Digital Asset consolidation continued with another week of modest gains and low volatility. Market cap for the space managed to squeak out a modest 1% gain while trading in the largest coins / tokens fell by about 20% for the week.
Trading this week remained stuck in a tight range with a high degree of price correlation across most of the larger coins / tokens. Smaller, very high beta coins / tokens continued to outperform with the < US$500M market cap cohort leading gains — pointing to improved risk appetite which could possibly be a bullish signal to the broader space.
Headlines this week were again led by continued maturation of the industry from an investment, fundraising and regulatory perspective. Last week we had reports that both Fidelity and Goldman Sachs had made new investments in the space. This week we had reports that 1. Temasek had invested in BInance, 2. Japan had granted self-regulatory authority to exchanges, 3. Both Bitfury and Coinbase were thought to be considering IPOs, 4. Coinbase had received a New York custodian license and 5. whispers that the VanEck ETF application was likely to see approval.
Price action seems to have materially decoupled from industry fundamentals (maturation of the underlying infrastructure and increased institutionalization of the space has become). Given how skinny liquidity is and how tight volatility is, any catch up in price action will likely be significant. At the risk of sounding hyperbolic, the market feels a bit like a powder keg, awaiting positive news or new inflows to set the next leg off.
Our midterm view remains intact – think the current low volume / low liquidity market, tendency of BTC to rally in Nov / Dec and tentative signs of improved risk appetite in high beta small caps skews near term risk reward to the positive.