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
- Fidelity: 47% of institutional investors see place for Digital Assets
– May be a sampling error in this survey
– The attitude amongst mainstream institutional investors is still very conservative overall - Bitfinex said to be planing a US$1B IEO
– The article reports that deal allocations are already being offered
– And that up to US$300M has already been allocated to Bitfinex clients
– Bitfinex has a history of innovative financing solutions, including the world’s first debt token issued in 2016 which were later 100% redemeed following the hack of 119,756 BTC in Aug 2016 (~$60M at the time) - New rules in Quebec keep electricity cheap for crypto miners
– Energy regulator allocates another 300MW for crypto miners
– Quebec offers the lowest power rates in North America
– Still demand for 1000s of MWs even after 2017–2018 price correction - Binance thought to be working on a stablecoin
– Binance has almost no fiat capabilities, so a fiat backed asset is unlikely
– Perhaps a token backed by another physical asset like gold? - Square BTC revenue jumped to US$65.5M in Q1
– Other stories highlighted Square is absorbing 10% of global BTC supply - Facebook said to be launching stablecoin payment platform
– Visa, Mastercard and First Data are said to be involved
– Facebook is thought to be raising US$1B for the project
– Will likely not trade in the wild like USDT and other stable coins - Galaxy Digital 2018 losses reportedly top US$270M
– Galaxy Digital Holdings, is a ‘crypto merchant bank’ founded by former Fortress (hedge fund) CIO Michael Novogratz
– Galaxy reported another $97M loss in 4Q18 - Electrum wallet attacked by 152,000 bots, $4.6M of user BTC stolen
– Electrum is a popular Bitcoin wallet
– Was ranked as one of the best desktop wallets in 2019 - NASDAQ launches XRP Liquid Index
– Powered by Brave New Coin, will provide a a real-time spot or reference rate for the price of 1 XRP, quoted in USD, based on liquid markets - Report says that US traders dominate crypto
– Rankings determined by website traffic of 100 popular exchanges
– Top 5 = USA, Japan, Korea, UK, Russia
– Website traffic is very different to traded $
– China is notably absent (Which we think is probably the #1 by $ traded)
– Results also likely heavily impacted by VPN usage - KuCoin launches second IEO on its Spotlight program
– Trias (TRY) is hoping to develop decentralized cloud infrastructure
– 400 million TRY will be offered at $0.004 USD per TRY
– The total raise will be hardcapped at $1.6 million - HTC said to be working on 2nd generation blockchain phone
– HTC reports that the sales of the 1st Exodus phone met internal targets
– Blockchain support will be extended from crypto currencies to include other areas such as browsing, messaging, and even social media
– Likely encouraged by similar tech included in the new Galaxy S10 - Vitalik Buterin, Elon Musk engage on Twitter after ‘Ethereum’ tweet
– Converasation follows a one word tweet from Musk, “Ethereum”
– Musk then asked Buterin “What should be developed on Ethereum?”
– Buterin’s answer led with ‘A globally accessible financial system’ - Iota price jumps after announcing partnership with Jaguar
– Jaguar Land Rover will reward drivers with crypto for data reporting
– Reminiscent of previous ideas where drivers or cars could user crypto currency to pay each other to pass, pullover or pay tolls - Reuters: Hamas shifts tactics in BTC fundraising, highlighting crypto risks
– Article says that Hamas has only managed to raise US$7,400 YtD
– To add context, Hamas was thought — at one point — to raise US$23M/month. Hamas’ BTC represents 0.03% of a $23M total
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
