in profit is pegged at 30,782,698.006, a figure based on a 7-day Moving Average (MA).

It is not surprising that many Bitcoin addresses are at a three month low in terms of profit. The price momentum of Bitcoin since the start of 2021 has been somewhat volatile. The cryptocurrency surged in price for the first week of the year, picking up from a growth of over 300% it recorded in 2020 to set new all-time highs above $41,500.

This all-time high record prompted a lot of bullish projections on Bitcoin by analysts and also sparked a FOMO (fear of missing out) wave among many investors who bought the coin at inflated prices. With Bitcoin continually being in loss over the past week, many of the addresses which served to previously bring the number one cryptocurrency above $35,000 may have contributed to the crashing statistics.

At the time of writing, Bitcoin has lost 1.63% in the past 24 hours and experienced a 10.76% drop in the past week. Each Bitcoin is now worth $31,723.06.

Are Bitcoin Skeptics Right About The Bull Run Being A Bubble?

The latest Bitcoin bull run picked up from December 2020 to mid-January 2021 has constantly been touted as a bubble that is doomed to burst when the frenzy ends. One of the proponents of this notion is Jeffrey Gundlach, a bond fund manager, who noted that the BTC began to look like a bubble when it surged above $23,000 in this ongoing bull run.

The sentiments of investment veterans like Gundlach may prove true should the price of Bitcoin continue to underperform, despite the expectations from HODLers.