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Sentiment Drops to “Greedy” as Institutional Demand for Bitcoin Exposure Reportedly Rises

Bitcoin sentiment has dropped to “Greedy” on the Fear & Greed index in the first week of August after having stayed in the “Extreme Greed” area the previous week. Latest market report from Arcane Research shows that institutional demand for Bitcoin exposure has risen after Bitcoin broke $10,000 again creating a record high dominance as the opening interest (OI) on CME soared through its former highs.

Currently at $850 mln in the August contracts holding 50,375 BTC ($564 million), or 16.8% of the total OI in the BTC futures market, the firm says the index touched the 80-point scale – Bitcoin price gained almost 50% in the following 10 days before topping out the last time it did in June 2019 – before the weekend’s BTC price fell from $12,100 to ~$10,500 in 30 minutes. Bitcoin daily volume has been approaching yearly highs too with several days’ volume above $2 bln indicating a shift in an almost 3-month long downwards trend.

Trading activity on Bakkt grew with total OI jumping to $24 mln though physical delivery slowed down in July. Bakkt’s increase of almost 550% from the lows when the July contracts expired has seen a massive spike in daily trading volume above $120 mln and a new all-time high of $132 mln compared to May’s $42 mln.

51% attack from China? 

The sentiment adjustment comes as the co-founder of secure storage solutions for digital wealth like Bitcoin sought to address the question of whether hashpower concentration within China could lead to a nation-state 51% attack on the Bitcoin network. Casa‘s Jameson Lopp’s attempt to answering whether Chinese miners are a threat to Bitcoin coincides with the view of a blockchain incubator and consultant firm serving the Asian market since 2017 that China remains the most promising cryptocurrency market.

Lopp points out that China may have the highest hashpower concentration due to having more semiconductor production facilities and cheap energy, a nation-state miner 51% attack is not likely as there are over a thousand mining farms scattered across China that would have to be seized at a nearly impossible same time.

Rather, he thinks a 51% attacker would likely succeed with a double spend on an exchange – though with downsides like exchange withdrawal limits, AML/KYC requirements, Bitcoin value decreasing substantially – than on the Bitcoin network. He added that attacking key mining pools in China could be another option but switching mining pools is incredibly easy for miners as well.

Capstone Research sees Asia being the first to restore blockchain events despite the outbreak of COVID-19 – with over 30% of events in the region – as a sign of “marked increase” of Asia’s impact on the crypto world. It notes that despite mounting scrutiny from regulators and the extreme market volatility, Chinese investors and practitioners remain committed enthusiasts.

The Cambridge Centre for Alternative Finance estimates that 70% of the total network hashrate was in China while a CoinShares Research report placed it at 65% and a report commissioned by the Fidelity Center for Applied Technology estimates it’s 50%. This has always been a concern despite attempts made in the past to quell the fear. Whereas, Capstone cites mining as China’s huge growth potential as the Bitcoin hashrate has increased by 80% in 2019 to give China more than 73% of the market share of ASIC mining hardware, and almost two-thirds of the computing power.

The firm also points to Huobi and OKEx being constantly ranked among the top 10 crypto exchanges on Coinmarketcap with over 50% of its users – surpassing 10 million in early 2019 – coming from China as China’s largest crypto wallet, Imtoken, has reportedly reached 20 million users in August 2019.

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