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Weekly Crypto News Roundup

Photo of: Nathan VDH
by Nathan VDH

The mining of cryptocurrencies is now officially legal in Venezuela. However, such a policy does not come without a panoply of regulations for this country that has sadly distinguished itself by its disastrous monetary policies in recent years. Indeed, government authorities will control all aspects of operations, including, of course, the distribution of profits.

The manufacturing of ASICs, the construction of mining farms, the importation of equipment, and the distribution of funds will all be governed by the new law. All miners will be required to participate in a national pool. Venezuela is a place of choice for miners as a result of the low price of electricity. While the legalization of the activity is not in itself unwelcome, the extreme centralization of activities will inevitably be problematic. This approach goes against the very nature of bitcoin.

Nothing emerges from China’s state media without a government reason. Surprisingly, CCTV, the main national channel, aired a three-minute segment last Friday showing that crypto assets have been the best performing this year, posting 70% growth. Many wonder what motivated the idea behind this message, as news always has a political agenda in China. In any case, it was undoubtedly perceived by the community as a bullish signal since the unusual tone is apparently in contradiction with China’s position that crypto speculation could undermine national financial stability.

According to the just released draft of the US tax report 2020, the IRS will use a simple and straightforward way to prevent its citizens from failing to report their crypto transactions. Starting next year, at the very top of the report, just below the name and address, the first question will be: “At any time in 2020, did you sell, receive, send, exchange or otherwise acquire a financial interest in a virtual currency? ยป

While it goes without saying that this question will help the U.S. tax authorities to win any tax evasion litigation related to cryptocurrencies, we think it is especially interesting to see how the nascent asset has become part of our financial lives rather than on the sidelines as it was a few years ago.

At the risk of seeming to repeat ourselves, the correlation between bitcoin and gold was the most interesting technical item of the week. Gold had a particularly difficult week, losing about 5% of its value. While Bitcoin is often correlated with gold, but with higher volatility, we were concerned that this would lead to a retesting of the $10,000 threshold and potentially break the bullish picture.

While Bitcoin is not yet standing alone, Bitcoin has shown a significant upward divergence from gold. We have found buyers at a higher level than last week, while gold has broken down its support. Bitcoin also rebounded strongly yesterday as gold struggled to do the same. In the short term, the 30-day moving average serves as a resistance for the crypto asset. It will have to be crossed north of $10,775. Going north of $11,200 would take the $10,000 zone out of play in the short term and reinforce the idea that this support is now a floor for the asset.