Commentary
Digital Assets -4% this week on active trading. Volume +15% from the previous week to a daily average of US$46B. Only 34% of the top 200 coins higher this week.
BTC +1% was modestly higher, benefiting from declines in smaller, higher beta coins and tokens as another round of USDT concerns drove a rotation into BTC and second tier US$ coins — USDC and PAX.
A week of generally positive news flow was reversed overnight with reports that Bitifnex has allegedly had US$850M in deposits frozen — forcing the exchange to borrow ~ US$700M from its sister company Tether and driving renewed speculation that USDT may be underfunded.
News flow prior to the Bitfinex / Tether allegations was positive, though, with a number of stories pointing to improving investor access to Digital Assets, including: 1) Samsung deepening its investments in the Digital Asset space, 2) Reports that TD Ameritrade may be edging towards Digital Asset support, and 3) Binance launching fiat trading in Singapore.
Looking into next week, the short term focus will certainly be on how USDT events play out. If Bitfinex and USDT operate normally over the following few days (and users are able to withdraw funds), then Digital Assets will likely resume a push for the US$200B market cap level. If not, expect an acceleration of the rotation into BTC from USDT and other smaller coins and tokens dependent on USDT liquidity. Its worth noting that while there are other USDT alternatives, USDT continues to account for ~ 97% of the total stable coin tradng volume and the alternatives will likely be unable to handle the bulk of any potential USDT outflows.
Thoughts
- Bitcoin mining is not bad for the environment
– Great report this week from CoinShares Research on the mining industry
– A few interesting takeaways:
1. “… contrary to the common narrative, the vast majority of global Bitcoin mining capacity (minimum 77.6%) is running on renewable energy.”
2. “…not only does cryptocurrency do no harm, it could actually be doing good. Bitcoin mining may in fact be acting as an electricity buyer of last resort , creating a highly mobile base-demand for any electricity sources able to produce at prices below current producers, regardless of location.” Essentially incentivizing and subsidizing renewable energy production. - Lots of speculation around improved access for mainstream US investors
– Articles this week speculated that TD Ameritrade users will be given access to Digital Assets through NASDAQ or ErisX
– On the surface level, this should be price positive to BTC as it will allow millions of mainstream investors access to BTC, but is also likely very negative existing Digital Asset exchange platforms.
– However, it is also possible that trading through TD Ameritrade will be heavily resitricted, and not allow users to move their Digital Assets off the TD Ameritrade platform (similar to Robinhood). This would still be positive to BTC, but would be less negative to existing platforms.
News
- Bitfinex said to have had US$850M seized from Crypto Capital account
– A statement from the New York Attorney General’s office stated that funds from Tether’s reserve were used to make up the shortfall, but neither the loss nor Tether’s fund movements were disclosed to customers
– So far $700 million is alleged to have been transferred - Binance goes live with SGD dealing, but only for BTC
– Similar to other platforms in Singapore, all crypto trades are routed through a payment platform called Xefers - Samsung invests US$2.9M in Ledger at US$290M valuation
– Seems like a natural tie up given the Digital Asset wallet on Galaxy S10s
– Ledger is also working on a custody venture with Japanese bank Nomura - Confirmed BTC transactions hit highest level since 2017 peak
– Confirmed daily transactions now back above 400,000
– The fact that BTC is retesting previous transaction highs, yet hasn’t had the network congestion issues of 2017 demonstrates the amount of optimisation that has been implemented over the past 1.5 years - Brave browser will pay you to surf the web
– Brave browser will block ads by default
– This week Brave gave users the option to to see ads
– Choosing to see ads entitles users to 70% of the revenue ads generate - eToro: Russia and Canada could replace China in crypto mining
– The mining exodus out of China has been ongoing since 2H17
– Mining favors geographies with surplus hydro and geothermal energy
– Canada, Russia, and Central Asia are probably some of the leaders - Binance clarifys whitepaper — doesn’t actually buyback BNB
– The original plan was to use “20% of its profits each quarter buy back and burn BNB”. The rewording was made to clarify that the exchange does not repurchase any BNB, but simply reduces the supply by burning the tokens
– Burning without buying is clearly very different than the original plan - Samsung developing ETH-based blockchain, may issue Samsung Coin
– Samsung released a Digital Asset wallet built into the Galaxy S10 - BCH SV big blocks caused a number reorgs over the weekend
– Resulted in the network being frozen for 1.5 hours - US$300M of Tether reportedly issued
– This story came out prior to the later allegations of frozen Bitfinex funds
– On the surface appears Bullish (investors have converted fiat to USDT)
– Though less clear what it means in the context of broader Bitfinex/USDT events reported on later in the week - Ripple CTO said to be selling XRP
– It sounds like this is probably responsible wealth managment
– As long as he retains a significant position, it’s probably not a big deal - IMF makes the case for negative interest rates
– Sees a cashless society as means to drop interest rates to -4%
– Idea is to punish savers and stimulate the economy via spending
– Positive BTC which is deflationary, reversing the time value of money - Analyst Tom Lee: improved risk appetite could mark new bull run
– Lee had previously stated that the fair price for BTC is ~ US$14,800 - Japanese crypto exchange Zaif back after US$60M hack last year
– Last year Zaif was shutdown by regulators after a US$60M hack - Japanese commerce giant, Rakuten, launches new crypto exchange
– Will be called Rakuten Wallet, has begun offering users pre-registration - Reports that NASDAQ is testing BTC/LTC with TDAmeritrade access
– TD Ameritrade might be giving its users simulated exposure to Bitcoin and Litecoin through a new, but not-yet-live, offering on NASDAQ - Use BTC LN to buy on Amazon with Moon browser extension
– Looks like it should work on any other ecommerce site as well
Charts
- Chart 1. Weekly price vs volume
– BNB and BAT up on better volume
– BTC up on slightly lighter volume
– Almost everything else down on lighter volume
- Chart 2. Weekly price change
– BNB and BTC the lone gainers this week
- Chart 3. Major thematics
– Small Mid Caps the hardest hit as USDT scare decreases risk appetite
- Chart 4. Monthly average daily volume as % of historic high
– TRX and XRP volumes continue to lag the rest of the space
- Chart 5. MtD average daily volume
– BTC, ETH, LTC and EOS continue to set new Monthly ADV highs
- Chart 6. Price 50 Day Z Score
– XRP looking slightly oversold as price falls -2SDs below its 50D MAVG
- Chart 7. Stable coin daily volume as % of YTD peak
– USDC and PAX see volumes surge on USDT concerns
– USDT still dominating overall stable coin volumes, though, accounting for ~ 97Engl% of total. USDT averaged daily volume of US$12.6B over the previous 10 days while all other stable coins combined averaged just US$267M.
