
Commentary
Digital Assets ended the week +19% after gaining as much as +40% earlier in the week. A volatile week of trading was punctuated by a BTC flash crash on Bitstamp which sparked a -12% intraday reversal on Friday (Asia hours). Breadth remained positive, though, with 82% of the top 200 coins and tokens ending the week higher. Trading this week was extremely active at a daily average of US$90B — the best week on record.
News flow remained active this week. Top stories included: 1. Bitfinex reportedly completing a US$1B fund raise, 2. Bakkt preparing for a possible July launch, 3. CME BTC futures setting a single day volume record of US$1.35B, 4. Coinbase reportedly looking to acquire crypto custody giant Xapo, 5. the SEC warning exchanges on IEO issuances and 6. Bitfury launching the world’s first regulated mining fund.
End of week excitement was provided by a flash crash on Bitstamp which reportedly saw a 3,000 BTC sell order plow through bids and drop price by ~ $1,600 in just 15 minutes. This looks to have either been a major security breach, an attempt at market manipulation or an algo malfunction. Bitstamp is one of the key exchanges used for reference prices on derivative markets including the CME and BitMEX and ended up triggering ~US$200Min BitMEX long liquidations.
Prior to today’s Bitstamp flash crash the market was beginning to look over heated on a number of metrics. The Mayer Multiple(spot price/200 Day Moving Average), for example, reached a high this week of 1.84, well above the historic average of 1.47. Historically, only 18% of BTC price closes have occurred above the 1.84 level.
Going into next week, would expect a period of consolidation after a sharp uptick in volatility over the previous 3 weeks. Today’s flash crash was probably constructive in that it allowed a lot of steam to escape the market. Given that the crash looks to have been largely an exchange specific issue, it is unlikely to be much of an impediment to the overall trend of generally improving sentiment (see Chart 8 — ‘Bitcoin’ Google searches are forecast to hit a > 12 month high this week). Would expect the US$6,300 level for BTC to be a significant line of short-term support given the convergence of the 20-day moving average, the historic Mayer Multiple Average of 1.47, and Fibonacci support around this level.
Thoughts
- Bitfinex’s $1B LEO raise was a significant capital markets event
– To put it in perspective 2018 only had 3 capital raises that were larger:
1. Epic Games $1.25B, 2. Uber $1.2B, and 3. Juul Labs $1.2B
– That fact that the raise was completed in 10 days, had several allocations > US$100M, is being sued by the New York Attorney General and didn’t give up any equity make it even more of a standout
– It’s doubtful there are many companies in crypto (or in traditional markets) that could have managed a similar raise in such a short time frame whilst facing a lawsuit from the New York Attorney General and perpetually negative press - Very good BTC explanation from crypto researcher Hasu this week
“BTC is a private alternative to government money. Governments don’t like competition. The innovation is that BTC is hard to shut down.”
Hasu commented that when investing 3 of the most important considerations are: 1. What is the potential market? 2. What is the innovation? and 3. What is the moat? In BTC’s case, the answers are:
Market. The market is huge as most of the planet doesn’t have access to strong currencies
Innovation. BTC is very difficult to stop or shut down
Moat. A huge first mover advantage in network, liquidity and community
News
- Bitfinex successfully raises US$1B in just 10 days
– Investors apparently took allocations > US$100M in a private sale
– Is a testament to the support Bitfinex has from large industry players despite a perpetually negative press over the previous few years - Coinbase said to be in advanced negotiations for acquisition of Xapo
– The cost of the acquisition is reported to be US$50M, which sounds extremely low given that Xapo currently custodies US$5.5B in assets
– The reason for the low acquisition price is rumored to be Xapo’s inability to secure banking licenses - G20 likely to impose stricter KYC policies on exchanges
– Wants exchanges to be supervised by a competent authority (not a SRO)
– Should be licensed or registered in their relevant jurisdiction - SEC says exchanges facilitating need to register IEOs
– If they are not registered, they will find themselves in trouble in the US, if they have a US issuer or US buyers, if they are operating on the US market - Gemini powers BTC payments at Whole Foods and Home Depot
– Leverages existing in store scanners to facilitate payments
– The store cashier will typically be unaware the customer is paying with crypto, while the merchant receives a real-time payment in the form of their choosing (crypto or dollars) - eBay confuses with crypto promotional adverstisments
– Photos from Consensus 2019 circulated early this week show eBay promotional material that said “Virtural Currency. It’s happening on eBay”
– eBay denied speculation that it planned to accept crypto payments
– The ads were reportedly “referencing the fact that eBay has a variety of virtual currency related items for sale on the marketplace, such as mining equipment”. - Ron Paul: SEC should stay away from crypto
– Ron Paul is a former congressman from Texas
– Paul stated that the market should regulate itself without interference
– Government intervention should be limited to policing fraud is involved. - ETH’s Lubin: Ethereum will be 1000x more scalable in 18–24 months
– As the project moves forward on Ethereum 2.0 implementation - Bakkt begins warm up for July launch
– CFTC approval could come by the end of this month
– Bakkt Bakkt will then begin user acceptance testing (UAT)
– Will offer physically settled BTC futures contracts and custodial services
– Bakkt is owned by ICE the parent company of the NYSE (and 11 other regulated exchanges globally). ICE’s 2018 revenue was US$6.3B. - Coinbase opens XRP trading to New York users
– Helped fuel a catch up rally in XRP this week
– XRP lags BTC by ~ 85% YTD - Bitfury launches the world’s first regulated mining fund
– The fund is under the supervision of Liechtenstein’s financial regulator
– The fund will invest in turnkey assets consisting of Bitfury mining sites
– Bloomberg Ticker: FBFDIMI LE - HTC said to be collaborating with Kyber network on ERC 20 exchange
– Links EXODUS 1’s wallet with Kyber Network’s liquidity protocol
– Allows users to exchange major ERC20 tokens like BAT, KNC, and DAI - CME futures volume breaks US$1B, smashes previous record
– Total of $1.35B up ~50% from the previous record on Apr 4 of $909M - German exchange SWB launches XRP and LTC ETNs
– ETNs can now be traded against EUR and SEK - TRON CTO quits to start new project — calls TRON highly centralized
– Alleges TRON has divereged from its goal of a decentralizing the internet
“Token distribution is centralized, Super Representatives are centralized, code development is centralized. Even the community is organized under centralization. No diverse voices in TRON ecosystem.” - South Korean internet giant Kakao plans June launch of new platform
– Thought to raise ~ US$300M via the company’s blockchain arm
– Will focus primarily on decentralized apps for gaming, messaging, etc
– Is also thought to be planing integration of a crypto wallet for messaging - Bithumb to resume withdrawals and deposits in EOS, BCH and XRP
– Bithumb announced a US$13M EOS hack on March 29
– EOS, BCH & XRP are Bithumb’s first assets to resume normal operations - Cryptopia goes into liquidation, fails to recover from $15M hack in Jan
– Cryptopia Reportedly suffered 2 additional hacks after users continued to send funds to wallets controlled by hackers - Canadian blockchain investment firm NextBlock hit with SEC fine
– The SEC says fined NextBlock US$25,000 for offering securities that were not registered with the SEC “in any capacity” and that false misrepresentations were made about the firm when soliciting investors
Media
- Good interview with Anthony Pompliano of Morgan Creek Digital Assets
– We are ~1 year out from the ‘halvening’ when BTC ‘production’ will halve
– Has historically been price positive as it makes a scarce asset more scarce
– BTC is a non correlated asymmetric return asset
Charts
Chart 1. Weekly price vs volume

Chart 2. Weekly price change

Chart 3. Major Thematics

Chart 4. Monthly average daily volume as % of this historic high

Chart 5. MTD average daily volume

Chart 6. Price 50 day Z-score

Chart 7. BTC vs other digital assets, 1 month % change

Chart 8. Google searches for ‘Bitcoin’, 1 year
