First Mover: Monero Leads Privacy-Coin Rally as Bitcoin Trips on Path to $12K

Bitcoin (BTC) was gaining for a fourth straight day, approaching the $12,000 price threshold the cryptocurrency failed to hold in August when it last rallied past that level.

“The market has started to move again,” the Norwegian cryptocurrency-analysis firm Arcane Research wrote Tuesday in a report.

In traditional markets, U.S. stock futures pointed to a higher open as investors bet U.S. lawmakers could reach agreement on a new stimulus bill.

Market moves

Privacy coins like monero (XMR) and zcash (ZEC ) are suddenly in vogue – despite regulators' efforts to crack down on them.

These digital tokens, which come with features allowing users to obfuscate their identities and hide the amounts transferred, have surged in value this year. Monero’s price has nearly tripled in 2020, and zcash has doubled. According to the data firm Messari, a group of 21 digital assets with anonymity-enhancing features has gained 142% this year, compared with bitcoin's 60% gain.

The bullish market tone comes even as U.S. Internal Revenue Service recently hired blockchain analytics firms Chainalysis and Integra FEC to develop transaction tracing tools for monero and other protocols used to obscure identities. And the U.S. Department of Justice earlier this month published an extensive report on its enforcement framework for digital assets, citing the use of anonymity-enhancing cryptocurrencies as a risk to anti-money-laundering programs and efforts to combat terrorism finance.

Some cryptocurrency analysts say the jump in prices for privacy tokens might just be coincidental, a function of speculation on the part of traders keying off price-chart patterns or algorithms. But it might be that traders think privacy tokens will occupy a key spot in fast-developing, international digital-asset markets and payment systems – precisely because so many users don't want to transact business under the glare of monitoring by governments, banks or exchanges.

"Cryptographers and researchers are always going to be one step ahead on privacy,” Riccardo "Fluffypony" Spagni, one of the Monero network's maintainers, told CoinDesk in an interview.

In other words, the regulatory inquiries could turn out to be net positives for monero.

“It gets visibility in the market,” David Jevans, CEO of blockchain forensics firm CipherTrace, told CoinDesk in a telephone interview. "People should be able to pay for day-to-day expenses without having to fear hitting regulators’ radar and provide identity proofs.”

- Omkar Godbole

Read More: Cryptographers Are Always Going to Be ‘One Step Ahead’ of Regulators: Monero’s Spagni

Bitcoin watch

The path of least resistance for bitcoin is to the higher side.

The cryptocurrency jumped more than 2% Monday, confirming a descending triangle breakout. The pattern indicates the rally from the Oct. 8 lows near $10.,500 has resumed.

Open interest in bitcoin futures listed on the Chicago Mercantile Exchange, which is considered synonymous with institutional interest, jumped over 20% to a seven-week high of $624 million Monday, validating the bullish breakout on technical charts.

Further, macro factors look to be aligned in favor of the bulls. The likes of the European Central Bank and the Reserve Bank of Australia are expected to ramp up monetary stimulus over the next two months – a long-term positive development for the perceived store of value assets like bitcoin and gold. Traditional markets are pricing additional inflation-boosting U.S. fiscal stimulus.

But a number of big sell orders appear positioned around $12,000, which could make it harder for bulls to engineer a quick move past that mark.

As such, the focus has shifted to resistance located at $12,476 (August high). On the downside, the Oct. 16 low of $11,200 is the level to target for the bears.

- Omkar Godbole

Read More: Bitcoin Closes on $12K But a Wall of Sell Orders Awaits: Analyst

Token watch

Filecoin (FIL): Decentralized file-storage protocol releases token rewards in advance after crypto miners rebel against "unfair" economic model.

Binance (BNB): World's largest cryptocurrency burns 1.1% of supply of its BNB exchange tokens, fourth-highest ever.

Uniswap (UNI): Vote to reduce quorum fails to garner quorum.

Curve DAO (CRV): Decentralized stablecoin-swapping platform's tokens hit fresh all-time lows.

What's hot

Bloomberg analyst Mike McGlone says bitcoin "has a history of adding zeroes," sees tether's market capitalization eclipsing ether's next year. (Bloomberg Intelligence)

Corporation-focused R3's Corda Network gets new "regulation-friendly" digital currency, XDC, calling it a "next-generation bitcoin or XRP." (CoinDesk)

Federal Reserve Chair Powell says it's more important to get digital dollar right than to be first. (CoinDesk)

A Puerto Rico-based bank founded by gold bug and long-time bitcoin skeptic Peter Schiff is under investigation over suspicions it facilitated tax evasion for “high-risk” clients. (CoinDesk)

Analogs

The latest on the economy and traditional finance

European investors rattled as number of new daily coronavirus reaches record high. (CNBC)

International money managers bet on Biden victory in U.S. presidential election to spur gains on non-U.S. assets, weaken dollar. (Reuters)

U.S. investment bank behemoth Goldman Sachs reaches deal with U.S. Department of Justice to pay more than $2B for role in Malaysia 1MDB scandal. (Bloomberg)

Investing legend Bill Miller calls Federal Reserve's inflation-averaging policy the "most significant" change in U.S. monetary policy in 40 years. (CNBC)

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