MAX Digital Asset Weekly, Nov 16 2018

Digital Assets fell almost -14% this week suffering one of the biggest corrections of the year. Declines were broad based with virtually all of the top 200 coins posting double digit declines. Overall sector market cap fell to $185B with BTC dropping below the US$100B mark for the first time in more than a year. Trading was active with volume in the most actively traded coins / tokens gaining ~ 12% from the previous week. Smaller, high beta coins / tokens were the hardest hit with small caps and utility tokens both down ~ -20%.

News flow this week was extremely light in the run up to yesterday’s BCH fork which saw Bitcoin Cash split into 2 competing camps: BCHSV (nChain and Craig Wright) and BCHABC (Bitmain and Roger Ver). As of the time of writing, BCHABC looked to be dominating the split — accounting for ~2x the hash rate of the SV chain and garnering the bulk of exchange and wallet support.

The correction this week looked to be largely the result of uncertainty around the BCH fork, record low volatility and thin trading volumes — with uncertainty around the fork finally forcing the market out of the tight band we’ve been stuck in for most of 2H18. The initial correction in BCH was exasperated by a lack of depth across markets and drove sharp volume gains in fiat backed stable coins USDT, USDC and PAX as investors rotated out of coins and tokens.

Trading this week was reminiscent of the volatility and general uncertainty around SegWit2X, UASF and the BCH fork in July and August of last year. Like last year, posturing from competing camps fueled market uncertainty, leaving investors to err on the side of caution — opting to sell first and ask questions later.

With BTC now trading at a more than 4 standard deviation discount to its 50 day moving average, it feels as if much of the uncertainty is now priced in. Over the past 1000 days, there have only been 9 occurrences of price falling below the 2 standard deviation mark — all 9 of those occurrences were followed by price rebounds over the following weeks (charts).