Data Shows $1,000 Bitcoin Price Gains are Followed by 38% Drawdown

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These Simple Factors Show Why Bitcoin’s Recent Rally was So Important

Bitcoin

These Simple Factors Show Why Bitcoin’s Recent Rally was So Important


  • Bitcoin’s rally yesterday allowed it to erase virtually all of the losses that resulted from its mid-March meltdown
  • This movement did more than just boost its technical outlook, as it has also bolstered BTC on multiple other fronts
  • One analyst is also noting that this was a “spot dominated” movement, meaning that it may actually prove to be highly sustainable

Bitcoin saw a massive rally yesterday that allowed it to erase virtually all of the losses that were incurred during the mid-March meltdown, with BTC nearly climbing back up to its 2020 highs in a fleeting overnight upswing that led it to $9,500.

Analysts are now noting that this rally was both impressive and significant for multiple reasons, including the fact that data now shows that it was almost entirely driven by retail investors making spot purchases.

This movement also allowed BTC to reclaim a key adoption curve, while also decoupling firmly from the traditional markets.

Bitcoin’s Rally Driven Primarily by Spot Purchases

At the time of writing, Bitcoin is trading up is trading up just under 7% at its current price of $8,840.

This marks a massive climb from recent lows of $7,700, and a slight decline from its overnight highs of $9,500.

The firm rejection at these highs signals that the crypto does have some heavy resistance laced within the mid-$9,000 region, and bulls will need to firmly surmount this if they want to make a bid at pushing BTC into the five-figure price region.

One important factor to be aware of is the fact that this movement was driven by retail buyers, which is elucidated while looking towards the crypto’s open interest hitting an all-time low – a sign of inactivity amongst margin traders.

Mohit Sorout, a partner at Bitazu Capital, spoke about this in a recent tweet, explaining that this movement was a “spot dominated ripper.”

“Bitmex OI hits a new All Time Low. This BTC rally was purely a spot dominated ripper. Incredible,” he explained.

Bitcoin

Image Courtesy of Skew

BTC Rally Results in Greater Fundamental Strength

One analyst recently explained that he believes there are multiple other positive results of this uptrend beyond it simply boosting the crypto’s technical strength.

He points to three primary results of this recent movement, including it allowing the crypto to decouple from the traditional markets, outperform Ethereum, and climb back above its adoption curve.

“I am very, very, very impressed with the move in BTC today for a variety of reasons. 1) First sign of decoupling from gold and the SP500 2) ETH lost value vs BTC & broke down a TL. 3) We are back above the adoption curve TL,” he noted.

These factors, coupled with the spot buying that drove this movement, could be enough to propel BTC significantly higher.

Featured image from Unsplash.

Dogecoin

Dogecoin is a parody cryptocurrency created by Adobe Systems employee Jackson Palmer and programmer Billy Markus in 2013. Its name is derived from the “Doge” meme, whose many iterations usually feature a Shiba Inu dog surrounded by Comic Sans text.

The meme gained popularity in 2013 and dogecoin was introduced in December of that year. Palmer has said he wanted dogecoin to draw positive attention to cryptocurrency and to encourage innovations with the technology by making it accessible and appealing to new users.

The open-source protocol is a fork of the luckycoin blockchain, which means that the original dogecoin developers created a copy of the luckycoin source code and modified that source code according to their own preferences. Luckycoin is a fork of litecoin, which is itself a fork of bitcoin.

Dogecoin was written in the C++ programming language, the same as bitcoin. According to the dogecoin website, the cryptocurrency is often used to tip internet users who create or share digital content. Its market capitalization exceeded $1 billion in 2018 and Elon Musk once declared dogecoin his favorite cryptocurrency.

Dogecoin’s developers have been largely inactive for several years. In 2015, Palmer announced that he would take an “extended leave of absence” from the cryptocurrency community, calling the community “toxic” and criticizing it for being “white male dominated” and marred by “buzzword-filled business ideas.”

He left the protocol’s development in the hands of a team of select community members. 

How does dogecoin work?

Vision

Similar to bitcoin, dogecoin was designed to be a type of currency (albeit not a serious one); it is not Turing complete or capable of facilitating smart contracts like ethereum. 

Dogecoin is often used to tip internet users who create or share digital content. Its market capitalization exceeded $1 billion in 2018. 

Launch & issuance

Dogecoin was launched in December of 2013. At the time none of the cryptocurrency’s supply was set aside to incentivize the founders. The software was made immediately available for use, and those who wanted to mine the cryptocurrency were able to compete for rewards.

Network design & security model

As mentioned, dogecoin is a fork of the luckycoin blockchain. The developers were able to copy the Luckycoin software because it is an open-source protocol — anyone is free to use, study, change, and share it. 

Luckycoin is a fork of litecoin, which itself is a fork of bitcoin. And like bitcoin, dogecoin is an open-source, decentralized peer-to-peer network that utilizes a proof-of-work consensus algorithm. The network therefore relies on miners to validate transactions and secure the network from bad actors who would seek to manipulate the blockchain’s record of transactions.

Unlike bitcoin, however, dogecoin uses the scrypt mining algorithm, which has lower hashrates and uses less energy than bitcoin’s SHA-256 mining algorithm. 

Monetary policy

The total possible supply of dogecoin was originally capped at 100 billion coins, and the value of block rewards (which miners receive for validating transactions) was set to halve every 100,000 blocks until block 600,000 was mined. At this block, the reward became fixed at 10,000 dogecoin per block. 

However, in early 2014 developers decided to make dogecoin an inflationary currency rather than a deflationary currency like bitcoin, and eliminated the cap on its supply. The network’s block reward remained 10,000 dogecoin per block.

Because dogecoin’s hard supply cap was removed, the price of the coins began to decline and the incentive for miners to mine the coin diminished. The network’s hashrate — a unit used to measure the processing power of a proof-of-work network — declined throughout 2014 and the dogecoin community became concerned that it could be susceptible to a “51 percent attack.”

This term refers to the possibility that a miner or mining pool could take control of more than half of a blockchain’s power, which would make it possible for them to prevent other network participants from carrying out transactions or creating blocks.

In secure networks with many miners (like bitcoin) these attacks are unlikely because the cost of the amount of power it would take to control 51 percent of the network would be prohibitively expensive. However, in networks with fewer miners, such an attack would be less expensive and more probable.

To attempt to prevent an attack on the dogecoin network, developers decided to enable “merge mining” or “auxiliary proof-of-work” which allowed dogecoin to receive “work” from other scrypt-based blockchains — specifically litecoin.

Merge mining allows miners to contribute work to two chains at once and compete for both rewards. So it is possible to mine both dogecoin and litecoin simultaneously.

Transaction processing

Dogecoin’s block time is approximately 1 minute — significantly faster than bitcoin’s average of 10 minutes.

Coding

Dogecoin was written in C++ (the same programming language that bitcoin was written in). The protocol is licensed under the open source MIT license which permits without restriction the copying, modification, publication, distribution, sublicensing, and selling of copies of the protocol.

Charlie Lee

Charlie Lee is the creator of litecoin and the managing director for the Litecoin Foundation. Born in Ivory Coast, West Africa, Lee immigrated to the United States at age 13.

Lee announced litecoin on Bitcointalk, a bitcoin forum initially created by Satoshi Nakamoto in 2011 while working at Google. Litecoin is a fork of bitcoin, intended to serve as “silver to Bitcoin’s gold,” rather than to compete with it. Litecoin’s price increased dramatically by 395% in 2013.

Lee sought to make litecoin technically distinct from bitcoin in two different ways. First, he aimed to make it possible for the average consumer to mine the coin using consumer grade hardware, as opposed to the specialized mining hardware that bitcoin utilizes. Second, Lee sought to create a network that allowed for faster and cheaper transactions (approximately 2.5 minutes per transaction compared to the 10 minutes bitcoin offered). This faster time and cheaper transaction fee was intended to enable consumers to use litecoin for smaller and more day-today transactions.

After creating litecoin, Lee joined crypto exchange startup, Coinbase, as director of engineering. In 2015, during his time at Coinbase, Lee shifted his focus away from litecoin and development on the protocol stagnated.

In 2017, Lee left Coinbase in order to dedicate his time and attention to the Litecoin Foundation.

Trezor

A subsidiary of Satoshi Labs, Trezor manufactures hardware wallets where users’ private keys are stored in the device.

Satoshi Labs was founded by Pavol Rusnak and Marek Palatinus, and produced the first Trezor prototype in 2012. They launched Satoshi Labs in 2013 and also began fundraising. Trezor offers two products, the Model T and Trezor One. The first generation Trezor One contains two physical buttons and a screen, while the Model T is a second generation product with a touchscreen. The two devices are nearly identical in functionality and security. The first Trezor One devices shipped in 2014, and a next-generation model was released in 2016.

Trezor wallets are compatible for both computers and mobile phones, supporting the Android, IOS, Linux, and Windows operating systems. Each device is compatible with hundreds of cryptocurrencies, including bitcoin, XRP, litecoin, bitcoin cash, tether, monero, zcash, ether and all ERC-20 tokens.

To access a Trezor device, users are prompted for a password or pin for authentication. Trezor offers a password management function cross-compatible with Google chrome, in an attempt to make their products more user friendly. For increased security, two-factor authentication is also available to consumers. Trezor additionally offers support for those that have lost passwords, request returns, or have general questions.

Chainlink Nears Key Support After Being Battered by Overnight Decline

Although Chainlink has been one of the most bullish cryptocurrencies throughout 2019 and 2020, its short-term price action has lagged against that of Bitcoin and many of its other peers.

The crypto is flashing some signs of immense short-term weakness after its bullish divergence was “destroyed,” leading some analysts to now watch for a significant pullback.

This potential decline could result in especially notable losses against its Bitcoin trading pair, but could be closely followed by another notable uptrend.

Chainlink Shows Signs of Weakness as Analysts Watch for a Movement to Key Support

At the time of writing, Chainlink is trading down just under 3% at its current price of $3.71, marking a notable decline from daily highs of nearly $4.00 that were set overnight.

LINK has also declined nearly 6% against its Bitcoin trading pair today, severely underperforming the benchmark crypto as it begins stabilizing within the upper-$8,000 region.

Analysts anticipate this weakness to persist in the near-term, as one pseudonymous trader explained in a recent tweet that previous bullish divergence that was bolstering Chainlink’s buyers has since been “destroyed,” thus opening the gates for further downside.

“Well, the bullish divergence got destroyed last night… Still thinking we’ll see a decent bounce on LINK soon,” he stated while pointing to support at 0.0004 BTC and 0.00036 BTC.

Chainlink LINK Crypto

Image Courtesy of Crypto Michael

Both of these support levels sit well below its current price of 0.000423 BTC, and continued weakness against Bitcoin could create some serious drag that also leads its USD trading pair to decline lower.

Analysts Concur: Short-Term Retrace Likely to Lead LINK Lower 

Others are offering similar short-term targets for the cryptocurrency while looking towards its BTC trading pair.

One such analyst explained that the two key support levels he is watching sit at roughly 0.00037 and 0.000315, with a decline below the latter level being enough to invalidate its mid-term strength.

“Not all heroes can break rising wedges upwards. Ultimate long entry would ‘level A’ also 0.786 of latest price structure invalidation below,” he said while offering a chart showing the rising wedge that sparked this decline.

Image Courtesy of Teddy

Another trader offered similar short-term downside targets, but he emphasized that Chainlink’s macro outlook is still incredibly bright.

“LINK on a macro is level is a bullish chart without a doubt. But short term we’ll probably see a retrace. Rounded top and confirmed sell signal on The Alpha,” he explained, referencing the chart and indicator seen below.

Chainlink

Image Courtesy of Byzantine General

As long as buyers step up and defend these levels, it is highly probable that Chainlink’s intense technical strength seen throughout the past year will be enough to continue pushing it higher.

This future uptrend could also be further bolstered by the growing strength seen across the aggregated market.

Featured image from Unplash.

Local Chinese Government Launches Its First Blockchain Platform

What can I do to prevent this in the future?

If you are on a personal connection, like at home, you can run an anti-virus scan on your device to make sure it is not infected with malware.

If you are at an office or shared network, you can ask the network administrator to run a scan across the network looking for misconfigured or infected devices.

China’s Tencent Begins Blockchain Accelerator Program

China’s Tencent Begins Blockchain Accelerator Program 

Tencent, a leading Chinese technology giant that doubles as the world’s largest video game company have announced the launch of its blockchain accelerator program. Tencent says it plans to mentor 30 companies in three major areas of distributed ledger technology (DLT), including finance, logistics, supply chain, and more, according to a press release on April 30, 2020.

Tencent Rolls Out Accelerator Program 

In a bid to make it easier for firms and industries to integrate DLT into their operations and promote independent blockchain innovation, Tencent has introduced its blockchain accelerator program called Tencent Industrial Accelerator.

Tencent says it plans to mentor 30 companies developing blockchain solutions or services that cater to various needs including energy, education, logistics, and more. The firm has made it clear that the program is open to both blockchain startups as well as established firms and industries interested in adopting revolutionary technology.

Tencent said:

Tencent Blockchain Accelerator is an important part of Tencent Industrial Accelerator. By integrating global DLT industry resources and linking excellent blockchain companies, a multi-dimensional service platform based on technology, scenarios, business opportunities and capital is created to achieve strategic planning.

Numerous Benefits for Participants

Importantly, Tencent has hinted that only blockchain projects or firms that have already completed at least one funding round are eligible to participate in the accelerator program and the firm must get a referral letter from a highly reputed firm or a financial service heavyweight.

The Tencent accelerator program is now live and interested participants have until June 6, 2020, to send in their applications, including their business plans and a recommendation letter.

Tencent has fixed the registration fee for the program at 100,000 RMB (roughly $14,120) and participants will enjoy several benefits including four mentoring sessions annually, overseas trips where participants will learn more about the blockchain ecosystem, free access to Tencent’s blockchain-as-a-service (BaaS) platform and more.

In related news, earlier in December 2019, BTCManager informed that Tencent was making plans to put in place a digital currency research team that will help it navigate the crypto and blockchain space.

Tencent reportedly filed the highest number of blockchain patents in China in 2019, a massive 718, out of a total of 5,800 patents.

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