Commentary
Digital Assets ended the week -5% on weaker volume. Trading this week slimed further to a daily average of $54B, -4% from the previous week. Breadth was again negative with only 25% of the top 200 coins and tokens ending the week higher.
Trading this week was relatively tame at the aggregate level — shrugging off action in the macro world with the USD falling to a 6 month low, GBP surging following a Conservative landslide election win and ECB’s Lagarde commenting on inflation and negative rates. Trading across the digital asset space saw volatility constrict to the lowest point in ~ 6 weeks — and one of the lowest overall levels of the year.
Action was focused in smaller coins and tokens with IEOs down a median -12% while ATOM +16% and XTZ +36% rallied reports on being added to Binance’s staking platform.
One of the more interesting themes of the week was that of mainstream companies embracing public blockchain technology with 1) Nike looking to tokenize shoes on ETH, 2) Twitter setting up a dedicated decentralized social media team and 3) Santander redeeming a $20M bond on the ETH blockchain. Outside of that it was again a mixed bag with 1) Bakkt launching regulated BTC options, 2) Circle and ConsenSys executing headcount reductions, 3)Houbi closing US offices, 4) BitMEX getting sued for $300M by its (alleged) first investor 5) South Korea considering a crypto capital gains tax and 6) New Jersey authorities arresting organizers of an alleged $772M Ponzi scheme (it’s not only Chinese that love Ponzis!).
Looking into next week, BTC is struggling to gain traction after drifting out of the falling wedge pattern of the previous 2 months. Price this week has been unable to establish positive momentum after a handful of tentative breaks above the 20 day moving average. Trading this week was generally characterized by both lower lows and lower highs. Not a great sign. Volatility also continued to decrease with Bollinger Bands contracting to their tightest range in months. Typically this foreshadows a significant price move. The previous 2 times BTC volatility condensed to the current level price broke lower. A break lower will likely see support at $6,500 — $6,800 given the amount of volume that traded in that range 2H18.
Thoughts
Hedging Hashrate Growth
BTC hash rate bounced back this week to 96% of its all time high in October. This is contrary to my expectation that an end to seasonal rains in China would result in a shelving of inefficient machines and a drop in overall hash rate.
3 of the major inputs into a miner profitability model are BTC price, hash rate, and electricity price. Of the 3, hash rate is probably the most difficult to accurately predict. Reports this week of new derivative products to hedge hash rate are an interesting development. The crypto derivatives space is maturing quickly, think it’s a matter of time before we see a growth in more products to help miners hedge hash rate’s constant grind higher.
News
- Bakkt launches regulated BTC options
– Bakkt is using its futures contracts as a benchmark for other products
– Options are regulated by the CFTC
– Have no exposure to unregulated BTC spot markets - Nike uses ETH blockchain to tokenize shoes
– Tokenized as a non-fungible token (NFT) on ETH — CryptoKicks
– Token would be “unlocked” by linking shoe ID code with owner ID code - Twitter team is developing a decentralized standard for social media
– Will initially focus on deciding whether to use an existing decentralized standard or to advance or create one from scratch
– Ultimately, Twitter hopes to be a client of the new standard - BitMEX sued for US$300M by reported 2015 seed investor
– Frank Amato and RGB Coin’s $30k investment wasn’t converted to equity
– Investor’s position is thought to be worth US$50M
– Additional $250M is for damages - ECB’s Largarde wants to be ahead of the curve on stablecoins
– They are so far behind…I don’t think they can even see the curve
“My personal conviction on the issue of stable coins is that we better be ahead of the curve. There is clearly demand out there that we have to respond to.”
– The demand is for non sovereign digital assets with a high degree of user freedom — like BTC and USDT — demand for sovereign digital assets is much less certain (BoJ: ‘No demand’ for state digital currency) - Jailed Silk Road founder predicts BTC to hit $100,000 — as early s 2020
– Silk Road was a dark web site that used BTC to facilitate transactions for illegal goods and services. The site’s founder, Ross Ulbricht, had 144,336 at the time of his arrest.
– Silk Road helped early BTC adoption, but was negative for its reputation (Silk Road is why many still think BTC is only used by criminals)
– In 2015 Ulbricht was sentenced to a double life sentence.
– Ulbricht’s analysis is based Elliot Wave Theory (technical analysis) - MATIC drops 60% on — false — rumors of insider selling
– Rumors were spread on Telegram of movement between MATIC wallets
– MATIC denied any wallet movements or selling - BitMEX enables Segwit support (finally)
– Segwit is a BTC scaling solution first rolled out in August 2017
– For users this means lower transaction fees
– For the broader BTC network it means increased capacity - Circle lays off 10 employees
– Laid off 30 employees in May, representing 10% of headcount
– The company sold Poloniex in October for $400 million
– Poloniex has sincefirewalled U.S. users to focus on non US markets - ConsenSys shutters operations in Philippines and India
– ConsenSys is the primary ETH development company
– Total headcount cut of 11 people
– Last year the company reduced their 1,200 person staff by 13% - BTSE looks to raise $50M in tokens issued on Blockstream BTC sidechain
– BTSE is a spot and Futures exchange based in Dubai
– Blockstreams Liquid allows for the issuance of ICO like tokens on BTC
– The ability to create smart contracts positions BTC and Liquid as an alternative platform to ETH for launching new crypto assets. - Huobi leaves US market
– Customers have until Jan. 31, 2020 to withdraw all of their assets
– Huobi opened their US business last year
– Follows a string of trading platforms leaving the US - OKEx aims to launch options trading by the end of the year
– Options trading targeted to kick off on Dec. 27 - South Korea suggests implementation of crypto capital gains tax
– This reads like it’s pretty high probability, targeted for mid next year - New Jersey authorities arrest founders of $772M Ponzi scheme
– BitClub Network promised massive rates of return in exchange for investments in a shared cryptocurrency mining pool
– Sounds a lot like PlusToken which raised $2.2B from Chinese investors - LedgerX places founders on leave following CFTC issues
– Due to long “…long-lasting disagreements with the board about the vision and direction of the business.”
– Founder Paul Chou famously took aim at the CFTC on Twitter with a string of spicy Tweets in August when the CFTC said that their product had yet to secure CFTC approval - Santander redeems $20M bond using ETH blockchain
“We just performed an early redemption of our blockchain-based bond that we issued on September 10th, 2019. This unequivocally proves that a debt security can be managed through its full lifecycle on a blockchain (public in this case).”
Charts
Chart 1. BTC price, Bollinger Band Width and Volume
– We’ve dribbled sideways out of the falling wedge
– Price is now bracketed by 2 big volume peaks
– Volatility (Boll Band Width) is low, this often foreshadows big price moves
Chart 2.
– Most major coins and tokens -3% to -5% this week
Coin 3. Price performance by top coins / tokens
– XTZ and Atom the week’s to major standouts
– Both driven by reports of support on Binance’s staking platform
Chart 4. Major sectors
– IEOs hammered this week following (false) reports of MATIC insider selling
Chart 5. BTC vs Everything Else
– Most major digital assets are trading in lock step
– BTC looks to be leading direction in the market
