Key metrics show that bulls may be betting heavily on Bitcoin as the coin reclaims ground from its late-February tumble in tandem with the global economy.
Investors seem to be accumulating with real conviction. Bitcoin’s 7-day trading average volume as measured by the Bitwise 24-hour “real” spot volume index is at the highest level since June 2019, when BTC posted its high for the year at $13,764, according to Arcane Research.
This metric has more than doubled in recent weeks, spurred on by some of the biggest days ever recorded by the Bitwise spot volume index including an all-time-high $5.7-billion day on March 13th.
The volumes will be seen as a much-needed portent of bullish sentiment for Bitcoin, coming in the wake of a market bloodbath and a sharp drop in hash rate, a key metric quantifying the overall security of the Bitcoin network as well as miner sentiment.
An even more encouraging detail is another sign that long-term investors are in the midst of an accumulation cycle. According to data from Arcane Research and Glassnode, holders just started to become positioned net long and cease selling off.
Bitcoin’s bouncing back swiftly
The market was left reeling on March 12 when the number-one crypto by market capitalization cratered nearly 40 percent in its largest intraday drop in seven years. Staggeringly, a number of top analysts assert that the coin could have plunged all the way to zero had crypto derivatives exchange BitMEX — which saw the bulk of trading volume during the plunge — not gone offline.
Yet Bitcoin has staged a healthy recovery in the weeks following the global Coronavirus crash, and the bulls may now have more reason than one to be strengthening their conviction.
Hash rate has rebounded significantly and looks to have reversed its slide downwards. It has now spiked to 112.5 million tera-hashes per second — the highest it’s been since before the March 12 sell-off.
The original cryptocurrency has also far outperformed all other major equity indexes, assets, and commodities in terms of its recovery since its most recent low, relative to the high at February 12, prior to the global Coronavirus-induced sell-off. Bitcoin is up 74 percent since bottoming out at $4,000, March 12.
Finally, leveraged funds trading the CME BTC futures contract have shuttered almost all of their short positions and now appear to be net long Bitcoin — or at least as long as they were in late January when the coin was in the midst of a weeks-long uptrend.
With foreign currencies tanking to multi-decade lows against the U.S. dollar and equity markets in free-fall, these metrics will surely strengthen Bitcoin’s perceived viability as a hedge against global recession and prospective reserve currency.
As foreign currency markets take aim at decades-old lows against a soaring U.S. dollar, one might wonder where global citizens will turn if they are unable to flee to the greenback — whether on account of shortages, barriers to purchase, legal restrictions, or all of the above.
To say foreign currencies are in a bad way right now would be a gross understatement indeed. The Great British Pound has just cratered to a shocking 35-year low, making it nearly one-for-one with the U.S. dollar, while the Australian dollar is at a 17-year low against the greenback, and the New Zealand dollar is at its lowest level in 11 years. Other major pairs are not faring much better.
Past crises have shown that the dollar has a willingness to strengthen during periods of global catastrophe — at times putting it at odds with the expectations of economists, who assumed a crisis centered in the U.S. would be widely bearish for the dollar. Most recently, the dollar rocketed when the Great Recession took hold in 2008, primarily a result of currency shortages worsened by the jitters of safe haven-seeking investors and reactive international markets, as well as the liquidations of overseas assets to meet margin calls.
While the Federal Reserve attempted to ease global dollar shortages with various forms of liquidity injections in 2008, they eventually resorted to what would be the first of many rounds of quantitative easing — the impetus for Bitcoin’s famed January 2009 genesis block message “Chancellor on Brink of Second Bailout for Banks” and the capping of BTC’s circulating supply to 21 million.
Can the Fed save the dollar, again?
But with a recession looming that’s widely predicted to be significantly worse than the 2008 economic crisis, it looks like markets are starting to show a whole new level of appetite for the dollar and this could put untold strain on the Fed in its ultimate capacity as the defender of the very fiat currency system itself.
The net result is going to be a scramble for dollars unseen in our lifetimes. The 1930's was the last time we saw this as money poured into the US, forcing an eventual devaluation vs gold.
This time the very dollar system is at risk, as I have always said.
Just in December, Deutsche Bank (DB) analysts produced a report suggesting that fiat was doomed to unravel in the 2020s as inflation rates began to rocket outside the control of central banks and that demand for “alternative currencies” like crypto could soar. The catalyst for this, DB said, would be a decline in the global labor force and rising labor costs:
“Ultimately, if and when labour costs rise at the margin rather than fall, there will likely be a more difficult environment for policy makers. And where politicians are worried about elections, it is likely that inflation will be the casualty.”
This came as a stunning endorsement to many crypto proponents, but at the time — with stock markets at their all-time-high after the longest bull market in history — it also may have seemed both a far-fetched utopia and a dystopia. Now that the Coronavirus has brought to most of the world’s major economies more or less to a shuddering halt and removed one of the last lines of defense for central banks, this prophecy seems more reasonable than ever.
The Fed’s pulling out all the stops, but will it be enough?
Since late February, when the Coronavirus started to send global markets into a rout, the Fed has stepped in with $700 billion (and counting) worth of quantitative easing, pledged a $5.4 trillion liquidity injection, eliminated reserve requirements for U.S. banks, and cut interest rates to nearly zero — what senior U.S. Rate strategist Gennadiy Goldberg described as “bringing an aircraft carrier to a knife fight,” according to Bloomberg.
The question on everyone’s lips is, will it be enough to keep the wheels spinning and stave off this imagined macroeconomic collapse?
Let us indulge ourselves and imagine such an event, something of the magnitude Deutsche Bank outlined where inflation rates in major economies began to careen upwards of 10, 20, 30 percent. Many lessons have already proved that during times of hyperinflation and flight to safety, governments are more than willing to impose capital controls to prevent the collapse of their own currencies.
Examples abound, but most recently, in the second half of last year, Argentinian citizens were restricted from purchasing more than $10,000 USD per month in the hopes the Argentine Peso would recoup some of its value against the dollar. Shortly after the restrictions were announced, Bitcoin rocketed to a $2,250 premium above the market on a top Buenos Aires exchange on account of overwhelming demand.
Traditionally Bitcoin has had a less obvious value proposition in countries with supposedly “robust” financial institutions and demonstrated more rapid adoption in places with low economic freedom.
If and when the pendulum swings the other way and it is the citizens of wealthy and developed nations scrambling to allocate to alternative currencies in the face of caustic inflation in their preferred safe haven, the dollar, how will governments and banks, the gatekeepers of the fiat system, respond?
Junior United States Senator and former CEO of Bakkt Kelly Loeffler disclosed dumping millions of dollars worth of stock holdings in the days and weeks following a private senators-only briefing on the Coronavirus in late January, as reported by The Daily Beast.
Loeffler, who left her post at Bakkt in December to become a junior Republican Senator for Georgia, reported selling stock on January 24, the same day she had been briefed by the Senate Health Committee on the novel Coronavirus COVID-19, co-owned by herself and her husband Jeffrey Sprecher, the chairman of the New York Stock Exchange and CEO of Bakkt’s parent company, Intercontinental Exchange (ICE), as reported the Daily Beast.
Shortly after attending the meeting, Loeffler tweeted the following:
Appreciate today’s briefing from the President’s top health officials on the novel coronavirus outbreak. These men and women are working around the clock to keep our country safe and healthy. #gapolhttps://t.co/5866TrrEFc
According to her public disclosure, Loeffler and her husband went on to liquidate 26 more stocks in the weeks that followed, the pair eventually racking up seven figures worth of sales. The biggest positions unwound were Exxon Mobil, Resideo Technologies, and Euronet Worldwide, which are down as much as 40 percent since Loeffler liquidated.
Not a good look
No official statements have been made against Loeffler yet, but the allegations certainly look damning. Ultimately, U.S. regulators will determine whether the senator’s actions violated the Stop Trading on Congressional Knowledge (“STOCK”) Act signed into law in 2012 by President Obama, which forbids members of Congress from trading on information obtained through their position.
Other U.S. Senators are coming under fire for making fortuitously timed trades.
Just hours before the Beast’s report on Loeffler surfaced, news broke that Senate Intelligence Committee head Richard Burr had unloaded as much as $1.6 million worth of personal stock holdings after assuaging the public in an op-ed that the U.S. was “better prepared than ever before to face emerging public-health threats, like the coronavirus.”
Tucker Carlson calls for Sen. Richard Burr (R-NC) to resign and face prosecution for insider trading if he can’t provide “an honest explanation” for dumping over $1 million of stock after he discovered the severity of the looming coronavirus pandemic https://t.co/1sITdZ2MZa
Just days ago, Bakkt — who focus on building institutional-grade crypto products and infrastructure like their flagship physically settled, NYSE-traded Bitcoin futures contract —closed a $300 million Series B round from inaugural investors Microsoft’s M12, PayU, Boston Consulting Group, Goldfinch Partners, CMT Digital, Pantera Capital, and Intercontinental Exchange.
The managing partner and co-founder of crypto hedge fund Multicoin Capital, Kyle Samani, says that the crypto market structure “broke” last week on account of a bottleneck in the Bitcoin blockchain and miners shuttering operations.
BitMEX has since been widely blasted for exacerbating the coin’s dramatic decline, with the CEO of rival derivatives exchange FTX going as far as to allege that, had the team behind the 100x leveraged Bitcoin futures exchange not halted trading for 45 minutes during the crash, the price of Bitcoin could have collapsed all the way to zero on account due to the inefficiencies of BitMEX’s liquidation engine.
Samani agreed with this grave assertion, writing:
“At one point, there were only ~$20M of bids left on the entire BitMEX order book and over $200M of long positions to liquidate. This means the price of BTC could have briefly crashed to $0 had BitMEX not gone down for “maintenance.” Given BitMEX’s central position in the crypto market structure, this price move could have propagated through to all the other BTC trading venues.”
Seychelles-based BitMEX released a number of statements in the aftermath of the event claiming the outage had been caused by a sophisticated botnet attack that had exploited hardware vulnerabilities.
BitMEX not to blame, entirely
But Samani, an outspoken market commentator and a regular contributor to the Multicoin blog, says the BitMEX catastrophe was more of a symptom of broader market inefficiency — not the cause of BTC’s crash.
According to Samani, during the ordeal the BitMEX order book was unable to be rebalanced swiftly enough because of congestion in the Bitcoin blockchain, a plight aggravated by miners shutting down their rigs. Indeed at the time of the Bitcoin flash crash, average confirmation times had rocketed to a seven-month high, while the hash rate began to buckle.
Arbitrageurs, who play an important role in efficient and rational markets by keeping price discrepancies between venues to a minimum, were unable to deposit BTC on BitMEX and offer buy-side delivery.
BitMEX upgrading their infrastructure would reduce the chances of a similar event occurring in the future, said Samani, but ultimately the fund manager blamed the low throughput of Bitcoin for the debacle, saying it is currently unable to “support global-scale capital markets activity.”
By comparison to the roughly $5 billion in trading volumes that drove the March 12 Bitcoin crash, the global foreign exchange market handles approximately $5 trillion a day, nearly a thousand times larger.
Trade volumes are booming on primary and secondary Bitcoin exchanges as Google searches for the number-one crypto skyrocket, indicating that to some degree a panic-induced flight to BTC may be in its early stages after the global economy’s recent capitulation.
Real trading volumes have rocketed on the Bitwise 24-hour spot volume index — on Friday standing at $5.7 billion, one of the largest days ever recorded by the San Francisco-based asset manager. Bitwise pitches its Bitcoin spot volume index as the industry’s most accurate, with the data purportedly being cleansed of “fake and/or non-economic wash trading.”
The index reads $2.6 billion at the time of press, putting it near the highest 7-day average trading volume ever recorded by Bitwise, which came in at $3 billion in July last year.
Peer-to-peer market lifting off
Both of the largest peer-to-peer Bitcoin marketplaces have also seen discernible spikes in volume over the few weeks, with a number of nations posting their all-time-highs.
As reported previously by CryptoSlate, the volumes of these peer-to-peer platforms can be considered particularly useful for analyzing global and regional interest in the non-speculative purchase of BTC due to the large premiums involved in each transaction.
Since the global economy entered free-fall in late February, Europe, India, the Philippines, the UAE, Sweden, and Kenya have all seen record fiat volumes on Paxful, and globally the platform saw the last week of February winding up as its biggest ever.
Over on LocalBitcoins, Japan, Argentina, and Egypt have hit all-time-high weekly fiat trade volumes, and the platform itself is seeing the highest levels of usage since October last year.
Meanwhile, worldwide Google searches for “Bitcoin” are rocketing towards the 12-month high, suggesting retail investors are becoming increasingly interested in the original cryptocurrency.
“In my opinion, we haven’t nearly seen the worst yet, neither of the health nor the economic crisis. The Fed cut interest rates to zero and started up QE; I think most wouldn’t be surprised to see negative rates next. The effect the coronavirus has on economies worldwide has exposed the instability of the financial system. It’s crumbling under the pressure.”
All of this is striking against the backdrop of a looming recession, the likes of which may be unprecedented.
Bitcoin has in recent years been hailed by both crypto proponents and select institutional investors as the ultimate hedge against macroeconomic crises and periods of hyperinflation, yet analysts have remained divided on whether the coin’s imagined panic-rally would be led by retail or institutional investors — as was the famed gold rally of the early 1970s. This time around, perhaps retail could lead the charge.
“With that in mind, Bitcoin’s advantage (and disadvantage in this particular case) is still that it has liquidity, is very accessible, and trades 24/7; so when investors become fearful, it’s easy to sell. But none of this changes any of Bitcoin’s underlying properties that are the reason Bitcoin is where it is today.”
The search term “Bitcoin” has exploded in popularity on Google in the last week, suggesting the unfolding global economic crisis may be spurring on interest in BTC even in the wake of one of the coin’s most devastating sell-offs ever.
Worldwide search volumes for Bitcoin have broken out to hit a seven-month high according to data from Google Trends, having started to rocket on Wednesday, March 11.
At that time Bitcoin was trading just below the $8,000-mark and was yet to plunge into Thursday’s mammoth 39 percent sell-off, the biggest daily loss posted in seven years. The bulk of the damage took place on 100x-leveraged crypto derivatives exchange BitMEX, where an unprecedented $876 million worth of contracts were liquidated in a 24-hour window and the exchange went down for 45 minutes purportedly on account of hardware issues.
The rout sent the market into a furor from which it is yet to recover. On Saturday the Crypto Fear & Greed Index capitulated to a near-all-time-low of 8, indicating an immense level of fear that has only been surpassed once in the two-year history of the index. At present, the index stands at 12.
Bitcoin’s surge on Google comes off as a glimmer of hope for investors waiting for a sign the coin will be one of the winners in the unfolding global recession. This age-old prophecy of BTC as a gold-like safe haven took a hit last week when the original cryptocurrency plunged alongside stocks as traditional havens rallied. Now with the coin at $5,280, 62 percent of investors are holding at a loss, according to data from IntotheBlock.
Intriguingly, users searching for Bitcoin on Google are also heavily looking at the terms “gold price,” “gold as an investment,” and “share price,” according to Trends. Users in Nigeria, Austria, and Switzerland are currently the most-interested in BTC considering search volumes.
Back-month Bitcoin futures contracts are trading at a steep discount to spot on the leading exchanges, indicating that derivatives traders could have low expectations for a price recovery after the coin’s recent capitulation.
The basis, which measures the premium or discount between the spot price and the futures price, is often considered a useful gauge of sentiment in the futures market. When futures contracts have a negative basis on back months, it generally indicates traders are bearish on the asset and will be more liable to short the spot market.
The BTC futures contracts for March and June are trading at a significantly negative basis (a.k.a. “backwardation”) on BitMEX, Deribit, FTX, Huobi, and OKEx, five of the largest leveraged Bitcoin derivatives venues.
Astonishingly, some of the contracts on BitMEX and Deribit are trading so far below spot price that their annualized discount to spot is almost 60 percent — hundreds of dollars below the current price of Bitcoin. Deribit’s March contract, for example, is trading at roughly $5,150, $110 lower than the BTC/USDT pair on Binance.
The Bakkt physically settled contract has also lurched into backwardation, to the extent Bakkt traders currently have an annual loss of 592 percent on their positions, according to data from IntotheBlock.
The turnover ratio of these five major exchanges is still higher than usual after the immense sell-off seen over Thursday and Friday, suggesting that Bitcoin’s recent volatility could continue.
But there are two correlated metrics that suggest the market may have seen the worst of Bitcoin’s sell-off and are a little more encouraging for the prospects of a recovery.
Open interest has dropped sharply across all the BTC futures venues, shrinking to an all-time-low on the regulated CME contract. This indicates a weakening of bearish momentum, and, when considering net open interest on CME for leveraged funds, it looks like institutional speculators have sharply eased off on their short positions.
The CEO of Hong Kong-based crypto derivatives exchange FTX has speculated that if BitMEX had not gone offline on account of “hardware issues” Friday morning, the price of Bitcoin could have crashed to zero.
Sam Bankman-Fried, a.k.a. SBF, mused in a thread on Twitter Friday morning that BitMEX may have pulled their exchange offline out of fear their liquidation engine could collapse the XBTUSD order book all the way down to zero, under the false flag of hardware issues.
1) Insane theory of the day: there was no BitMEX hardware issue.
According to SBF, also the founder of crypto research firm Alameda, the BitMEX liquidation engine continuously drove Bitcoin down as it failed to liquidate enough BTC from leveraged long positions. SBF alleged the BitMEX order book was ten times too thin to balance the books, effectively creating a waterfall effect sending Bitcoin into a death spiral.
6) Well, this looked like it was happening today. There was $1m per 25bps or so on the orderbook, and constant $10m liqs. I think R was, in fact, > 1.
Just before Seychelles-based BitMEX went offline the price of XBTUSD crashed 10 percent below the spot price and the funding rate collapsed to one of its lowest levels on record. Shortly after, Bitcoin staged a sharp reversal to the upside—dubiously during the 40-minute window the leveraged derivatives giant was offline.
SBF pointed to the timing of this rally, saying that the outage took BitMEX’s momentous sell wall off the market and allowed Bitcoin to recover. Stunningly, he also suggested the BitMEX team themselves may have deliberately shuttered trading in order to prevent further collapse and to avoid having to dip into the exchange insurance fund.
While figures are yet to be released by BitMEX, there are allegations the fund may have lost more than 2,000 BTC in the lead-up to the crash. As of Thursday, the fund’s balance stood at 33,881.2 BTC.
BitMEX responded to SBF’s allegation on Twitter, rejecting it as a “conspiracy theory,” and that in fact the exchange had been prepared for such an event.
"Insane" is right. Sam, you know better than to deal in this type of conspiracy theory, especially since you operate a platform in the space and under pic.twitter.com/NvNvUrYg0I
Atlanta-based mining outfit BitPico has drawn an even more grave conclusion, alleging the waterfall had been engineered by BitMEX. Without providing evidence, the BitPico group claimed BitMEX had used their own “bots and capital” to liquidate $993 million worth of long positions.
Per our analysis @BitMEXResearch liquidated $993 billion long positions using their own bots & capital. 2:43 UTC time activity across all exchanges stopped and @BitMEXResearch database crashed. Today’s $btc manipulation was caused by one entity. #bitcoin Investigation underway.
BitMEX is by orders of magnitude the largest unregulated Bitcoin derivatives in terms of trading volume, and it has been blamed a number of times for exacerbating declines in the price of BTC on account of its mass liquidations.
The price of Bitcoin deviated $400 below the BTC spot price on BitMEX’s Bitcoin perpetual swap contract as the platform’s funding rate cratered to its lowest level in years. The huge divergence came following a ferocious market-wide sell-off that saw Bitcoin shed nearly 40 percent against the dollar, one of the coin’s worst days on record.
The sudden drop in funding comes after one of the largest bloodbaths ever seen on the Seychelles-based derivatives exchange, with Thursday seeing nearly $1.4 billion worth of long contracts get liquidated.
As Bitcoin hit $4,000 on the spot market BitMEX’s XBTUSD two-hour funding rate saw a drop to a massively low -0.3750 percent, and the contract price wicked down to $3,600.
“The crypto markets are affected right now because BTC has been trading like its positively correlated with the equities market. If you compare the traditional markets to the BTC market cap of $140 billion it is difficult to consider Bitcoin as a safe haven at this time”
The funding rate is a mechanism unique to perpetual futures offerings like BitMEX’s Bitcoin contract designed to encourage the futures price to stay near the spot price. In periods where the funding rate is skewed heavily negative, short contract-holders must pay larger fees to long-holders. Bouts of extreme volatility — like at present — can send the futures price careering away from the index as the funding rate swings in one direction or the other.
According to crypto analyst Alex Kruger, BitMEX’s -0.3750 daily funding rate would work out to short holders paying 400 percent to longs annually.
Ross Middleton, CFO at decentralized exchange DeversiFi spoke to CryptoSlate about the reasons for the drop, stating:
There is a general ‘risk-off’ approach to all risk assets, including crypto. Bitcoin will show its safe-haven credentials over a longer time horizon once this move has bottomed out, or at least prove uncorrelated to other asset classes.”
Bitcoin has entered a sharp sell-off in the wake of an address Wednesday night by U.S. President Donald Trump on the Coronavirus, strengthening speculation the number-one crypto by market cap is trading as a risk-on asset.
Global markets entered another rout as President Trump said his administration would be imposing fresh measures to combat the Coronavirus pandemic—including new flight restrictions between the U.S. and Europe, scheduled to come into effect Friday, and taking emergency actions to provide financial relief for workers who are quarantined, ill, or caring for others due to the virus.
The S&P 500 began to dive immediately at the news, launching into a steep decline that would see the key stock index lose more than 4 percent in an hour—the biggest hourly loss recorded since the start of the global market’s Coronavirus-induced panic.
Bitcoin also started to sell off sharply at the news and went on to shed 2.6 percent over the next hour, demonstrating a remarkable correlation to the S&P.
Surprisingly gold—a prototypical safe-haven asset that in recent weeks has posted strong rallies in response to macroeconomic jitters—also began to slide south as Trump gave one of his biggest market-moving speeches on the Coronavirus to date.
Antoni Trenchev, Managing Partner of Nexo told CryptoSlate:
“The Bitcoin price falling right now is reaffirming its status as a safe haven because it is performing inline with how gold performs around a crisis. If you look at gold’s performance just around the great financial crisis of 2008, it rose a little bit in value immediately following Lehman and collapsed by 30 percent after that.”
Can Bitcoin prove its worth as a safe-haven?
The virus seems to have brought about the biggest test yet for Bitcoin’s status as an asset, calling into question the narrative of BTC as a hedge against economic uncertainty. Where gold has surged as much as 8.2 percent this month, Bitcoin is down more than 10 percent. Expectedly, sentiment in the crypto market has plummeted over the course of the last few weeks, with the Crypto Fear and Greed Index plunging to its lowest in months.
Despite the evidently dire tone of the market, data suggests BTC’s current bear-trend may be nothing more than a retracement as part of a larger bullish impulse. As reported previously by CryptoSlate, leveraged funds appeared to begin pricing in a downward move as in late-January—nearly a month before the global market entered free-fall.
$7,500, the 78.6 percent Fibonacci retracement level, is a key level for Bitcoin however, and a drop below could confirm a bear market for the number-one crypto by market capitalization.
Crypterium, a crypto fintech firm led by Visa’s former General Manager for Central Europe, claims to have rolled out the most widely available prepaid crypto debit card, allowing users in 178 different countries to spend Bitcoin, Ethereum, and Litecoin in-store and online.
The card comes as the second iteration for Crypterium, who purportedly ran into a bottleneck in production with their inaugural debit card, launched last June. In December, the Estonia-based firm suspended all pending card orders, explaining their original card-issuing partner had failed to work fast enough to meet consumer demand (a number of complaints of delays had been voiced on Crypterium’s social media channels). Crypterium also pointed the finger at the card-issuer when it came to their “filthy” FX rates and card-loading speeds, saying neither was competitive enough. They wrote:
“Launching a brand new product comes with many challenges attached. One of them is that you can’t make a very precise market assessment. While we expected demand for the Crypterium Card to be high, our card issuing partner did not.”
A key part of Crypterium’s original mobile “cryptobank” pitch, with which in January 2018 it raised $51.6 million in an Initial Coin Offering, was to offer a virtual debit card available to users immediately after registration. But until now, registrations for both the physical and virtual cards have been capped and not globally available.
Paying homage to UnionPay
Crypterium claims that on account of having signed a new banking partner, the latest card fulfils the firm’s founding ambitions. Users can order the new debit card off the Crypterium mobile app and use the in-app virtual debit card “almost instantly” after signing up, according to the firm. The physical card reportedly takes three business days to arrive.
#CrypteriumCard is available both in plastic and virtual version which is almost instantly delivered to you following the order. Thus, you can start spending #crypto immediately without waiting for the plastic version to arrive😎🛍️
The card’s wide availability—indeed at present it is likely the most ubiquitous card on the market, available in 178 countries—is on account of its being part of the UnionPay network, according to Crypterium:
“[UnionPay] is the only one able to produce a card that can be delivered and used anywhere in the world. Being a company that serves clients in over 180 countries, it’s vital to ensure that each of our clients has access to this revolutionary solution.”
Crypto debit card providers have historically been heavily beholden to their payment processors and as a result grappled with operational challenges. In 2018, Visa abruptly terminated its relationship with card provider WaveCrest for “violating [Visa’s] operating regulations,” rendering useless crypto debit cards from Bitwala, Cryptopay, Wirex, TenX, and more.
Major card providers have in recent years appeared to warm to the idea of crypto debit cards, however. In February this year, Coinbase became the first crypto company to become a principal member of Visa.
Quantitative crypto fund Strix Leviathan says the narrative of Bitcoin as a hedge against economic uncertainty could be false—considering last week’s nearly unprecedented stock market sell-off, where the S&P 500 suffered its sharpest correction since the 2008 financial crisis and BTC shed nearly 15 percent in USD terms.
The number-one cryptocurrency by market capitalization started to tumble in tandem with the S&P on February 19 as market panic ensued on account of the novel coronavirus. With nearly 3,200 deaths and 91,000 cases of the virus having been reported across 85 countries, the pandemic appears to have triggered a flight to safety in global markets.
Digital gold no more?
Bitcoin has consolidated its reputation as a risk-off asset in recent months, with many having cited the coin’s correlation with gold, in January, after the United States’ lethal drone strike on the Iranian military commander-in-chief.
At the time, analysts like Andrew Kang argued Bitcoin’s price movement during the US-Iran affair proved the market had “strengthened its belief” in BTC as a store of value and hedge against macroeconomic uncertainty.
Bitcoin has never shown much correlation to gold or other SOVs. That is, until now.
But according to Strix, Bitcoin’s latest downtrend suggests that the so-called ‘digital gold’ may be no less “susceptible to market panic” than other assets during risk-off market cycles.
Gold, a prototypical risk-off asset, has expectedly been a strong performer during the coronavirus crisis with investors opting out of stocks in favor of more defensive positions. On February 24, just four days after the S&P started to slide south, gold broke out to make a seven-year high.
The Seattle-based quant fund said both Bitcoin and Ethereum were affected by the global flight to safety as they are “poor currencies” on account of their volatility (Ethereum plunged 25 percent over the course of the global sell-off). Ultimately, however, the hedge fund admitted it is simply too early to tell whether these cryptocurrencies qualify as risk-on or risk-off assets. They stated:
“Some pundits in January pointed to Bitcoin acting like a risk-off asset as evidence of its status as a safe haven store-of-value. Others point to the risk-on behavior with crypto tracking equities throughout February as proof of its status as a speculative asset. Competing behaviors signal that the market doesn’t know what Bitcoin is going to be used for at full adoption, let alone what the other thousands of crypto assets end-state will be.”
Post-virus outbreak, BTC seems to have befuddled market spectators and further inspired these “competing behaviors.” Crypto analyst and trader Alex Kruger, for example, stated he has been trading Bitcoin as a “clear risk-on asset” in recent weeks.
$BTC has been trading like a clear risk-on asset since last week. This has been surprising in some ways, unsurprising in others, and could be something valuable to keep in mind regardless. Past correlations do not matter much when in uncharted waters.
But one metric that does provide more clarity around the narrative of Bitcoin as a store of value—albeit perhaps not a safe-haven or “risk-off” store of value—is a risk-adjusted return. Even in spite of its recent downturn, BTC has retained status as a top-performing asset by Sharpe ratio, above gold, stocks, U.S. real estate, oil, bonds, and emerging currencies.
According to crypto analytics firm IntoTheBlock, 43 percent of ETH addresses are in profit with the Ethereum spot and derivatives markets seeing explosive growth in key metrics, making the second-largest crypto one of the top-10’s biggest showstoppers this year.
The first two months of 2020 have seen Ether rally nearly 110 percent against the dollar, with a $15 billion injection in market capitalization seeing the coin rapidly gain dominance in the broader crypto market. Spot trading volumes have spiked immensely in recent weeks during ETH’s months-long upsurge, prompting speculation the overall market is positioned for an extended rally.
ETH takes back ground against BTC
Yet the new year rally has already brought about a dramatic change of fortune for ETH holders. Just four months ago a slim 0.01 percent of Ethereum addresses were in profit, when at the time 55 percent of Bitcoin addresses were in the green.
The coin has also exhibited a similar show of strength against Bitcoin since the start of the year. Having rallied 68 percent against the original cryptocurrency, ETH/BTC is in the midst of its biggest uptrend since December 2018.
ETH has not seen these levels of price or dominance since July last year—the point at which it collapsed into the start of a six-month bear market and tanked to taking one of its lowest shares of the crypto market ever.
Futures traders, institutional investors long on ETH
Futures traders appear to be jumping in with conviction behind the coin’s uptrend—all ETH derivatives venues have seen steady hikes in open interest in recent months, with aggregated open interest closing in on the $1 billion mark, up roughly 100 percent since late January.
While in USD terms, Bitcoin has seen a larger increase of open interest, $2 billion, proportionately this is a lesser 66 percent gain in terms of the number of contracts being opened. The largely unregulated ETH futures market may not be the most reliable gauge of sentiment, however.
The Grayscale Ethereum Trust may be a more trustworthy indicator. Grayscale’s accredited and institution-only ETH trust has seen a 170 percent increase in assets under management since the start of the year compared to a 50 percent increase for the Bitcoin trust.
Trading volume has rocketed to a near-all-time-high on the CME cash-settled Bitcoin futures market as the number-one crypto by market capitalization continues one of its longest unbroken uptrends since the first half of last year.
Tuesday posted over 23,000 contracts, worth $1.1 billion, according to preliminary data from CME Group, the Chicago-based commodities exchange that operates the market’s most actively traded regulated Bitcoin futures contract.
The day falls just short of the contract’s all-time-high volume of $1.3 billion, posted on May 13 last year, as Bitcoin cleared its five-month high with a spirited $1,500 intraday rally—BTC then went on to rally more than 100 percent over six weeks and eventually made the high of 2019 at $13,800.
Institutional traders appear to be building momentum
Open interest has also been making strong gains on the CME contract, a promising sign for the continuation of BTC’s uptrend considering the healthy gains in volume. This metric has appreciated alongside Bitcoin this month despite minor pullbacks—a signal that institutional traders are likely betting on higher prices and opening fresh long contracts.
Traders over on Bakkt’s Bitcoin futures market appear to be even more confident that Bitcoin’s rally will continue. Open interest has hiked nearly 100 percent on the physically-settled and cash-settled contracts this month, accompanied by convincing increases in volume.
All of this is encouraging for what has just become a three-month bull rally, a price hike of more than 55 percent. Bitcoin has clung to a daily trendline since December 17 and along the way has exhibited balanced buy-side and sell-side delivery.
Data from IntoTheBlock reveals that over the last three months BTC has increasingly been bought in large blocks, further supporting the idea that sophisticated investors are fueling Bitcoin’s latest rise. The number of transactions greater than $100,000 has been rising steadily since late December, seemingly in sync with Bitcoin’s uptrend.
Career dotcom entrepreneur and serial bootstrapper Jesse Proudman is the co-founder of Strix Leviathan, a quantitative hedge fund that’s beating the market through software and systematic investing.
Like so many entrepreneurs, Proudman may have found his initial concept as a reward for past struggles. Before his last company Blue Box was acquired by IBM in 2015, Proudman spent almost a decade scraping together funding to keep the private cloud-as-a-service platform running—until the firm had graduated from the tenuous years of bootstrapping to the world of VC funding.
In 2015, post-exit, he joined IBM as a “Distinguished Engineer” focusing on crypto and blockchain research and developed an incredible fascination that would eventually form the thesis behind Strix Leviathan. According to Proudman, he began to see visible patterns after analyzing crypto charts with the following assumptions:
“This asset class lacked valuation models that were shared among market participants. This resulted in price discovery that’s largely speculative and highly reflexive. At the same time, these markets offer relative liquidity and trade 24 x 7 x 365.”
In January 2018, Proudman and one of his long-time colleagues at Blue Box and IBM, Sadie Raney, bid farewell to Big Blue and co-founded Strix Leviathan as their next adventure. Two months later, the quant fund-in-making closed a $1.6 million seed round sponsored by venture funds including San Francisco-based Liquid 2 Ventures, Seattle’s Curious Capital, Future Perfect Ventures, and angels including ex-Seahawks player Doug Baldwin and Orion Henry, founder of Heroku.
Fundamentals follow price
There’s something philosophically quantitative about Strix’s approach to the crypto market, beyond running a fund where algorithms determine investment decisions and human judgment is minimized.
Proudman and his team question the notion that fundamentals play a role in the price of cryptocurrencies—at least for now:
“We do not believe this asset class has enough history or clarity to confirm which fundamental metrics provide value in decision making. We will look to incorporate fundamental metrics when there is more clarity around adoption and a longer timeframe to confirm the validity of proposed valuation metrics.”
Instead, Strix Leviathan points to the market’s relative lack of history, global 24/7 nature, and “highly fractured” datasets to say that crypto price-action is “entirely defined by the behavioral patterns of market participants,” a stark contrast to the value investing theses behind some of crypto’s best-known hedge funds. A post on the Strix blog states:
“The development of a narrative to explain complex and opaque market behavior persists in every financial market; however, cryptocurrency investors must do so with an extremely limited historical record.”
For one, Strix describes the narrative of Bitcoin’s upcoming halving being a springboard for an extended bull run as a “circumstantial illusion” propagated by “unsubstantiated belief systems with scant supporting evidence.” According to their analysis, the halving of mining rewards, in fact, had little or no discernible effect on an asset’s performance outside of market sentiment.
The fund itself is managed by Nico Cordeiro, previously an analyst at Pitchbook, specializing in private equity, venture capital, and crypto research. Nico told us that,
“Cryptocurrency prices are reflexive in nature meaning price is simply the aggregate beliefs of other market participants except those individual perceptions are constantly changing. This results in a market that weaves in and out of forceful positive and negative feedback loops. The Nest Fund is designed to exploit and benefit from these persistent feedback loops.”
How to play the market
Strix’s flagship fund, the Nest Fund, launched in May 2018 with the ambition of outperforming the top-ten cryptocurrencies with lower beta and correlation.
Debuting in the midst of a full-blown bear market, the fund may have taken on something of a trial by fire, a test of the proprietary “Algorithm Factory” software that drives its strategy (in 2018 the median crypto hedge fund took a 46 percent loss, while quant funds—a more appropriate comparison to the Nest Fund—made an average return of 8 percent, according to PricewaterhouseCoopers).
Strix’s software takes an AI and machine learning-driven approach to capturing alpha, built on the idea that the unique characteristics of the crypto market can be exploited for gain, whether on the long side or short.
These characteristics include:
Opaque fundamental value
Transparent market data
Proudman explained that, from conception, the platform has been engineered to plug these gaps for gain. He stated:
“While tools existed for fundamental or discretionary style trading, the ability to derive real-time pricing data, develop algorithmic models, operate successful models against fund capital, execute and settle trades and report on fund performance all required a platform to be developed – a platform we’ve spent the better part of the last two years developing.”
Naturally, Strix was unable to fully reveal the details of its proprietary methods, but a representative did give CryptoSlate a “high level” view of how the algorithms operate in their bid to capture alpha.
First, the software platform seeks out volatility in markets and jumps in to follow trends and momentum—what the Strix team describes as being “risk on / risk off models”. The software also analyzes the relationship between cryptocurrencies (the likes of ETH/BTC for example), in order to take advantage when divergences occur. Arbitrage is in the algorithm’s playbook too, and the platform is hooked up to eight exchanges to take advantage of discrepancies in the price of assets.
The software—which according to the team has been in development for two years and undergone 17,000 code commits—seems to be working as promised. The fund has outperformed by ~60 percent to date against the Bitwise 10 Large Cap Crypto Index (BITX), which tracks the ten largest cryptocurrencies weighted by free-float and 5-year inflation-adjusted market capitalization.
The Fund has also been outperforming the benchmark in terms of risk. When compared with both the BITX and Bloomberg Galaxy Crypto Index (another weight-adjusted index tracking the top coins by market capitalization), the Nest Fund has taken significantly less drawdown, roughly half of the volatility, and, with a higher Sharpe ratio, ultimately delivering better risk-adjusted returns.
Strix says the software platform is a “differentiator” over funds that manage capital using spreadsheets (something that is apparently all too common) and pitches to investors seeking “portfolio diversification and better risk-adjusted returns than a passive buy/hold approach.” These include high-net-worth individuals and family trusts, who make up the client base of the Nest Fund. Jesse is currently building an investor portal that will allow all LPs to view their account, historical performance, and legal documents. The investor portal will provide for an LP experience that is completely absent among existing crypto hedge funds.
Like many infrastructure leaders, Proudman and his team have in a sense gone long on the crypto market itself and bet that its eventual form will mirror the size and sophistication of traditional markets. Strix said that at this stage of the game only a number of counterparties can support the “speed and capabilities” of their platform, and that the firm is looking to “maximize” its technology once the broader market’s infrastructure has matured. In terms of size, the crypto quant hedge fund market would look to have ample room to expand, with approximately $370 million in assets under management (AUM) last year—2700 times smaller than the orthodox quant hedge fund market, which managed roughly $1 trillion as of 2018.
If you are interested in learning more about Strix Leviathan, you can follow their blog for regular market updates and research. The Nest Fund accepts new investors on a monthly basis and is open to Qualified Purchasers. Email email@example.com and follow Twitter, LinkedIn, and Facebook.
Crypto exchange BTSE has shifted its operations out of Dubai, claiming that regulators in countries with “non-permissive legal systems” are holding back the mass adoption of cryptocurrency with their inaction and broken promises. The move comes as the latest in a global game of musical chairs by crypto businesses, who have little choice but to relocate in the face of regulatory uncertainty.
The spot, futures, and fiat-crypto/crypto-fiat exchange have now joined Tether, Bitfinex, and other firms headquartered in the British Virgin Islands (BVI), on account of BVI’s having a “permissive legal system” that is “more welcoming to innovation,” BTSE Co-Founder Jonathan Leong told CryptoSlate. He elaborated:
“Regulatory uncertainty is holding back cryptocurrency progress in countries with non-permissive legal systems. Exchanges have to plan ahead and it’s pretty difficult when a jurisdiction has unclear rules and regulations. Malta, for example, made a lot of promises and in the end their framework was very narrow and not particularly useful. These are the greatest barriers to more infrastructure being built to support and encourage long-term mass adoption of crypto.”
A post on the BTSE blog said the exchange had endured nearly two years of regulatory uncertainty in Dubai before the decision was made to pull the plug, after regulators failed to deliver on a long-promised legislative framework for cryptocurrencies (a framework that had originally enticed the startup to set up shop in the UAE in March 2018). The exchange has been “gradually transitioning” to the BVI since October 2019.
Regulators failing to deliver the goods
Leong said exchanges could not plan ahead in jurisdictions with “unclear rules and regulations,” and pointed to Malta — widely held up as one of the world’s most progressive regulatory regimes for blockchain and crypto—as an example of a place that had “made a lot of promises” but ultimately failed to deliver. The BTSE blog post stated:
“As many in the cryptocurrency space are well aware, crypto regulations are far from stable and often very uncertain, even when regulations in a region have already been formed. Malta presents an example of a country that was once hailed as a new crypto haven, but has made little regulatory progress.”
The tiny island nation began championing itself in 2018 as “The Blockchain Island” after passing a set of bills regulating cryptocurrencies and the companies that deal in them and attracting two of the world’s largest crypto exchanges by daily volume, Binance, and OKEx, into setting up their operational bases in Malta. By early 2019, exchanges based in Malta accounted for the majority of crypto trading volume globally.
But despite the Maltese government’s beckoning stance as a crypto utopia, there have been signs that crypto businesses are facing a different reality down on the ground.
In March last year “dozens” of crypto firms told the Times of Malta that they had been unable to open bank accounts on the Mediterranean island after having shifted operations there, with banks explaining that cryptocurrency was outside their “risk appetite.”
Then in August, Zebpay, one of India’s top crypto exchanges, allegedly shuttered its Malta headquarters just 11 months after having shifted to the Mediterranean island and moved operations to Singapore.
Shortly after in October, another exchange, Bittrex, announced it would be moving its headquarters from Malta to Liechtenstein. While no official explanation was given, the move came just weeks after the Malta Financial Services Authority (MFSA) said it would start actively monitoring crypto exchanges for anti-money laundering (AML), and days after Bittrex suspended operations for customers based in 31 countries, many of which are deemed high-risk by the intergovernmental Financial Action Task Force (FATF).
The MFSA would look to have its hands tied with the broader AML crackdown on crypto seen in financial strongholds like the U.S. and U.K., however, highlighting a sobering reality: we are still waiting for a progressive and conclusive directive on cryptocurrency from a major power.
Handshake, a Proof-of-Work DNS protocol spearheaded by the co-creator of Bitcoin’s Lightning Network, has launched its mainnet in its bid to decentralize trusted Certificate Authorities and replace authoritative bodies like ICANN that govern top-level domains (TLDs) like “.com” and “.org.”
The project has maintained a low profile since debuting in August 2018, when news broke Handshake had raised $10.2 million in stealth from a16z Crypto, Draper Associates, Founders Fund, Sequoia Capital and other big-name VCs. Handshake’s mainnet officially went live at 1700 UTC Monday.
At the same time, Namebase, a domain registrar, cloud wallet, and exchange for Handshake also backed by a16z Crypto, launched its exchange services for Handshake token (HNS). Namebase users will eventually be able to purchase domains on Handshake and use email-style crypto addresses to send and receive Bitcoin and other tokens in a vein similar to Ethereum-based Unstoppable Domains, who recently added support for My Ether Wallet.
Users will also be able to bid on Namebase for unique TLDs like “.guy” using the HNS token, and then earn HNS whenever someone registers a sub-domain to that TLD.
The Handshake blockchain is now minable for its native HNS tokens, however, transactions and full functionality will not be enabled until February 17. At the same time, the protocol will disperse $115 million worth of HNS (85 percent of the supply) to open-source developers in a long-planned decentralized airdrop.
Pitched by Handshake lead developer Joseph Poon as a challenge to the standard initial coin offering (ICO) model, the airdrop will distribute tokens to users with eligible accounts on GitHub, Hackerbase, or PGP keys in the PGP Web of Trust Strongset.
In practice, internet users can now configure their browsers to lookup IP addresses on the public Handshake blockchain instead of on traditional centralized infrastructure—the top 100,00 websites by Alexa ranking have already been allocated domain names on Handshake.
Mine Handshake on the Coinmine
Handshake will be available to mine on the consumer-friendly Coinmine One. Coinmine CEO Farbood Nivi told CryptoSlate why Handshake is important:
“Coinmine’s mission is to make it easy for everyone to be there at the start of new and promising tokens like Handshake. That’s when you can earn the most of the token. Handshake’s mission is to make the web more free and powered by the people. We’re excited to be able to make that available to non-technical people who will be able to earn Handshake tokens with their Coinmine One with a tap in the Coinmine app. We think this is great for the average person who can for the first time be a part of exciting cryptocurrencies when they first launch, but it’s also exciting for networks like Handshake because we’ll help Handshake get into the hands of thousands of people all over the world in just the first few days. Those people will in turn help educate more people about Handshake.”
CryptoSlate is excited to announce its partnership with Paradox Consulting, a specialist blockchain and crypto marketing firm based in the United Kingdom.
London-based Paradox Consulting will act as CryptoSlate’s official advertising and marketing partner and as such will be responsible for all advertising on CryptoSlate, as well as broader activities in marketing to grow the user base of the CryptoSlate platform.
Paradox offers a wide range of services specific to blockchain and crypto including ad placement, web development, public relations, growth marketing, and conversion optimization, and CryptoSlate recognizes the effectiveness of its unique targeting strategies and commitment to cultivating the growth of the crypto industry.
This can be seen in Paradox’s growing list of partnerships with market-leading firms including Etherscan, CoinMarketCap, and a number of key stakeholders in the crypto ecosystem. Paradox commented on the partnership:
“Paradox has been striving for client success ever since our inception, with our strong success and excellent track record with our clients, we can’t wait to see the growth we will provide in our partnership with CryptoSlate.”
As Bitcoin closed out its best January in seven years, open interest rocketed to a new all-time high on Bakkt’s physically-settled Bitcoin futures market, and institutional traders on CME Group looked to position themselves for higher highs.
Bulls at Bakkt
On Friday the Bakkt physically-settled contract saw a new record of $11.6 million in open interest—up 114 percent in a week, according to data from Bakkt Volume Bot. In the context of an extended uptrend, this increase reflects an influx of new buyers coming into the market and opening long contracts, a standard precursor of higher prices.
Bulls have dominated Bitcoin since December 18, when the number-one crypto by market cap terminated its months-long decline at $6,480 and sharply shifted to a bullish market structure. Around this time, open interest on the Bakkt contract hit a new high of $7.02 million, nearly 40 percent lower than current levels.
CME traders HODLing contracts past January close
The CME cash-settled futures contract, by orders of magnitude the largest regulated BTC futures market by trading volume, has continued to post some of its biggest trading volumes in months while seeing near-record levels of open interest. Crucially, the data suggests most CME traders are betting on higher prices for BTC.
Thursday was the largest day in months with $846 million worth of contracts changing hands, just prior to the January contract’s last trading day. Had open interest dropped off during this flurry of trading activity, it would have suggested traders were liquidating contracts and locking in profits in advance of the monthly close.
Historically, CME expiration dates have tended to coincide with bouts of volatility, widely suspected to be the result of CME traders manipulating the spot market for gains on their futures contracts.
That this didn’t happen is encouraging for the prospects of an extended bull trend. The month closed off with 4,611 contracts in open interest, not far off CME’s all-time-high monthly close of 5,252 contracts (July 2019). Only 537 of these contracts were held until expiry, indicating that the vast majority of CME traders have rolled over their contracts—likely in anticipation of higher prices.
Hardware wallet provider Ledger has erected a digital billboard over London’s Canary Wharf financial hub reading “let’s take back control for real,” taking a jab at the pro-Brexit rhetoric of British Prime Minister Boris Johnson on the day the U.K. formally leaves the European Union (EU).
In a press release shared with CryptoSlate, Ledger said it saw Johnson’s “taking back control” Brexit tagline as being the “perfect analogy” for crypto as a means for individuals to reclaim their financial autonomy.
Financial independence has been a theme central to the Brexit debate, a saga that has gripped the nation since a 2016 referendum when a majority voted that the U.K. should leave the EU. Ledger has opportunistically looped crypto into the Brexit conversation in Canary Wharf, the world’s de facto center for fiat currency, hosting the bulk of the global forex market’s $5-trillion-a-day trading volumes. Ledger wrote:
“On Brexit day, Ledger is taking out a digital billboard in Canary Wharf, the center of finance in London, to promote the core values of cryptocurrencies, which align with the underpinnings of Brexit.”
Staying neutral, sort-of
Yet Ledger, an EU-based firm headquartered in Paris with offices in San Francisco, U.S.A. and Vierzon, France, insisted the advertisement has no political component and that the company does not take a stance on the U.K.’s widely controversial decision to leave the EU.
A blog post by Ledger conveyed a different message to their official line and rung of political charge—the firm pointed to crypto as a “borderless” medium of exchange that could help “bring the world closer together” as the U.K. tightened its borders.
“Boris Johnson, the British Prime Minister, has always expressed that the UK should “take back control”. During his campaign, he highlighted the financial sovereignty of the country and needing to limit its borders. At Ledger, we believe that taking back control means so much more.”
Furthermore, Ledger aimed to clarify the link between Brexit and crypto by stating:
“There are quite a few similar themes in the two, albeit at times opposing each other. For example, #crypto is all about borderless financial freedom, whereas the #Brexit focuses on closing its borders with financial freedom from the EU in mind.”
MyEtherWallet (MEW) users are now able to send and receive ETH and ERC-20 tokens using their own personalized “human-readable” address instead of the standard 42-character public key.
Unique addresses can be created on MEW in the form of “[name].crypto,” powered by Unstoppable Domains, a blockchain registry startup funded by Draper Associates and the Ethereum Foundation. Unstoppable Domains CEO Matthew Gould commented:
“Blockchain domains enhance the payment experience for cryptocurrency users. Our collaboration with MEW allows users to replace complicated crypto addresses with human-readable names. This is an important step towards onboarding the next billion people into cryptocurrency.”
San Francisco-based Unstoppable Domains has to date integrated its “.crypto” address feature into 15 different wallet applications including Binance-owned Trust Wallet, IM Token, and Zilliqa wallet ZilPay, and as a result of the new tie-up with MEW, will be offering its existing user base MEW tools like token swaps and the MakerDAO DeFi portal.
In practice, when users type a recipient’s “.crypto” string into MEW, the wallet automatically searches the Ethereum blockchain for the address registered to that domain and inputs said address. The domains also double as names for Ethereum-based websites, and unlike conventional domains do not require renewal or escrow agent to facilitate the transfer of ownership.
MEW CEO Kosala Hemachandra said in a press release the initiative will make the user experience “easier and friendlier,” while making it significantly harder for funds to be sent to the wrong address.
Eight months after launch, Terra, a stablecoin protocol backed by four of the world’s largest crypto exchanges, has surpassed one million user accounts and hit an annual run rate of $2.4 billion, the company reported in a press release seen by CryptoSlate.
In 2018 Seoul-based Terra raised $32 million from myriad VC heavyweights, including the venture arms of Binance, Huobi, as well as UpBit’s parent company and OKEx, with the idea of using stablecoin technology to disrupt the eCommerce payments market.
Terra’s existing user base was probably a strong drawcard for investors.
Conveniently, the platform’s co-founder Daniel Shin is also the founder and president of one of Korea’s top eCommerce sites, TMON (Ticket Monster), and Terra has signed 11 online retail partners throughout Asia that purportedly handle a combined $50 billion in gross merchandise volume each year.
The company said that its rapid user acquisition can be attributed to the success of partner applications using the Terra protocol. Korean mobile payments app CHAI has apparently been instrumental in driving users to Terra.
CHAI comes off as a cheaper, blockchain-powered equivalent to PayPal, allowing users to pay for items online via their bank account, and the app seems to be gaining ground. In its first four months, CHAI routed $54 million worth of eCommerce payments through Terra, and the app now claims over 500,000 users.
Do Kwon, Co-Founder of Terra, stated:
“Terra kept its head down and focused on building a payment network that benefits both merchants and customers and the results speak for itself. Our use cases in countries like Korea and Mongolia, where we have established roots via consumer-friendly mobile payment platforms, support our growth trajectory and help to drive transaction volumes.”
Volumes have skyrocketed on LocalBitcoins Venezuela after posting a staggering 2,492 percent increase over the last twelve months, making the stricken South American economy the world’s fastest-growing—but likely the most expensive—market for LocalBitcoins.
Weekly volumes leaped from 13.7 billion Venezuelan bolívars ($55,533) in mid-January 2019, to 363 billion bolívars ($1.46 million) at the end of last week, according to CoinDance. The week just passed was one of the platform’s biggest on record, having seen an explosive 38 percent increase from the week prior.
This is in spite of the fact the platform may be seeing the highest premiums for Bitcoin in the world. BTC is currently listed on LBC Venezuela no lower than $9,401 (about $1,300 above spot) and the only seller offering a whole Bitcoin has listed an ask price of an outlandish $11,687 per BTC (a $3,580 premium).
LocalBitcoins to the rescue?
LBC’s evident growth in Venezuela can be seen as another validation of Bitcoin’s reputation as a non-confiscatable and censorship-resistant store of value.
LocalBitcoins (LBC) is widely considered a platform for facilitating non-speculative purchases of BTC, due to its being a solely fiat-to-crypto exchange, and its charging typically several-hundred-dollar premiums to spot. It is also, crucially, one of the only exchanges that regularly publishes country-specific trade volumes.
As such LBC trade volumes have become a yardstick for quantifying purchases of seeming necessity. And indeed, a closer analysis of LBC data has revealed that the original cryptocurrency is seeing exceptionally high rates of adoption in countries with low economic freedom—countries like Venezuela.
This narrative becomes more convincing when cross-examining with trends on other exchanges. Last year Bitcoin jumped to a $2,250 premium on one of Argentina’s top exchanges after the government imposed capital controls, not too long before LBC Argentina volumes hit their all-time-high.
Venezuelans are hedging against their government
For decades Venezuela has grappled with one of the worst national crises in recent history, described by economists as the “single-largest economic collapse outside of war” in the last 45 years. And things don’t seem to be getting better. Last year Venezuela took the title of Bloomberg’s “most miserable” economy on its annual “Misery Index,” which ranks the world’s worst economies based on inflation and employment rates.
Faced with an inflation rate of more than eight million percent, on-and-off capital controls, and a steady decline in the production of oil—which accounts for about 99 percent of Venezuela’s export earnings—Venezuelans would have ample reasons to allocate to Bitcoin.
As reported previously by CryptoSlate, Venezuela is the world’s most Bitcoinified nation in terms of amount of BTC owned per head of population, and amount of income spent on BTC relative to income.
“Enterprise-first” blockchain platform Dragonchain clocked a peak performance of 15,000 transactions per second in a 24-hour performance demonstration Thursday, as reported by the company’s official Twitter account.
Dragonchain said that a quarter of a billion transactions were fully processed within the 24-hour window, making for an average throughput of 2,800 transactions per second, and peaking at 15,000 per second.
The results are encouraging for Dragonchain’s claims of “unlimited scalability” purportedly enabled by the platform’s unorthodox consensus mechanism, Dragon Net. Instead of running a mainnet where all nodes share a homogenous ledger, Dragon Net mandates five “levels” of nodes whereby each node (user) stands alone as its own, unique blockchain, and fulfills a certain function within the network-wide verification process.
As a blockchain-as-a-service platform pitched at enterprises, Dragonchain describes its hybrid public/permissioned architecture as striking a balance between keeping sensitive business data private, while incorporating the security and transparency of decentralized public blockchains.
In 2018 the Seattle-based firm patented its “Interchain” system, which connects Dragonchain’s private network to a number of public blockchains including Bitcoin, Ethereum, and NEO. In practice, this mechanism gives businesses the ability to run the bulk of their operations on a private chain, and selectively publish information on a number of public blockchains.
Dragonchain Founder and CEO Joe Roets gave a nod to this after Thursday’s test demo, reporting that the 250 million transactions had been “memorialized” with the “combined security” of Bitcoin, Ethereum, Ethereum Classic, and Binance Chain.
IntoTheBlock, a machine learning-driven crypto analytics firm, is to integrate its unique market intelligence into CryptoSlate to bring real-time indicators and signals to users.
CryptoSlate recognizes IntoTheBlock’s (ITB) sophisticated approach to data-driven analysis, which continues to broaden our understanding of the crypto market and the ability to deliver unique and valuable insights to users.
ITB’s Miami-based team, which includes data scientists machine learning specialists, have quickly built out one of the industry’s go-to sources for market analytics. CryptoSlate intends to continue to work closely with the ITB team to refine and develop signals that deliver maximum value to our users.
Overview of the ITB platform
ITB offers rich data analytics for hundreds of cryptocurrencies as well as an overview function, giving users a quick, yet comprehensive, snapshot of how each coin is positioned in the market. The platform incorporates an exhaustive range of variables, from on-chain metrics like the number of transactions greater than $100,000, to fundamental factors like search popularity on Google.
You can now find IntoTheBlock data on all of our 2400+ coin profile pages, including Bitcoin, Ethereum, XRP and many more.
The platform also digs deeper. In real-time, ITB quantifies unique on-chain metrics including the number of holders of a certain coin currently at a profit or a loss and represents them in a visual format for a clearer picture.
CryptoSlate has leveraged many of these tools to offer its users a more accurate understanding of market trends and the positioning of market participants and draw attention to crucial data points that would otherwise go unnoticed. Over the past few months, we’ve covered proprietary data from IntoTheBlock in a number of articles including:
IntoTheBlock CTO Jesus Rodriguez commented on the integration:
“With the IntoTheBlock integration, CryptoSlate users will have access to quick data points as well as momentum signals that describe trends in their favorite crypto assets. The data points will offer quick glimpses about the behavior of a crypto asset such as number of investors realizing gains, investors in Asia versus the rest of the world, levels of concentration and many others.”
Per the new integration, a number of IntoTheBlock’s crypto market indicators will become available for CryptoSlate users including momentum signals that turn bullish or bearish based on market data such as “bid-ask volume imbalance” and “network growth.”
More sophisticated data points will also be integrated, for example, the percentage of volume traded each day in Asia versus the rest of the world, giving users another level of insight into market trends.
A sudden jump in key metrics in both the futures and spot markets indicates strength and institutional sponsorship behind Bitcoin’s latest rally, a factor that could mark the start of an extended winning streak for the bulls.
As it stands, the five-day rally has seen Bitcoin gain more than 16 percent in price and $15 billion in market capitalization, having kicked off at $6,900 January 2 and peaking January 7 at $8,440. Bulls have dominated the market since December 18, however, when BTC broke market structure in the form of a sheer thousand-dollar rally to the upside.
Futures, spot data look promising for BTC despite technical overextension
Since June last year trading volumes and volatility have been declining across the entire Bitcoin market, casting doubt over the near-term prospects of an extended bull-run. Recent developments could change this, however,
There has been a dramatic surge in open interest and trading volumes on Bakkt and CME Group, two venues that are widely considered to have a vital bearing over Bitcoin’s price movements as the incumbent institutional venues for Bitcoin derivatives.
On Tuesday both venues saw hikes in open interest of 50 percent or more on their monthly BTC futures markets, coming as Bitcoin blew through the $8,000-mark and topped out at $8,440. This indicates the addition of participants to the marketplace in the form of new contracts being opened and—seen alongside an increase in price—can be considered an indication of aggressive buying.
Both markets have seen significant increases in volume, with CME nearly hitting $500 million on Tuesday—the highest volumes in months. Bakkt saw the same trend, with $40.7 million taking the monthly contract just shy of its all-time high of $49.6 million (December 18).
Spot volumes have also rocketed to levels not seen since late October. According to Bitwise, who measures trading volumes minus “fake” or “non-economic” activity, Tuesday saw nearly $1.5 billion worth of Bitcoin change hands in the spot market, a 300 percent increase from the December average of $500 million.
Volatility has also increased during the latest rally — another sign that Bitcoin could continue to trend higher or lower, and not stagnate in a consolidation. Granted, at its current level of 40 percent, volatility is nowhere near the levels seen in the first half of 2019, when Bitcoin rallied nearly $10,000 (a 260 percent increase) in three months.
While several technical indicators suggest that Bitcoin could be overextended after its latest rally and due for a retracement, the sudden increases in futures and spot trading could be a portent of a coming bull market.
Bitcoin has rocketed to a 30-day high after posting one of its largest intraday rallies in weeks, but closer inspection suggests the sudden breakout may not mark the start of an uptrend.
The rally, which began around 9 pm UTC Monday, injected more than $4 billion into market capitalization over five hours and took BTC to just below the $8,000-mark. But as it stands, Bitcoin is yet to clear the highest high of its weeks-long consolidation, made November 29 at $7,933.
The rally appears to have catalyzed a shift toward positive sentiment in the crypto market, but not convincingly. The Crypto Fear & Greed Index is up by two points out of a hundred after the rally, from 39 to 41.
Bitfinex longs start to deteriorate
The number of long positions on Bitfinex — a figure that in November hit a historic high — has finally begun to erode. This suggests Bitcoin’s recent uptrend appears to have been a chance for long-holders on the Hong Kong-based exchange to unload their positions and take profit.
If this trend continues and Bitfinex long-holders exit their positions at this level, short-term sell pressure could be fierce indeed. Nearly $320 million worth of long positions are currently on the Bitfinex order books, skewing the platform overwhelmingly in favor of the bulls (currently longs account for 91.3 percent of all positions on Bitfinex).
Volumes and open interest still not convincing
Hourly volumes on margin trading platforms BitMEX and Bitfinex leaped to their highest since mid-December, however, in terms of gains on higher timeframes, the volumes have been insignificant. This casts doubt on the chances of a continued uptrend.
Overall volumes in the Bitcoin market are still down about 90 percent from their levels of June 2019, and the volumes driving the latest rally are a fraction of those that marked the start of BTC’s months-long rally from April ($4,000) to June ($13,800) last year.
Data from the futures markets also suggests the latest rally may not have further legs and that a retracement could be in order.
Critically, all of the futures trading platforms have seen very little increase in the way of open interest — an indication of new buyers coming into the marketplace. In recent days the Bakkt and CME monthly contracts, as well as the perpetual XBTUSD BitMEX contract, have seen reasonable bounces in volume, but not the double, or triple-digit hikes in open interest percentages one would expect at the start of a strong uptrend.
Despite a strong rebound in both price and sentiment, the Bitcoin market is grappling with the lowest real trade volumes seen since April last year, as reported by Forbes.
Bitcoin posted a convincing bull rally Friday morning, seemingly ending a weeks-long consolidation that had taken BTC down to $6,900. The recovery appears to have been driven by a collection of buy orders resting below the $7,000-mark, characterized by a rapid spike in open interest on both the CME and Bakkt futures contracts.
Most indicators look healthy
On the surface, the market looks to be in recovery mode. The Crypto Fear & Greed Index has climbed back up from the bouts of “extreme fear” seen in November and December and is now hovering just below neutral.
Bulls seem to have found solace in the news that the United States could be headed into another military conflict with Iran, prospectively sending fearful investors flocking to safe-haven assets like Bitcoin.
Tensions between USA and Iran are escalating fast after a very long equity market rally. This could be a turning point for Bitcoin as investors turn to non correlated assets.
While all of this is highly encouraging for Bitcoin’s long-term prospects, sinking levels of volume and volatility could cast uncertainty over the conviction of the coin’s latest uptrend.
CoinMarketCap has recorded steady growth in Bitcoin volumes over the last 24 months, and yet several research outfits claim the bulk of this data is inaccurate.
In May 2019, digital asset manager Bitwise published a report that dismissed the methods used by CMC and claimed up to 95 percent of the platform’s volume is “fake,” stating:
“Despite its widespread use, the CoinMarketCap.com data is wrong. It includes a large amount of fake and/or non-economic trading volume, thereby giving a fundamentally mistaken impression of the true size and nature of the bitcoin market.”
In contrast, Arcane Research extrapolated data from Bitwise’s “real volume” feed and found that spot volumes are now down about 90 percent from June 2019, when Bitcoin made its high for the year ($13,800).
Volatility has recently been lethargic, which could also indicate a low likelihood Bitcoin’s latest rally will be long-lasting. Volatility is at its lowest in nearly ten months, after having dropped by nearly 50 percent in the last few days of December (this can likely be attributed to an absence of institutional traders during the holiday season).
With both volume and volatility having dried up, it is difficult to evaluate Bitcoin’s current trend with any certainty. A healthy rally should be accompanied by an increase in both of these metrics.
Periods of low volatility have traditionally attracted institutional investors to the over-the-counter market, however — widely estimated to be triple the volume of the global Bitcoin spot market — this action will not be represented in the Bitwise findings.
Just after regional authorities reportedly urged Bitcoin miners to reduce electricity consumption in Sichuan — a province that could account for up to 50 percent of global hash power — BTC’s hash rate rocketed to a new all-time high.
Asia Times reported December 29th that Sichuan state authorities held a meeting with local power operators and mining companies with the aim of having mining operations scaled down during the dry season, which lasts from October until April.
Sichuan’s oversupply of hydropower energy in the wet season, and its cool climate, have made the southwestern province China’s top mining destination. During the dry season, mining firms reportedly tend to relocate to other provinces reliant on thermal power.
Shortly after the purported meeting Bitcoin’s hash rate hit an all-time high of 119 million terahashes per second on January 1st, according to data from Blockchain.com, razing the previous record of 114 terahashes set on December 24th.
A 51 percent attack now costs more than $21 billion
Hashrate, which measures the total computational power for nodes securing transactions, may be the most important metric when it comes to quantifying the security of the Bitcoin protocol.
A higher hash rate increases the difficulty of performing a 51 percent attack, where a collusion of miners overthrow a blockchain network in order to halt and reverse transactions, double-spend, and generally undermine trust in its native cryptocurrency. Logistically, a malicious entity would now need a greater number of miners than ever before to coordinate such an attack on Bitcoin.
A high hash rate also increases the costs of attacking Bitcoin, which is by orders of magnitude the most expensive PoW blockchain to overthrow. At its current hash rate, the Bitcoin network would cost an outlandish $21 billion to perform a 51 percent attack on, as calculated by GoBitcoin.
Hash rate has rocketed 686 percent in two years, representing an influx in interest for large entities — particularly Chinese mining conglomerates like Bitmain — to mine the number-one cryptocurrency by capitalization. In 2018, a staggering 74 percent of Bitcoin’s hash power came from Chinese-managed mining pools.
Such a high concentration of hash power in the hands of few has sparked numerous concerns over the years that the Bitcoin network could be prone to attack, and yet the latest news suggests a more elemental risk could be at play. Should Chinese miners be disabled for any reason, Bitcoin will suffer a tremendous drop in hash rate and security.
A number of solutions have been proposed to decentralize Bitcoin’s mining network, however. Perhaps most prominent is Stratum V2 — the upgraded version of the protocol currently used by the vast majority of miners — which features a number of improvements designed to take de-risk mining pools.
The development has officially begun on Litecoin’s implementation of Mimblewimble extension blocks, a feature that will bring confidentiality to the sixth-largest cryptocurrency by market capitalization.
The news comes nearly a year after Litecoin creator Charlie Lee announced the intention to improve LTC’s fungibility by enabling confidential transactions, and a month after the Litecoin Foundation began accepting donations to support the effort.
Fungibility is the only property of sound money that is missing from Bitcoin & Litecoin. Now that the scaling debate is behind us, the next battleground will be on fungibility and privacy.
I am now focused on making Litecoin more fungible by adding Confidential Transactions. 🚀
Burkett, the Grin developer tasked with implementing privacy features in LTC, stated on the project’s “Progress Update Thread” he spent December reorganizing the code that will be shared between Litecoin and Grin++, a Grin node client that will interact with the Litecoin protocol to enable opt-in confidential transactions.
The developer also linked to two GitHub repositories, “libmw-core” and “libmw-ltc,” and advised that the technically-inclined can follow along as he makes updates.
A quarter of the way there
In December, the Litecoin Foundation announced a crowdfunding campaign to provide David Burkett with enough funds to support a year’s worth of work on the project. That figure was set at $72,000, and the Litecoin Foundation pitched in $5,450 worth of LTC and BTC to kick off the effort.
A month later, the crowdfund is a quarter of the way to meeting its target, having drawn about $9,500 worth of LTC and $100 worth of BTC contributions from donors, which added to the foundation’s contributions will provide Burkett with just under three months’ worth of runway (at $6,000 per month). Lee has once again called on the Litecoin community to chip in:
A number of users responded positively to Lee’s request, and yet many claimed the Litecoin founder — who controversially sold an estimated $200 million worth of LTC at or near the coin’s all-time high — should fund the entire project.