Bitcoin through Fire and Flames
With an increase of over 120% since the beginning of the year Bitcoin confirms itself as the best asset of 2020 The climb ignites the souls of the HODLers who now see historical records drawing nearer
After Bitcoin's positive closure of October (+27%), behind only April (+34%) and January (+30%) in terms of performance since the beginning of the year, many were expecting a period of rest, partly as a consequence of waiting for the US election results. Instead, except for the first day of the month of November, Bitcoin prices have risen again with even greater intensity.
The daily closing on Thursday, November 5th - just over 10% - marks the third-best increase since the beginning of the year in percentage terms, while on a nominal value basis (+1,550 USD) we have to go back to January 5th, 2018 (+1,752 USD in 24 hours). To find a similar trend we must go back to June 2019 when in less than three weeks the price of Bitcoin rose by more than 6,200 USD, achieving a gain of more than 80%, which added to the profit accumulated during the four previous months (February-June) recorded a jump of 320% from the lows at the beginning of February 2019.
Last year the race ended just over USD 13,700, a level of resistance that last week succumbed to the bullish attack. In almost eight months, from the mid-March lows to today's values - from 3,850 to 15,500 USD - the gain for Bitcoin exceeds 300%. For the first time after 34 months, Bitcoin's prices climbed to $16,000, realizing a gain of more than 120% since the beginning of the year.
When comparing it on an annual basis (Year To Date) with other financial assets, the comparison becomes embarrassing. Despite gold enjoying a successful year, having reached absolute records last August at $2,074 an ounce, performance since the beginning of the year stands at +28%, a gain that, if maintained, would close 2020 as the best year in 40 years. In the past only in 2010 ended with a similar performance (+28.9%). The asset which holds the comparison better is silver, the other raw material considered to be a 'safe-haven asset', which has been earning more than 45% since the beginning of the year.
Unlike the more noble metal, in the same period at the beginning of August, silver touched 30 dollars an ounce, remaining far from the historical peaks of 50 dollars reached in 2011. If 2020 were to end at these levels, above 25 dollars an ounce, silver would record the best second year of the last 30 years. The comparison becomes even more ruthless when made with stock indices.
For the US Standard & Poor stock index, which lists the 500 most capitalized US companies, 2020 is proving to be a muscular year. After falling by 35% in mid-March from the previous all-time highs set the month before, in less than six months prices have made up all the ground lost and even updated their all-time absolute highs at 3,579 points on September 2nd, recovering more than 60% from the lows. A recovery that had never been recorded before when measured in speed of price and time.
The S&P 500 index is now approaching its eleventh consecutive year with a higher high than ever before. But all this has failed to push performance above 8% since the beginning of the year. This performance is similar to the Chinese pool represented by Shanghai Composite, which so far has achieved a gain of just over 8% for 2020. The European equity indices represented by Eurostoxx50 are worse off, with a loss of 14% since January 1st. Â
The week is drawing to a close for the fifth consecutive time. To find such a sequence, or rather even a longer one, it is necessary to go back to the period between mid-November and mid-December 2017, an increase of 225%.Â
DeFi - Decentralized Finance
Since the second half of October, trading volumes on the main centralized exchanges (CEXs) have been increasing again. This trend has also intensified during the first week of November. On November 5th, the aggregate volume of Bitcoin traded on the world's major exchanges exceeded $5.5 billion, the second most vibrant day since June. If we also add the trading of the following day, Friday November 6th, amounting to just under 5 billion dollars, the value recorded in the last two days is the highest since the middle of March. In that period, between March 12th and 13th, more than 15 billion dollars were traded.Â
BTC Spot - Aggregated Daily Volumes
In contrast, trading on decentralized trading platforms (DEXs) is cooling down. With almost $3 billion traded since last Friday, the total volume dropped by 60% on a weekly basis.
DEXes Volume Last 7 Days
After last week's trading hangover on Curve, at $412 million, activity is back in line with the historical average, with 14% of market share.
Uniswap is once again consolidating its leadership both for weekly trades - around $2 billion in the last seven days - and for total value locked (TVL) calculated in US dollars, which for the first time rose over $2.8 billion.
In the last few hours, the strengthening of both Bitcoin and Ethereum, as well as the other tokens that can be used as collateral in the various DeFi protocols, has brought the TVL back above $12,4 billion.
Since last week, the total number of Ether locked as collateral has dropped by about 400,000 units, while the number of tokenized Bitcoin has risen to 169,000 BTC, close to the absolute record of 173,147 BTC set on October 23rd. Among the projects that allow the tokenization of Bitcoin with Ethereum's ERC20 protocol, WBTC is the undisputed leader with more than 123,000 BTC - equal to about $1.9 billion at current prices - ranking third overall.Â
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Technical Analysis
Bitcoin (BTC)
As anticipated in the previous report "the break of the 14,000 USD opens up space to continue the recovery of 15,500 USD..." the hypothesized bullish scenario has materialized. With the rise of the last 48 hours, the price of Bitcoin has reached almost 16,000 USD, the highest level since January 10th, 2018. At the time, within a different context from the current one, we were in the initial phase of the decline which culminated 11 months later with the low of December 15th at 3,122 USD.
Today, however, the trend is in the midst of the explosive phase of the new six-month cycle that began between September and October, the second 6-month cycle of the current annual cycle that started in mid-March. If the cyclical structure were to follow the characteristics in a higher bullish cycle, as it seems, the bullish trend will accompany the rise until the beginning of the first quarter of 2021.
The anatomy of the shorter cycles (monthly and quarterly) should be followed very carefully, as they may or may not reinforce the bullish hypotheses and may also be a reason for intense short-term bearish speculation. As has happened in the last two weeks, when the upward trend is accompanied by a strong impulse leaving few marks on the graph, it is necessary to build valid and useful support levels to slow down the next retracement.
BTC Chart
The rise in prices over 14,150 first and 15,000 later, has blown all the hedges opened by operators to protect a further extension. The hedging of the positions has required the opening of long contracts (upwards) making the demand grow and feeding the rise. For this reason, new upward hedges remain absent at the moment. We will have to wait until the beginning of next week to get a better picture of the next strategies (to follow the updates subscribe for free to the Telegram channel by clicking here). The coverage of supports between 13,500 and 12,500 USD is being strengthened. These are the two levels to be monitored in case of a trend reversal. Upward, at the moment, a further extension would find no resistance. For this reason, and in these conditions, the continuation of the climb can only end due to lack of demand resulting from operators' dizziness.Â
BTC Options
Ethereum (ETH)
With a delayed effect, similar to what happened between July and August, the prices of Ethereum suddenly explode upwards and in just over 72 hours they recover all the ground left behind relative to Bitcoin's performance. From the lows of Wednesday to the highs of the last few hours, the increase is over 23%, bringing the prices close to 470 USD, a step away from the annual records of 488 USD set at the beginning of September. The 420 USD resistance, which in mid-October had rejected an attempt to rise, was shattered in one blow.Â
ETH Chart
A resistance that had weakened in the last week due to an error of assessment by operators who had started to move their hedges to the $405 area (as indicated in the update on the DeFi Today Telegram channel - subscribe by clicking here).
For Ethereum too, the recent climb has erased any coverage structure of operators in options. It is necessary to wait for the next few days to identify the next areas of resistance that will be chosen for the new operational structures. Downwards, the coverage of the supports between 355 and 370 USD is strengthened, a level that has been accompanied by the bullish trendline for over seven months.
ETH Options
The first Ethereum 2.0 milestone on the mainnet
Here's the first milestone of Ethereum 2.0 on the mainnet.
It is the ETH2 deposit contract, registered on the Ethereum blockchain on November 3rd, 2020.Â
This is the first official step recorded on the mainnet of the process that will lead to the launch of the new version of the Ethereum protocol. In reality, however, this process will still be lengthy, since it is still only in the testing phase and will require three phases.Â
The registration of the deposit contract marks the start of the preparation procedures for the launch of phase 1. In fact, as soon as the Medalla tests are successfully completed, it will be possible to start phase zero, i.e. the launch of the testnet on the mainnet. It appears that the tests are proceeding more or less on schedule, so it is possible that phase zero will start by the end of 2020, or at the latest in the first months of 2021.Â
During this phase zero the Beacon Chain, staking, the bridge between ETH and ETH2 will be launched and the validators will be chosen. However, it will only be with the next phase, i.e. phase 1, that it will be possible to freely convert ETH to ETH2, and vice versa. For the moment, the timing of the future launch of phase 1, which will also see the introduction of the long-awaited sharding to increase the number of transactions per second manageable by the network, does not seem to have been decided yet.Â
Therefore, phase zero will not produce any improvement in the speed or cost-effectiveness of transactions, and will only be a transition phase in preparation for phase 1, in which the first tangible consequences on the use of the network will begin to be seen. In other words, although this process may start soon, the only big difference at first will be staking.Â
Before reaching phase 2, i.e. the final launch of the second full version of the protocol which will see the current chain become a shard of the new one, there will be an intermediate phase, called 1.5, which could make transactions even faster and cheaper. In this phase new offchain solutions will be introduced, capable of producing significant improvements, so much so that the Ethereum network will probably be able to finally challenge other similar platforms in terms of number of transactions per second, speed of execution of the same, and costs.Â
Phase 1 could theoretically start shortly after phase zero, while phase 2 will probably take some time. This is why phase 1.5 has been hypothesized.Â