Market Update 29th July – 4th August 2020
July was a great month in the markets, with almost every major coin appreciating in price. Social media sentiment appears to indicate we could be entering a bull market with the Fear and Greed Index at 75 (Greed). Markets barely broke a sweat after the weekend’s flash crash and Bitcoin is currently up 4.6% on the same time last week to trade just above $16,000 at the time of writing (23% up on a month ago). Ethereum was up 18.9% this week, and 67% this month, while XRP has awoken and recorded 37.5% gains this week and 72% for the month. Everything else is up on a week ago: Bitcoin Cash (8.7%), Bitcoin SV (8.6%), Litecoin (99.3.3%), Chainlink (23.5%), EOS (6.3%) and Stellar (10.5%). The total crypto market cap is $482 billion which is within sight of the 2019 peak of $531 billion.
Bitcoin and Ethereum crashed by 12% and 20% respectively in about six minutes on Sunday afternoon, with more than a billion USD worth of positions liquidated. It inevitably led to speculation about market manipulation. The crash occurred at a time of low liquidity, with American and European traders in bed, and the dump appears to have been caused by a whale or whales taking profits which caused the cascading liquidations. Analyst Mati Greenspan says volatility is part of a bull trend because when traders get “a bit over-excited they tend to pile on the margin, giving way to extra-large liquidations and frequent shakeouts.”
Bull run, no bull
Spartan Group partner Kelvin Koh believes we’re in the second half of a three-year bull market that began in January 2019. “There is new capital flowing into crypto probably enticed by the massive rally in DeFi tokens over the last few months,” he said, predicting the big coins will run for two or three months before DeFi coins take off again. Spencer Noon, head of DTC Capital, said he’d been talking with institutional investors: “The herd is coming. They’re excited about DeFi but new to it, so they’re buying $ETH first. Once positions are set, I expect them to move up the risk spectrum to protocols.”
Who started the rally?
Ethereum and Bitcoin proponents are spinning two very different stories about the current bullish run. Anthony Pompliano reckons it’s the inevitable result of the Bitcoin halving and the money printing/financial crisis. But Joe Weisenthal, The Block’s Larry Cermak and Eric Wall all say the run was led by the excitement around DeFi and ETH breaking out. “Ethereum has been leading this rally just like it did in 2017. Might be tough to swallow for some people but it’s what it is,” wrote Cermak. Pomp pointed out his May 2019 piece pretty much predicted this scenario (minus the pandemic).
The dawn of ETH 2
The final Medella testnet for ETH 2 kicks off tonight at 11pm AEST. The Ethereum blog describes it as a “dress rehearsal” and “a huge milestone in the development of ETH 2 – “if Medalla proves stable, mainnet launch is next.” Don’t get too excited though, as MEW founder Kosala Hemachandra points out: “The full reality of ETH 2.0 is at least a couple of years away.” The launch comes less than a week after the network turned five, with the genesis block dating to July 30, 2015. Since it launched, Ethereum has processed $1.385 trillion in aggregate transaction volume, most of which happened since early 2018. More than 90% of ETH holders are currently in profit.
Bits and pieces
The supply of tokenised Bitcoin grew by 70% or $135 million worth in July. More than 20,000 Bitcoin (around $315m worth) have been tokenised for use on Ethereum. Analyst Josh Rager says that historically speaking, Chainlink is the coin to buy whenever Bitcoin corrects “Never fails – after every major pullback for Bitcoin, LINK pumps like crazy.” Grayscale’s crypto funds have grown by $1.6 billion in less than two weeks, and it now has more than $8 billion assets under management. Bitcoin miners enjoyed a 7% increase in revenue during July off the back of increased transaction volumes and high network fees. The Australian newspaper this week covered the APAC Provenance Council (APC), which offers a blockchain-based supply chain tracking and finance platform for goods between Australia and China, using VeChain and Mastercard Provenance.
Money printer goes brrrr
Pantera Capital’s latest investment letter points out that the US printed more dollars in June than in the first two centuries after its founding and the resulting inflation is the reason investors should “get out of paper money and into Bitcoin.” Meanwhile, Fidelity Digital Assets released a report this week calling Bitcoin an “aspirational store of value” and an “insurance policy” against a troubled financial system. Other factors Fidelity believes will boost the price include increasing acceptance of the narrative of Bitcoin as “digital gold” and the impending transfer of wealth from older generations to more crypto-friendly generations.
Until next week, happy trading!
Independent Reserve Trading Desk