Maicoin Digital Asset Weekly, Dec 13 2019

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

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

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