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Bitcoin: Spring In the Air?

The bullish crypto markets of the past few days have given crypto market participants something to cheer about, after what had been a predominantly sideways market since the turn of the year. While it is hard to predict if this rally could signal the beginning of a secular trend reversal or if it is a minor ‘dead cat bounce’ on the way to further lows, there are plenty of reasons to feel optimistic.Firstly, beyond the debate of whether or not the launch of JPM coin spells the end for other cryptocurrencies, the adoption of blockchain technology, the foundational technology for almost every cryptocurrency that is in existence by a leading Wall Street giant generally will lead to more awareness about cryptocurrencies in general. Let us examine other positive triggers:
1.On the institutional activity front, we have Fidelity launching its crypto services later this year
2.Bitcoin ETF could be approved in 2019
3.The launch of Bakkt and ETH futures are also in the pipeline.
4.Leading pension and endowment advisor, Cambridge Associates, recommended that institutional investors start considering small allocations to crypto

In addition to these, a technical reason could be a short squeeze, due to all the short interest volume that has built up in December being unwound now.

There is also one more fundamental reason. We have covered the Lightning Network in the past. The Lightning Network continues to grow at a steady rate, and could propel Bitcoin into a proper mainstream payments network, and make it a legitimate competition to Visa or MasterCard. In addition, Japanese e-commerce giant Rakuten hinted at integrating cryptocurrencies (expectedly Bitcoin) into its payments app very soon. The biggest trigger for the next rally could be the approx. $6B capital that is currently sitting on sidelines as dry powder for crypto funds, invested in stablecoins and fiat on crypto exchanges, according to Su Zhu. Assuming Su Zhu’s estimates are broadly in the ballpark, the upside potential with $6B capital inflows could be enormous. The net effect on market caps is amplified as a function of net flows of capital. For example, JPM estimates that the fiat amplifier effect in crypto markets is a dizzyingly high 117x, while Citi’s estimate is more realistic at 50x. Taking a conservative fiat amplifier estimate of 20x, with $6B in inflows, the total marketcap of cryptocurrencies could potential double from their current value. Note that this estimate includes only capital that has been committed to cryptocurrencies, i.e crypto ‘dry powder’, and does not include other potentially fresh inflows into cryptocurrencies.

Meanwhile in Crypto Wonderland….

“Streamr Launches Ethereum Scaling Solution Monoplasma” Blockchain data platform Streamr has officially released a new open-source ethereum scaling technology called Monoplasma.  Inspired by a pre-existing scaling solution called plasma, Monoplasma is different in that it focuses specifically on “one-to-many payments” in which users would need to “repeatedly distribute value to a large and dynamic set of ethereum addresses,” according to Henri Pihkala, the CEO of Streamr.

“CFTC Commissioner Suggests Self Regulation” US CFTC commissioner Brian Quintenz has suggested that participants in the cryptocurrency industry should create a self-regulatory structure. More precisely, Quintenz said that because of the CFTC’s lack of crypto statutory oversight capability, platforms should come together to form some type of self-regulatory structure where they can discuss, agree to, implement, and hopefully examine or audit. Such an organization could carry out audits concerning conflicts of interest, business conduct, insider trading, redemptions, custody and liquidity.

“German Opens Blockchain Consultation Process” The government of Germany is consulting local blockchain companies and industry groups recently. The country has opened a consultation process on how to use all the potential of the technology ahead of presenting a new strategy in the following months.  According to Reuters, many companies and industry groups are set to become stakeholders in an occasional blockchain deployment which may happen in Germany.

“Indonesia Crypto Futures Legal Framework Established”Indonesia’s commodity futures regulator has established a legal framework for operating crypto and digital assets futures markets. The Indonesian Commodity Futures Trading Supervisory Agency (Bappebti) has officially required multiple entities involved in crypto futures trading to seek regulatory approval and apply for registration before legally operating in Indonesia. The news follows the recent release of legislation that officially recognizes Bitcoin and other digital assets as trading commodities.

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