MaiCoin Digital Asset Weekly, May 3 2019

MaiCoin Digital Asset Weekly, May 3 2019

Commentary

Digital Assets ended the week +7%. Breadth remained positive with 69% of the top 200 coins ending the week higher. Volume was lighter this week, falling -11% from the previous week to end at a daily average of US$41B.

With USDT news failing to have much impact on sentiment, news flow for the week recovered to a more positive tone. The theme of the week was increased participation in the space from mainstream investors, corporates and governments with: 1. Facebook said to be working on a stable coin, 2. Square reporting 1Q19 BTC revenue of US$65M, 3. Fidelity saying institutional investors are warming up to crypto, 4. HTC planning a 2nd generation Exodus blockchain phone and 5. Quebec expanding its hydroelectric allocation to BTC miners.

Given the market largely overlooking USDT concerns this week, Digital Assets are likely back on track for a test of the US$200B market cap level. Given the out performance of spot vs futures, demand for BTC looks like real, organic buying rather than just trading.

BTC ended the week strong, rallying +4.4% on Friday Asian hours to extend outperformance versus smaller coins and tokens. BTC ended the week +7% and at an RSI of 71 vs a +3% gain in smaller coins and tokens and an RSI of 51. Volatility in both BTC and smaller coins and tokens is very low. This normally foreshadows a significant price move incoming.

BTC could face increased resistance as it closes in on the US$6000 mark. With BTC outperformance vs smaller coins and tokens now increasing to 2 standard deviations, a slowdown in BTC momentum around $6000 could be the trigger to for a catch-up rally in smaller coins and tokens. The 200-day moving average remains the strongest immediate line of support for both BTC ($4400) and the broader Digital Asset space ($143B).

Thoughts

  • New survey shows strong BTC penetration amongst American youth
    – One of the more interesting results is that 48% of 18–34 think that it’s likely that most people will be using BTC in the next 10 years
    – Changing demographics are one of the strongest cases for BTC success
    – Around 50% of the US population is now a millennial or post millennial
    – The median millennial age crossed 30 last year, and millennials will play an increasingly important role on investment and economic trends as they begin to increase their wealth
    – This is similar to how demographic changes have driven legalization of marijuana in Canada and many parts of the US
  • Modern Monetary Theory could lead to inflationary spiral
    – The article cites comments from billionaire Carl Icahn who says inflation could revive and spin out of control if policy makers were to embrace modern monetary theory
    – MMT argues that a country printing its own currency, such as the U.S., can’t go broke and has room to run larger budget deficits so long as prices are subdued
    – An increasingly inflationary world could make a deflationary asset like Bitcoin more attractive. In May 2020, BTC’s annual infaltion rate will fall from the current 3.8% to 1.8% (below Gold’s historic average of ~ 2%) in 2024 it will fall again to < 1%.
  • Unpopular view: USDT is the most disruptive digital asset to date
    – Lots of criticism of both Bitfinex and USDT this week after it was revealed that a banking partner had US$850M frozen, forcing the company to back 26% of USDT with equity in Bitfinex rather than USD
    – It’s important to remember, though, that the creation of USDT is what made possible the birth of Binance and the proliferation of Digital Asset products and exchanges that came with the 2017 ICO boom
    – Exchanges like Binance have effectively outsourced the hardest part of running an exchange — maintaining banking relationships — to USDT
    – USDT is low friction, low volatility, extremely liquid and allows users a high degree of accessibility and freedom of use — including opting out of the swift banking system — this puts it in natural conflict with a post 911 global banking system that is extemly reluctant to engage with Digital Asset exchanges

News

Charts

  • Chart 1. Weekly price vs Volume
    – ATOM, MIOTA and TRX the main outperformers
    – Everything else mostly up, but on lighter volume
  • Chart 2. Weekly price change
  • Chart 3. Major Thematics
    – Gains skewed towards Big Caps this week, Small Caps the worst
  • Chart 4. Monthly average daily volume as % of the historic high
    – TRX — a significant volume laggard — is the only major coin to see continued volume gains so far in May
  • Chart 5. MTD average daily volume
  • Chart 6. Price 50 day z score
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