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The United Arab Emirates chase crypto and blockchain adoption

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For a long time, the United Arab Emirates has been one of the most progressive crypto countries in the world. For example, government-owned licensing firm Kiklabb allows clients to pay for their visa and trade license fees via various digital assets to the Dubai Financial Services Authority, which announced its decision to work on a holistic crypto regulatory framework as part of its 2021 business plan.

In fact, as a result of Dubai’s crypto-friendly policies, Ripple, a firm that has recently been in murky waters with the United States Securities and Exchange Commission, announced its decision to open an office in the region. Furthermore, the UAE and Saudi Arabia are reportedly working on a joint central bank digital currency research initiative that has been dubbed “Project Aber.”

Commenting on why the UAE is fast becoming the destination of choice for some crypto/blockchain startups, Mazdak Rafaty, managing partner for Ludwar International Consulting FZC, told Cointelegraph:

“If you ask anyone from the tech and startup sector anywhere in the world about the speed of regulations of the authorities, you will get the same answer: ‘It could definitely be faster.’ However, UAE has always been a pioneer in the adoption of new technologies and building support regulatory frameworks for their development.”

He further opined that blockchain as a novel disruptive tech was recognized very early by UAE regulators, as a result of which many governmental organizations were instructed not only to facilitate its development but actually utilize its advantages within a comprehensive e-government strategy.

Lastly, Rafaty added that while blockchain adoption was swift, cryptocurrencies definitely took more time to understand, utilize and regulate. Even in terms of crypto adoption, Abu Dhabi was one of the first regions to introduce a well-thought-out framework for exchanges and different types of tokens back in 2018.

The UAE already has the base

At a time when many countries are still struggling to formulate comprehensive strategies to adopt crypto-enabled technologies in a streamlined fashion — with some even looking to implement blanket bans — the UAE is seemingly laying the foundation for a digital ecosystem.

Providing his insights on the subject, Mohammed Abbas, co-host of the Dubai Global Blockchain Congress, told Cointelegraph that many projects, such as decentralized ride-sharing platform Drife and blockchain-based fantasy sports ecosystem DeFi Eleven, have been able to attract interest from the private offices of UAE’s Royal Families as well as other big-name players, such as San Francisco-based VCs like the Draper Walled Garden, adding:

“In a bid to set the pace and become a leader in blockchain technology, UAE launched Blockchain Strategy 2021 — pursuant to which 50% of government transactions will have been conducted using blockchain technology by 2021. This, in turn, will further attract talent and spur innovation in this region.”

Similarly, on the subject, Marwan Alzarouni, CEO of Dubai Blockchain Center, opined that the UAE — Dubai, in particular — has always been forward-thinking and fast-moving when it comes to any futuristic technology, with cryptocurrencies and blockchain being no different.

He highlighted that Dubai launched its “Blockchain Strategy 2020” in 2016 and is already achieving its goals. Alzarouni further pointed out that when it comes to cryptocurrency regulations, the UAE Securities and Commodities Authority issued its regulation in 2020, which was swiftly followed by the country’s central bank revealing the Stored Value Facilities regulation, which seeks to provide clarity as to how crypto and other digital assets may be used as a stored value when purchasing various goods and services.

The aforementioned regulations are quite in-depth and seem to help to position the UAE as a leader in the cryptocurrency adoption space. Not only that, but it also stands to provide a solid foundation for startups and investors in the UAE with the right and safe environment in which to operate.

The UAE regulatory difference

Elucidating his thoughts on why the UAE regulatory landscape is different than most other nations today, Abbas pointed out that the Know Your Customer, Anti-Money Laundering and Counter-Terrorist Financing laws that are currently in place in the region are progressive when compared to those of other “global financial hubs.”

On the subject, Saeed Al Darmaki, co-founder of Alphabit crypto fund, told Cointelegraph that the UAE has been forward-looking with its adoption of crypto-enabled technologies for a long time, with the Arab powerhouses’ regulatory outlook looking very positive at the moment, adding:

“Regulated crypto exchanges will launch in the next few months. With ESCA regulation, local banks should be more open to crypto transactions on local bank accounts. Incubators and accelerators are supporting crypto companies here now and will continue to do so. The government is very supportive of blockchain technology.”

A similar sentiment is shared by Austin Alexander, managing director for the MENA region of the cryptocurrency exchange Kraken, who believes that to date, the UAE has been among the most proactive locations globally in regulating cryptocurrency. In this regard, he pointed out that Abu Dhabi Global Markets was one of the first regulatory jurisdictions to draft a framework from the ground up specifically for digital asset exchanges, adding:

“No regulations are perfect, and as crypto businesses launch and expand in the UAE, the FSRA or other regulators may come to find that there is room for improvement. That being said, the UAE is clearly establishing itself as one of the world’s most forward-thinking governments in regard to cryptocurrency and innovative industries broadly.”

Are locals supportive?

On the subject of how the local UAE population views the country’s tech-friendly stance, Rafaty opined that most residents have acknowledged the government’s blockchain initiatives. However, he did add that it will be some time before these projects actually start to bear fruit.

Additionally, he also shared that on the crypto side of things, most of his private and professional contacts in UAE are, to some degree, involved and/or invested in various crypto and altcoin offerings thanks in large part to the bullish growth that has happened in the sector over the course of the last few months.

Similarly, Alexander believes that UAE residents and businesses tend to embrace new innovation more enthusiastically than most, and cryptocurrency has been no exception. However, he added that for some time now, UAE residents have had some difficulty investing in digital assets, as there have been few legitimate local gateways for crypto exchange, adding:

“This has delayed adoption and reduced the ability for local businesses to build on the technology. With recent new regulations onshore that will help to further foster innovation, we should soon see access to virtual assets increase markedly. With domestic virtual asset markets in the UAE, which have been the missing piece of the puzzle until now, we should see a massive boom in economic growth surrounding virtual assets.”

Lastly, Abbas believes that local residents and businesses in the UAE have quickly warmed up to the utility of the blockchain ecosystem and have been looking at cryptocurrencies as not just another financial instrument for monetary gains but also as a means to exchange and settle transactions among users operating within this domain.

In his view, the barriers for entry are getting lower by the day and that soon, mainstream retail crypto offerings will flourish within the country. “UAE is probably the only country that has been able to host some of the largest blockchain summits and bring crypto pioneers, think-tanks and investors on a common platform to address the global issues concerning financial inclusion and neo-banking solutions”, Abbas added.

Some of the the interviewees have participated in the Global Blockchain Congress in Dubai on Feb. 9, hosted by Agora.



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Fractal From Last Bull Run Says Bitcoin Will Hit $100K By May

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Bitcoin price is back over $50,000 after bullish news broke this morning regarding Coinbase officially filing to go public. However, according to a fractal from the last bull market cycle kicking off in early 2017, that number could be merely the halfway point to where the cryptocurrency will trade in just two months from now.

Here’s a look at the similarities between the two cycles, and the roadmap that takes the price per BTC to $100,000 and higher within the next couple of months.

Characteristic Bitcoin Volatility Returns, Price Swings Reach $10,000 In A Single Day

Bitcoin volatility is picking up, starting with an explosive move from $10,000 to $50,000 in a few short months. The complete repricing of the coin has been due to institutional investors scrambling to buy what they can of the scarce crypto asset.

RELATED READING | BITCOIN HASN’T REACHED MANIA STAGE YET, ACCORDING TO THIS METRIC

At only 21 million coins and a market cap of under $1 trillion, Bitcoin is expected to grow in the long-term reliably. And in an economic climate where growth is challenging to come by, the cryptocurrency has become especially attractive.

But as Bitcoin price discovery takes place, volatility is bound to ensue and is has in recent weeks as the cryptocurrency recently shed 20% in a single day. At prices of $50,000 per coin, a 20% dive means $10,000 in value apiece evaporating into thin air, compared to the $1,000 per plunge crashes during the last bull market.

bitcoin price fractal $100k

The structure is strikingly similar, albeit less volatile overall | Source: BTCUSD on TradingView.com

Early 2017 Fractal Suggests Deeper Downside Possible, Rebound To $100K By May

On the way up the last time around, price action closely resembled the current market volatility. Taking a comparison between early 2017 when Bitcoin was trading in the four-digit range and now, the similarities are strikingly clear.

If the same path is followed, Bitcoin could see further collapse before experiencing a sharp rebound to more than double the price. The price action will play out quickly, taking Bitcoin price first to $75,000 in April, then $100,000 by the time May rolls around.

RELATED READING | BITCOIN TREND STRENGTH MORE POWERFUL THAN 2017, ONLY JUST BEGINNING

It is also important to note that the path following the fractal continues onward from there as well. By the time the fractal runs out of room on the price chart above, the cryptocurrency tapers off at just $2,000 per BTC.

The cryptocurrency did another 10x from the end of the above price action, and if the fractal continues the same from current levels, it could potentially put each Bitcoin at a price of $1 million per coin before the top of this cycle is in.

What do you think – can Bitcoin price really climb that high before the next peak is in?

Featured image from Deposit Photos, Charts from TradingView.com



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Soaring Treasury yields are worrying economists — But what does this mean for Bitcoin?

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This week’s correction in the price of Bitcoin (BTC) showed that a market doesn’t go up in a straight line. Meanwhile, another topic has been gaining attention, namely the big rise in the 10-year yields of U.S. government bonds. 

In recent weeks, the 10-year Treasury yield of U.S. government bonds has surged by 35% to a new high of 1.44%, the highest point since the cross-asset crash in March 2020.

Treasury yield bounces from a 60-year low

U.S. 10-Year Yield 1-week candle chart. Source: TradingView

The 10-year Treasury yield has been accelerating massively in recent weeks, similar to the run-up to the economic downturns in 2000 and 2008. Hence, rising yields are typically considered a signal of weakness for the economy and can have a big impact across many markets.

As the yields increase, governments must pay more for their underlying government bonds. This combed with the current economic conditions of the post-Covid era and record national debt are factors that are unsurprisingly worrying economists. 

However, looking at the chart above from a technical perspective, this entire run can still be considered as a simple bearish retest of the previous support level.

Such an example is shown by the previous attempt to test the resistance above. This could be happening here as well, where the rates will then drop back down from the 1.53% level. But it is important to keep an eye on this level because breaking through it can have a major impact on the markets.

The government bond yields also have an impact on mortgage markets. Given that the real estate market is massively overheated at the moment with people taking on massive debt to purchase homes, an increase in interest rates could pop this entire bubble similar to what happened in 2008.

However, yields also impact other markets as gold often reacts to these moves as well. But is this time different? And how will Bitcoin respond to these potential macroeconomic shocks?

A weakening dollar vs. Bitcoin

U.S. Dollar Currency Index 3-day chart. Source: TradingView

The Dollar Currency Index (DXY) index continues to show weakness as yields are rising, which is generally good news for Bitcoin bulls. This suggests that investors are fleeing the dollar toward higher risk, higher reward investments, such as Bitcoin.

However, from a technical perspective, the DXY saw a bearish retest at 91.50 points, followed by more downside for the USD, as seen in the chart above. Now, a retest of the 90 points level is underway, with the primary question being whether this level will hold as support.

BTC/USD vs. DXY. Source: TradingView

Nevertheless, it’s debatable whether the rise in yields is having any direct effect on the price of Bitcoin, particularly in recent days. Meanwhile, the DXY has often been inversely correlated with the price of Bitcoin, though this has been decreasing in recent months (see: below).

BTC rolling 90-day correlation vs. USD, VIX, Gold, S&P500. Source: Digital Assets Data

Since the crash in March, this inverse relationship grew stronger until September 2020, as a weakening USD was accompanied by a major increase in BTC price.

Of course, assets are only correlated until they aren’t, and many other factors can have a much bigger impact on BTC in the short term, e.g. miners or whales selling Bitcoin, government regulations, etc. 

Why is gold showing weakness?

Gold 3-day chart. Source: TradingView

The 3-day chart for gold price shows a clear-cut correction since August 2020. More importantly, the increase in yields or the weaker dollar has not impacted the gold market as much as Bitcoin’s.

Even with the recent surge in yields, people are not buying gold. In fact, an increase in yields has historically not benefitted gold — at least not in the short term — because higher yields would make government bonds more attractive for funds to hold for settlement and as a risk-off asset in their portfolios.

When yields continue rising toward higher levels, however, the uncertainty surrounding the economy also increases, and investors typically begin to shift from the dollar to gold as a safe-haven. This was seen in the 1980s when yields ran toward 14% and gold also spiked to new all-time highs.

BTC has become increasingly important in macroeconomics 

In the current state, however, falling gold prices may simply be an immediate reaction to the increase in yields in general. However, another possibility is that an increasing number of investors are opting for “digital gold” instead of the precious metal, not only because of the higher upside potential, i.e. risk-reward but also because these positions can be liquidated much easier.

But, another possibility is that an increasing number of investors are preferring “digital gold” to the precious metal — not only because of the higher upside potential but also because these positions can be liquidated much easier on digital trading platforms.

Today, the market capitalization of Bitcoin is still only 7-10% of gold’s, which highlights this massive upside potential.

Therefore, the macro conclusion that can be drawn is that the markets are becoming increasingly uncertain about the economy’s and the dollar’s future, as exemplified by the rising 10-year Treasury yields. However, it’s still too early to write off the recent correction in BTC price to this macroeconomic development as multiple other variables are at play.

Ultimately, the rising yields and a weakening dollar is an exciting development to keep an eye on moving forward. With Bitcoin becoming an increasingly important player in the macroeconomic environment, strategists at JPMorgan, for example, say BTC may continue to eat away at gold’s market share. This will likely result in an even higher valuation for Bitcoin, particularly in the event of another economic crisis at the expense of gold.

In December 2020, the JPMorgan strategists noted:

“The adoption of bitcoin by institutional investors has only begun, while for gold, its adoption by institutional investors is very advanced. If this medium to longer-term thesis proves right, the price of gold would suffer from a structural headwind over the coming years.”

The views and opinions expressed here are solely those of the author and do not necessarily reflect the views of Cointelegraph. Every investment and trading move involves risk. You should conduct your own research when making a decision.