Weekly Market Report-June 22nd 2019
This weekly report aims to provide an overview of the crypto markets focusing on secondary market trading. Though nothing here is investment advice, we hope this provides some useful and targeted information.
Market Overview
We are focusing our market overview on the top 100 tokens from CoinMarketCap and the sector classification is roughly in line with what MyToken uses with some minor modifications. We will be continuously updating the sectors and their constituents as we develop a deeper understanding of the crypto ecosystem.
This week’s new participants in the top 100 coins:
RDD, EKT, ODE, GRIN, LEO
Coins that dropped out of the top 100 coins compared with last week:
CNX, LOOM, ARK, DGD, WTC
Rolling Returns of Top 100 Tokens by Sector
Returns of the top 100 Tokens by sector from May 22, 2019, to June 21, 2019
Returns vs Volatility
This is a look at the mean and total daily returns vs volatility for the 15 sectors as well as the overall crypto and equity market. Some sectors only contain one or two coins/tokens while others have more than a dozen –
Mean Daily Return vs Volatility from May 22, 2019, to June 21, 2019
We abbreviated the names of several sectors to make it easier to view:
M = Market
DC = Digital Cash
CP/MP = Computing Power/Mining Pool
A/M = Advertising/Media
G/E = Gaming/Entertainment
C = Classics
D/GT = Dividend/Governance Token
E/T = Exchange Token
OC/I = Off Chain/Interoperability
Correlation Between Daily Returns of Each Sector
Correlation between daily returns of each sector from March 21, 2019, to June 21, 2019. Correlation ranges between -1 and 1. A correlation close to 1 or -1 means a very positive or negative relationship between the two subjects, respectively. A correlation close to 0 means no linear relationship between the two subjects.
The above figure shows the correlation between the daily returns of each sector. Starting last week, we added the price movement of gold to our market analysis. Similar to SP500, gold displays a rather weak correlation with the overall crypto market.
Focus Spotlight — Libra Coin
Last Friday Facebook made the headlines as Wall Street Journal released a report discussing Facebook’s plan to launch their cryptocurrency Libra Coin. According to the report, over a dozen companies have joined together to invest in a consortium that will govern the digital coin. Though the coin was initially designed to power Facebook’s payment channel, Facebook itself will not have entire control over its development.
On June 18, 2019, Libra released their whitepaper, detailing the coin’s infrastructure and as well as future plans for development. Here are some key takeaways:
Libra Coin
- Libra Coin is designed as a stablecoin backed by a mix of fiat deposits and short-term government securities. Unlike most stablecoins, it is not pegged to a specific fiat currency
- Reserve for Libra is sourced from investors in the separate Investment Token as well as Libra users
- Libra Association will not set monetary policy for Libra Coin. Changes in token supply are solely based on deposits and withdrawals to the reserve
Libra Network
- Libra Association consists of major players from the payment, tech, telecommunication, and blockchain industry. The project aims to expand to over 100 members by H1 of 2020
- Libra coin will run on its native blockchain, which will start out as a permissioned blockchain, meaning that only members of Libra Association can run a validator node
- The blockchain is built using the new “Move” programming language, focusing on the security feature of the network
- Libra testnet is open-sourced and available for testing. Its mainnet is expected to launch in 2020
Following the newly released details, Libra received mixed reactions from the public. The project was well-received by many crypto enthusiasts as it serves as an opportunity to educate people about public-private keys and crypto usage. With more than a billion users worldwide, Facebook has already established an enormous user base with its user demographics distributed across users of all ages. If proven successful, Libra may push cryptocurrency into mainstream adoption.
Meanwhile, many voiced their concerns regarding the project’s development. While Libra is designed for instant, low-cost, cross border payments, it faces stiff competition against existing projects such as Stellar and Dash as well as other traditional payment processors including WeChat and AliPay. At the time of writing, the two companies have not yet provided any comments on the project.
On the other hand, Libra is facing heavy regulatory scrutiny as a result of Facebook’s earlier security and privacy issues. In addition, Libra Coin poses a threat to central banks’ ability to conduct monetary policy. In the United States, senators from the Democratic party have called for a halt in the project’s development, as “Facebook is already too big and too powerful, and it has used that power to exploit users’ data without protecting their privacy.” In Europe, Russian officials have stated that Libra will not be legalized in Russia, while politicians in France and Germany expressed their concerns that Libra may become a sovereign currency and could empower Facebook to become a shadow bank.
In terms of issues with user data privacy, so far the project has failed to provide a clear and convincing solution. According to Libra’s whitepaper, Facebook created Calibra “to ensure separation between social and financial data and to build and operate services on its behalf on top of the Libra network.” However, as Calibra states in their consumer data privacy policy, “when you authorize a payment, we share data with third parties necessary to process that transaction. We also share Calibra customer data with managed vendors and service providers — including Facebook, Inc. — that support our business. In both cases, we share only the Calibra customer data that is necessary for completing the defined activity or service.” In other words, Libra users will not enjoy the privacy feature of cryptocurrency, as users’ financial data will be shared by Facebook and other business entities.
Finally, the greatest concern with Libra involves its limited market reach. While Libra is created to help the unbanked, the project may find difficulty reaching this population. According to World Bank’s Global FinDex Database 2017, China and India have the largest unbanked populations of 224 million and 190 million adults, respectively. Furthermore, India is currently Facebook’s largest market with over 260 million users.
In China, the payment industry is already dominated by WeChat Pay and Alipay. In addition, China has banned Facebook along with other platforms including Instagram and WhatsApp. Meanwhile, in India, the Reserve Bank of India has prohibited banks and regulated business from dealing with virtual currencies. Earlier this month, a bill was also introduced to add a 10-year jail sentence to those that “mine, hold, sell, transfer, dispose, issue or deal in cryptocurrencies.” Given limited access to the world’s largest markets, Libra may find difficulty achieving global dominance and fulfilling its intended purpose.
Libra coin is an ambitious project aimed to revolutionize the world’s payment system. While it benefits from the strong support of leading tech and payment companies with direct access to billions of consumers, Libra must overcome issues with fierce competition, regulations, and limited reach to restricted regions before it can become a viable global coin.
Thank you for reading this week’s report! Please leave a comment below to share your thoughts and ideas on crypto trading!
Data Source
We included data from sources such as CoinMarketCap for analyzing price movements, volatility, mean daily return, and correlations between each sector; MyToken for sector breakdown; Worldbank for Global FinDex Database; Libra Whitepaper and Calibra website for project information.
Stay Tuned Here
KRONOS is a leading quantitative research firm based in Taipei, Shanghai and Beijing. We’re bringing new asset management strategies to the crypto world by leveraging our combined decades of experience trading in global traditional markets.
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