Bitcoin Takes Aim at $11,000 After Federal Reserve Rate Cut; Tezos Skyrockets on Coinbase Pro Listing
Bitcoin’s long unwind from 17-month highs may have run into sellers’ exhaustion this week, as the largest digital currency returned above $10,000 despite contentious news about crypto taxation and government clampdowns on digital assets. On Friday, bitcoin’s price peaked closer to $10,600, setting the stage for another run at $11,000 in the near term.
With “stage 1 of the bull market” now complete, bitcoin was said to be entering the much-talked about consolidation phase that has seemingly eluded the market since February. If bitcoin manages to return above $11,000, it will surely invite speculation that higher highs are on the horizon much earlier than previously expected.
Bitcoin’s market capitalization inched closer to $190 billion on Friday following four consecutive daily advances. On Bitstamp, the price peaked at $10,583.88 on Friday, having gained 1.2% during the session and more than 7% for the week.
At the time of writing, the BTC/USD exchange rate was valued at $10,530. The price is back above the 30-day exponential moving average (EMA), which previously served as a strong near-term support.
Bitcoin’s recovery picked up the pace Wednesday after the Federal Reserve delivered its first interest-rate cut since 2008. The decision put stock markets in a tailspin, as investors dissected the pace, likelihood and timing of future rate adjustments. As one would expect, the decision had no direct impact on bitcoin, though some hodlers may have used it as an opportunity to increase their exposure.
Once again, bitcoin has outperformed its peers in the altcoin universe. The bitcoin dominance rate is back at 66%, leaving altcoins and tokens with the remaining 34% of the crypto market cap.
Nevertheless, bitcoin’s rally helped the cryptocurrency market cap recover $30 billion from its weekly low. The market is now worth $285.2 billion, according to CoinMarketCap.
The sustained price increase hasn’t been accompanied by a noticeable rise in trading volumes. In fact, daily turnover on verified exchanges has barely exceeded $1 billion, according to Bitwise data.
IRS Sends Letters to 10,000 Crypto Traders
Washington’s Internal Revenue Service (IRS) has reportedly begun sending letters to more than 10,000 cryptocurrency traders it suspects may have violated federal tax laws. As The Wall Street Journal reported, the IRS didn’t specify the nature of the possible violations, though failing to pay capital gains is probably high on the list.
“Taxpayers should take these letters very seriously. The IRS is expanding efforts involving virtual currency,” IRS Commissioner Chuck Rettig said, as quoted by WSJ.
While it’s not entirely clear how the agency was tipped off on possible tax evaders, a federal court order targeting Coinbase users probably played a major role. In March 2018, the San Francisco-based exchange was forced to hand over information on roughly 13,000 users who bought, sold or received cryptocurrencies worth $20,000 or more.
In percentage terms, cryptocurrency Tezos (XTZ) was the market’s top performer this week. The native token of the securitization platform gained a whopping 44% between Fridays after Coinbase Pro confirmed that XTZ trading will be enabled shortly.
In an official blog post, Coinbase Pro announced Tuesday that XTZ transfers will begin August 5. The exchange will start accepting deposits for at least 12 hours before full trading commences.
Coinbase has developed a strongly favorable view of Tezos. It was just a few months ago that the exchange announced it will allow institutional traders to participate in the cryptocurrency’s staking method – a process called “baking” that allows users to earn interest on their holdings.
Tezos’ market cap is fast approaching $1 billion, putting it in 15th spot on the active leaderboard. It was last seen trading at $1.46, the highest in over two months.
The Week Ahead and Things to Consider
The long-running hypothesis that bitcoin is a superior hedge against central bank inflation will finally be put to the test in the coming months. The Federal Reserve is said to be eyeing another rate cut as early as September, a move that will likely compel other central banks to follow suit. The European Central Bank is already on board for further easing measures; the Bank of Canada and Bank of Australia could be the next dominoes to fall.
Bitcoin is clearly the best-performing major asset of the last ten years. If bitcoin purists are correct, another wave of quantitative easing from world governments will only strengthen the cryptocurrency’s appeal as an asymmetrical store-of-value asset.
Disclaimer: The author owns Bitcoin, Ethereum and other cryptocurrencies. He holds investment positions in the coins, but does not engage in short-term or day-trading.
Featured image courtesy of Shutterstock. Charts via TradingView and CoinMarketCap.