Commentary
Digital Assets ended the week +2%. Volume was flat vs the previous week at a daily average of US$74B. Breadth was negative with only 45% of the top 200 coins and tokens ending the week higher. Overall market cap improved to end the week just north of US$200B.
Sentiment looked tentatively better with risk appetite already bouncing back after last week’s sell off. Small Mid Caps were some of the best performers this week with MATIC +61%, Alogrand and Cosmos +18% and VeChain +9%.
News this week was again a mixed bag. Top headlines included: 1) Bakkt’s BTC futures hitting a new record high in daily volume, 2) UpBit suffering a US$51M hack, 3) German banks will be allowed to sell and custody BTC next year, 4) Plus Token related wallets continuing to sell BTC, 5) 3iQ’s listed BTC fund garnering Canadian regulatory approval and 6) BTC hashrate taking a dip lower (positive non Chinese miners).
After blowing through expected support levels last week, think price consolidation is probably likely for the following week. Though again it’s very tough to call. Reasons for optimism include normal December seasonality and outperformance this week in a number of small mid cap tokens. Chinese selling looks like it should diminish somewhat in the coming months as power prices increase — reducing sell pressure from miners — and as the market looks to have now largely digested the Plus Token unwind.
Thoughts
Thanksgiving thoughts….at least this Nov is better than Nov 2018!
Who remembers last November? When BTC dropped -36% MoM — it’s worst monthly dump of the past 5 years.
Last year’s November drop was driven by the very messy BCH — BSV hard fork. The fork saw claims of aggressive BTC selling from BSV founder Craig Wright — also known as Faketoshi for his unlikely claim to be BTC’s Satoshi Nakamoto. Craig Wright also claimed to know of an exploit that would take down BTC by the end of 2019. Both BCH factions were also thought to be aggressively selling BTC to fund uneconomic mining in their preferred chains.
Has the Plus Token Ponzi been driving BTC price in 2019?
Plus Token was a high yield Chinese investment scheme offering investors 9% to 18% monthly returns — with larger investments getting more rewards. Plus Token was a classic Ponzi scheme. It promised high returns to new investors in return for funding via BTC, LTC, EOS and ETH.
By the end of June 2019, the scam had stopped paying out returns. Investors soon started to notice transactions amongst Plus Token controlled wallets including one with the transaction note “sorry we have to run”. Shortly after, a number of the scheme’s operators were arrested overseas and extradited back to China. The scheme is thought to have raised ~200,000 BTC, almost 1% of BTC’s total supply worth around US$1.9B.
The rise and fall of Plus Token matches up well with BTC’s 2019 price peak of $13,880 on June 27. Implying that the 2Q price rally may have been largely driven by Chinese buying for Plus Token funding.
Recent analysis alleges that Plus Token wallets have sold ~ 187,000 BTC over the course of 2H19 at an average rate of $1,300 / day. Suggesting that 2H19 weakness may have been partly due to the schemes unwind. There is a silver lining, though…at this rate, the balance should be completely unwound by the end of 2019.
BTC hash rate looks ready for a drop
If I was a charting man…I would be betting that BTC hash rate is about to drop significantly after recently breaking the neckline on the a head and shoulders pattern.
This is inline with Chinese power seasonality which typically sees lower hydro power prices from April — October. When those prices revert to normal, less efficient machines are unplugged and hash rate falls.
News
- Accounts linked to Chinese ponzi scam Plus Token selling a lot of BTC
– Article suggests that these accounts maybe selling > 1,000 BTC daily
– Selling largely facilitated by Huobi
– Plus Token is thought to have raised ~ 200,000 BTC - German Banks will be allowed to sell and custody BTC starting next year
– Previously, banks were barred from offering direct access to crypto assets
– Allows banks to act directly as custodians (rather than using 3rd parties) - Bakkt BTC futures volume hits record high of US$42.5M
– Total of 4,443 BTC traded — over 60% higher than its previous record - Canadian regulator approves retail BTC fund
– Ontario Securities Commission support is a step forward in listing plans
– Company hopes to list the product by the end of the year
– Would give long term investors easy, regulated access to BTC - BTC futures trade a record US$40M on Bakkt
– Total of 4,443 BTC traded — over 60% higher than its previous record - Korean exchange UpBit loses 342,000 ETH worth US$51M
– Not clear yet if this was an external hack or an inside job
– The company has already stated that they will make users whole - S Korea drafts bill to provide regulatory clarity to digital assets
– Needs to be approved by the judiciary committee, would take effect 2020
– Would require all crypto businesses to register with the FSC - BTC ATM business partners with the largest US shopping mall operator
– Simon Malls will install BTC ATMs at 5 locations initially
– Hopes to grow ATM network to 500 locations by the end of next year - Price drop drives uptick in BTC Google searches
– In Taiwan, we saw a pick up in walk in account openings this week too - Total ETH locked in DeFi hits 2.7M ETH
– DeFi is a shorthand term for decentralized finance.
– Most current applications are crypto borrow / lend platforms
– Offer lenders yield in return for borrow - Thailand plans ‘competitive’ crypto laws in 2020
“ …laws should not be outdated and should serve market needs…”
– But how can incumbents protect their moat? 😛 - Bitfinex hit with another class action suit
– Like the previous NY suit one this one claims market manipulation
– Interesting how these suits continue to come out of the US despite neither Bitfinex or Tether serving US clients for several years - Ripple completes $50M investment in MoneyGram
– Last trance of $20M brings total investment to $50M - Chinese regulators shut down BISS exchange, arrest 10
– Part of a broader crack down on China based crypto exchanges
– There are still a number of exchanges facilitating trading in China - Binance threatens lawsuit against media outlet’s FUD
– Follows a ‘scoop’ from The Block in which they reported Binance offices had been raided in Shanghai
– The Block has a history of aggressively criticizing non American exchanges and crypto platforms including Bitfinex and Binance
Charts
Weekly Price
– Price gains mixed this week with a number of small mid caps leading
Historical Price
– At this point last year, BTC was testing sub $4,000 lows
Recent Price Performance
Monthly Price Performance
– Nov on pace to be the worst month of the year
– Note that it was also the worst month of last year as well
Crypto Fear and Greed
– Improves to 32 from a 2 month low of 17 earlier in the week
Monthly Average Daily Trading
– November on pace for a very active month of trading
– Especially for BTC and USDT
Volume 50 Day Z Score
– Trading low across the board
– BNB, EOS, ETH & ETC volume at the extreme bottom end of 100D ranges
