Digital Assets extended last week’s gains to finish up another 3% this week. Trading remained active at a daily average of US$30B, roughly in line with the previous week. Sentiment remained upbeat with 93% of the top 40 coins / tokens ending above their 50 day moving averages and news sentiment indicators gaining to the top end of the YTD range.
Newsflow was more subdued this week but remained incrementally positive. Positives this week were led by 1) Twitter / Square CEO Jack Dorsey looking to hire a team of dedicated crypto engineers, 2) Kakao messaging looking to integrate crypto wallets for its 44M users, 3) Binance offering basic fiat-crypto services in Australia and 4) Bluewallet now supporting LN transactions for Apple Watch. Negatives this week were focused primarily on regulatory concerns around leveraged trading and short selling with 1) Japan limiting crypto leverage to 4x and 3) Canadian regulators considering a ban on crypto short selling and margin trading.
Trading remained very active this week with BTC struggling to regain footing above the US$4,000 mark and the space as a whole attempting to break convincingly above the US$135B market cap level. LTC remained one of the most notable volume standouts and is now on pace for Average Daily Turnover (ADV) of US$1.7B in March — it’s best monthly ADV on record. Likewise, trading in ETH, EOS and DASH are all on track for their 2ndbest months on record while BTC is tracking its 3rdbest with ADV of US$9.5B so far in March.
Better volume is supportive of our view that Digital Assets have likely already printed the lows of this cycle (in 4Q18) and that the rest of the year will be characterized by consolidation and an eventual grind higher. If the space as a whole can break convincingly above the US$135B level (US$4,000 for BTC), we think that the most likely scenario is for Digital Assets to fill the gap created by the Nov 2018 correction and for a recovery to around the US$200B market cap level (for BTC this implies an initial recovery to around US$6,000). The Nov 2018 correction resulted in a sharp price decline on very little volume. That lack of volume means that there is very little resistance to prevent price from recovering to the US$200B market cap level. Extending this scenario out even further, we would then expect Digital Assets to consolidate between the US$200B level (where there is significant price and volume resistance) and the 200 Day Moving Average (currently at US$150B).