MaiCoin Digital Asset Weekly, Sep 20

MaiCoin Digital Asset Weekly, Sep 20 2019

Commentary

Digital Assets ended the week +2% on better volume. Trading grew 14% WoW to a daily average of US$57B. A rally across smaller coins and tokens saw BTC dominance fall to a 6 week low of ~ 67% and breadth increase sharply with 68% of the top 200 coins and tokens ending the week higher.

This week’s Alt Coin rally looks to have been kicked off by ETH and driven by the migration of USDT transactions to Ethereum from Omni. The rally already looks to be fading. As mentioned previously, I think a sustained, broad based Alt Coin rally is unlikely at the moment — we’re probably too early in the cycle and the overhang of sellers is just too large.

Top stories this week included: 1. Messaging app Line launches Bitmax exchange in Japan, 2. Binance opens US platform for registration and plans CNY OTC desk launch in Oct, 3. China cracks down on miners, 4. Germany and France give firm NO to Libra, and 5. HTC plans to add a full BTC node in its next generation crypto phone.

Looking into next week, I expect to see a significant pick up in volatility. As highlighted last week, BTC is really getting down to the business end of the triangular price formation that’s been playing out over the past 4 months. On top of that, volatility (as measured by Bollinger Band Width) has also now fallen to ~ 6 month low. This looks to be a classic Bollinger Band Squeeze — a signal that can foreshadow a significant advance or decline.

All of this fits in really well with the launch of Bakkt next week on Sep 23. Bakkt is the much anticipated (and delayed) institutionally focused BTC futures trading platform run by ICE — one of the world’s largest operators of traditional trading exchanges. In short, expect to see a big move next week.

Support and resistance targets remain largely unchanged. Think near term resistance probably moves down a bit to ~ $10,800. If we break that, $13,000 is in the cards. If we break $13,000 — given how little volume has traded above this level — outlook becomes very bullish. On the downside, support is between $9,300 and $9,800 depending on how you draw the triangle. Below that expect strong support at $8,500 (convergence of 50% Fibonacci retracement and the 2018 full year volume weighted average price).

Thoughts

How Much of the ETH rally was USDT rotation?

Coin Metrics released some interesting analysis this week highlighting how Ethereum based USDT transactions recently eclipsed USDT Omni transactions. Interestingly, this transition lined up really well with this week’s ETH price spike.

One of the interesting findings in the report is that “USDT-ETH is generating so many transactions that it recently accounted for over 25% of all Ethereum transactions on September 8th, and has consistently accounted for more than 10% of all Ethereum transactions since mid August”

Chart below shows how the price bounce in ETH lines up very well with USDT-ETH transactions overtaking Omni transactions. It looks likely that for the foreseeable future the largest single use case of ETH will be to facilitate USDT transactions.

Technicals imply breakout around Bakkt launch

After more than a year of delays, next week Bakkt will finally begin offering physically settled BTC futures trading to mainstream institutional investors. Interestingly, the timing of this launch matches up very well with expectations of a breakout (either up or down) from the the triangular price pattern BTC has been forming over the previous 4 months.

This looks now to be a classic Bollinger Band Squeeze. Bollinger Band Squeezes occur when volatility falls to low levels and the Bollinger Bands narrow. These periods of low volatility are typically followed by periods of high volatility. Meaning that a narrowing of the bands can foreshadow a significant advance or decline.

Starting Sep 23 (next Monday), Bakkt will offer 2 products: 1) A daily settlement BTC future, and 2) a monthly BTC futures contract. Expect a lot of news around how this product trades next week.

News

• Line launches new exchange — Bitmax — Targets 80m Japanese users
  - Line is 73% owned by South Korea’s Naver
  - Offers trading in BTC, ETH, LTC, XRP and BCH
  - Part of a trend amongst messaging apps to monetize large user bases
• Binance to roll out CNY OTC trading platform in Oct
  - Will be interesting to see how the mechanics of this desk work
  - Massive demand for this service given Chinese capital controls
• Coinbase may add Telegram and 16 other new digital assets
  - Avalanche, Celo, Chia, Coda, Dfinity, Filecoin, Handshake, Kadena, Mobilecoin, NEAR, Nervos, Oasis, Orchid, Polkadot, Solana, Spacemesh, and Telegram
• Zuckerberg tours DC to address Libra concerns
  - This is going to be a very hard sell. Especially ahead of 2020 election and after flat our refusals to allow Libra in the EU from France and Germany
• Chinese regulators look to crack down on crypto mining in Inner Mongolia
  “The ‘mining’ industry of virtual currency belongs to the pseudo-financial innovation unrelated to the real economy, and should not be supported,”
  - This is positive non China based BTC miners
• HTC integrating full BTC node Into new phone
  - Release expected by the end of 3Q19
  - An interesting way to boost decentralization of the network
• Binance.US account registration opens today, bars 13 states
  - Excludes New York, Washington, Florida and 10 more states
  - Will offer a very slimmed down product line indcluding:
  BTC, USDT, ETH, XRP, BCH and LTC
• Abra expands crypto trading platform to Philipino 6,000 7-11s
  - Fiat On ramps are probably easier to establish than off ramps
  - Philippines obviously has massive inward remittance demand
• Edward Snowden: BTC protects my money from government theft
  - Follows reports that the US Justice Department would seize any earnings from the publication of his new book “Permanent Record”
• USDT accounting for as much as 25% of all ETH transactions
  - Great report by Coin Metrics
  - Highlights the transition of USDT primarily from the Omni chain to ETH
  - USDT is now the dominant use case for Ethereum
• German Finance Minister: We must reject “parallel currencies” like Libra
  - Germany’s Finance Minister: We will not leave currency issuance “to private companies”
  - This is an unsurprising approach from the 2 key constituents of the EU given the economic stresses Europe is facing
• Huobi launches Argentinian branch, plans fiat-to-crypto services
  - In Oct, Huobi will allow users to invest with Pesos via credit cards
• Binance to launch Monero, Zcash and Dash lending from Sept. 20
  - Binance will offer a 3.5% annualized interest rate in all 3
• Analysis questions Hedera Hasgraph’s performance claims
  - Hedera claims its capable of processing 10,000 transactions per second
  - Analysis suggests for smart contract trasnactions Hedera may actually have lower transactions per second than ETH
• Germany and France agree to block Libra
  - In a joint statement, the two governments affirmed that “no private entity can claim monetary power, which is inherent to the sovereignty of nations”
• NBA player to tokenize and sell his $34m contract with New Jersey Nets
  - Spencer Dinwiddie of the Nets will give investors principal / interest
• BTC segwit transactions hit all time high
  - Segwit is a scaling solution to make BTC more efficient
  - It frees up 65% of the space in a given transaction, allowing more transactions in each block
  - SegWit transactions now represent 50.5% of all the activity on BTC
• Billionaire VC, Tim Draper, says BTC $250k by 2022 is conservative
  “$250,000 means that Bitcoin would then have about a 5% market share of the currency world and I think that maybe understating the power of Bitcoin.”
• EOS to undergo hardfork on Sep 23 as part of upgrade
  - We will shut down deposits and withdrawals for 2 days around the fork

Charts

• Chart 1. Volume vs Price
  - Most major tokens up this week. Many on better volume

• Chart 2. Weekly Price %
  - BTC the only major Coin down as others rally

• Chart 3. Weekly Price %, Tehmatics
  - Privacy coins amongst the best this week, big laggards also reports of Binance offering lending services

• Chart 4. Volume Z Score.
  - Trading in ETH, USDT and LTC very active this week

• Chart 5. Average Daily Volume — Month
  - Better trading in a number of tier 2 coins this week

• Chart 6. BTC vs Others
  - Rally in smaller coins and tokens already losing steam