Summary:
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A BIS report confirms that the Bitcoin price is still being steered by news events
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A breakdown of Bitcoin supply unveils interesting results
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Cryptocurrencies take a step back as a new week unfolds
Along with the new trading week a majority of digital currencies are heading lower trimming their gains made at the end of the past week (we mean mainly Ripple). Today we would like to focus on a report released by the Bank for International Settlements (BIS) as well as the detailed information regarding supply of Bitcoin. Beginning with the former, the BIS report unveiled that the best known cryptocurrency is still being influenced by news events related to regulation. It could suggest that a lot of crypto traders perceive regulations for virtual currencies as the important factor in valuing cryptocurrencies. In the report dated on 23 September the BISn wrote “While cryptocurrencies are often thought to operate out of the reach of national regulation, in fact their valuations, transaction volumes and user bases react substantially to news about regulatory actions”.
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Bitcoin’s reactions to the selected regulation-related events. Source: coindesk.com
The organization also provided us with several examples of the Bitcoin price reaction to various events. The first one focused on the news from March 2017 that the US SEC had shot down a proposal from investors Cameron and Tyler Winklevoss to create what would have been the first US-based ETF for Bitcoin. After the news came out, the Bitcoin price plunged 16%. The second event concerned Japan where the Financial Services Agency (FSA) ordered six cryptocurrency exchanges to improve their money laundering procedures in June 2018. The question is why Bitcoin is reacting to regulation-related news? The BIS wrote that “cryptocurrencies rely on regulated institutions to convert regular currency into cryptocurrencies. Their cumbersome setup also means that many consumers hold and transact in cryptocurrencies through more interfaces, such as online crypto-wallets that are often regulated, or can be regulated in principle”.
After touching $63 Litecoin has begun trimming its gains. As a result, one may count on a reversal even toward $51 followed by $48. Source: xStation5
According to the data released by Chainalysis investment coins account for the largest part of total Bitcoin supply followed by lost and unmined coins and speculative coins. The report revealed that between December 2017 and April 2018 new speculators (speculative coins) flooded the market, while long-term investors liquidated some of their positions at the same time. As evidenced by the chart below one may notice that a contribution of speculative coins has grown over the recent 12 months (around 22% of available coins). In turn, the amount of coins held for investment remained stable during the summer at around 30%. Notice that unlike the Bank for International Settlements, the author of the above chart claims that the Bitcoin market seems to be less sensitive to hype, where each news item does not have the ability to significantly push Bitcoin prices up or down.
The breakdown of Bitcoin supply according to Chainalysis. Source: blog.chainalysis.com
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