Commentary
Digital Assets +7% this week for the 5th consecutive week of gains. Trading this week remained active at a daily average of US$85B, +18% WoW. Breadth fell from the previous week but remained positive with 53% of the top 200 coins and tokens ending the week higher.
Profit taking in IEOs and Small Mid-Caps was offset by another week of gains in Big Caps and Exchange Tokens.
News sentiment was 83% bullish this week but slow with total articles written -11% vs normal. Top stories this week included: 1. Investment app Abra expanding into 150 countries, 2. EOS’ rallying 20% ahead of tomorrow’s big announcement, 3. Crypto focused asset manager Grayscale’s AUM breaking above US$2B, and 4. Continued Lightning Network development.
Trading was tough for leveraged positions this week with BTC’s spike higher earlier in the week liquidating $136M of short positions and the drop lower later in the week forcing another US$207M of long liquidations. This could put the market a little more back foot going into next week and help support a decrease in price volatility.
BTC’s inability to extend the breakout described in last week’s note likely means consolidation for the first week of June. Declining volatility will likely be encouraged by a week of significant margin liquidations this week. BTC now looks to be in an ascending channel (chart 8). A breakout of the channel would likely put BTC above the $10,000 mark. The bottom end of the channel and the 20-day moving average will likely converge sometime next week, which should provide a fairly solid line of initial support at the $8,000 level.
Thoughts
- The largest BTC holders are increasing their positions
– This a great summary of BTC flows by address over the past 1.5 years
– Over the last 9 months wallets in the 1k BTC — 10k BTC cohort have increased their BTC holdings by 450,000 BTC
– Since Jan 2018, 955k new BTC have been mined, about half of that has been absorbed by ‘firm’ sized wallets (100 BTC — 10,000 BTC)
– This is a high value indicator, if the Big Money BTC balances start to shrink it would likely foreshadow a pullback in price - Union Square’s Fred Wilson: US regulators will push innovation to Asia
– We see this as a likely scenario where smaller, hungrier jurisdictions have an opportunity to leap frog capital market incumbents
– Just as global investors have been excluded from the previous few decades of capital market innovation in the US, US investors could be left out of the next few decades as a global internet age capital market develops. As Fred Wilson, put it:
“In 5–10 years when we look back and consider why the next big tech sector centered itself in Asia and not in the US, it will be the SEC’s unwillingness to create new rules to regulate new assets that will be the cause”
News
- Abra expands to 150 countries, provides acces to equities, crypto and FX
– This looks like a pretty impressive product
– Unlike similar trading platforms that support crypto, it actually allows you to both fund and withdraw you account with crypto
– Supports BTC, ETH, many alt coins as well as FX, ETFs and equities - Popular Lightning Network wallet opens largest BTC channel ever
– Eclair recently opened a 1 BTC channel with Bitrefill
– A customization that adjusts the previous 0.16777216 BTC channel limit
– An expansion of channel limits has a number of interesting applications such as using the LN to facilitate order execution; ie self custodying BTC and slicing individual orders directly to an exchange - Chinese media outlet pumps BSV with false report of ‘proof of Satoshi’
– Proof of Satoshi is a term used to describe the ability demonstrate control of a wallet by moving a small portion of its assets
– Chinese media falsely reported that Craig Wright had moved 50k BTC to Binance from one of the early Satoshi wallets, proving that he had control over Satoshi’s wallets and was likely Satoshi Nakamoto - Grayscale AUM tops US$2B
– Grayscale is an asset managment firm specializing in Digital Assets
– Products include the listed GBTC fund - S Korea holds cross-ministry meeting to boost monitoring of crypto trading
– Follows recent upswing in digital asset prices and sentiment
– Primary motivation looks to be the protection of retail investors - Egypt now requires crypto licenses, regulatory framework on the way
– Central Bank now requires mandatory operations license for advertising or business related dealings with the crypto industry - EOS trades higher on reports of a June social network launch
– Block.one (EOS’ parent company) CTO Dan Larimer recently tweeted:
What if you could decentralize social media more than steemit? The future of social media is thousands of blockchains under independent governance coordinating with inter-chain communication behind a seamless user experience.
– Speculation was further fanned by reports that Block.one had bought US$20M of RAM (EOS’ DApp fuel) ahead of big June1st launch - Crypto businesses hope for regulatory clarity at SEC blockchain forum
“Circle, Kik and others say a lack of clarity from the SEC about what is and is not a security is hurting the industry and holding back innovation in the U.S.” - Another ‘Satoshi’ registers BTC White Paper copyright
– Chinese citizen Wei Liu filed an application with the US Copyright Office
– Follows last week’s highly publicized filing by Craig Wright
– Wei Liu: “I filed it just to let people know anyone can register [a] copyright.” - Binance confirms plans to add margin trading
– The company has confirmed the upcomming feature with a screenshot
– Margin trading has is reportedly in beta testing with selective users - Failed exchange Cryptopia seeks $2mn in “urgent interim relief”
– “Urgent interim relief” needed to maintain a SQL database that stores all of its users’ individual account holdings and contact details
– Liquidators are worried all of its data could be overwritten or lost unless Cryptopia pays an eye-watering $2 million to the company that hosts it - WalletGenerator.net gave the same private key to multiple users
– The websites promises random key generation for paper wallets
– The code on WalletGenerator.net URL did not match the code on Github - 0x partners with StarkWare improve DEX speeds
– StarkWare can reportedly process ~ 500 trades / second
– Most DEXs are likely limited to < 10 trades / second
– 0x facilitated 713,000 trades ~ $1 billion since it was founded in 2017 - Max Keizer reiterates $28,000 BTC target price post EU elections
– Keizer’s short term target price is $28,000, longer term is $100,000 - Startup allows genome storage on ETH blockchain
– Genome.io securely stores DNA sequencing for personal use and storage
– Would also allow users the ability to monetize their data - Gemini Dollar stablecoin circulating supply continues to fall
– Current total circulating supply is ~ US$20M vs peak of US$100M
– Gemini has been aggressively marketing “its regulatory compliance and direct oversight from U.S. regulators” … something that nobody outside of the US is particularly keen on embracing
– Interestingly, USDT hit a historic high US$3.2B market cap this week - Bitfinex enables LEO as collateral for margin positions
– Also enables holders to lend out their tokens - North Korean hackers attack UpBit users
– UpBit is one of South Korea’s largest exchanges
Charts
Chart 1. Weekly Price vs Volume
Chart 2. Weekly Price Change
Chart 3. Major Thematics
Chart 4. Monthly average daily volume as % of historic high
Chart 5. MTD Avg daily volume
Chart 6. Price, 50D Z Score
Chart 7. BTC vs other Digital Assets, 1 month % change
Chart 8. BTC, Ascending Channel
