China Bans Bitcoin…Again.

I used to really like the band Green Day — now, I prefer green days. Lame joke to start the morning but eh, it kind of fits and might as well keep it light after what has been a bloody week for Bitcoin and subsequently an even bloodier week for the broader crypto market.

September has historically been a bearish month across all markets. While many have theorised about what causes the “September Effect”, there is no consensus on what causes it. I think about it pretty simply: if there has been a track record of September being a bearish month and enough investors believe this to be true, then it’s sort of self fulfilling. If I was a trader, I would certainly think about trimming my positions at the very least heading into a month where year after year the same pattern shows. It seems like a prime example of market psychology.

September has been an eventful month. We’ve seen the potential fallout of Evergrande in China, the adoption of Bitcoin in El Salvador, South Korea’s shuttering of crypto exchanges, and the SEC Chair, Gary Gensler cement his position as the tough sheriff in town as it relates to crypto. As always, when sentiment turns bearish, the FUD piles on. The mythical September Effect has not been so fun.

Personally, I’m watching out for a September close of $43K. Again, I’m not a trader but I have been following Plan B’s stock-to-flow (S2F) model for a while now and it’s been impressively accurate. If we can close at or above $43K this month, then the model shows that we are in for some fireworks in October and through to the end of the year.

What we saw at the desk

Our traders have been busier than usual this week as we saw a ton of activity at the desk. Starting on Sunday, we had a number of clients trim, or completely exit their positions ahead of what was presumed to be a bloody Monday off the back of fears around a possible default by Chinese firm Evergrande. Fears peaked on Monday on the Evergrande default narrative which spilled over to global equities and the crypto markets with BTC printing a low of $39,600 during the 3 day sell-off.

Markets bounced on Wednesday as the Fed announced that they would delay tapering and fears over Evergrande defaulting eased. We noticed that clients who sold off earlier in the week entered back into their positions with the thought that the worst of it was behind us. We also noticed clients that had cash on the sidelines bought the dip, and many other clients took advantage of the move down and strategically added to their position.

It will be interesting to see how today shakes out as the news of China banning crypto for the umpteenth time takes hold.

Now, the good news.

Let’s put aside the China FUD for now and look at some bullish headlines.

  • RIP Western Union— the two Jack’s (Dorsey & Mallers) combined forces to revolutionize both Twitter and Bitcoin allowing tipping in BTC over the lightning network. Starting yesterday, Twitter users were able to send micro amounts of BTC to other Twitter users, instantly, and virtually for free.

“Why would anyone ever use Western Union again? When you take one of the world’s largest social internet networks and combine it with the world’s best open monetary network, Twitter accidentally becomes one of the best remitting experiences in the world,” said Mallers. “This one singular payment standard in this one singular open global monetary network is dematerializing all existing monetary networks.”

  • Not your keys, not your coins…yet — In a much-anticipated move, trading app Robinhood is moving to unveil a crypto wallet to give users the option to send, receive, and withdraw popular cryptocurrencies like Bitcoin on its platform. Robinhood has previously never allowed crypto to be withdrawn or deposited on its platform. This initiative could lead to more meaningful adoption as net new wallets will be created as users get comfortable taking BTC into their own hands.
  • Follow the smart money — The overall funding environment for crypto this year has been incredible. In August alone, the crypto/blockchain sector received nearly $2.1 billion in private investment across over 100 rounds.
  • SEC Chair Gensler doesn’t seem to be after your (bit) coins — Gary has been all over Crypto Twitter these days. This week the SEC showed up at the Mainnet 2021 conference in NYC and served one of the speakers a subpoena sparking an outrage across the industry — namely from Messari CEO Ryan Selkis who used this as fuel to make an eventual run for Senate.

Gary also didn’t do himself very many favours when he tweeted out a video of himself urging students to start saving early. He said that by just putting aside $5 a week at 8% you will have a nice nest egg.

While Goldman Gary isn’t doing himself any favours in the likeability department, he remains pretty accommodating to Bitcoin. He seems to be focused on the 5000 or 6000 projects that are raising money from the public who are anticipating a profit, stable coins which he referred to this week as “poker chips”, and staking — all of which he believes fall under SEC oversight.

Sorry, couldn’t help myself.

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