Commentary
Digital Assets ended the week little changed — digesting last week’s ~20% sell off. Volumes were slower as well falling -21% from the previous week. Breadth was better, though, with ~67% of the top 200 coins and tokens ending the week higher.
News flow this week was largely infrastructure and regulatory focused. One of the key themes was a focus on yield producing products with custodian BitGo announcing 7–13% annual returns for savers of select Digital Assets and Coinbase announce 1.25% annual returns for USDC depositors. Outside of that we also had reports of OKeX launching a compliance focused SRO and Coinbase, Cumberland, Kraken and others teaming up to form a Crypto Rating Council — an attempt to offset a lack of SEC clarity with stronger industry standards.
EOS’ relatively small $24M settlement with the SEC (relative to their >US$4B ICO raise) was seen as clearing a significant overhang and helped drive optimism that there could be a path forward for ICOs, IEOs and STOs. Smart contract protocols (upon which ICO type products are built) and projects with ‘unregistered security’ overhangs mostly outperformed; TRX +10%, EOS +5%, ETH +5%, XRP +3%.
Looking into next week, ETH will likely be in focus with Devcon 5 scheduled for October 8. As mentioned below, am a bit concerned that any strength into Devcon will likely be seen as a buy the rumor sell the news type event.
BTC +1% squeaked out modest gains this week after last last week’s dump. Price continues to consolidate just south of the 200 day moving average of $8,500. Continued declines in the 20 day moving average are a bit concerning — especially because it looks like there’s potential for the 20 day moving average to cross below the 200 day over the next couple of weeks. This would be viewed as a strongly negative technical signal. One possible reason for optimism, though, is renewed CNY weakness (Chart 7). The CNY : BTC relationship has broken down somewhat over the last 5 or 6 weeks, but another drop in the CNY should stimulate gains in BTC. Will be interesting to see what news comes out of US/China trade talks next week.
Autoregressive Neural Network analysis from MaiCoin Contributor Andrew Jim this week suggests that over the next 20 days BTC would trade in the $7,600 ~ $10,000 range at a 68% confidence level with a 95% confidence band of $6,000~$11,700. The analysis’ mean price path for the next 20 days is $8,700. The mean level for the longer 100 day forecast hints at a steady price recovery over the next 3 months to around $9,900.
Hope springs eternal!
Thoughts
- An Autoregressive Neural Network Approach to Forecasting Bitcoin Price
– Interesting analysis from MaiCoin Contributor Andrew Jim
– Model predicts steady price recovery over next 3 months
– 20 day forecasted mean path ~$8,700
– $100 day forecasted mean path ~9,900
- I’m a bit wary of ETH bounce into Devcon…
ETH is enjoying a pretty decent bounce the past 2 weeks after being hammered -50% over the past 100 days (vs BTC -28%).
Devcon. 5 is scheduled to start Oct 8. Historically, Devcon has marked an inflection point for ETH. Either it pumps ahead of Devcon and is sold afterwards or vice versa.
Outperformance into Devcon 5 would make me very wary of the potential for market disappointment around annoumcnets coming out of the event.
News
- State backed German bank says BTC will hit $90,000 in 2020
– Forecasts are based off of a Stock to Flow based model
“If the May 2020 stock-to-flow ratio for Bitcoin is factored into the model, a vertiginous price of around USD 90,000 emerges. This would imply that the forthcoming halving effect has hardly been priced into the current Bitcoin price of approximately USD 8,000.” - Crypto custodian BitGo adds staking services
– Will offer 7–13% for staking on Dash and Algorand - Binance integrates AML platform to comply with FATF
– Bit surprised to see this level of compliance coming from Binance
– Even Coinbase, a much more regulated exchange, has pushed back:
“…applying bank regulations to this industry could drive more people to conduct person-to-person transactions, which would result in less transparency for law enforcement.” - Bithumb looking to build regulated exchange in India
– This reads like all sizzle and now steak. Probably a paid article.
– Doesn’t sound like they’re even actively engaged with regulators - Libra launches Testnet to demonstrate network functionality
– Libra’s efforts to push it forward may see more pushback from regulators
– In July, House Democrats requested FB halt all development of Libra - Critical MakerDAO bug revealed through bug bounty program
“..the bug could have allowed an attacker to steal all of the collateral stored in the MCD system — possibly within a single transaction…” - OKEx founds crypto compliance focused SRO
– This is a good idea, but requires backing from several major exchanges - PBOC denies plans to launch new coin in November
– Contradicts a Forbes article from August
– Cited participation from Bank of China, Tencent, Alibaba amonst others - Reports Bithumb’s $352M acquisition could fall apart
– BTC Korea Holdings had agreed to sell a 50% stake in the exchange
– The buyer was BK Global, a plastic surgery medical group in Singapore - WSJ: Institutional backers of Libra getting cold feet
– WSJ named Visa & MasterCard as 2 early backers that are now reconsidering - SEC fines Block.One just US$24M after US$4B EOS ICO raise
– Agreed to pay the fine, but neither admitted nor denied with SEC’s claims
– Seen as a win for Block.One/EOS given it represents 40bps of the raise - Coinbase, Kraken, Cumberland and others form Crypto Rating Council
– Effort by the industry to self regulate in the face of unclear SEC rules
– Will issue a 1–5 rating on various digital assets
– 1=Unlike a security, 5= Like a security
– Maker was rated as most like a security vs LTC, XMR the least like a security - Coinbase to pay offers USDC holders 1.25% interest
– 2nd tier stable coins have seen a pick up in interest (no pun intended)
– Expect this move to accelerate adoption of USDC - Ohio suspends program allowing tax payments with BTC
– Article cites a number of regulatory concerns revealed by internal review - SBI, Nomura, Monex and Daiwa form STO association
– Article is light on details, but key points will be if regulations limit investment to accredited investors, allow crypto crypto transactions and participation by foreigners
– Failure to to follow through on any of those 3 will likely result in low trading volumes and investor interest - Telegram’s TON expected to launch in late Oct
– The project is scheduled to launch no later than Oct. 31
– Very few details of the project have been released to the public since completing a US$1.7B ICO in 2018 - Visa, Mastercard, Paypal, and Stripe may drop Libra support
– Follows backlash by European and US regulators and law makers
Charts
Chart 1. Price % change matrix
Chart 2. This time last year…
– BTC, LTC, & BNB trading at their beset levels for this point in past Octtobers
Chart 3. Price vs Volume
– Most coins / tokens in the upper left quadrant — better price, weak volume
Chatt 4. Weekly price performance
Chart 5. Volume Z Score
– Volumes light across the board. TRX trading a bit more than usual.
Chart 6. Average Daily Volume — By Month
– Volumes tracking lower almost across the board in the first few days of Oct
Chart 7. CNY vs BTC
– CNY weakness reaccelerated this week
– Most analysts look for CNY to go to 7.2 by the end of the year
