Commentary
Digital Assets +9% this week with BTC +11% again doing the bulk of heavy lifting. Volume was a bit softer across the space~ -5% WoW to US$47B. Breadth was modestly better with ~53% of the top 200 coins and tokens ending the week higher.
Gains early in the week were supported by a mid week short squeeze and the liquidation of ~ $130M of short positions on BitMEX. Overall market setup in BTC saw a switch to new longs being added while a number of other major Alt Coins saw continued growth in short positions. BTC’s YTD performance increased to +180% while other major coins and tokens saw YTD gains trimmed to +20%.
News flow this week was generally positive with 1) VanEck moving forward with an institutional only ETF, 2) Indian authorities warming up to crypto, 3) Bitfinex launching derivatives trading, 4) Binance and Paxos launching new stable coins and 5) BTC shaking off a sharp dip in gold.
Most interestingly, though, was a sharp spike in Google search interest this week (Chart 8). China looks to be the epicenter, so pick up in interest is likely part of the broader CNY devaluation story.
Looking forward, BTC price continues to work its way through a triangular price structure (Chart 9). Near Term support looks to be stacked around $9,300 to $9,500 (convergence of Fibonnaci Retracement and Mid Term Trend Line). Near Term resistance looks to be at about $11,000. If BTC can crack convincingly through $11,000 than I think $13,000 is in play. I still like the idea of a small leveraged short on Delta Exchange with a $8,500 target to hedge a break of $9,300 support.
Thoughts
BTC now 70.9% of overall industry market cap
In 1Q18, BTC’s market share fell to a historic low of 33%. This was driven by a surge in ETH price, an explosion in ICO issuances and a series of BTC forks. Prior to 1Q17, BTC normally accounted for >80% of total industry market cap.
I think we’re unlikely to see a significant, broad based recovery in Alt Coins in the near term. ETH, the second largest Digital Asset by market cap, continues to struggle with scaling issues and its transtion to PoS. There is also amassive overhang of 2017 buyers in the ICO market that are likely to sell into any bounce. The BTC forks have largely faded into irrelevance with BSV and BCH combined now accounting for less than 4% of BTC’s price.
Continue to think there is a high probability that BTC dominance will reeturn to the > 80% level.
News
- VanEck plans launch of institutional only ETF this week
– Sales will be sold from Thursday under the SEC’s Rule 144a
– Allows for the sale of privately placed shares to institutional buyers
“The shares will provide institutional investors access to a physically-backed bitcoin product that is tradeable through traditional and prime brokerage accounts” - India’s DEA flips, sees potential of Crytpo, ICOs and Blockchain
– In July, Department of Economic Affairs recommended a ban on crypto
– The report makes no new policy recommendations on Digital Assets
– India is a huge potential market for BTC and crypto, but has been throttled somewhat by regulatory overhangs - Ripple transfers 500M XRP from escrow wallet
– Equates to ~ US$130M
– 2Q19 Ripple sold $250M of XRP, +50% from $169M sold 1Q19
– Ripples selling has been a significant overhang on XRP price - Trezor announces support for ‘Shamir Backup
– Based on a cryptographic algorithm known as Shamir’s Secret Sharing
– Allows users to set up a 2-of-3 or 3-of-5 recovery scheme for private keys
– This would allow users to share ‘recovery shares’ with trusted people
– This is a big step forward to preventing keys from being lost and simplifies issues like inheritance preparation etc - BTC holds steady as gold plunges
– Not often that BTC shows lower intraday volatility than gold
– Gold saw its biggest single day drop in more than 6years - Binance launches its own USD coin — with NYDFS approval
– The new stable coin will be called BUSD
– Is a partnership with Paxos which operates the USD stablecoin PAX - Paxos launches PAX Gold — regulated and redeemable for physical gold
– Not the first Digital Asset to be backed by physical gold, but claims to be “the first crypto-asset redeemable for physical gold.”
– Each token will be backed by a troy ounce of physical gold
– Stored in professional vault facilities in London - Report: BTC price could hit $100,000 by 2021
– Applies a regression model to a log of both price and time data - BTC is using less energy, despite record computing power
– Shows how mining can be a force for innovation in power conservation
– In June a study found 74% of BTC mining was powered by renewables - HSBC executes CNY transaction on Voltron
– Voltron is a blockchain trade finance platform developed by eight banks, including BNP Paribas, HSBC and Standard Chartered - Bitfinex launches 100x BTC, ETH trading
– Long term would expect to see BitMEX bleed volume as existing spot exchanges and new market entrants add futures and options functionality - HTC, Alibaba join $3M round for blockchain property rights startup
– Bitmark is a Taiwan based company working on property system to record rights for digitally streamed music
Charts
- Chart 1. Price vs Volume.
– Volume was down across the board. BTC and ETC the main price leaders
- Chart 2. Price Performance, Top Coins and Tokens
- Chart 3. Price Performance, Major Thematics
– BTC leads. Bit of a bounce in oversold exchange tokens.
- Chart4. Price Z Score
– BTC price back to neutral vs the 50D AVG
- Chart 5. Volume Z Score
– Volume in ETH really drying up, could imply a bottom
- Chart 6. Average Daily Turnover, By Month
– Volume in everything down for the 4th consecutive month
- Chart 7. YTD Price Performance
– BTC +180% YTD, everything else +20%
- Chart 8. Google Trends
– BTC search interest in tracking a historic high
– Top countries: China, Nigeria, South Africa and Ghana
- Chart 9. Triangular Price Consolidation
– Depending how you draw the lower support line, I think you could even make the case for a Bull Pennant, which would imply potential upside to $15,000
