Weekly Insights #33

Written by on June 4, 2019

May 31: The week ended with a steep dump all across the crypto market, but the majority of crypto assets still achieved positive gains for the week, and some assets even set yearly highs before the decline. Market sentiment is increasingly bullish, as bitcoin crossed 9K USD mark for a short period and on-chain transactions and hashrate is nearing ATH levels. Traditional companies are continuing to launch their solutions related to blockchain technology or crypto assets and Tezos stakeholders successfully upgraded the network via a three-month-long process. We further explore what might be additional factors behind the recent surge in the crypto market.

 


NOTEWORTHY NEWS

Wall Street’s FOMO: Grayscale Gobbling Up 21% of Newly Mined BTC—May 29, Bitcoinist

According to a recent tweet by Bitcoin analyst Rhythm, Grayscale bought more than 11,000 BTC in April 2019. With 54,000 BTC being mined per month, the largest cryptocurrency asset manager is buying up about 21 percent of the monthly bitcoin supply. This suggests an increasing demand for crypto assets from Wall Street.

 

First Tezos Amendment Protocol Activates Network Upgrade-May 30 Coindesk

After three months of on-chain voting, the first Tezos Amendment Protocol process has been completed, and two backwards-incompatible changes have been automatically activated. The baking roll was reduced from 10K to 8K XTZ, and the block computation limit was increased. This is the first network hard fork executed via such a process, with more than 80% of stakeholders casting their vote.

OUR OPINION: The successful activation could be important not just for Tezos, but for the governance of public blockchains in general, which are currently governed by informal DAOs. This was the first amendment process where the activity of stakeholders was more significant than the network upgrades themselves and was a social and technological experiment. In this upgrade, no changes were contentious, and the real test of this governance approach will be tested when the majority of stakeholders split into two or more camps regarding the best approach for further progressing the network, as Bitcoin experienced, resulting in a network and community split.

 

JP Morgan Blitzing Towards Privacy for Its Ethereum Fork, Quorum—May 31, Blockonomi

Banking giant JP Morgan is continuing to build out the privacy functionalities of its permissioned Ethereum fork, Quorum. The bank’s blockchain developers have built out a modified version of Zether, a zero-knowledge proof (ZKP) system that allows users to conceal transaction amounts on Ethereum or similar account-based smart contract blockchains, e.g. Stellar. Morgan’s rendition, “Anonymous Zether,” goes one step further, allowing users to obfuscate their identities in addition to the transacted sums.

 

Yahoo! Japan to Enter the Crypto Trading Fray with Upcoming Taotao Launch—May 28, CCN

Yahoo! Japan is launching its FSA-licensed cryptocurrency trading platform Taotao on May 30. It is rumored that the new exchange will largely focus on BTC and ETH spot trading, and options trading on BTC, ETH, BTC, LTC, and XRP are expected. They have also announced that these are only the first offerings and additional crypto assets might be listed later.

OUR OPINION: This is a positive development, as it means more traditional financial firms are entering the crypto exchange business, improving ease of access for institutional investors and risk-averse individuals and increasing the legitimacy of the asset class. Such services, especially outside the US and licensed by a relevant financial authority, are much needed for the possible crypto ETF in the US. One of the main reasons the SEC has not approved a crypto ETF yet is the limited ability of the SEC to prevent spot price manipulation. Cryptocurrencies are global assets not limited to a single juridistriction, meaning financial authorities need to cooperate in order to surveil spot markets and prevent illicit activity. Licensed exchanges from reputable companies in countries where crypto trading activity is high are a positive sign for the convergence of cryptocurrency and traditional financial companies.

 


 DIGITAL ASSETS ON THE MOVE

Possible Reasons Behind This Spring’s Price Surge

The crypto market started to surge rapidly in the beginning of April; here are some possible reasons why. 

Since crypto became more popular, several individuals and companies have developed many different metrics and approaches to analysing crypto networks and native cryptocurrency price dynamics. While many fundamental metrics and statistics are being widely used and interpreted today, only a few of them are resistant to manipulation. For example, social metrics from different social networks can be manipulated by bots and fake accounts, and the focus of the average investor can also be manipulated by timing news to create social buzz. On-chain statistics like number of transactions can also be manipulated, especially on networks with low or zero-fee models.
One factor that is set in stone and cannot be manipulated that has great impact on network economics and native coin price dynamics is block reward halving. The next block reward “halvenings” are less than one year away for several large networks: Litecoin is 66 days away from a 25 LTC to 12.5 LTC halvening, and Bitcoin is 356 days away from reducing the block reward from 12.5 BTC to 6.25 BTC. Many other Bitcoin forks will have halvenings in a similar time period. Halvenings have an important impact on the price of native coins because the constant selling pressure from miners is cut in half; currently miners mine approximately 1,800 BTC per day, the majority of which is most likely sold to cover costs.
Large IT and financial companies around the world are launching products based on blockchain technology. While this is not directly related to cryptocurrencies, as most of these products are permissioned and offer completely different solutions, they are still based on the same technology, which raises the general level of knowledge and interest. Facebook’s Libra project can potentially introduce their stablecoin to millions of users (Facebook, Instagram, WhatsApp), who will be more open to real cryptocurrencies after they have some experience with similar technology.
As prices achieved new 2019 heights, social sentiment became more bullish and prices started to react more to positive news and developments. Many projects are exploiting this fact, so we see more “announcements of an announcement.” Such announcements can be about real development progress, but the crypto industry has already figured out that hype is more important for short-term price increases than actual positive development. Short-term price increases later have a multiplicative effect, as they raise even more interest and are generally a very effective marketing tool. For example, Daniel Larimer, the founder of EOS, has been hinting at a big announcement on June 1 by Block.one (B1); at the same time, B1 is conducting share buybacks and has bought a large amount of RAM, a resource on the EOS blockchain. Coinbase is also planning to capture some of the hype, as they have just listed EOS on Coinbase.com. The same positive sentiment was recently exploited in China, where gambling is very popular. Fake news that Craig Wright had proven himself to be Satoshi by transferring 50K BTC from one of the early addresses that was used to mine some of the earliest blocks by Satoshi was shared on social media, resulting in a more than 100% increase in the BSVBTC market in a span of 24 hours.
Lastly, the Tether USDT supply is growing quite fast and is currently at ATH with 3.125B tokens issued. Many things have happened with Tether and Bitfinex lately, including the clarity that reserves can include crypto assets such as bitcoin. According to Bitfinex, their 1B USDT IEO for LEO tokens was successful, but the whole situation is not very clear for those not directly associated with the organisation. Given everything that happened, it is hard to imagine who would deposit fiat with Tether and issue USDT this days. Nevertheless, there is still a possibility that issued tokens are being used to purchase crypto assets that then serve as a reserve, especially when the USDTUSD market is above 1.

 


 MARKET OVERVIEW & METRICS

Weekly Market Overview, 24 to 31 May 2019. Source: Coin360

Weekly Crypto Stats

  • Global network value is $261.65B, with a 6% weekly delta.
  • Global crypto market turnover is $101.32B, 1% from ATH.
  • Real 10 market turnover was $5B, 114% weekly delta.
  • Bitcoin dominance is 56.3%, with -0.9% weekly delta, and beta of 0.85.
  • Ethereum dominance is 10.49% with 1.8% weekly delta, and beta of 1.26.
  • Bitcoin hashrate is 59.33B TH/s, with 12.67% weekly delta.
  • Ethereum hashrate is 164.79K GH/s, with 2.79% weekly delta.

 


CHART OF THE WEEK

Bitcoin mining difficulty—an indicator of how strong Bitcoin network security is—has just hit an all-time high.

Source: Source: Twitter @kerooke

Information provided above is not to be considered as an investment advice.

ANNOUNCEMENT

Block Analitica, the company behind Squared Capital, has just launched its digital asset metrics dashboard to the public. Though still in beta, if you are interested in a more in-depth analysis of blockchain fundamentals — everything that’s happening with stablecoins, development activity, exchange balances, and much more — we invite you to register for a free account.


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