DAR Crypto Weekly — 2/21/20
How to Use the News
Market Overview
Digital asset prices were down on the week with total industry market cap down 8.0% to $272.6B. Large-cap winners on the week were Tezos (XTZ +6.7%), Chainlink (LINK +3.9%), and Huobi Token (HT -3.5%). Laggards in the large-cap category were Bitcoin Cash (BCH -22.3%), EOS (EOS -22.0%), and TRON (TRX -21.4%). Other noteworthy positive movers across the industry were Algorand (ALGO +18.4%), ICON (ICX +8.2%), and OKB (OKB+5.6%). Other notable laggards on the week included Ravencoin (RVN -21.2%), Lisk (LSK -20.2%), and Bitcoin Diamond (BCD -20.1%).
How to Use the News
Understanding what’s happening in crypto is a tough job. Not only does trading and the news cycle never stop, it comes from all sorts of places — dev meetings; official websites, blogs, and Twitter handles run by the projects; news organizations and reporters; and crowdsourced news on social media sites like Twitter. This is opposed to US securities markets, which trade Monday — Friday 9:30 AM — 4:00 PM. Information is conveyed from publicly-traded companies on regular intervals like quarterly earnings calls and corporate filings as well as press releases and publicly available presentations from company executives. All this can be packaged up and consumed through financial analysis software, like a Bloomberg terminal. But no such service exists in crypto and as such, simply acquiring all possible information is a challenge. You’ll probably notice a symptom of the disease is the number of browser tabs concurrently open.
Even if all information can be ingested, there’s no guarantee sense can be made of it in part because often the information requires context or specialized knowledge. Also, terms and definitions aren’t standardized across the industry or from project to project. When Apple “reduces sales guidance”, you know it’s the same as “decreases revenue estimates” or “lowers turnover projections.” The same can’t be said in crypto.
Even if the context is understood though, price reactions aren’t always commensurate or even reflective at all. That double-spend attack on Ethereum Classic at the beginning of 2019? Ethereum Classic outperformed Ethereum and Bitcoin during that time frame. Pausing the Coordinator on IOTA two weeks ago (i.e. halting their chain)? That caused about 10% underperformance compared to Bitcoin, a seemingly trivial amount given the severity of the issue.
Google Partnerships Provide a Jolt
But news can and does move prices. The recent news that Google Cloud Platform (GCP) was “working with” Hadera Hashgraph pushed its token price up nearly 340%, for example. We put “working with” in quotes because the article meta headline “Hedera Hashgraph Chose Google Cloud as Its Preferred Cloud Provider to Help It Bring Enterprise-Ready DLT Adoption at Scale” complicates the matter — it indicates that Hashgraph chose GCP, not the other way around. Frankly, the post reads more like a customer testimonial for GCP than anything else, but we’ll let you decide. Remember, we saw a lot of these “partnership” announcements in the mania of 2017, so be careful sifting through news. Just because you wear Nikes doesn’t mean you’re a Nike sponsored athlete.
The Hadera post from Google indicates a more symbiotic relationship than a vendor selection, however, given that Google has also been added to the Hadera Governing Council, alongside IBM, Boeing, and Tata Communications, among others. We don’t know the actual economics of the relationship but cloud competitors like Amazon AWS and Microsoft Azure frequently partner with Software-as-a-Service (SaaS) companies, open-source software solutions, and proprietary software implementations to bring offerings to clients. They don’t just offer raw storage and compute. They even have blockchains-as-a-service (BaaS) offerings that enable clients to spin up nodes for Ethereum, Hyperledger, or other blockchains easily.
No doubt, Google is a powerful brand and its association with a cryptocurrency historically has driven prices. When Google posted that GCP used Chainlink oracles to provide data from BigQuery, it drove the price of Chainlink up 76% in one day. Subsequent news, like the listing of trading on Coinbase, ultimately drove the price of Chainlink up nearly 1000%. And while it didn’t hold those gains over the year, Chainlink ended 2019 as the best performing digital asset we track.
So yes, news can be an important trading signal. Just be aware that looks may be deceiving and crypto has a short memory. Traders are often looking for the next shiny object.
That’s all the time we have this week. Please reach out with any questions, comments, or feedback on our work. Get our weekly wrap and daily news delivered directly into your inbox here.
