News Recap: KuCoin gets Hacked, Bitcoin is Decoupling from Traditional Markets, and More!
Last week’s news was very mixed as there were both negative and positive headlines. Despite this, Bitcoin might be taking its own route once again.
Not Your Keys, Not Your Crypto
Major Cryptocurrency Exchange, KuCoin, reported a major security breach on September 26th. Despite this news, Bitcoin did not see any correlated price movement. This was the same scenario for Ethereum and other ERC20 tokens. It is estimated that the breach affected around $150 million in user funds. In order to battle potential selloffs; major exchanges, including Bitfinex, froze USDT transactions associated with the hack.
It is important to remember than once you deposit your crypto into a broker, it stops being your crypto. Similar to traditional finance, the crypto represented in your account is only an IOU which establishes that the broker owes you that quantity. If you do not own the private keys of those wallets, then you do not really own that crypto.
MicroStrategy Could “Liquidate $200M in Bitcoin”
Michael Saylor, CEO of MicroStrategy, said in a recent interview with Bloomberg that all of its $400 million Bitcoin holdings could be liquidated at any time. He pointed out that volatility is not a good reason to sell but that he would not hesitate to sell MicroStrategy’s 38,250 Bitcoin (BTC) if he notices a more appealing alternative.
It is important to understand that this is the underlying factor behind the volatility in Bitcoin. Whales and other big holders can sell their assets at any given time without any previous notices. This in combination with the overall low liquidity of the cryptocurrency market, often leads to a big correction in price terms.
Is Bitcoin Decoupling from Traditional Financial Markets?
Statistician Willy Woo says that a key gold relationship between Gold and Bitcoin has broken out of a long-term downtrend. Additionally, he said that Bitcoin might start earning ground similar to a startup company. “Bitcoin will decouple from traditional markets soon, but driven by its internal adoption s-curve rather than changes in perceptions as a hedging instrument by traditional investors.”
It is important to highlight that even though it is true that the ratio of BTC/GOLD has broken out from a downtrend, this does not signify that Bitcoin will decouple from traditional markets. In a recent article that I wrote for AlphaChain capital, I suggested that the price of Bitcoin was more correlated to traditional equities rather than Gold. If this holds to be true, Bitcoin and Stocks could theoretically still rally while Gold comes down due to the decreasing uncertainty in market sentiment.
Dave Portnoy: “Bitcoin is just one big Ponzi scheme”
Day trader and founder of Barstool Sports, Dave Portnoy, unveiled that he bought $1.25 million with of Bitcoin (BTC) despite his thoughts of Bitcoin being “just one big Ponzi Scheme”. In an interview with Anthony Pompliano he said the following. “You get in, and you just have to not be the one left holding the bag”. Portnoy clarified that just after eight days into his crypto experience, his Chainlink investment took a sharp hit. Portnoy then announced that he would be out of crypto “because coins don’t always go up.”
Volatility has always been extremely associated with Bitcoin and cryptocurrencies in general. More than a Ponzi Scheme, these “Pump and Dump” cycles happen due to the low liquidity of the market. Even though an argument could be made comparing both, it would be very ignorant to be in favour of this as there is a strong use case behind Bitcoin and cryptocurrencies which have been disruptive for many industries.
More about the author:
Patrick Maldonado is a Cryptocurrency Trader & Market Analyst at Alphachain Capital and Founder of TCE Trading.