Cryptocurrency market trend and investment strategy analysis

Bitcoin on a high, DeFi Index returns less than Ether.

| Bitcoin’s Highlight Moment
Bitcoin had its high moment on June 9 – the Salvadoran Congress passed a bill to make bitcoin legal tender in the country. El Salvador could become a prime example of how to benefit from the adoption of bitcoin.

El Salvador is located in Central America, and about a third of Salvadoran households receive remittances from abroad, with Salvadorans receiving a significant amount of dollar remittances each year, ranking in the top 10 in the world for dollars received. Currently, remittances are typically sent through money transfer services such as Western Union. These traditional remittances charge fees of up to 20% and take days or even weeks to settle.

The remittance process in El Salvador could be greatly improved with cryptocurrencies. Using the Lightning Network for Bitcoin transfers, services such as Strike could help Salvadorans radically eliminate transaction fees and provide almost instant cross-border transfers. the Strike service launched in El Salvador in March of this year and has sort of gone through a warm-up phase. And, El Salvador is also home to BitcoinBeach, an economic community built around Bitcoin.

The Lightning Network leverages off-chain payment channels and is a second-tier scalability solution for Bitcoin. If usage in El Salvador continues to grow, the Lightning Network is expected to help expand Bitcoin payments and remittances.

Cryptocurrency market trend and investment strategy analysis

(Photo) The state of development of the main network of the Lightning Network

While Strike and other similar services improve the Bitcoin remittance process, El Salvador’s Bitcoin bill also creates a convenience for those receiving remittances within the country – the bill allows taxes and all other liabilities to be paid in Bitcoin; Bitcoin will also be excluded from capital gains taxes because it will be considered a currency . In a country where 70% of the population is unbanked, bitcoin could be used as a way to do basic banking for individuals.

The bill also requires all businesses to accept bitcoin as a valid form of payment. For businesses that do not want to hold bitcoin, a trust would need to be established with the Bank of El Salvador to provide a way to immediately convert bitcoin to U.S. dollars. To do this, the Salvadoran government will establish a $150 million fund to convert bitcoins.

Since 2001, the U.S. dollar has been the primary form of currency in El Salvador. While the dollar has helped bring some stability, it has also disguised the outsourcing of El Salvador’s monetary policy to the United States. In the long run, U.S. monetary policy is unpredictable, but bitcoin is.

Cryptocurrency market trend and investment strategy analysis

Currently, fiat currencies around the world are threatened by inflation, but Bitcoin’s annual inflation rate is less than 2% and will continue to decline over time. The number of bitcoin mining rewards is halved every four years until it reaches its maximum supply of 21 million. This predictability and transparency may help El Salvador and other potential countries rebuild their economies based on bitcoin.

El Salvador’s bitcoin bill has already caught the eye of other countries interested in bitcoin and has caught the attention of regulators and governing bodies such as the International Monetary Fund (IMF). According to the latest statement from El Salvador’s finance minister, the country has requested technical assistance from the Bank so that bitcoin can become a fiat currency, and the IMF is not opposed to bitcoin as a fiat currency.

Cryptocurrency market trend and investment strategy analysis

There are currently about 18.4 million addresses holding at least 0.001 bitcoins – an impressive figure for a supersovereign currency, but it still represents only a small fraction of the world’s population. As El Salvador begins to adopt bitcoin on a larger scale, more challenges and opportunities will undoubtedly arise. If El Salvador’s experiment goes well, this could be the tipping point for large-scale global adoption of bitcoin.

| A Brief Analysis of On-Chain Metrics

Cryptocurrency market trend and investment strategy analysis

Over the past week, bitcoin active addresses fell 0.7% from last week, and ethereum usage fell more, with daily active addresses dropping 11.1%. Mining revenue for Bitcoin and Ether declined by more than 10% over the week as transaction fees continued to decline. Despite the overall decline in activity, Bitcoin’s adjusted transfer value increased 23.8% to a daily average of $10.1 billion, while Ether’s adjusted transfer value was $9.4 billion, down 4.1% from last week.

Cryptocurrency market trend and investment strategy analysis

Bitcoin hash rates (7-day moving average) fell about 11% last week, mainly due to the vacuum period when some Chinese mining operations migrated to new locations. Also, hash rates often decline during the transition from dry to rainy seasons.

Cryptocurrency market trend and investment strategy analysis

The Bitcoin BinaryCDD indicator reflects when long-term holders are trending to cash out or remain dormant. When the number of BTC days being cashed out is greater than the long-term average, the BinaryCDD indicator will approach 1 (long-term holders cashing out heavily); conversely, the indicator will approach 0 (long-term holders holding still). Throughout June, the indicator dropped to close to 0, back to June 2020 levels, indicating that very few long-term holders chose to sell at this price level.

| DeFi Vs Ether
Finally taking a look at the investment returns of DeFi and Ether in comparison, the following chart shows the returns of the 4 common strategies in the circle (January 1, 2021 – June 16, 2021).

Cryptocurrency market trend and investment strategy analysis

A. Buy and hold ETH for a 298% return.

B. Buy and hold DeFiPulse Index (DeFi Index), a basket of blue chip DeFi tokens (index composition is shown below), for a yield of 182%.

Cryptocurrency market trend and investment strategy analysis

C. Liquidity mining on Sushiswap (SUSHI-WETH) with a yield of 326%.

D. Stablecoin liquidity mining on YearnFinance with a 9.5% yield.

From the above data, it can be seen that D has the lowest yield but also the lowest risk, B has a lower yield and needs to endure high volatility, C has the highest yield but needs to endure the unpredictable losses from SUSHI price fluctuations and requires a certain strategy to ensure the yield. Combining volatility and operating costs, for the average investor, simply holding ETH is instead the optimal solution.

Posted by:CoinYuppie,Reprinted with attribution to:
Coinyuppie is an open information publishing platform, all information provided is not related to the views and positions of coinyuppie, and does not constitute any investment and financial advice. Users are expected to carefully screen and prevent risks.

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