> Commentary
Digital Assets ended the week -10%. Volume was up slightly from the previous week at US$52B, +6% WoW. Overall, August was a slow month for trading though with most major coins showing the 3rd straight decline in monthly volumes. Breadth was heavily skewed towards the negative this week with only 28 of the top 200 coins / tokens higher this week.
Headlines this week were largely institutionally focused with 1: China teaming up with corporates to launch ‘PBoC Coin’, 2. Bakkt opening warehousing and eying September for a formal launch, and 3. Hut 8 posting record mining revenues and earnings.
Declines this week look to be testing the bottom end of BTC support and potentially threatening a further technical breakdown. There are some signs, though, that this leg could already be a bit overdone. The Mayer Multiple has fallen to 1.27, the 50D Z Score is at -1.41 standard deviations, and the 20D ROC has dropped to -16%. Comparing these readings to historical performance, there looks to be ~ 60% chance of a rebound over the next 20 days. We continue to like $8,500 as the first major line of support and an intuitive place to build a small leveraged long.
Looking slightly farther out, Bakkt — which is set to formally begin operations at the end of September — could be a major catalyst for the market. It also ties in well with BTC’s normal volume seasonality (Chart 8), which tends to accelerate into the last 2 months of the year.
>Thoughts
PBoC Coin challenges USD, not BTC
‘PBoC Coin’ offers China the ability to enforce capital controls to previously unseen levels while also chipping away at USD hegemony overseas.
Distribution of PBoC Coin through Tencent’s WeChat Pay platform gives the PBoC access to more than 1 billion monthly users. If cash is replaced by PBoC Coin, it not only gives the central government more control over domestic transactions but also increases the ability of authorities to apply capital controls. Both abilities could be advantageous in managing domestic unrest (Hong Kong), a controlled devaluation of the CNY or even a break of the HKD peg.
Internationally, PBoC Coin could be used as a means to execute transactions outside of the supervision and restrictions of the swift banking system and American regulators. China would be able to freely trade PBoC Coins for Iranian oil or any other resources. One could also imagine a scenario in which China leveraged its dominance in African trade and FDI to boost global adoption in regimes with high degrees of currency volatility and inflation.
In such a situation, BTC becomes increasingly important as a means to execute transactions outside of the control and surveillance of Chinese authorities. This is why Chinese money still accounts for ~ 30% of global crypto trading despite the closure of exchanges, restrictions on mining and a ban on crypto events. It also explains the massive amount of Chinese USDT demand.
G7 — No crypto news is good news
With the the massive amount of governmental and regulatory pushback on Libra and China’s increasingly vocal interest in developing a homemade version, we had been expecting to see some sort of regulatory coordination out of last week’s G7 meeting. It turns out, global leaders have enough on their to-do list with trade wars, Brexit and deteriorating economic data.
No news is definitely good news.
> News
- Bakkt to offer BTC warehousing services from next week
– In prepearation for BTC daily and monthly futures contracts
– Futures trading kicks off from Sep 23
– This will be a major on ramp for mainstream institutional money - Hut 8, posts record quarterly earnings, revenue and BTC mined
– Hut 8 (TSXV: HUT) is the largest listed miner miner on the planet
– 2Q revenue CAD $28.3M, Net Income $33.7M, BTC mined 2,816 - PBoC digital asset could be released within months
– Will be supported by Alibaba, Tencent and Union Pay
– as well as a consortium of banks including CBoC, BoC, etc
– China wants a work around to the swift system and USD hegonomy
– Tencent later denied participation - Grayscale report highlights BTC’s role as a global macro hedge
– Highlights BTC outperformance during a number of global macro shocks - Portugal: BTC trading and payments are tax exempt
– Cites a 2015 ruling for crypto tax exemption - I like Big Blocks … $2.3B block executed on BTC blockchain
– Output total hit a whopping 223,211.90432992 BTC, ~ US$2.3B
– Transaction fees totaled 0.19187683 BTC, ~ US$1,800 - Binance cuts comms for BNB holders and referrals
– Looks like a -25% cut for everyone with enough BNB. And a 40% cut for everyone that both meets BNB criteria and is earning referral income - Craig Wright loses courtcase may have to pay billions in settlment
– Claims to have created BTC under the pseudonym Satoshi Nakamoto
– Wright is being sued by the family of a deceased business partner
– Judge has reportedly recommended that he turnover 50% of mined BTC
– This could put Wright in the position of either admitting he’s not actually Satoshi Nakamoto or being on the line for > 500,000 BTC - Brave browser expands crypto tipping to Reddit & Vimeo
– New tipping feature on Reddit & Vimeo follows earlier version on Twitter - Remember when Hal Finney called a BTC target price of US$10M?
– Hal Finney was the first recipent of a BTC transaction (from Satoshi)
– His calculation was pretty basic: Global wealth/number of BTC - BitGo launches EOS multi-signature wallet & custody service
– BitGo is one of the largest custodial service providers in the space - Ethereum Foundation grants over $2M to ETH 2.0 client developers
- Binance launches lending business for customer deposits
– Follows the launch of roll out of margin trading in July - XRP bag holders petition Ripple to stop dumping tokens
– So far nearly 2,500 bag holders have signed the petition
– Ripples 2Q19 report revealed XRP selling of $250M that quarter - Max Keiser sees fragile stock market pushing Bitcoin to $25,000
– Expects a gap lower for equities and a rotation to safe havens
– Looks for gold to run to $3,000 and BTC to go to $25,000 - Swiss regulator FINMA approves the first two “Bitcoin Banks”
– SEBA Crypto AG and Sygnum AG approved for banking licences
– Aimed at institutional investors - Crypto futures exchange Coinflex lands $10M in funding
– Backed by Polychain Capital, Bitcoin.Com, amongst others
– There have been a rush of new derivative exchanges this year - Libra opens up bug bounty program
– Ciritical bugs will be rewarded with US$10,000
> Charts
- Chart 1. Price vs Volume
– Almost everything buried in the lower left quadrant
- Chart 2. Weekly price performance
– Exchange tokens — BNB and HT — amongst this week’s hardest hit
- Chart 3. Price performance, Major thematics
– Smaller tokens and IEOs hammered this week
- Chart 4. Price Z Score
– BNB looking oversold — has corrected -3.4 SDs < 50D MAVG
– This is one of the lowest values seen on BNB in the past year
- Chart 5. Monthly Average Daily Turnover
– All major coins / tokens on pace for another MoM decline
- Chart 6. Volume Z Score
– ETC the hottest at +1.2 standard deviations > 50D MAVG
- Chart 7. BTC vs CNY
– BTC continues to show short term divergence from CNY correlation
- Chart 8. BTC, Volume seasonality
– BTC volume peaks are normally skewed towards the 4Q (60% of the previous 5 years), and to a lesser degree 1Q (40% of the previous 5 years)
– Likely that volume will reaccelerate beginning as early as Nov of this year
