MAX Digital Asset Weekly, Dec 7 2018

MAX Digital Asset Weekly, Dec 7 2018

Digital Assets were hit with another steep week of declines falling another ~ -20%. Declines were broad based with only 12% of the top 200 coins / tokens managing to keep their heads above water. Small Mid-Caps remained the most aggressive sell targets with a median decline of ~ 25%.

Trading remained active with BTC on track for them most active month of trading since May of this year.

The Bitcoin Cash hard fork continued to weigh heavily across the space with speculation of miners selling BTC and BCH to fund operations. Trading in BCH shrunk -40% from the previous week and is now on pace for the skinniest monthly trading in more than a year. BSV continued to lead gains — though with 2/3 of trading concentrated on just 2 exchanges — outperformance this week looked extremely suspect.

News flow remained mixed. The top stories this week included: 1) Fidelity, Nasdaq and TD Ameritrade announcing a $27M investment in ErisX exchange, 2) SEC delaying VanEck ETF decision until Feb 2019, 3) Fidelity considering expanding its custody offering to include a total of 7 digital assets, and 4) Greyscale reportedly now owning 1% of all BTC in circulation.

With correlations high across the space we continue to expect BTC to dictate direction. On that front, Bitcoin’s 60 day ROC (Rate Of Change) is now -48%. The last time the 60 day ROC dropped below that level was on Feb 4th 2018, 1 day before a medium term bottom was put in — that was subsequently followed by a 95% rally. Similarily, the only other occurrence was on Jan13th 2015 — just 1 day prior to the 2015 bear market bottom.

Whilst we can’t necessarily rely on this to predict a bottom right now, some additional solace can be found in the fact that Bitfinex’s BTC shorts are now back at recent record highs in stark contrast to the suppressed short activity back in February. This shows the brazened confidence of short investors which is remarkable considering the magnitude of the recent declines.

Another thing worth noting is that this latest sell-off from 6500 to 3400 (-47%) is now in its 24th day. We often debate what’s driving this and rarely come to any solid conclusions -but it’s easy to forget that over the same number of days at the peak, we went from 7800 to 20,000 with just as little knowledge of what was driving such an aggressive move. This move on the downside is just a mirror image of the peak where the driving force right now is FONGO (The Fear of Not Getting Out) vs the equally powerful FOMO (Fear of Missing Out) at the peak.