Commentary
Digital Assets ended the week +0.6%. Trading this week -21% from last week’s record high. Breadth this week was positive with 64% of the top 200 coins and tokens ending higher. Alts outperformed BTC led by gains in XLM, EOS, XMR and LTC. Some very big moves in smaller names as well with ATOM +22%, MKR +23%, XTZ +30% and VET +42%
News this week was led by more positive Greater China news with Mainland authorities removing Crypto Mining from their list of industries to be phased out and HK offering further clarity on exchange licensing criteria.
Derivatives markets were another big focus following a flash crash on Deribit last week, a CME BTC futures flash crash this week, A $150M market manipulation suit against FTX, BitMEX accidentally revealing 10s of thousands of user emails and Bakkt futures seeing increasingly active trading.
Other major stories included: 1. Square reporting continued BTC user growth, 2. Ongoing management infighting at Bitmain, 3. Listed BTC miner Hut 8 positing solid 3Q numbers, 4. ‘Crypto bank’ Silvergate listing on the NYSE, and 5. the President of Venezuela flashing his Trezor on state TV.
Looking into next week, it looks as if Bart Simpson is once again planing mischief (chart 6). The Bart Simpson chart pattern is characterized by a price gap, consolidation and then another gap in the opposite direction. Our gap higher came with the price rally following President Xi Jin Ping’s positive blockchain comments. Since then, we’ve been stuck in a descending triangle pattern with price repeatedly testing the bottom end of the range. A drop below $9,000 will likely trigger the completion of the Bart pattern and a test of $7,800 support. A move > $9,500 would break the descending triangle pattern and save us from a Bart like gap lower.
Thoughts
BTC and USDT both on pace for record volume this month. BTC is tracking a daily average of $24B. USDT is on pace for $28B. I think a lot of this is being driven by sharp price moves and a string of action packed weeks in futures markets (flash crashes, large liquidations, security scares).
Combined BTC and USDT are now accounting for ~ 65% of total digital asset trading over the past 5 days — Much higher than the 100 day average of 42%
I’m not sure what this means exactly for price. But it certainly shows how these 2 assets are dominating investor interest at the moment.
News
- China cancels plan to phase out BTC mining
– This has been a significant overhang for the Chinese mining industry
– Will certainly make things easier for Caanan and Bitmain which are both thought to be pursing IPOs in the US - Listed BTC Miner Hut 8 posts impressive 3Q numbers
– Mined 1,965 bitcoin at a Cost per Bitcoin of US$4,363
– Mining margin 58% despite a 30% price drop and 61% difficulty increase
– Revenue = $67.1M, Gross Profit $18.6M - Crypto bank Silvergate IPOs on NYSE
– Silvergate says it serves a total of 765 crypto customers
– In many ways it is the global lynch pin of crypto USD transactions - Venezuelan president shows of Trezor on state TV
– Trezor was quick to deny any official business relationships in Venezuela
– Venezuela previously tried to launch the Petro, an oil backed coin
– The country is strongly motivated to find ways to skirt sanctions - Ousted Bitmain boss pursuing legal action after management coup
– Bitmain’s co-founder Micree Zhan was abruptly ousted last week
– Zhan is also the biggest shareholder and a registered legal representative
– Very messy. Don’t know how they expect to IPO with this overhang - Square’s first time Bitcoin buyers doubled in 3Q
– Square processed $148M in bitcoin sales in the third quarter of 2019
– Bitcoin revenue +244% YoY to $146M and profit of $2M - HK launches framework to regulate crypto exchanges under SFC
– Can only serve professional investors, assets must be insured, have an external market surveillance system and not list securities
– Extremely challenging for most exchanges - BTC hits $11,600 in Argentina on capital controls
– Latest control prevents citizens from purchasing more than $200/month - CME BTC futures drops $1,000 to low of $8,500
– CME typically trades $10–20M a day (liquidity > most BTC exchanges)
– Flash crash shows that heavily regulated exchanges are not immune to extreme price volatility - BitMEX email mishap leaks 23,000 email addresses
– Email addresses were revealed due to a bcc user
– The incident was followed by a reported hack of BitMEX’s twitter account
– Speculation that the incident was caused by a disgruntled employee - FTX sued for $150M over market manipulation allegations
– Accused of market manipulation and sale of unlicensed securities in US
– Looks a bit like a nuisance suit - Binance CEO says BTC price will hit $16,000 ‘soon-ish’
– Suggested that price gains will be driven by increased China participation - CSW (Faketoshi) claims funds insufficient to settle court case
– Had previously been ordered by a Florida court to pay a 500,000 BTC ($4.5 billion) settlement to the family of his previous business partner
– CSW has both claimed that he is Satoshi Nakamoto and that Satoshi Nakamoto, the author of the Bitcoin white paper, plagiarized him - UK updates crypto tax rules, requests user data from exchanges
– Will require exchanges to provide user identity and trading histories - Stellar burns 55 billion tokens worth US$4.7B
– Given size of the burn, price performance this week is probably bearish - XRP drops 5% during flagship conference
– By the announcement sell the conference - Huobi Global will freeze US user accounts Nov 13
– Huobi is recommending that customers transfer their assets to HBUS
– Provides access to only 3 assets: BTC, ETH, USDT via USD - US Fed hires stablecoin and crypto researcher
– Responsibilities include researching how to integrate digital currencies, stablecoins and distributed ledger technologies - Bittrex sued by user after alleged hack
– Sued over a SIM swap that netted criminals 100 bitcoin - Investors, exchanges reject claims Tether manipulated markets
– This is a painfully stupid argument
– Anyone who lived through the 2017 bull run will remember the struggle exchanges had to keep up with new account openings
– The 2017 bull run was caused by millions of new retail accounts not a single USDT user with low price sensitivity and poor trade execution
– Tether’s official response here - Bank of Canada: 5% of Canadians own crypto
– Not new data, a similar article was published last year
– Highlighting that ownership had increased from 2.9% in ‘16 to 5% in ‘17
– Sounds high to me - Bakkt volumes set new high of 1,061 BTC
– Marks the 2nd time Bakkt futures have traded > US$10M in a single day
– Think we’ll slowly see volume ramp over time
– A good proxy for the degree of institutional interest in the space - Binance: new wallet (TSS) system will reshape custodial landscape
– Binance also published an Introduction to TSS article this week
– The benefits are that it adds security and allows users to generate multiple seed phrases for a single wallet (similar to multiple signature)
– MaiCoin subsidiary — Amis — is also working on TSS implementation
Charts
Chart 1. Price Performance %
Chart 2. Price by Sector
– Smart Contract and Privacy the best this week led by EOS, ETC and XMR
Chart 3. Price vs Volume
– Maker and Atom up on lower volume
– XTZ, XLM and XMR up on better volume
Chart 4. Historic Price Performance
– BTC and BNB still at the highest levels ever for this point in November
Chart 5. Average Daily Volume, By Month
– BTC and USDT on pace for the best Monthly ADV ever
Chart 6. BTC, Revenge of Bart
– Possible Bart Simpson pattern forming in BTC
