MaiCoin Digital Asset Weekly, July 19 2019

MaiCoin Digital Asset Weekly, July 19

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

MaiCoin Media

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

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