MaiCoin Digital Asset Weekly, Dec 6 2019

Commentary

Digital Assets ended down -5% WoW on another week of light trading. Volume across the space fell to US$58B, -23% WoW. breadth was strongly negative with only 25% of the top 200 coins and tokens ending the week higher.

Pretty slow this week for headlines — total BTC related articles were down about 25% from normal. The focus of news this week was around sovereign digital currencies as well as a few upgrades and updates from major exchanges. Top news this week included: 1) Bitfinex implementing Lightning Network support, 2) Huobi joining China’s government run blockchain alliance, 3) France to begin testing a Digital Euro in 1Q20, 4) BVI developing a USD stablecoin, 5) former CFTC Chair Giancarlo lobbying for a digital USD, 6) Bakkt’s CEO being appointed to the US Senate and 7) a Deutsche Bank report saying that cryptocurrencies could replace fiat by 2030.

Looking into next week, BTC remains in a falling wedge pattern. Price action is again starting to condense, so I think it’s likely we could see a big move next week. The first big line of resistance is the 20 day moving average ~ $7,600. If we can break above the 20 day moving average, the upside on a falling wedge breakout is typically pretty significant. That said, trader sentiment continues to feel about as bad as I’ve ever seen it. The crypto fear and greed index dipped deep back into fear territory again this week. Interestingly, the weekly candlestick looks set to end in ‘spinning top’ pattern — which typically signals market indecisions and implies that that traders are beginning to lose conviction in the current trend. Two potential reasons for optimism include a golden cross in the weekly BTC price (something that’s only occurred once previously — just before the 2016 bull run) and a continued grind higher in the Bitfinex long/short ratio. $6,800 should be a fairly robust line of support given how much time BTC spent trading there in 2H18.

Thoughts

Golden Cross in Weekly BTC price

A ‘Golden Cross’ refers to a shorter term moving average line crossing above a longer term moving average. BTC’s weekly 50 Day Moving Average looks like it is set to cross above the 100 week moving average next week. This has only happened one time previously in the history of BTC — May 2016 at the start of the last BTC bull run. Will be interesting to see how this plays out especially given the recent increase in longs/shorts.

News

  • Bitfinex Lightning Network allows instant deposit/withdrawals
    – Allows users to make transactions much faster and cheaper
    – There is currently only $6M on the Lightning Network, a Bitfinex node could see this increase considerably
    – Bitfinex has also teamed up with Bitrefill to shop with BTC over the LN
    – Allows users to buy over 2,000 different prepaid vouchers in BTC
  • Huobi joins Chinese gov blockchain alliance
    – OkEx and Huobi seemed to secured some degree of tacit approval/support from Beijing — and seem to have come through recent exchange raids unscathed.
    – Beijing’s attitude towards Binance looks a lot frostier.
    – Huobi’s platform token had a strong week on the news
  • Deutsche Bank: Crypto could replace Fiat by 2030
    – The report says digital currencies are inevitable
    – Calls cryptocurrencies the 21st century cash
  • France wants to test its Digital Currency in 1Q 2020
    – Central Bank Gov wants France to be 1st country to issue digital currency
    – Will be a digital Euro open only to financial institutions
    – Will not be open to retail users or for payments
    – “Aims to assert France’s sovereignty over private digital currency initiatives like Facebook’s stablecoin Libra”
  • Bakkt CEO appointed to US Senate
    – Kelly Loeffler, CEO of institutional Bitcoin futures platform Bakkt
    – She will replace Sen. Johnny Isakson (R-GA) who is retiring
    – Loeffler has relinquished her position as CEO of Bakkt
    – An interim CEO will be appointed before a permanent candidate is found
  • British Virgin Islands developing USD stablecoin
    – Backed 1:1 with USD, being developed by Blockchain startup LifeLabs
  • Kazakstan will not tax BTC mining
    – Mining is classified as a ‘purely technical process’
    – Will only be taxed on conversion to fiat currency
  • Poloniex is kicking US users off their platform
    – US users will see their balances fined or confiscated after Dec 16
    – Fees include a monthly service fee and a 1x dormancy fee
    – “Unclaimed assets may be sent to state governments” (?!)
  • Bakkt open interest hits record high
    – Points to new capital inflows
    – Follows a steady increase in daily trading on the platform
  • Bank of Japan: There is no demand for state digital currency in Japan
    – Says there is already a wide variety of JPY denominated digital money
    – Cautious on stablecoins until the ‘risks are addressed’
    – In other news Jpn’s MUFG Bank denied reports of new Digital Currency
  • Stolen Upbit tokens on the move
    – $1.5M of the $51M total ETH stolen from Upbit last month has moved
    – The wallets associated with the hack are being very closely watched
  • Former CFTC Chair joins law firm to lobby for digital USD
    – Former CFTC head Christopher Giancarlo intends to continue advocating for the creation of a digital USD
  • XMR implements ASIC resistant algo
    – The new upgrade is optimized for CPU mining in an effort to discourage GPU and ASIC mining and increasing decentralization
  • Ripple moves 1 billion XRP back into escrow wallet
    – Ripple sold $66M XRP in 3Q19 and $251M in 2Q19
    – A lot of investor criticism recently around Ripple selling
    – Ripple maintains that selling is used to fund investments in the ecosystem

Charts

Chart 1. BTC falling wedge
– Falling wedge breakouts typically see a pretty strong reversal
– Bitfinex Long/Short ratio continues to move higher

Chart 2. Price Performance

Chart 3. Price by Thematic
– Huobi Token +6.8% led gains amongst exchange tokens after joining China’s blockchain alliance (thought to show a good relationship with government)
– Some big moves in IEOs — MATIC +48%, MTC +21%

Chart x. Historical Prices

Chart x. Average Daily Volume — By Month

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