Crypto Market Update 06.04.2018

Crypto Market Update 06.04.2018

Our weekly crypto market update uses a standard set of information sources in an effort to get a less biased opinion of the market. 

 

“Let’s say the market can support 4000 different monies, one public the others private..which services get tokenized? “

The ongoing experiment with bootstrap equilibria, also known as tokens
Tyler Cowen Marginal REVOLUTION 1

 

Crypto Indexes

The Bletchley Indexes “offer the most thoughtful and consistent approach to index construction” according to CoinMetrics. 

Original “top X” indexes were launched in June 2017, followed by a market-wide index in December 2017 and sector specific indexes in February 2018. In total, there are 13 Bletchley indexes, with charts over various timetables available for each on their site.

Below is an alternate view of the performance based on the downloadable data made available by Bletchley. This view is intended to give a side-by-side snapshot of a handful of indexes.

Observations

  • A positive week for BTC vs USD, with the B10 Index outperforming BTC by ~3%
  • B10 and BTotal even indexes slightly underperformed weighted indexes over past 7 days, which is a typical
  • All sector indexes were positive over last week vs USD and BTC.
  • All sector indexes outpferformed B10 and BTotal last week
  • Platform index up over 12% vs USD over last week, down nearly 20% past month

 

Global Crypto Charts

For a quick look at the global markets from another perspective, Coinlib.io provides simple charts with a lot of info, including Bitcoin marketshare, a visualization of the top 20 currencies by volume and market cap, and more.

Total Market Cap of Cryptocurrencies: $336.31 billion ( vs $326.65 billion one week ago)

Market Share of Top Cryptocurrencies

Bitcoin’s market share has climbed to 39%, up from a recent low of 34% in early May. Looking longer-term, Bitcoin continues a long-term declining trend, with new currencies such as EOS and BCH taking some of that market share.

Market share of top 20 cryptocurrencies

The top 20 currencies (by market cap) currently make up roughly 86% of the total crypto market share.

TradingView Technical Indicators

Based on data and info from TradingView (Click  for 30% off a pro subscription)

Scores based on the cumulative total of positive and negative technical indicators signals over three time horizons on Trading View. Scores are weighted by multiplying total as follows: daily (x 1) weekly (x 2), and monthly (x 3). 

  • BTC and ETH have turned much more positive vs USD since last week
  • ETH indicators show significant strength over BTC

 

CRYPTO PERFORMANCE

  • BTC down up 3.5% vs USD over last week, down over 20% in last 30 days
  • ETH has performed slightly better than BTC over last 7 days, lagging ~7% over last year

 

Google Trends

 

Google Trends have have shown slowly declining searches out after falling significantly in February.

I’m tempted to stop tracking this, as I believe there will be fewer searches as the public gains knowledge. However, significant price action could still lead to search volume surges.

WooBull Charts

NVT Ratio This long-term cycle tracking ratio has continued the upward trend seen last week. The ratio is very high and suggests BTC is towards the end of long-term cycle.

NVT Signal -This short-term signal has risen to 125, up from 115 last week, continuing an upward trend.

In the original post introducing NVT Signal, 150 was indicated as an overbought signal.

Willy Woo also recently published a Tweet thread where he suggested BTC may go to $5500-5700 next.

CoinMetrics Charts

CoinMetrics has provides great charting tools for a number of top cryptocurrencies. Kalvichkin’s NVT is a regular check for checking short term trading signals. 

Kalvichkin’s NVT – Similar to NVT Signal, Kalvichikin’s NVT

Articles of Note

 

“Blockchains and tokenization are a way to incentivize the creation of a commons.”

Blockchains and the Opportunity of the Commons
Alex Tabarrok Marginal REVOLUTION

“Precisely because the blockchain is unowned the designers have to get much more correct, right out of the gate. Changing a commons on the fly, forking, is costly, disruptive and not always possible
2

“Flipside have built a service which allows individuals to buy baskets of #cryptoassets – a new one is released each day”

Coinmetrics, Flipside, and Secure Chains
the Coinmetrics Team Coin Metrics

“So this morning Flipside Crypto, a data-driven asset manager, released their Coinmetrics secure chains basket.
3

“Once you move past speculative pricing of cryptocurrencies and ICOs, Blockchains are a way to create economies.”

CryptoEconomics : Why Blockchains need Computer Scientists & Economists to come together?
Medium

“An alternate interpretation of CryptoEconomics is at the application layer: creating incentives for each participant to either create or consume value, using a token as a medium of exchange for the transaction.
4

“I don’t want to hold cash as working capital – I‘d rather stay fully invested while my wallet proportionally sells assets”

The Security Token Thesis – Hacker Noon
Hacker Noon

“lay out the reasons why security tokens dominate other methods of recording and trading ownership claims. Taken together, the features listed below form the foundation of the thesis that security tokens will see widespread adoption across numerous asset classes in the coming years.
5

“Instead of looking at “blockchain”, look at what you actually need and see what fits you best.”

Alternatives to Blockchain – Jimmy Song – Medium
Medium

“some alternatives that use aspects of blockchain technology that do a lot of what “blockchain” advocates claim, but do it a lot cheaper.
6

“The peak $BTC.X price coincided with the day bitcoin futures started trading on the Chicago Mercantile Exchange”

How Futures Trading Changed Bitcoin Prices
Federal Reserve Bank of San Francisco

“The peak price coincided with the introduction of bitcoin futures trading on the Chicago Mercantile Exchange. The rapid run-up and subsequent fall in the price after the introduction of futures does not appear to be a coincidence. Rather, it is consistent with trading behavior that typically accompanies the introduction of futures markets for an asset.
7

 

 

Our Take

Short term: bullish though cautious as a bear market may still be coming.
Long-term: very bullish, especially on dapps and digital assets

  1. http://marginalrevolution.com/marginalrevolution/2018/06/ongoing-experiment-bootstrap-equilibria-also-known-tokens.html
  2. http://marginalrevolution.com/marginalrevolution/2018/06/blockchains-opportunity-commons.html
  3. https://coinmetrics.io/coinmetrics-flipside-and-secure-chains/
  4. https://medium.com/koinearth/cryptoeconomics-why-blockchains-need-computer-scientists-economists-to-come-together-fd0eda583834
  5. https://hackernoon.com/the-security-token-thesis-4c5904761063
  6. https://medium.com/@jimmysong/alternatives-to-blockchain-9f858c0a1f2d
  7. https://www.frbsf.org/economic-research/publications/economic-letter/2018/may/how-futures-trading-changed-bitcoin-prices/

Weekly Crypto Outlook 05-01-2018

Crypto Market Update

My weekly update on the crypto market intends to look at the market from a macro perspective. With a majority of the crypto market cap concentrated on Bitcoin and a handful of other tokens, my focus is on the major coins. I check a standard set of information sources each week and include links to articles of interest.

Crypto Indexes

I follow the Bletchley Indexes, which CoinMetrics believes “offer the most thoughtful and consistent approach to index construction.”

Original “top X” indexes were launched in June 2017, followed by a market-wide index in December 2017 and sector specific indexes in February 2018. In total, there are 13 Bletchley indexes, with charts over various timetables available for each on their site.

Below is an alternate view of the performance based on the downloadable data made available by Bletchley. This view is intended to give a side-by-side snapshot of a handful of indexes.

Bletchley Cryptocurrency Index Performance 05-01-2018

Obserservations

  • Over the last month, the Application Index (consisting of the likes of Tron, OmiseGo, Binance, Icon, and two dozen others) has outpaced the market as a whole.
  • Platform Index has roughly kept the same pace as the market as a whole, while outpacing the top 10 index.
  • Currency sector weakest over last month
  • In general, “even” indexes (with an even allocation to all assets) have outperformed weighted indexes over most time periods, with the exception of nearly even performance for the total market over since index inception.

Global Crypto Charts

For a quick look at the global markets from another perspective, I find Coinlib.io provides simple charts with a lot of info, including Bitcoin marketshare, a visualization of the top 20 currencies by volume and market cap, and more.

Market Share of Top Cryptocurrencies

Market Share of Top 5 Cryptocurrencies - 05-01-18

Bitcoin’s market share has declined to ~38%, close to all-time lows. This continues a long-term declining trend, with new currencies such as EOS and BCH taking some of that market share.

Top 20 Cryptocurrencies by Market Share

The top 20 currencies (by market cap) currently make up roughly 85% of the total crypto market share.

TradingView Technical Indicators

Based on data and info from TradingView (Click  for 30% off a pro subscription)

Cryptocurrency Technical Indicators 05-02-2018

Scores based on the cumulative total of positive and negative technical indicators signals over three time horizons on Trading View. Scores are weighted by multiplying total as follows: daily (x 1) weekly (x 2), and monthly (x 3). 

  • ETH has surged compared to BTC and USD over the last month. Technical indicators suggest the tide may be swinging to favor BTC in the short term.
  • USDT has outperformed USD by over 6% in the last year.

Google Trends

Google Trends Bitcoin + Crypto 05-01-2018

After a significant rise in Google searches for “bitcoin” in late 2017, there’s been a downward trend, which continues this week. I’m hesitant to keep tracking this, as my assumption is that there will be less searches as the public gains knowledge and no longer needs to search for the term. However, significant price action could still lead to search volume surges.

WooBull Charts

Bitcoin NVT Ratio 05-01-2018

NVT RatioThis long-term cycle tracking ratio has dipped in the past ewek, though still remains very high. This is worrisome as it suggests a significant drop may be on the horizon.

 

Bitcoin NVT Signal chart 04.16.2018

NVT Signal – This short-term signal continued its upward trend from the previous week. It has moved significantly over the last few weeks week and now sits near 130. In the original post introducing NVT Signal, 150 was indicated as an overbought signal.

Overall, there is potential for the upward trend to continue in short-term, though NVT Ratio suggests a downturn is looming.

 

CoinMetrics Charts

Bitcoin Kalvichkin NVT Signal May 01 2018

Kalvichkin’s NVT – Similar to NVT Signal, this suggests an upward trend is possible for both BTC and ETH in the short term.

Articles of Note

How reliable are ratios?

CoinMetrics collects a large amount of data on a number of coins. In the past, they’ve written about the challenges of collecting data for a number of different currencies, as well as problems with reliability of the data. Unsurprisingly, they understand the power and pitfalls that come with analyzing such data, particularly at a relatively nascent stage.

This week, they wrote on the potential problems of using ratios for valuations:

While users are more empowered than ever, uncertainty remains about a) whether ratio analysis is appropriate, b) how to interpret major ratios, and c) the shortcomings of such analyses.

NVT (network value to transaction volume) has become a popular way of measuring value, and I’ve included it as part of my own regular checks based on the writings of Chris Burniske, Willy Woo, and others. However, this may be a flawed method:

..ultimately, Bitcoin price isn’t a function of its transaction count! That’s only one small variable in the entire system – other important variables include average transaction value, fees, hashrate, accumulated trust, miner concentration, developer innovation and so on. 

Thus, the relationship between transaction count and the economic activity occurring on the network is an extremely tenuous one – we will cover this in a future post.

Read the full post for more info and check out their previous posts on the trouble with data collection.

 Making investment & ownership open to all

Nick Tomaino, founder & general partner of crypto investment fund 1Confirmation, writes on how crypto can make investment and ownership truly open to everyone and how regulation from the likes of the SEC is a threat:

This could have a negative effect of giving wealthy individuals and institutions ownership of the the blockchain ecosystem, leaving the masses out of wealth creation in the industry.

In the event all tokens are determined to be securities, he suggests a possible workaround:

Another possibility is that many more founders could go the Satoshi route of being completely anonymous upon launch to allow their tokens to maintain broad accessibility and also avoid any regulatory risk. If regulators come down aggressively and say that all tokens are securities, there is a strong chance that this happens.

 Blockchain to transform digital art?

While Cryptokitties may have been mocked in some circles, there are incredible new possibilities for digital artwork stemming from ERC-721 tokens. Each token is non-fungible, giving it a uniqueness from other coins. The public ledger aspect proves both authenticity and scarcity.

Here’s an 18 minute discussion on digital art with the founders of cryptokitties, hosted by Chris Burniske, via AVC.

The talk includes discussion of the human aspect of art and how it effects value (presumably higher) compared to AI-created artwork.

Blockchain as decision maker
Prolific blogger and economist Tyler Cowen opines on how blockchain could change the world in terms of governance:
To drive the point home, a blockchain is actually a form of governance and that is what makes it such a potentially radical idea. We’ve had families, and businesses, and governments, all as methods for making decisions.  Now we have blockchains. That could be huge, but is it going to take off?
Cowen outlines a scenario for this to happen and concludes:
That all said, I have more important news yet: I am not sure this cannot happen. In fact, I give it at least a 5 percent chance of taking place in some form, even if not exactly as I have outlined.
The big ICOs are alright

2017 saw some enormous ICOs based on little more than white papers. Jeremy Epstein checks in some of the biggest ICOs, nearly 1 year later.

He looks at the Brave browser, which incorporates the Basic Attention Token, Bancor, Gnosis, Golem, all of which he finds are doing well.

While the SEC and others have been clearing out the scam projects and regulators are cooling the market a bit (which is ultimately good), we are seeing more and more of the first wave of ICOs start to deliver.

This is the lull following the frenzy of November/December of 2017 when the infrastructure and apps are getting built.

Final Thought

“I am not saying here that there is no information in big data. There is plenty of information. The problem — the central issue — is that the needle comes in an increasingly larger haystack.”

Nasim Taleb wrote that in 2013, and it feels more true today. Where will be in another five years?