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Bitcoin’s parabolic increase well above its previous all-time-high has many experiencing déjà vu from 2017 and a number of analysts are concerned the market is overdue for a sizable correction.
On Jan. 8 With Bitcoin (BTC) price reached a new all-time high at $41,940 and this week’s 28% collapse to $31,076 had professional and retail investors afraid that a strong trend reversal was in the making.
Bitcoin’s historical data shows that rapid parabolic ascents are usually followed by equally catastrophic corrections like the one seen after the 2017 bull run. Because of this, the current market’s similarities to the euphoric mania of 2017 to 2018 bull run have not gone unnoticed.
Cane Island global macro investment manager Timothy Peterson recently pointed out that:
“Bitcoin’s risk is approaching 2017 levels. Investors that buy at this price can expect to lose 40% of their investment sometime in the future. However, the typical maximum drawdown is 30%, so this risk is only modestly elevated from the average.”
In a follow-up private conversation with Cointelegraph Peterson noted that there remains a short term bull case for Bitcoin stating:
“For bitcoin’s valuation to reach 2017 levels, it would have to be at least $80,000. There’s a small chance that would happen, and if it did, it would happen quickly. High prices have a tendency to move even higher.”
Popped bubble or lower support retest?
There are some telltale signs that Bitcoin’s quick gains reflect a manic market on the verge of a correciton and the current bull versus bear debate centers around whether this week’s volatility is a healthy pullback to test lower supports before the price initiates the next move higher.
LookIntoBitcoin founder and Decentrader analyst Philip Swift recently made the case that Bitcoin’s recenet price action reflected a “needed pullback/slowdown” and he noted that several indicators were flashing red, indicating that the rate of BTC’s price appreciation was reaching extremes.
Swift said:
“Price has now pulled back below the x3 multiple where I expect it to stay for a while. As others have spoken about, price likely ran up to x3 (beyond x2) because we’ve had an earlier mania phase in the cycle vs last cycle with both retail+institutions buying.”
Swift’s analysis indicates that BTC is likely to trade sideways and slowly ascend in the near term but at a slower rate “as some money/profit rotates into altcoins.” Recent price moves in altcoins, especially DeFi-related tokens indicate that this rotation might already be underway.
BTC bulls aren’t done yet
While analysts and chart watchers are calling for Bitcoin to take a breather, bullish traders may have indicated that they have different plans. At multiple instances this week, bulls defended retest of lower support by buying into each dip and there is also the expectation that institutional inflow into BTC will resume now that Grayscale has re-opened its GBTC family of products.
A look at the 30-day average daily sentiment score for Bitcoin shows that despite the pullback, the average score has only decreased slightly from recent highs and is well above the lows seen during previous downcycles.
While few know the exact course Bitcoin’s price action will take this weekend, the strengthening fundamentals from a technical perspective, increased institutional inflow and positive announcements by government regulators suggest that the recent dips were nothing more than healthy corrections that were bound to occur before Bitcoin gears up to reach for a new all-time high.
The views and opinions expressed here are solely those of the author and do not necessarily reflect the views of Cointelegraph.com. Every investment and trading move involves risk, you should conduct your own research when making a decision.
Image Credit: Refer to Source
Author: Refer to Source Cointelegraph By Jordan Finneseth
Bitcoin’s parabolic increase well above its previous all-time-high has many experiencing déjà vu from 2017 and a number of analysts are concerned the market is overdue for a sizable correction.
On Jan. 8 With Bitcoin (BTC) price reached a new all-time high at $41,940 and this week’s 28% collapse to $31,076 had professional and retail investors afraid that a strong trend reversal was in the making.
Bitcoin’s historical data shows that rapid parabolic ascents are usually followed by equally catastrophic corrections like the one seen after the 2017 bull run. Because of this, the current market’s similarities to the euphoric mania of 2017 to 2018 bull run have not gone unnoticed.
Cane Island global macro investment manager Timothy Peterson recently pointed out that:
“Bitcoin’s risk is approaching 2017 levels. Investors that buy at this price can expect to lose 40% of their investment sometime in the future. However, the typical maximum drawdown is 30%, so this risk is only modestly elevated from the average.”
In a follow-up private conversation with Cointelegraph Peterson noted that there remains a short term bull case for Bitcoin stating:
“For bitcoin’s valuation to reach 2017 levels, it would have to be at least $80,000. There’s a small chance that would happen, and if it did, it would happen quickly. High prices have a tendency to move even higher.”
Popped bubble or lower support retest?
There are some telltale signs that Bitcoin’s quick gains reflect a manic market on the verge of a correciton and the current bull versus bear debate centers around whether this week’s volatility is a healthy pullback to test lower supports before the price initiates the next move higher.
LookIntoBitcoin founder and Decentrader analyst Philip Swift recently made the case that Bitcoin’s recenet price action reflected a “needed pullback/slowdown” and he noted that several indicators were flashing red, indicating that the rate of BTC’s price appreciation was reaching extremes.
Swift said:
“Price has now pulled back below the x3 multiple where I expect it to stay for a while. As others have spoken about, price likely ran up to x3 (beyond x2) because we’ve had an earlier mania phase in the cycle vs last cycle with both retail+institutions buying.”
Swift’s analysis indicates that BTC is likely to trade sideways and slowly ascend in the near term but at a slower rate “as some money/profit rotates into altcoins.” Recent price moves in altcoins, especially DeFi-related tokens indicate that this rotation might already be underway.
BTC bulls aren’t done yet
While analysts and chart watchers are calling for Bitcoin to take a breather, bullish traders may have indicated that they have different plans. At multiple instances this week, bulls defended retest of lower support by buying into each dip and there is also the expectation that institutional inflow into BTC will resume now that Grayscale has re-opened its GBTC family of products.
A look at the 30-day average daily sentiment score for Bitcoin shows that despite the pullback, the average score has only decreased slightly from recent highs and is well above the lows seen during previous downcycles.
While few know the exact course Bitcoin’s price action will take this weekend, the strengthening fundamentals from a technical perspective, increased institutional inflow and positive announcements by government regulators suggest that the recent dips were nothing more than healthy corrections that were bound to occur before Bitcoin gears up to reach for a new all-time high.
The views and opinions expressed here are solely those of the author and do not necessarily reflect the views of Cointelegraph.com. Every investment and trading move involves risk, you should conduct your own research when making a decision.
Image Credit: Refer to Source
Author: Refer to Source Cointelegraph By Jordan Finneseth
Author: Cai Yan (llamacorn), general manager of NGC Ventures Director
Since June of this year, we have witnessed a bull market in cryptocurrency led by DeFi and have seen more and more projects emerge. The price of tokens fluctuates and is sometimes manipulated by some bookmakers. Some people made money, some people suffered losses and pain. We are tired of research projects because there is no way to make money by simply researching fundamentals. Personally, I would like to remind you that the project can be forked or copied, but its core essence will not.
Let’s go straight to the topic below.
A recent article written by Multicoin Capital introduced the current state of the DeFi field. Reading this article is very convenient for newcomers to fully understand the DeFi market. On the basis of this article, I usually divide DeFi projects into two categories: ” old ” and ” new “.
“Old” DeFi projects are mainly pioneers that emerged in 2019 or earlier . At that time, DeFi was still in its infancy, and they seized the largest market share. The “new” DeFi project (although not determined by the release date) is a more aggressive and innovative project in this year’s fierce competition.
The following table briefly summarizes my thoughts.
Compound ‘s liquidity mining is the fuse that ignited the DeFi bull market this year, but Uniswap and Year are real opportunities for retail investors to make big money. Some people call Uniswap the value discoverer of “Shitcoin”, helping many retail investors get their first pot of gold in the field of cryptocurrency investment. Many people also received generous airdrop rewards when $UNI was issued. Yearn is the real dark horse of this year. It enables smart contracts to interact seamlessly to release liquidity , just like the glue in DeFi Lego.
These two winners sparked my thinking, what do we need in today’s DeFi market? I think I can sum it up in three words.
- Limitless : the imagination of the agreement
- Light (light): the effectiveness of the design
- Liquidity (liqudity): willingness to participate
I will use Cover Protocol as an example to show my views.
Cover Protocol, formerly known as yinsure.finance . Under the aura of Andre Cronje funding, Yinsure was a popular project for liquid mining at the beginning of its birth. After going online, due to a dispute between the two core members of the project, the high APY of liquidity mining did not last long. (More details can be Googled). In short, after this turmoil, the young founder of the Cover Agreement chose to take a break from university and become a full-time contributor to its project. In September of this year, Yinsure was renamed Cover Protocol.
Infinity: the imagination of the agreement
When we build a new product, we need to know exactly what it should do, but we should not set limits on what it will develop into in the future. This is infinite —allowing customers to release their imagination when using the product.
The Cover protocol actually does this. In many people’s minds, insurance is always a very serious business, because it needs to protect people from accidental harm by accurately calculating the amount of claims and avoiding insurance fraud. Nexus Mutual is the pioneer of DeFi insurance. The project achieves this goal by hiring professional actuaries , while Cover Protocol has gone another way.
In September, Yinsure (the name of Cover at the time) launched a new experiment-using NFT to tokenize the insurance policy so that it can be freely traded and circulated. The market is very excited about this move, and Nexus Mutual’s policy sales are booming-Yinsure has almost exhausted the entire Nexus Mutual capital pool.
Yinsure named “mining Insurance” is in agreement Cover the evolution of “mining Shield” (Shield Mining / Farming). I believe that on the first day of the creation of Yinsure, its founders have decided to take a different approach-let the market freely determine demand and supply.
The Cover agreement contains three elements:
- Market Maker (MM);
- Insurance provider (CP);
- Insurance demand side (CS)
Four tokens:
- DAI (stable currency) represents the deposit that the market maker needs to mortgage;
- Claim rights of the insurance demander represented by CLAIM tokens;
- The rights of the insurance demander represented by NOCLAIM tokens;
- COVER token represents reward and governance token
Three fund pools:
- CLAIM-DAI pool;
- NOCLAIM-DAI pool;
- Cover-ETH pool
I created the following diagram to show the principle of the system.
Aside from the traditional complicated premium or claim calculation model, the entire system circulates according to market demand . Every part of the insurance process has been tokenized, allowing users to assemble freely, thereby releasing people’s imagination. Cover protocol initially launched 10 types of protocols in their insurance market. You can freely choose your role in the system by analyzing APY and APR statistical information. I think we can further customize our insurance fund pool in the future.
Lightweight: the effectiveness of the design
Why do we need long and tedious project BP to express project ideas? Code and economics will explain everything.
Excellent projects have a lightweight core design . In the Cover agreement, the entire system operates based on a formula:
1 CLAIM token + 1 NOCLAIM token ≈ 1 Collateral (eg DAI)
Both CLAIM tokens and NOCLAIM tokens can be invested in the Balancer fund pool. This lightweight design allows the platform to be released quickly and operate smoothly.
Three days after the start, the Cover agreement encountered a claim. Pickle.finance bug Agreement for the new strategy to be hackers looted nearly $ 20 million. The Pickle agreement is one of the first 10 insurance pools deployed by the Cover agreement. The community also responded quickly to this claim, and it only took 3 days from voting to claim. Almost all Pickle.finance CLAIM (nonce 0) insurance tokens have now been paid in the form of DAI. The total payout is US$282,000 . Compared with other insurance agreements, the performance of the Cover agreement is very efficient and outstanding.
The community created an Internet celebrity meme
Meme of Cover Protocol
Liquidity: willingness to participate
What is the most important element in trading? I think it is definitely liquidity . Mobility determines people’s willingness to participate and can establish a virtuous circle in the system. In the first few months when human liquidity mining is very popular, many protocols have chosen to push up the price of tokens to create an incredible high APY in order to attract more people to participate and increase the total locked value TVL. When currency prices fall, such behavior usually falls into a death spiral.
As I analyzed in the previous article, the liquidity of the Cover agreement first comes from its top-level design -making every aspect of insurance become tradable . You can easily buy and sell insurance policies by holding or not holding CLAIM tokens. By holding different tokens, you can switch your identity back and forth between market makers, insurance providers, and insurance demanders.
A beautiful description can be found in its white paper: “Once the CLAIM and NOCLAIM tokens are minted, they can be invested in the Balancer fund pool, sold on the auction platform Bounce, and even used in various lending platforms. Collateral (high risk, but technically feasible!)”.
Second, liquidity comes from token economics . The Cover token is defined by the team as a governance token with no value in itself, but in fact the token plays a very important role in increasing liquidity. I personally think that Cover is the balancer in the system .
Take a look at the formula in the white paper:
Actual insurance cost = purchase price of ClAIM tokens-mining rewards obtained by pledge
When you buy CLAIM tokens in the market, you may really have a real need to insure your assets in the agreement. If the mining rewards obtained by staking are very high (determined by the price of Cover tokens), your factual insurance cost may be 0 or even negative. (Here is an example given by the team:). This in turn will motivate people to take out insurance under the Cover Agreement. This is very different from the meaningless high APY of many DeFi protocols.
In addition, the worthless governance token Cover is only used to vote on Pickle.finance claims. In Nexus Mutual, people must strictly pass the identity verification KYC process to participate in voting. I think this is a bit unfair to ordinary NXM token holders and prohibits them from enforcing their rights, while the Cover protocol is different. I think Cover will have more governance functions in the future.
The above is my humble opinion on the Cover protocol. Recently, Cover agreement and Year.Finance reached a cooperation. As a Cover holder, I am very happy to see that this young founder has taken the first step towards leading Cover to become a new unicorn company in the DeFi field. But I think that is not his ultimate goal, as he wrote on the Medium blog, ” Provide products that change the world “.
Antivirus software pioneer John McAfee, the founder of McAfee Associates — the company that released the first commercial antivirus software, McAfee VirusScan, in the late 1980s, contributing to the birth of multibillion-dollar industry — was indicted on five counts of tax evasion and five counts of willful failure to file a tax return, which could result in a maximum sentence of 30 years if convicted. He could also expect to pay U.S. taxes and penalties, according to the United States Department of Justice. The DOJ’s charges were announced shortly after the U.S. Securities Exchange Commission revealed it had brought civil charges against McAfee related to cryptocurrency offerings.
McAfee has been a controversial figure in several countries, not only in the U.S. He went into “exile” after claiming he had been charged with using cryptocurrencies against the U.S. government, foolishly tweeting last year from a boat, boasting about the fact that he hadn’t filed any U.S. tax returns.
According to the DOJ’s indictment — which was unsealed following his arrest in Spain, where he is pending extradition to the U.S. — McAfee failed to file tax returns for four years, from 2014 to 2018, despite earning millions from consulting work, speaking engagements, cryptocurrencies and selling the rights to his life story to be used in a documentary. McAfee is accused of evading tax liability by having this income paid into bank accounts and cryptocurrency exchange accounts that were in the names of nominees. He allegedly also concealed assets in the names of others, such as a yacht and real estate property.
The sale or exchange of cryptocurrencies, the use of cryptocurrencies to pay for goods or services, and holding cryptocurrencies as an investment generally have tax consequences that could result in tax liability. Taxpayers who do not properly report the income tax consequences of cryptocurrency transactions may be liable for taxes, penalties and interest. The Internal Revenue Service oversees the enforcement of the global taxable implications of cryptocurrency transactions via a virtual-currency compliance campaign led by its Withholding and International Individual Compliance practice area. The campaign aims to address global tax noncompliance related to the use of cryptocurrency through “multiple treatment streams, including outreach and examinations.”
Monitoring the IRS’s cryptocurrency tax collection initiatives
Nevertheless, despite the DOJ’s and IRS’s recent success in unveiling McAfee’s concealed cryptocurrency-related tax evasion, two reports — one released in late September by the Treasury Inspector General for Tax Administration, or TIGTA, and the other released earlier this year by the Government Accountability Office, or GAO — sound the alarm on how the IRS’ efforts to ensure compliance with tax obligations for cryptocurrencies have been inadequate.
These reviews were initiated to evaluate the IRS’s efforts to ensure the accurate reporting of cryptocurrency transactions, in light of the fact that the use of cryptocurrency as a payment method is growing in popularity and, amid the COVID-19 pandemic, is emerging as an alternative asset to the U.S. dollar or other fiat currencies.
Related: Not like before: Digital currencies debut amid COVID-19
Both the TIGTA and GAO audit reports find that the IRS has limited data on tax compliance for cryptocurrencies because of limited information reporting by third parties, such as financial institutions and crypto exchanges, due in part to unclear requirements and to thresholds that limit the number of cryptocurrency users who are subject to third-party reporting.
Related: The US plan to monitor illegal crypto activities more sufficiently
These audits focused on cryptocurrency exchanges because they play an important role in the transferability and stability of cryptocurrency by facilitating the buying and selling of cryptocurrencies for customers in exchange for fiat currency or other cryptocurrencies. While these exchanges are in a position to provide important information for use by the IRS in tax administration, information reporting on cryptocurrency transactions from the exchanges is lacking.
Related: Virtual currency exchanges and US customers beware, IRS is coming
The IRS’s most recent tax gap study, issued in September 2019, found that noncompliance varies with the amount of information reported by third parties, such as employers, banks and partnerships. Items subject to substantial information reporting and withholding (e.g., wages) have a net misreporting rate of 1% for individual income tax. However, the net misreporting rate for items subject to some information reporting (e.g., partnership income) is 17%, and the net misreporting rate for items subject to little or no information reporting (e.g., non-farm proprietor income) is 55%.
Related: Illicit crypto transactions are getting more attention from the government
Monitoring OECD’s digital tax proposal
Two years ago, during the G-20 meeting in Buenos Aires, the world’s economic leaders agreed that technology such as cryptocurrency and blockchain, given its borderless nature and increasing ability to automate tasks, is significantly changing the global economy.
The G-20 settled on characterizing cryptocurrencies as assets, thereby setting the stage for cryptocurrencies to be adopted as a new digital asset class. The group confirmed its commitment to following the Organization for Economic Cooperation and Development’s Base Erosion and Profit Shifting framework, studying international nexus and profit-allocation concepts for taxing the digital economy, and developing a new approach by 2020 — when the COVID-19 pandemic forced governments worldwide to focus on bringing blockchain tech to their financial services.
Related: Latest pronouncements from OECD, EU & G20 allow fintech to flourish
Nevertheless, OECD’s global digital tax approach concerning international nexus and profit-allocation concepts has drawn criticism from the National Taxpayers Union, which is laid out in a new issue brief in response to a leaked draft of OECD’s most recent proposal. The NTU’s new report states that the plan put forward by OECD is aimed at U.S. consumers and businesses that operate internationally, attempting to levy a minimum tax on a poorly defined tax base. The NTU and its sister organization the NTU Foundation have previously expressed concerns about the approach that international bodies such as OECD are taking regarding taxing the digital economy. As NTU’s president, Pete Sepp, explained:
“One practical step should be to restore transparency and stakeholder engagement in the further development of Pillars One and Two — two principles which OECD had heretofore largely embraced but has recently made a low priority. Equally troubling is that there are currently no concrete plans at OECD to comprehensively assess the financial and compliance burdens of the proposals until after they are approved. […] Backward-facing tax policymaking is rarely a formula for success.”
The views, thoughts and opinions expressed here are the author’s alone and do not necessarily reflect or represent the views and opinions of Cointelegraph.
Selva Ozelli, Esq., CPA, is an international tax attorney and certified public accountant who frequently writes about tax, legal and accounting issues for Tax Notes, Bloomberg BNA, other publications and the OECD.
Image Credit: Refer to Source
Author: Refer to Source Cointelegraph By Selva Ozelli
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