DAR Crypto Weekly — 2/1/20
4Q19 Review of Crypto Markets
Market Overview
Digital asset prices were down on the week as the total industry market cap up 9.7% to $255.7B. Large-cap winners on the week were Ethereum Classic (ETC +46.0%), Cardano (ADA +30.5%), and Litecoin (LTC + 27.6%). Laggards in the large-cap category were XRP (XRP +8.4%), Tezos (XTZ +9.9%), and Stellar (XLM +10.0%). Other noteworthy positive movers across the industry were ICON (ICX +72.6%), Zcash (ZEC +39.1%), and Lisk (LSK +37.8%). Other notable laggards on the week included LEO (LEO -2.7%), Cosmos (ATOM +1.0%), and Holo (HOLO +3.1%).
DAR Research and Events
It was a busy week for DAR, with members of our team down at the Inside ETFs conference down in Hollywood, Florida. Here DAR Chairman Doug Schwenk talking with Nasdaq about price discovery in crypto markets and some of the work we’ve done in our efforts to provide a clean price: link.
Cointelegraph picked up a version of Lucas Nuzzi’s post on innovation in Bitcoin’s technology stack. The industry’s version of “digital gold” has been anything but inert and there’s a lot to look forward to in the upcoming year and beyond: link.
The Tabb Forum ran a version of our lead-lag analysis on Bitcoin spot markets originally published by Greg Cipolaro. The Tabb Forum is a discussion board and news outlet for finance professionals and capital markets practitioners: link.
We published an op-ed on BlockTribune regarding the discussion with regulators around a Bitcoin ETF. There’s important history here going back to 2013 that market participants should understand: link.
4Q19 Review of Crypto Markets
This week we published our quarterly review of all things crypto for our clients. Normally we’d follow this up with a webinar for the general public, something we’ve done since our inception, but this quarter we’re doing something different — we’re giving our readers access to the entire report: PDF link.
Our observations about the quarter and year can be summed up with a couple of items. First, it was another tough quarter for asset price performance as most assets were down, but not all like in 3Q19. The full-year show good, but uneven performance for the asset class. The largest asset in the class, Bitcoin, was the 6th best performance asset during the year. While there were other winners on the year, most digital assets fell again in 2019, including some notable projects like Ethereum and XRP.
We’ve talked about an exponential distribution of asset price performance in the past, very much like early-stage VC investing, and nowhere was this more apparent than in 2019. This is best illustrated by the difference in median returns and average returns and the win rate (percentage of assets that were up). 69.6% of assets we track were down on an absolute basis in 2019. The average return of an asset that was up on the year was +76.3% while the median was +33.6%. The average return of an asset that was down on the year was -42.4% while the median was -50.6%. Even among winners and losers, there was a big discrepancy between the average return and what the group did.
Dispersion or the variability of asset returns was also subdued, but not as low as last quarter. As a reminder, active managers rely on low correlations as well as a high level of variability of returns in order to generate alpha through asset selection.
The macro factors that were attributed to the positive performance for Bitcoin in the first half completely reversed beginning in September. These include the price of gold, the value of the Yuan versus the USD, real yields, and the negative-yielding debt balances. Continued issuance of Tether seemed to have little to no impact on the price of digital assets during the quarter.
All eyes shift to the 3 upcoming halvings, BCH, BSV and BTC. There’s quite a bit of debate as to how those will impact prices but our observation is that they historically seem to coincide nicely with the parabolic rise in the price of Bitcoin. We’ll see what this year has in store, but the price of these assets seemed to have bottomed over a year ago, at the end of 2018.
OK, that’s enough of an overview of our report. Check out all the charts and much more, including our overview of important regulatory and technical events, in the full report: PDF link.
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.
