MaiCoin Digital Asset Weekly, May 17 2019

MaiCoin Digital Asset Weekly, May 17 2019

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

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

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