Bitcoin: USD/BTC (BTC=X) Holders May be Tempted to Fractional Reserve Practices

Bitcoin: USD/BTC (BTC=X) Holders May be Tempted to Fractional Reserve Practices

Eric Wall, a cryptocurrency expert, warns that there is nothing to stop bitcoin owners from effectively expanding the supply. This could happen in the manner of banks, which hold onto a portfolio of assets, but can also lend them without losing control.

Wall believes BTC usage may adopt a broad money supply, which is similar to a mix between the activity of central and commercial banks.

Currently, most bitcoin adopters tend to hold coins in their own wallets. But custodial services for crypto assets are expanding. Coinbase already offers multiple custodial wallets. The Bakkt Bitcoin futures exchange also bases its trading on holding BTC on behalf of its clients. Wall warns that this is the first stage of using IOUs instead of BTC directly.

Such usage of bitcoin is comparable to promissory banknotes issued in exchange for actual gold stored in a bank vault. However, proponents of sound money believe that any form of fractional reserve banking would defeat the original purpose of BTC – to allow anyone to control their own wealth.

Exchanges are perhaps the best candidates to inflate the actual BTC supply, social media comments echoed the initial argument. Currently, market operators claim to preserve bitcoin in their custodial cold wallets, while issuing a database entry to traders. Adding lending and margin trading, exchanges manage to increase the impact of the BTC and coins held in custody.

Technical Indicators

Overall, the bias in prices is: Downwards.

Note: this chart shows extraordinary price action to the downside.

By the way, prices are vulnerable to a correction towards 9,288.19.

The projected upper bound is: 8,647.11.

The projected lower bound is: 6,986.20.

The projected closing price is: 7,816.65.


A black body occurred (because prices closed lower than they opened).
During the past 10 bars, there have been 5 white candles and 5 black candles. During the past 50 bars, there have been 23 white candles and 27 black candles for a net of 4 black candles.

Momentum Indicators

Momentum is a general term used to describe the speed at which prices move over a given time period. Generally, changes in momentum tend to lead to changes in prices. This expert shows the current values of four popular momentum indicators.

Stochastic Oscillator

One method of interpreting the Stochastic Oscillator is looking for overbought areas (above 80) and oversold areas (below 20). The Stochastic Oscillator is 39.3574. This is not an overbought or oversold reading. The last signal was a buy 6 period(s) ago.

Relative Strength Index (RSI)

The RSI shows overbought (above 70) and oversold (below 30) areas. The current value of the RSI is 26.20. This is where it usually bottoms. The RSI usually forms tops and bottoms before the underlying security. A buy or sell signal is generated when the RSI moves out of an overbought/oversold area. The last signal was a buy 1 period(s) ago.

Commodity Channel Index (CCI)

The CCI shows overbought (above 100) and oversold (below -100) areas. The current value of the CCI is -103.This is an oversold reading. However, a signal isn’t generated until the indicator crosses above -100. The last signal was a buy 7 period(s) ago.


The Moving Average Convergence/Divergence indicator (MACD) gives signals when it crosses its 9 period signal line. The last signal was a buy 1 period(s) ago.

Rex Takasugi – TD Profile

FOREX BTC= closed down -319.200 at 7,861.200. Volume was 97% below average (consolidating) and Bollinger Bands were 48% wider than normal.

Open     High      Low     Close     Volume___
7,988.6908,027.3007,693.6607,861.200 2,337
Technical Outlook 
Short Term: Neutral
Intermediate Term: Bearish
Long Term: Bearish
Moving Averages: 10-period     50-period     200-period
Close: 8,153.70 9,674.86 8,526.22
Volatility: 35 55 80
Volume: 81,745 79,510 84,651

Short-term traders should pay closer attention to buy/sell arrows while intermediate/long-term traders should place greater emphasis on the Bullish or Bearish trend reflected in the lower ribbon.


FOREX BTC= is currently 7.8% below its 200-period moving average and is in an downward trend. Volatility is relatively normal as compared to the average volatility over the last 10 periods. Our volume indicators reflect moderate flows of volume out of BTC= (mildly bearish). Our trend forecasting oscillators are currently bearish on BTC= and have had this outlook for the last 12 periods. Our momentum oscillator is currently indicating that BTC= is currently in an oversold condition. The security price has set a new 14-period low while our momentum oscillator has not. This is a bullish divergence.

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