Market Overview for October 8–15, 2018

In this review, we decided to not only tell you about the most important events of the past week but also to sort out the unusual situation developing on the market on Monday.

In terms of significant events, we should highlight the long-awaited addition of ERC-20 tokens to the Coinbase exchange. The first project that was chosen was 0x (ZRX), which is a protocol for decentralized exchanging of assets on the Ethereum network. Symbolic, isn’t it? Thus, listings began of a large class of cryptoactive assets at one of the oldest and most respected platforms.

Coinbase is not just an exchange. In fact, it is a company at an institutional level, and a lot depends on its decisions and actions. In early October, information appeared regarding a current investment valuation of Coinbase. The British hedge fund Tiger Global considered investments of $500 million, based on a possible capitalization of almost $8 billion. Looking ahead, we recall that at Coinbase, cryptocurrencies are traded on par with fiat currencies, in particular, USD. Also, trading pairs for fiat currencies are presented on the exchanges Bitstamp, Bittrex, Kraken.

In 2018, many companies launched their own stable coin projects: USDC from Circle (Poloniex), Gemini dollar from the eponymous exchange. Binance also listed True USD and Paxos. By the way, today OKEX exchange announced the listing of all of the above stablecoins. All of these US dollar equivalent tokens are designed to reduce risks associated with providing the most popular stable coin — Tether (USDT).

Rumors and suspicions about problems with the provision of Tether have spread earlier. Often, many of them were aimed at discrediting the Bitfinex exchange. However, it is worth recalling that USDT is used on other major exchanges, such as Binance and OKEX.

What is so special about the current “crash” of Tether? First, last week Bitfinex customers experienced delays when it came to processing fiat currencies. The exchange promised to fully restore and moreover improve its performance from October 16 onwards. Secondly, on Monday morning, the rather well-known exchange, Kucoin, announced that it was suspending USDT. This was followed by planting of information, rumors and other events that catalyzed trader’s fears.

Below is a graph in which we see a huge discrepancy between Bitcoin prices on Coinbase (pair with USD, blue line) and Bitfinex (pair with USDT, red line), as well as falling USDT relative to USD (Kraken data, black line).

It is clear enough that it was the distrust in USDT that provoked a rise in the price of Bitcoin (by + 17% with USDT and only by 7% with USD). The increase in volatility also contributed to the closure of short positions, the volumes of which again reached record highs, especially in Ethereum.

What conclusions can be drawn from the current situation?

Leading stock exchanges are ready to work with various stablecoins, which will have a positive effect on liquidity but will require the attention of the crypto community to stabilize not only Tether but also its analogs. You can also expect growing popularity of decentralized stablecoins, for example, DAI from Maker, and the emergence of new projects in this area.

Traders and investors preferred to get rid of the USDT, acquiring the most liquid cryptocurrencies: Bitcoin, Ethereum, XRP. The trading volumes of USDT against USD are far from a record high. All the same, the greatest interest was displayed when it came specifically to acquisition of cryptocurrency.

Large exchanges will ensure maximum effort with regards to trading specifically fiat currencies if they don’t already.

I would like to finish the review with a tweet from Changpeng Zhao (CEO of Binance):

Learned today, short term, launching a fiat exchange that required months of work had less positive impact than FUD about USDT (a single photoshopped fake announcement) on BTC price. But I also know for a fact, long term, hard work wins. Keep building!

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