Crypto Corner - Summary of the Week 10/08

data taken at 9:02am 14/08/2020
Written by: Yves, Head of Trading at Wirex

The Bitcoin price (BTC/USD on Bitstamp) is still struggling this week to stay above the $12,000 level, despite a second short-lived peak at $12,080, reached on August 10th. A correction the following day sent the price back at $11,130, the weekly low. The positive trend has been losing steam for the last two weeks, in line with the price of precious metals. Indeed, at the same time on August 11th, the gold price (XAU/USD) retreated after reaching its all-time record high at $2,029.93, dropping by 8.38% from this peak. The digital gold is riding the precious metal bull trend as institutions are desperately looking for either alpha returns, or just another safe haven. As Bitcoin proved its resiliency with the post March fast recovery, it is now harder for institutions to ignore or dismiss Bitcoin as an alpha generating investment for them or their clients. JP Morgan recently accepted crypto exchanges such as Coinbase and Gemini as clients. All major private Swiss banks are offering Bitcoin related products. Goldman Sachs changed its mind… these are the signs of an accelerating integration of Bitcoin in the traditional investment space. It is a clear opportunity to profit from substantial premiums and fees.

A clear indicator of institutional interest in the main cryptocurrency is the unyielding growth of the Grayscale Bitcoin trust (GBTC) Assets Under Management (AUM). The AUM reached $4.7 billions yesterday with 427.3 millions of shares outstanding. The number of shares outstanding is up 15.4 millions (or 3.7%) over the last 10 days. With a share currently valued at $13.11, this is nearly a $200 millions increase over ten days. The Grayscale Bitcoin trust inflow is more than 2.5 times higher than the daily average of the first half of 2020! The most interesting part is that the Grayscale share is priced at a 17% premium to the actual Bitcoin price. Still, investors are pouring into the trust.

In general, we can only imagine the premiums that banks are already cashing in through Bitcoin related structured products… Why not buy and own Bitcoin directly? Anyone can do it and it is safer to store it yourself. In fact, the 17% premium is nothing else than a regulatory inefficiency. Traditional funds have to invest in vehicles that are compliant with the law and with the fund’s mandate, which restricts immensely the investment vehicles allowed.

Regardless, this has been a strong bullish signal for cryptocurrencies all along, but eventually the high premiums and the high cost of entry via institutions might leave many disappointed, bursting a bubble created by the same who radically denounced it in the first place. Georges Soros, who considers Gold to be the “Ultimate Bubble”, is himself a traditional buyer of Gold, Gold miners and Gold call options, skilled at detecting bubbles and buying them. If institutions still believe Bitcoin is a bubble, then they might have decided to buy it and enjoy it for as long as it inflates, as Georges Soros would.

Despite the rising AUMs and shares outstanding of the GBTC fund, Glassnode reminds us that “the % of supply owned by entities holding less than 10 BTCs grew from 5.1% to 13.8% in 5 years” . The trend highlights main street’s adoption of Bitcoin. Still ~32.5% of the total Bitcoin value is concentrated in accounts that hold more than 1,000 Bitcoins. Nearly half the total value is concentrated in accounts that hold more than 100 Bitcoins. This number dropped by nearly 13% over 5 years.

Whales have a tendency to sell their inventory quickly and aggressively. Every movement of a large inventory is tracked by “whale alerts”. Such movements are typically considered as bearish signals. Selling their inventory quickly lets whales trade an opportunity cost (the cost of the transfer signalling a potential sale) for the cost of a large market impact. At the end of last week, 92,857 BTCs were transferred ($1.092 billion). Bitcoin crossed the $12,000 level only 4 days earlier. Consequently, a strong resistance near the $12,000 level might be expected.

Source: - ~32.5% of the total Bitcoin value is concentrated in accounts that hold more than 1,000 Bitcoins

Regarding the alternative cryptocurrencies this week, we’ve seen a major shake up in the top 5 cryptocurrencies by capitalisation. The Chainlink (LINK) cryptocurrency is now at the 5th position on coinmarketcap, one more signal of the incredible dynamic of the Decentralised Finance (DeFi) space. Chainlink offers “Oracle” services, meaning independent reference prices (or data feeds in general) that are used by smart contracts to determine whether specific events were triggered. An example of such an event is a “liquidation event” in a lending transaction: here, the reference price is used to value the collateral. LINK is based on the Ethereum blockchain and is one of the reasons behind the impressive growth of the Ether (ETH/USD) price this year. It is a potential wrapper for every DeFi smart contract on the Ethereum blockchain. We know the importance of an oracle for sound management of DeFi projects, at least since the ETH crash of March. Then, MakerDAO’s internal oracle (the “medianizer”) failed to update their ETH prices, causing millions in losses.

Today, the DAI/USD price remains constantly above $1.0, most of the time above $1.015, when the stablecoin should objectively stay around the $1.0 price. DAI borrowers have become more risk-averse . They fear that an ETH price crash would trigger the liquidation of their collateral. They buy back DAI when the ETH price drops, to get ready to close their account if necessary by returning the borrowed amounts: there is a negative correlation between the DAI and ETH prices. Furthermore, a large quantity of DAI is now locked in DeFi projects (e.g. Compound): the premium observed is also a liquidity premium as the DAI supply on exchanges is drying out.

The ETH price is up nearly 12% this week, still enjoying the benefits of the DeFi growth, including Chainlink.

This week, Ripple (XRP) might have described the pivot we were waiting for two weeks ago. Brad Garlinghouse, Ripple’s CEO mentioned the potential pivot in a CNN interview: he hopes “that in 5 years, Ripple is not just Amazon books, it is Amazon”. The pivot seems to be the more reasonable solution when banks are now openly doubting the Ripple business model: Santander recently stated that XRP “was not actively traded in enough markets”. It doesn’t seem to be operationally mature yet. XRP/USD, like most cryptocurrencies, ended this week without a clear direction.

ETH/USD and DAI/USD prices dynamic this week

The above is an opinion piece and therefore should not be taken as financial advice. Please do your own research thoroughly when looking at Cryptocurrency.


what’s happening with WAVES??!


Ustedes me habéis cerrado la cuenta con balances de manera fraudulenta y os escribo para darme una solución y no me contestéis

Llevo una semana intentando y nadie me quiere contestar

:slight_smile: getting into DeFi with TRON using Gravity. Ethereum has some competition.


Siento escuchar eso. Sin embargo, esto es algo que el equipo de soporte deberá analizar directamente. Hay un hilo de soporte dedicado en este foro, publique el número de referencia de su ticket allí para que el equipo pueda ayudarlo más. El enlace a ese hilo está AQUÍ.


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Great round up @yves! Great to read on the commute home! :top: