Commentary
Digital Asset Weekly out early this week as Taiwan shuts down for the Mid Autumn Festival Long Weekend.
Digital Assets down -3% over the past 7 days with volume up ~ 7%. Breadth remained weak with just 30% of the top 200 coins and tokens ending the week higher. BTC -4% accounted for the bulk of declines. Gains were concentrated in EOS +13%, LTC +3% and ETH +2%.
Headlines this week were largely focused on institutional and infrastructure developments with 1. ICE publishing margin requirements for its Bakkt platform (and possibly executing a $1B BTC transaction), 2. Gemini launching a regulated custodial service, 3. Binance futures gaining to $150M / day and CME futures up to $370M / day, 4. Listed miner Hut 8 expanding capacity and 5. Coinbase considering an IEO platform.
Looking into next week, BTC is getting closer to the business end of the triangular price structure that has been playing out over the past 3 months. With volatility (Bollinger Band Width) down to a 5 month low, price is looking increasingly tightly wound. Typically, this type of scenario is resolved by a sharp move in price. The consensus view at the moment is that price is stuck in a descending triangle that will likely break lower. I remain optimistic though given we continue to ride the long term trend line higher (Chart 7). Near term resistance remains at $11,000. If we break that, $13,000 is in the cards. If we break $13,000 — given how little volume has traded above this level — outlook becomes very bullish. On the downside, the bottom end of the triangle puts support at around $9,300 — $9,500. Below that expect strong support at $8,500 (convergence of 50% Fibonacci retracementand the 2018 full year volume weighted average price).
Thoughts
Great chart this week from PlanB:
The chart suggests that we are just in the start of the latest bull market. Bull markets look to have pretty consistent durations of 130,000–140,000 blocks (1 block ever 10 minutes). The chart suggests that start of bull markets is marked by troughs in BTC mining difficulty adjustments (December 2011, May 2015, and December 2018). Working forward, that implies a top sometime between June and August of 2021.
Each cycle is characterized by smaller returns as Bitcoin market cap, price and volume grow. Extending the previous patterns into this cycle, the chart suggests a cycle peak of at least 1,000% from December’s low of $3,200.
Most investors have made money on BTC
There’s a narrative in the market that a lot of speculative money had their face’s ripped off by BTC’s correction from $20,000 to $3,000. Looking at BTC’s historic volume at price charts and it’s annual Volume Weighted Average Price, I would argue that the vast majority of investors have made money.
BTC’s 2017 VWAP was just shy of $10,000. 2018’s VWAP was $8,500. 2019 is already back above $8,100. Implying a pretty modest loss for most 2017 investors.
Likewise, only 20% of BTC volume has ever traded ≥ the $11,000 level. I think this implies that the vast majority of BTC buyers are actually pretty deep in the money. It also provides a reason why $10,000 and $8,500 have been seen as key technical support levels (2017 VWAP and 2018 VWAP).
It’s also interesting to note how little volume actually traded above the $12,000 level. Once, BTC breaks above this level — there looks to be very little historic resistance.
News
- FINMA releases stable coin guidance, confirms Libra enquiry
– Swiss Financial Market Supervisory Authority
– Libra would require a payment system licence from FINMA
– Subject to Swiss AML act and additional requirements based on capital allocation, risk concentration / liquidity and management of the Libra reserve - SEC Chair Clayton: ‘Progress is being made’ toward bitcoin ETF
– Cited continued concerns around custody and price manipulation given the bulk of global trading takes place on unregulated exchanges - ICE publishes margin requirements for Bakkt’s BTC futures trading
– Will begin trading on Sep 23
– Bitcoin warehoused by Bakkt is protected by a $125M insurance policy - Gemini launches custody service for 18 digital assets
– Through the Gemini Trust Company will be a regulated custodian
– Overseen by the New York Department of Financial Services (NYDFS) - BitMEX hires former BNP General Counsel as new legal head
– Seems timed to offset news around the departure of their COO - Coinbase may unveil an IEO platform in coming months
– Said to be exploring both the IEO and STO space
– Made several acquisitions in 2018 to become a regulated broker dealer
– Said STOs have been “talked about a lot but traded much less” .. so true - Binance Futures daily volume > $150M in Invite-Only mode
– Preliminary volume data has yet to be verified
– Represents ~20% of Binance’s normal reported volume in spot markets - Survey: 40% of Millennials look to crypto in the event of recession
– 2/3 of U.S.-based investors are afraid of a recession
– Look to hedge stocks with crypto assets, commodities or real estate - Bitcoin hits $2250 premium in Argentina after new capital controls
– Bloomberg reported that the country could burn through is $15B in foreign reserves within the next couple of weeks - Hut 8 adds new Bitfury hardware, expands capacity by 13%
– Hut 8, listed in Canada, is the world’s largest listed BTC miners
– Will add 9 new Blockboxes for US$7M increasing capacity by 9.9MW - UK asset manager raises $50M for crypto arbitrage fund
““Our vision is that it’s simply a matter of time until digital assets become part of institutional portfolio allocation” - BitMEX’s COO steps down after less than a year
– Angelina Kwan is a former compliance head at Hong Kong exchange
– Follows a CFTC investigation into trading by US users - BTC hash nears 94 quintillion hashes per second
– Highlights the massive amount of computer power dedicated towards securing BTC transactions globally - CME BTC futures now trading an average of $370m a day
– 132% increase from the same period last year - $1 billion BTC transaction may be part of Bakkt launch
– The receiving address i snow the 5th BTC wallet
– Also the largest wallet not associated with an exchange
– The transaction cost US$700 (looks like they overpaid) - $26 million XRP transferred from Ripple to EX-CTO Jed McCaleb
– Early in 2018, his token ownership was valued at $20 billion
“The company, through a series of lawsuits and agreements, has tried to prevent McCaleb from dumping all of his holdings at once” - Telegram releases code, documentation ahead of TON launch next month
– TON will be a PoS platform, promising instant, secure transactions
– Will allow payments to be integrated into its messaging app(like WeChat)
– Telegram has 365M users - Binance US weeks away from launch
– Expected to support 30 coins and tokens
– New accounts will require gov ID and a social security number - Startup finds and patches vulnerability in Libra code
– OpenZeppelin a 3rd party audit firm has patched a vulnerability
“would have enabled malicious actors to introduce executable code to smart contracts”
Charts
Chart 1. Price vs Volume
– Price and volume declines pretty much across the board
– EOS a big standout leading gains on big volume
Chart 2. 7 Day % Change
Chart 3. Major Thematics
– Platform tokens mostly higher. Huobi Token the best. BNB the worst.
Chart 4. Volume Z Score
– ETH. and EOS volumes starting to heat up a little bit
Chart 5. Average Daily Turnover, Month
– EOS +18% MoM and TRX +9% MoM Sep volumes on pace for MoM gains
– ETH very close to passing August average daily turnover as well
Chart 6. BTC vs Alts
– Alts continuing to dissapoint
Chart 7. BTC is a tightly wound spring…
– Support:
$10,000 (mid term trend line, 2017 VWAP)
$9,300 — $9,500 (bottom of triangle, lower Bollinger Band)
$8,500 (50% Fibonnaci, 2018 VWAP)
– Resistance:
$11,000 (top of triangle, 23% Fibonnaci)
$12,000 (August price peak)
$13,000 (June price peak)
