CryptoCorner 2-26-18
The Crypto complex gave back a little bit of ground this week as technical selling weighed in and what may be a continued end of month futures pricing mechanism pattern developing. Anyway, here are the settlements for the week ending 2/23/18:
One interesting thing to point out is that last week we commented on the utility pricing function of Ripple and how we don’t really see much value add other than a “tether” type instrument, pegged to $1 US dollar. If indeed the only benefit is cheaper and quicker transfer rates than this merely becomes a utility function token whose value will be derived not from the hodlers, but from the instantaneous transfer and conversion into Ripple and out to Fiat and the corresponding liquidation trades as the transfer is completed. We aren’t quite sure as to how the Ripple token will provide added benefits to the crypto community, but we are keeping a close eye and we may pull this coin from our index as we feel the adoption of Cardano, NEO and/or Stellar may provide us with a cleaner long term Crypto play.
Breaking news today saw the announcement that Circle, the social payment startup by Jeremy Allaire, who is also the founder of Bitcoin Wallet, acquired the U.S. based cryptocurrency exchange Poloniex. Sources are saying that Circle paid around $400 million for the buyout. This is just further confirmation of the ongoing battle to see which banks are going to get behind this crypto movement and which ones will be left in the dust. In this case Goldman Sachs which staked Circle back in 2015 with a round of $50 million along with IDG Capital, has indeed taken a more positive tone toward the industry.
As all our readers know Goldman is very proactive in making the financial system work in their favor and their wide connection base only adds legitimacy to the industry. We welcome this move and we are quite sure GS sell side will be making the rounds to promote such a venture. We also know that GS HFT black box modelers will no doubt be licking their chops at front running any and all crypto bids and offers that are transacted.
The Crypto space as a whole lost some ground this week, except Bitcoin posted a rare unchanged as of Friday’s close. We noted in last week’s letter that the $11200 level in Bitcoin is really our pivot for being a constructive long, but that level didn’t hold. It wasn’t really a shock to see resistance @ $12k, to only see a pullback to the $9500 transpire. What traders need to realize is that the crypto space cannot be compared to a mature and traditional asset class. The volatility of this new asset class is much higher and traders must position and account for this accordingly. We see this mistake often with traders, especially ones with little or no experience, they disregard position sizing and it is absolutely without question, the wrong thing to do. So just a word of caution to all our traders, adjust your size using volatility-based metrics and parameterize to account for 20 to 30% moves.
ABCs Nightline ran a nice Bitcoin spot last week, if any of you missed it we have the link HereIt certainly seemed to paint a more skeptical tone and highlighted the volatility and seemingly painted a “millennial” novelty type of construct. We could be wrong but that is our opinion of the piece but we like that ABC even covered it.
Reuters reported that Sixteen Japanese cryptocurrency exchanges are in talks to create a self-regulating body. We think this is an excellent idea and advancements like this are absolutely necessary for advancing the crypto eco system. The story can be found Here
Reuters also pointed out that Choe Heung-sik, chief of South Korea’s Finance Supervisory Service (FSS) said this, “The whole world is now framing the outline (for cryptocurrency) and therefore (the government) should rather work more on normalization than increasing regulation.” This is indeed very good news especially for a country that has seen huge speculation surrounding the potential regulation or even outright bans, which have now seemed to be proving quite false. We can only imagine the continued global battle that continues to be waged between countries that are willing to adopt and countries who are trying to over regulate. Anyway that story is found Here
Finland was out last week floating its preparing to auction off 2000 BTC it seized 2 years ago in a related Silk Road linked drug bust. What is interesting to note is at the time BTC was around $600 and now some 16.6x greater in price, quite a nice rake for Finland.
Venezuela floated a new petro based cryptocurrency and it is reported that they raised $735 million on the first day. We aren’t sure how Maduro is actually decentralizing this thing or even if it is decentralized, yet we will continue to report on it in the coming weeks to check out its progress. What isn’t clear to us is how a country can waste such vast resources and cost so many innocent civilians such hardships, but that’s not for us to opine.
We have been hearing numerous reasons for the drop in Bitcoin transaction fees, which have plummeted toward year and a half lows. This is all a good thing and the quantitative supply/demand mentality in us wants us to attribute it to, simply lower demand. The data suggests that the number of daily transactions which reached a peak on December 14thnear 500k are now down 70% to 150k transactions per day. We have been hearing how Segwit has a lot to do with it and increasing block size. We have also read that “batching” might be contributing to this as large transaction processors are rolling many transactions into one, but we aren’t so sold on the validity of this as it contributes to fees. We would rather just stick to the supply demand model and use the simplest solution, that which is if demand is lower, than fees will be lower, but that’s just us.
We have noted on a weekly basis that large holders don’t seem to correlate to driving the sell offs in Bitcoin. We have seen rather the opposite, where it seems like they use the down move to accumulate more or simply stand aside and do nothing. So, we have decided for your viewing pleasure each week include our list of the Top 5 BTC wallets and their respective net changes on the week in BTC and in dollar value. The abbreviated wallet is on the top and to the right is the amount of BTC the wallet contains, as shown here:
As you can see from the data the top wallet was unchanged and the 2nd and 3rd place added 12930 and 3147 BTC respectively. The 5th wallet sold a few off, this was the wallet that doubled the amount it owned last week and was part of a speculative story on Zerohedge.
As far as our CryptoCorner Index, it gave back some ground losing $54.21 or 1.6% on the week. We can expect an adjustment next week as we most likely add Cardano in and remove Ripple, but the adjustment will keep the weights the same for continuity. Here is the chart:
We like looking at the space from the Index perspective as we are trying to promote the space as a whole as opposed to any one explicit coin. Moving over to a few technical charts now, first up we have Bitcoin:
Next up, Ethereum which continues to pound the pavement above $850:
Litecoin continues to consolidate around and above $200 so we still are looking for $267:
Ok our final chart is XMR or Monero. It has seen quite a jump since hitting $150 earlier this month, now nearing $300 once again. We believe this to be the most anonymous coin of them all and whether or not that has anything to do with its recent rise or not, it bears worth watching here as it nears $300 once again. It’s all time high is right near $450 so this is on our radar for right now, $275 is downside key:
Ok that’s it for now, thank you for joining us and we hope you continue to read our weekly letter and we hope to be able to offer you further products in the future in this exciting and ever-changing field. We have spent years touting this new blockchain technology and we hope we remain a constant in your quest for knowledge. Cheers!
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