Commentary
Digital Assets ended the week -8% on slightly slower trading. Overall turnover fell modestly across the space for a daily average of US$74B this week. BTC continued to help soften declines outperforming the rest of the space and continuing to account for a growing chunk of both volume and total Digital Asset market cap. Breadth was heavily skewed to the negative with only 15% of the top 200 coins and tokens ending the week higher.
Headlines were dominated by an unprecedented degree of regulatory and policy maker interest in the space. While this netted some positive sound bites and helps to draw the distinction between BTC and more centralized projects — like Libra — the overall tone was broadly negative. As feared, it looks like Libra will likely result in a coordinated global regulatory response that will likely lump all Digital Assets together. We should get a first look at what that looks like at the 2019 G7 summit at the end of August.
In terms of BTC fund flows and technicals, the market has likely already digested this recent correction. In terms of technicals, BTC price has pulled back ~30% from the end of June peak when the Mayer Multiple hit a 2.5 reading. This is largely inline with previous occurrences and signals that, statistically, risk/reward is now skewed more to the upside. From a fund flow perspective, USDT hit a record high market cap of >US$4B this week. This looks to be a combination of a rotation out of Alt Coins and new, Libra driven inflows into the space. There is a lot of capital on the sidelines at the moment. One caveat, though, remains the increasingly coordinated global regulatory response to Libra. While there are hints of an effort make a distinction between corporate coins and decentralized Digital Assets the risk remains, however, that the whole Digital Asset space gets caught in the wake of a coordinated pushback on Facebook and Libra.
Thoughts
- Libra has a very uphill battle to gain approval in the United States
Libra, Bitcoin and Digital Assets received an unprecedented degree of attention from American regulators and policy makers this week. Following on last week’s BTC/Libra tweet from President Trump we also had a 30 minute statement from the Secretary of the Treasury and a statement from Chairman Powell of the Federal Reserve. In addition to that, David Marcus — who heads Libra at FB — was called before both the Senate Committee on Banking, Housing and Urban Affairs as well as the House Financial Services Committee.
Policy makers on both sides of the aisle seem united in their resistance to the Libra project and lack of trust in Facebook.
While this has resulted in some interesting pro BTC sound bites our primary concern since the publication of the Libra whitepaper is that it would force global regulators to take a coordinated approach on the Digital Asset space — and that the approach is likely to result in more onerous oversight for the space as a whole.
Would not be surprised to see the first hints at what a coordinated, global regulatory response will look like at the G7 meeting in France at the end of August.
- BTC dominance may return to the 80% level (chart 7)
Pre Jan 2017, BTC accounted for between 78% and 100% of the entire Digital Asset market cap. By Jan of 2018, BTC had fallen to a low of 33% driven by the boom in ICOs, the proliferation of smaller Alt Coins, ETH and a number of BTC forks.
Given the break down in ETH:BTC (highlighted last week) and the focus Libra is putting on the difference between centralized projects and BTC, expect mean reversion to ~80% level. This will likely be supported by ETH 2.0 scaling implementation, which looks like it could be an overhang for several quarters (if not years).
Given that the SEC has guided that only BTC and ETH are the only Digital Assets sufficiently decentralized to not be considered unregulated securities, I would expect the bulk of institutional investment to be focused in BTC and ETH. Given the ETH 2.0 overhang, we also expect these inflows to be heavily skewed towards BTC.
News
- Representative Patrick McHenry: You can’t kill Bitcoin
– One of a number of anti-corporate-coin, pro BTC sound bites this week
– McHenry points out that even China hasn’t been able to kill BTC - Draft bill proposes ban on Big Tech from launching a digital asset
– The working title is: “Keep Big Tech Out of Finance Act” (for real)
– Reportedly being floated by the House Financial Services Committee
– Title feels like a Wall Street attempt to deepen their moat - China leads global Google searches for Libra
– Given China’s wealth and restrictive capital controls there is an unparalleled appetite in China for stablecoins - G7 urges tough Libra regulation, agrees to tax digital giants
– “must be regulated as tightly as possible to ensure they do not upset the world’s financial system”
– Want to collude on a minimum level of tax to discourage countries from competing in ‘race to the bottom’ to attract digital multinationals - Secretary of Treasury: BTC and Libra are a National Security Issue
– 30 minute long press conference from the US Secretary of Treasury
– The bulk of the concern was directed at illicit use of Digital Assets
– Tone was supportive of BTC as a speculative / investable asset
– Regulators seemed more concerned with Libra than BTC - Roubini: Exchanges are dens of iniquity, regulators asleep at the wheel
– Roubini’s criticism is a combination of an appeal to authority, elitism and ego. Roubini thinks that retail investors are too dumb to responsibly manage portfolio positioning and is painful in how aggressively he cherry picks data and builds straw man arguments.
– His performance in Taipei earlier in the month was very emotional and frankly a bit embarrassing. There is something disingenuous about an aggressive critic of BTC that regularly attends crypto events for pay. - LibertyX surpasses 1,000 Bitcoin ATMs across the US
– Will expand into 90 retail locations in Arizona and Nevada
“Our goal is to make bitcoin available on every block in America.” - Indian police rescue hostages held for two weeks under BTC ransom
– Kidnapers requested 80 BTC for the return of 2 BTC traders - Better market sees Huobi burn 116% more tokens
– Burnt 14,011,700 tokens from a 310,318,300 market supply
– Burn rate is 116% greater than it did last quarter. - Vitalik suggests using BCH as a temporary scalability solution
– This reads as more of a thought piece than a serious proposal, he also discusses using ETC as another natural alternative until the launch of Ethereum 2.0 - Huobi backs new stablecoin under Paxos custody
– HUSD aggregates 4 US-regulated stablecoins into a single product
– Comprised of PAX, GUSD, TUSD and USDC - Coinbase deposits for U.K users now take 10 days and must be over £1,000
- Hacked crypto exchange Bitpoint discovers an additional $2.3M missing
– Follows reports of an additional $30M hack last week
– $23 million-worth of the missing funds belonged to its customers - Fed chairman compares BTC to gold
– Can envision a return to an era where the US uses multiple currencies - Foundation For Defense Of Democracies: BTC could fuel defeat of USD
– Highlights how sanctions are used against sanctioned regimes
– And how Digital Assets could allow for the erosion of the USD - Wells Fargo bans users from accessing digital asset platforms
“Thanks for reaching out to us. Unfortunately, Wells Fargo does not allow transactions involving cryptocurrency”
– Wells Fargo still supports payments for alcohol, cigarettes and casinos - Japan’s top regulators setting up working group dedicated on Libra Coin
– Bank of Japan, the Ministry of Finance and the Financial Services Agency
– Discuss Libra’s impact on regulations, monetary policy, tax & payments
– Will likely see a formal statement from G7 meeting in France next week
MaiCoin Media
- MaiCoin Podcast #1 — Samson Mow, Charlie Lee
– Samson and Charlie join us at MaiCoin HQ to talk about Libra, Charlie’s meeting with Andrew Yang, the upcoming Warren Buffett lunch, that time Roubini called Charlie’s lifework a scam, why Asia loves USD ..and of course..Blockstream’s Liquid. Also, watch#engli Podcast #2, Justin Sun TRON - MaiCoin planning carbon credits STO by end of the year
– Plan enables carbon credit producers to interact with banks with mandated social responsibility spending programs
– Taiwan is prevented from engaging in global carbon credit markets due its exclusion from the United Nations since 1971 - BTC as a hedge against the (increasing) probability of negative rates
– Article from the IMF outlines why Central Banks need to go negative
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
– BTC continues to set new volume highs
– XRP is a significant volume laggard
Chart 5. MTD average daily volume
– BTC is the only major Digital Asset on pace for record trading volume
Chart 6. Price 50 day z score
– BTC is the only major Digital Asset trading above its 50D MAVG
Chart 7. Bitcoin dominace
– BTC’s historically has accounted for > 80% of market cap
– The 2017 crash was driven by the rise of ICOs, BTC forks and ETH strength
– Given the ETH scaling overhang and Libra’s acceleration of regulatory interest in more centralized coins / tokens, could see a return to 80% levels
