Commentary
Digital Assets -13% WoW for one of the worst weekly drops of the year. Declines were broad based with < 15% of the top 200 coins and tokens ending the week higher. Volume continued to slide, falling ~ 5% WoW to a daily average of US$55B.
Headlines this week were led by 1. Reports of large selling from PulseToken (a Ponzi scheme broken up by Chinese authorities 2 months ago), 2. Barclays ending its relationship with Coinbase, 3. China’s central bank digital currency reportedly ready, and 4. the SEC again delaying a decision on BTC ETFs.
Declines this week came on the back of BTC’s failed bull pennant set up from last week. Remain cautiously optimistic going into next week, though, given the oversold signals from:
– 7D ROC. Hit a low of -15% this week. One of the largest readings YTD.
– 50D Price Z Score. -1.34 standard deviations. The lowest since early Feb.
– 50D Volume Z Score.-1.04 standard deviations. One of the lowest YTD.
– RSI. Low this week of 38 is the lowest since early Feb.
– TD Sequential. Currently on a down 7. Values > 7 are often inflection points.
Given strong support at the $8500 level, a conservative way to play the possibility of continued weakness is a small leveraged long between $8500 — $9,000.
Thoughts
Why did BTC lag Gold this week?
While we’ve recently been highlighting the increasing correlation between BTC and Gold, it’s important to remember that these are 2 very different assets despite having similar thematic drivers.
With a macro backdrop that seems uniquely favorable to BTC and Gold — European Banks hitting 52-week lows, trade wars, CNY devaluation, inverted yield curve, etc — it is, in someways, perplexing to see BTC underperform this week.
BTC and Gold are very different in terms of market participants, volume fragmentation, regulatory oversight, market cap, and overall maturity. I think that what this means is that while BTC is trending towards becoming a safe haven asset (as implied by increasing correlation with Gold), the correlation remains low — and we shouldn’t be surprised to see periods of short term diversion between the two.
Will there ever be an Alt Season?
Probably, no.
Alt Coins continued to underperform this week widening the gap with BTC YTD (chart below). Historically, the primary driver for Alt Coins is a rotation out of BTC on the back of a strong price move and the entrance of new money reluctant to chase a BTC rally.
Given that 1. new money generally prefers new projects (not struggling ICOs), 2. existing Alt Coin holders (mostly down ~90% from issuance) are a big overhang and 3. increasingly onerous regulatory oversight it’s hard to imagine a replay of 2017.
News
- Did a Chinese ponzi scheme crush price this week?
– Reports this week of selling from PlusToken, a ponzi scheme broken up by Chinese authorities 2 months ago
– PlusToken reportedly raised 800K ETH and 200k BTC
– Selling from ‘Chinese Scams’ is becoming a common excuse for sell offs
– While there seems to be more specifics this time around, Chinese scam selling was also cited as a reason for the mid July sell off
– There does seem to be some evidence for this given large BTC inflows at a number of major exchanges — though you would expect inflows to increase as users sell on a price pull back, so it’s hard to say
– Also, some of the largest inflows were at US and European exchanges like Bitstamp, Bitrex and Poloniex — which you’d expect to have better suspicious transaction controls than exchanges domiciled elsewhere - Walmart announces blockchain managed drone + stable coin
– The drone blockchain will allow for coordination between UAVs
– The USD pegged stable coin will be for use within Walmart stores only - SEC delays decisions on three bitcoin ETFs, new deadlines now Sep /Oct
– ETF related expectations are low after numerous previous delays
– Really a non event at this point - US court rules CSW must defend lawsuit claiming he stole Bitcoin
“In weighing the evidence, the Court simply does not find the Defendant’s testimony to be credible” - UK Advertising Standards Authority confused by BitMEX’s log chart
– “BitMEX’s use of the chart exaggerates Bitcoin’s success and failed to illustrate the “risk” of investing”
– The difference between log and linear scales is typically taught in Jr High School math - Barclays breaks up with Coinbase
-Cited as being due to a contraction in the bank’s risk appetite
– Really highlights the struggle exchanges — even the most heavily regulated exchanges – face in maintaining banking relationships
– Clearbank will replace Barclays for transactional banking in the UK - New Zealand legalizes salaries paid in crypto
– Requires payment to be pegged to a fiat currency
– Cited as a global first, but don’t think there are rules against this in many jurisdictions (Taiwan for example) - Crypto deriv exchange raises $4.3mn pre launch from Coinbase, others
– Blade is a new cryptocurrency derivs exchange launching in three weeks
– Expect growth from the crypto derivatives market to outpace the broader industry over the next 2 years given the dearth of product in the market at the moment - Bitcoin reaches more than $12,300 in Argentina as Peso Tumbles 30%
– Follows incumbent president President Mauricio Macri losing the primaries by a huge margin to a left leaning rival
– Highlights the value of BTC in jurisdictions with political instability, hyper inflation and draconian capital controls - IBM and Tata to join Hedera Hashgraph’s governance council
– Hedera is a Hedera Hashgraph is a ‘blockchain-like public network’
– Designed primarily for enterprise use - China’s central bank digital currency (CBDC) is ready after 5 years of work
– Reads like banks will settle transactions on the PBoC’s blockchain - XRP hammered on speculation it could be seen as an unregistered security
– Follows a new amended complaint against Ripple that draws on the SEC’s framework for digital assets
– Ripple has until mid-September to file its response - EU members are expected to adopt tougher crypto rules
– German financial authorities will consider digital coins a financial instrument after which exchanges and wallets will need licenses
– Has led to a number of companies cutting off services to German users including BitPay
– The EU and US seem to be determined to push the next wave of financial innovation into Asia - Ethfinex to part ways with Bitfinex brand as part of ‘regulated’ rebrand
– Ethfinex will be rebranded as DiversFi
– While Bitfinex will no longer be a controlling shareholder, the shareholders behind Bitfinex will likely remain the same
Charts
Chart 1. BTC vs Alt Coins, 1 year
