Commentary
Digital Assets ended the week -2%. Trading slowed to a daily average of US$64B across the space -18% WoW. BTC -7% continued to lag this week — leading declines across major coins and thematic groupings. Selling in BTC and modest outperformance in select alt coins saw a pickup in USDT trading. Average Daily USDT Turnover in November is now tracking a record high of US$25B/day. Month to date volume also active in BTC, TRX, BNB and BCH.
Headlines this week were mixed. Top stories included: 1. Rumors that the Royal Bank of Canada could launch a crypto platform, 2. Tether discussing tokenizing physical gold, 3. Renewed reports that China could launch a digital currency in the next 2 to 3 months, 4. Facebook possibly taking a step back from Libra (with the launch of their new payment platform) and 5. Bakkt announcing both New York regulatory approval and a full roll out of its custodial solution.
After spending the week drifting lower on decreasing volatility, BTC looks to be setting up for another big move. That said, the direction of the near-term move is hard to call. We’re teetering on the edge of 50 day moving average support and sentiment feels negative, but historically performance in November has been strongly skewed to the upside with 4 of the previous 5 years being up months. The 5 year median November gain is +11.6%. That implies a November finish of around $10,200. Given we’re currently -5.5% from where October ended — we’ll need to see a strong month end finish for the normal seasonal pattern to stay intact.
Thoughts
China’s DCEP and ‘Unrestricted Warfare’
Interesting comments this week from Binance’s CEO at BlockShow Asia 2019.
CZ thinks China’s new digital currency — DCEP — is going to be a blockchain-based version of the RMB.
“The Chinese government wants to push RMB’s influence globally. They want RMB to be competitive with the US dollar. In order to do that they really need to push this currency to have more freedom.”
Could China issue a relatively unfettered blockchain based currency as part of a broader effort to chip away at US reserve currency status? It’s unconventional — but is also very much inline with the 1999 classic Unrestricted Warfare. Written by 2 PLA Officers the book argues that while China is unable to challenge the US in a direct conflict, it could be successful on other fronts: economic, legal and cyber.
What’s happening with ETH’s Dec 4 Istanbul HF?
As usual, it’s difficult to find a concise summary of what’s happening with the Istanbul hard fork. After discussing it with our engineering team, it looks like there are 3 major improvements expected:
1. Privacy: Improved by allowing atomic swaps and greater chain interoperability with privacy coin ZCash as well as by lowering the cost to implement zk-SNARKs (zero knowledge proof). This should help with scaling and with the implementation of privacy applications.
2. Security: Done by adjusting opcode prices which will help prevent attackers from launching DoS attacks. It will also reduce the threat of reentrancy attacks on smart contracts.
3. Functionality: Introduction of new functions for smart contracts — mostly Ethereum Virtual Machine support features (EVM is a protected sandbox for smart contract execution).
News
- Royal Bank of Canada said to be considering crypto platform
– RBC is Canada’s largest bank with $661 billion CAD ($499 billion) AUM
– Canada has had a mixed yr with crypto after the explosion of Quardriga
– Though Canada has listed a number of crypto funds and is home to the largest listed BTC miner in the world — Hut 8 - USDT working on Tether Gold linked to individual gold bars
– Plans to launch a gold backed Tether Gold
– Will be directly linked to specific gold bars - Andreessen Horrowitz leads $25M investment in Compound
– Compound is an automated crypto lending platform with ~$150M AUM
– Compound is one of the best known companies within the DeFi (Decentralized Finance) space. Lenders typically receive mid to high single digit % annualized rates for lending out their crypto assets - Blockchain.com on pace for $120M in 2019 crypto loans
– The borrow / lend market has probably been the highest growth sector of the Digital Asset space this year. A number of major wallets, exchanges and OTC desks have moved into the space in an effort to monetize balances and offset ongoing commission compression - Facebook launches new payment platform as Libra struggles
– Facebook Pay will be the American version of Alipay or WechatPay
– This is interesting given that FB’s financial technology innovation is essentially reduced to simply following China’s lead
– It may also suggest the need to initiate an actionable plan ASAP to offset its ongoing decline in active daily users — especially in its home market - Bakkt gets NY regulator approval, announces full custody rollout
– Green light from New York Department of Financial Services (NYDFS)
– Custody is “the critical link in the institutional adoption of Bitcoin.” - China’s digital currency may launch in next 2–3 months
– Comments come from Foxconn backed HCM capital
– Says all the systems for DCEP (the best name in crypto?…’Deception’) and the network are already in place - Anonymous group donates $75M in BTC to privacy focused startups
– An anonymous group plans to fund startups focused on anonymity and the protection of personal data
– The fund will focus on 4 niches — personal data protection, tools for online anonymity, cryptocurrencies and blockchain
– Unknown Fund Press Release . Unknown Fund Website - Binance the first client for the Paxos’ new fiat gateway
– Allows users to more easily fund their accounts with traditional money - Tron’s Justin Sun reveals investment in Poloniex
– Poloniex announced that it would support Tron trading this week - eToroX lists 7 new stablecoins
– Amongst these are a few region specific token for Turkey, HK and Poland
– Tradable assets on the platform are now up to 26
– eToroX is available to retail investors in dozens of countries - Tim Draper: BTC to hit $250,000 by 2023
– Draper is a legendary American VC investor
– Said his price target could be hit as early as 2022
– Sees the Lightning Network as one of the key price drivers - Binance adds EUR, RUB, UAH and KZT
– Funding facilitated via Gibraltar based payment processor Advcash - EIDOS airdop causes EOS network congestion
– Users are “mining” for new eidos tokens by moving eos back and forth
– Other articles have suggested that it’s accounting for 95% of transfers
– I don’t really understand what’s going on here, but it looks like people are renting CPU to mine the EIDOS airdrop and this has made CPU a scarce resource on EOS - Standard Chartered joins Ethereum Enterprise Alliance
– Joins Microsoft, Hyperledger as well as Santander and Russia’s Sberbank - ETH’s Istanbul hard fork expected on Dec 4
- New York apartment sells for $15.3M in BTC
– Looks like an advertising gimmick by Bitpay
– I think this actually happens quite frequently…but by people that don’t want to advertise it - Local Bitcoins trading sets new high in Venezuela and Argentina
– Follows new capital controls in Argentina, ongoing inflation in both
– Exactly the type of situation in which BTC looks like a safe haven asset
– BTC is probably 80% a risk on asset, but in situations like this is a haven of last resort
Charts
Chart 1. BTC Seasonality
– November is typically one of the best months of the year
– BTC has been up in Nov 4 of the past 5 years
Chart 2. Weekly performance, subsector
Chart 3. Major coin performance
Chart 4. Price vs Volume
– Almost everything buried in the bottom left — price and volume both down
– LINK, NEO, XTX, DASH and ETC the major outliers
Chart 5. Historical price performance
– BTC, LTC, BNB and TRX at historic highs for this point in November
Chart 6. Volume, top coins and tokens
– BTC and USDT dominating volume
– Accounting for ~ 70% of trading in major coins over the previous 5 days
Chart 7. BTC vs Alts
– BTC underperforming month to date as Alts relatively unchanged
