State of the Market I (September 2018)

Macro summary in the past month:

From Coinmarketcap, as of Sept 29, 2018


  • People were trading more in September, at least relative to market cap. Despite the market being down, and likely as a result, crypto investors found buying opportunities in these lower prices. Trading volume as a function of market cap was notably higher in September (6.8% vs 5.6%).
  • Ripple grew its market dominance to 10% — the same as Ethereum. Everyone heard about Ripple’s coin price, which doubled in 2 days. However, less people knew that as a result of this unprecedented spike (even for crypto markets), Ripple’s market cap exceeded Ethereum for a brief period of time. The coin was boosted by Ripple’s announcement that it had a new product for banks to improve their transaction speeds (a noteworthy problem to solve).
  • The U.S. Government spends $5.7 million on blockchain analysis firms. The U.S. government, it turns out, is one of the biggest funders of crypto analysis firms. The reason behind this is plausible. One of these firms is Chainalysis, which helps monitor on-chain transactions. This is useful for regulators and tax collectors, who can more clearly identify who is making what kinds of transactions, and consequently who is evading tax payment. 93% of this $5.7M has gone to Chainalysis :O
  • Speculators have come and gone; informed investors have remained constant. For Bitcoin at least, it seems that the proportion held by speculators has remained roughly the same from May to Auguest, at around 22% of total BTC supply. This was a highly fluctuating number in the period from September ’17 to Feb ’18, and is indicative of a more informed investor base becoming involved, while the so-called “weak hands” have been pushed out of the market.

Positive developments:

  • Coinbase welcomes altcoins. Coinbase is changing its application process to attract more altcoins, all of whom are pretty eager to be listed on the U.S.’s largest crypto exchange. It’s an inevitable boost in transaction volumes and accessibility for the ones that are accepted and onboarded.
  • Walmart x IBM is latest tag-team for Big Blue. More and more so, institutions are looking to implement blockchain into their processes. Whether this is for boosting share prices or genuinely improving processes depends on the use-case in question. However, IBM is a key player that helps these companies develop blockchain solutions, acting as a consultant. The latest in the mix is Walmart, which is looking to track food from farm-to-store using a distributed ledger system. The goal is to streamline recalls and reduce the number of food-borne diseases. Big Blue has also worked with Tyson Foods, Unilever, Nestle and Driscolls for food supply chain, as well as others in shipping and banking (a more limited scope).
  • Crypto is a beacon of hope for economic-stricken countries. Countries in South America facing a lot of political and economic turmoil, including Venezuela, Argentina, and Columbia, also had some of the highest weekly transaction volume in crypto. It seems that individuals that want to take their money out of the country have resorted to crypto after most legal systems in place have been temporarily disabled.

Negative developments:

  • SEC delays decision on Bitcoin ETFs till Dec, possibly Feb. The agency is actively summoning as many comments from the public as possible, likely not in order to actually listen to the public, but more in an effort to buy themselves some time. The SEC’s concern, which is a valid one, has to do with market manipulation of the price of Bitcoin, given the disparity in ownership (a significant proportion of coins is owned in China). The concern would be that these countries would be able to manipulate the price of the ETF, listed in the U.S., and therefore affect retail investors that own the ETF. We should have more clarity in Q1.
  • New Month, New Hack. Your money ain’t Zaif. It would be strange if we didn’t report a hack in the month, although in general the market has improved its resilience. The latest to be hacked was a Japanese-based crypto exchange — Zaif — that lost $60M in BTC, BCH and MONA. It plans to refund users.
  • Killing the Earth one BTC at a time. Likely one of the costliest jobs in the world today, mining just 1 Bitcoin now costs more than $4000 per BTC in terms of average electrical costs, excluding overheads, machinery and equipment, which probably shouldn’t be overlooked if you’re planning to get in the field. If the electrical cost is $4000, imagine for a second how much electricity you’re using. To break even, you’d have to get your costs low enough such that mining becomes a profitable endeavor. At $6500, margins are slim. In China, however, if you pool resources, you’ll probably make it out with a pretty decent return given lower electricity costs and overhead in general. Clearly the market has noticed this — 81%+ of Bitcoin’s hashing power comes from Chinese territories.