NKB Group's Blockchain Market Update

30 July 2018

SUMMARY

  • Bitcoin’s dominance continued, rising 45.6% to 47.5% over a week with Bitcoin reaching over the $8,400 level. The best performers among the top-40 crypto assets were VeChain (39%), Binance Coin (12%) and Zcash (10%). Bitcoin Diamond(-51%), Ethereum (-1%), XRP (-1%), and Cardano (-9%) were among the losers.
  • Winklevoss Brothers’ ETF proposal has been rejected for the second time
  • Swiss regulator investigates Envion ICO
  • TransferGo adds crypto trading
  • Telegram introduces Telegram Passport
  • Ethereum is testing code for the next upgrade
  • Largest Wall Street Crypto Firm lost $134 million in Q1

MARKET MOMENTUM

The Bitcoin price continued its climb by another 6% after its 18% gain over the course of the previous week. The price reached $8,200 and remains around $8,100 now. The best performers among the top-40 crypto assets were VeChain (+39%), Binance Coin (+12%) and Zcash (+10%). Bitcoin Diamond, which jumped over 100% on the announcement of trading admittance on HitBTC, lost 51% last week. Ethereum (-1%), XRP (-1%), Cardano (-9%) were among the losers last week.

Figure 1. The performance and market capitalisation of top-40 cryptocurrencies (by MktCap)

Source: coinmarketcap.com, as of 30 July 2018 as of 8:45 AM UCT

Figure 2. Best performing digital assets* with Market Cap (7 days)

Source: coinmarketcap.com, *) MktCap>=$40m

Figure 3. Worst performing digital assets with Market Cap (7 days)

Source: coinmarketcap.com, Mkt Cap >=$40m

A number of events affected the market’s performance last week.

  • Blockchain projects are providing good newsflow around upgrades and additional services, including the decentralised crypto exchange on Waves, Telegram’s Passport feature, additional services by TransferGo, and CLS testing for blockchain payments, amongst others
  • Winklevoss Brothers’ ETF proposal has been rejected for the second time
  • Restrictions applied by regulatory bodies, including trading limits set by the Japanese self-regulatory crypto exchange association on client trading, and FINMA investigations into the Envion ICO, show the sector’s move under the regulatory umbrella is inevitable and not actually affecting investors’ moods.

REGULATORY NEWS

Japan self-regulatory crypto exchange association may set trading cap for some clients
The Japan Virtual Currency Exchange Association (JVCEA) will require member-exchanges to limit the trading activity of some clients, according to Cointelegraph. They give maximum limits on the traded volumes which may be placed by exchanges, to protect investors with “small assets” from heavy losses. There will be two options to set limits: to set one fixed maximum limit for all small asset traders, or to set different limits for different customers depending on various factors. Currently, the association includes 16 crypto exchanges. It was formed following the hack of Japan-based crypto exchage Coincheck in January 2018.

The Swiss regulator investigates Envion ICO
The Swiss Financial Market Supervisory Authority (FINMA) announced it has launched enforcement proceedings against the blockchain startup Envion AG for breaking financial markets rules during ICO. The startup company raised $100m in the ICO in 2018. According to FINMA, the proceedings focus on “possible breaches of banking law resulting from the potentially unauthorised acceptance of public deposits in connection with the Initial Coin Offering for the EVN token”. Envion accepted funds of c. CHF100m from more than 30,000 investors in return for issuing EVN tokens in a bond-like form.

SEC postponed decision on five Bitcoin ETFs until September 2018
The SEC has postponed the the review of Direction Asset Management’s proposal of five Bitcoin ETFs until 21stSeptember. The SEC statement explains, “The Commission finds it appropriate to designate a longer period within which to issue an order approving or disapproving the proposed rule change so that it has sufficient time to consider this proposed rule change. Accordingly, the Commission designates 21stSeptember 2018, as the date by which the Commission shall either approve or disapprove the proposed rule change.”

The Direction ETF proposal is just one of many waiting “in line”. NYSE submitted their ETF proposal in January, as did CBOE together with VanEck and SolidX just couple of week ago. Meanwhile, Winklevoss twins’ ETF proposal has been rejected for the second time as the SEC is not yet “convinced of the relevant surveillance” of Bitcoin and its market manipulation in particular.

CRYPTO MARKET NEWS

Telegram introduces Telegram Passport
Telegram Messenger, which held one of the largest ICOs for $1.7bn this year, announced the launch of Telegram Passport in its recent blog. Telegram Passport was among the first features mentioned as part of the roadmap of Telegram Messenger. Telegram Passport allows the upload of all users’ documents in a secure way, and then shares the data instantly with services that require real-world ID, like financial services, ICOs and others. This is a unified authorisation method, which uses end-to-end encryption, so Telegram has no access to the data. Data is shared by a user directly with the recepient. Telegram stated that the data will be moved to a decentralised cloud in the future.
The implementation of Telegram Passport works in ePayments.com, according to the blog. Telegram has invited all developers to integrate Telegram Passport into their apps and services free of charge.

TransferGo adds crypto trading
The UK-based remittance service TransferGo became the first remittance operator to offer crypto trading. There are five major cryptocurrencies now added to the service: Bitcoin, Ethereum, Ripple, Bitcoin Cash, and Litecoin. TransferGo said there were over 4,000 users signing up for this service within the first few hours, of their 600,000+ current users. In 2017, the global remittance flow to developing countries reached $466bn.

Ethereum is testing code for the next upgrade
Ethereum developers are testing the code for Constantinople, the next network upgrade. Constantinople will be activated some time before October, when Ethereum will hold Devcon4. The implementation stage continues untl 13th August, followed by two months of testing and the launch of the Constantinople-specific test network. It includes EIP 210, which reorganizes how block hashes are stored on Ethereum, EIP 145 and which increases the speed of arithmetic in the Ethereum Virtual Machine (EVM), EIP 1014 focuses on the addition of Ethereum state channels, and EIP 1052 which optimizes how the contract interacts, and which aims to improve the efficiency of the blockchain. Constantinople is the second part of the two-part upgrade after Byzantium activated in October 2017. Two changes to the protocol, including a difficulty bomb and new gas pricing model, are delayed.
 
Iran plans National Cryptocurrency to evade US sanctions
Iran is seeking ways to bypass US economic sanctions and, according to the Chairman of the Parliamentary Economic Commission, Mohammad Reza Pour-Ebrahimi, cryptocurrencies are one of the major mechanisms Iran can leverage not only to evade the US sanctions, but digital currencies can help get rid of the dollar hegemony in international trade as well. The Deputy head in charge of investment affairs, Alireza Daliri, further noted that state-backed digital currency would back and tokenize Iran’s national currency the Rial. Since Washington pulled out of the nuclear deal and threatened Iran with sanctions, beginning 6thAugust, the Rial has lost more than 50% of its value.
 
City of Nanjing launches $1.5 billion Blockchain Fund
The capital city of China’s Jiangsu province Nanjing, together with the Zhongguancun blockchain alliance, has launched a $1.5 billion fund which aims to invest in blockchain technology startups. The alliance represents a conglomerate of blockchain companies as well as government research institutes based in Beijing. Nanjing’s investment fund is not the first government-backed fund in China; earlier in April, the city of Hangzhou announced another $1.6 billion blockchain fund.
 
Largest Wall Street Crypto Firm lost $134 million in Q1
Galaxy Digital, the cryptocurrency investment bank, founded by former macro-trader Mike Novogratz, has released its first quarter report, posting a $134 million loss — $85.5 million net unrealized loss on digital assets, $24 million loss on investments, $11 million in operating expenses and lastly $13.5 million loss from its income. Despite the huge loss, Novogratz said that he is “very proud of the progress that we have made since the beginning of the year.” The report further confirmed Novogratz’s intentions for RTO to have shares listed on the Canadian stock exchange. The results from the second quarter are yet to be released.
 
Pantera Capital reports 10,000% gains over 5 years of existence
One of the major cryptocurrency investors, Pantera Capital, has reported a lifetime return on investments, exceeding 10,000% net of fees and expenses since its launch in 2013. Pantera has also revealed its very first email to investors, when Bitcoin was at $104 arguing that “ Bitcoin dominates cash, electronic fiat money, gold, bearer bonds, large stone discs, etc. It can do all of the things that each of those can. It’s the first global currency since gold. It’s the first borderless payment system ever. It’s like deciding whether to buy Microsoft back in the day at $0.20 a share.”
 
CoinDesk’s Q2 2018 Report
Coindesk’s 100+ slide analysis of the industry covers market interest in public blockchains, quarterly interest around Bitcoin and Ethereum, data around trading, ICOs, SAFTs, VC, regulations, tech development and more. Eventually, report shares sentiment survey of 1200+ readers.

CRYPTOASSETS' PERFORMANCE

Bitcoin rose 6% in a week, wth levels over $8,400 seen during the last 7 days. The charts may indicate some correction is possible from this level. 20DMA is close to 90DMA. Trading volumes have increased,as well as bitcoin dominance by another 2% withinin the space of a week to 47.5% on 30th Jul 2018.

Figure 4. Bitcoin price, USD (YtD)

Source: cryptocompare.com, NKB Research

Litecoin relative performance remained weak versus Bitcoin, as all the interest has been focussed on the major cryptocurrencies over the past three weeks. The current level is close to 0.10 BCT/LTC. BTC play is the stronger one, while LTC remains a follower with significant reduction in investor interest now.

Figure 5. Litecoin price, BTC/LTC (YtD)

Source: cryptocompare.com, NKB Research

Ethereum stays at $460–470. This was not an Ethereum week, with Bitcoin catching all the investors’ imagination. Ethereum remains at an historically low level compared to Bitcoin of 0.0565BTC/ETH, last seen in March this year and before in December last year, when Bitcoin was climbing to $15,000-$20,000.

Figure 8. Ether price, USD (YtD)

Source: cryptocompare.com, NKB Research

Market Data Source: Coindesk.com as of 16:00 CET 30/07/2018

This report is for informational purposes only. It is not intended as an offer or solicitation for the purchase or sale of any financial instrument or as an official confirmation of any transaction. All market prices, data and other information contained in this document has been prepared from sources believed to be reliable, but we give no representation or warranty that the information is complete, accurate or current. Past performance is not a reliable indicator of future performance. Not for further distribution. Investments in cryptocurrencies associated with essential risks, including risk of losing 100% of value. Not for the distribution in countries where digital assets are recognized as illegal.

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The report is prepared by NKB Group in collaboration with Hypothesis Research Ltd (UK).