data taken at 9:45, 26/06/2020
Written by: Yves, Head of Trading at Wirex
We have another week of market sentiment swings in the digital economy as the Bitcoin price jumped near the $9,800 mark on Monday, and fell back to the $9,200 levels a few days later. On Thursday, the BTC/USD price touched the weekly low at $8,989 (source: Bitstamp). The price range of 9% this week is a typical range level for the market this year, and Bitcoin aficionados are certainly used to it by now. Regardless of the impressive swings, Bitcoin seems to be undecided as markets have evolved in the $8,500-$10,000 range for the past two months.
The BTC/USD price drop was triggered by the bearish signal of a 2,680 bitcoins transfer to bitfinex on June 23rd (most likely to sell), and the market was eventually pulled further down by a 2.2% correction in the S&P500 index price. The bitcoin quantity transferred by miners to exchanges on June 23rd is the highest recorded by Glassnode since March 2019.
Meanwhile, Bitcoin’s interest seems to be on the rise as Glassnode also reports that the number of active addresses reached new heights since January 2018. The bullish sentiment is confirmed by the growing Grayscale Bitcoin trust fund. Grayscale reports an addition of 19,879 Bitcoins to its fund between the 16th and 24th: the number of shares issued and outstanding is up 5% week-to-week. The numerous predictions of a serious institutional push post Covid-19 and post halving are now being tested. Is the fear of missing out the most eagerly-awaited rally since 2017 gradually flipping over the most risk averse mindsets? At least for now, social networks are widely relaying the idea that ‘only’ a 1% institutional investment in Bitcoin would drive the asset price to a record height.
If Grayscale’s Bitcoin trust shows impressive growth, its Ethereum counterpart suffered a 50% price collapse since June 12th as institutionals have pulled out their investments at the end of their mandatory 12 months lock-up period. By contrast, the ETH/USD price is only down ~3% over the same time range. The low liquidity and high barriers to entry into the Grayscale funds can generate significant premiums relative to the underlying digital currency. The premium widens in periods of high demand, creating bubbles waiting to burst.
The foolproof indicator of crypto-asset interest must always come from the real economy. Most notably this week, KPMG stepped up with the launch of Chain Fusion, “a patent pending suite of advanced analytics capabilities” to help financial service companies and fintechs reconcile blockchain data for “business, risk and compliance”. Having a top auditor tackling the digital accounting challenge is reassuring for all companies looking for strong operational support. Furthermore, on the transactions front, Paypal reportedly wants to support crypto sales, looking for crypto engineers to set up the service. Finally, Australians can now buy crypto assets at any of 3,500 local post offices.
Australia is clearly a dynamic digital market. For instance, it is one of the most promising hubs of the DeFi (Decentralized Finance) boom with projects (e.g. synthetix). MakerDAO (DAI recently featured by Wirex) is probably the most successful DeFi project where participants can pledge ETH or other admissible ERC-20 tokens to generate and borrow DAIs, stablecoins that are pegged to the U.S. dollar. The total value locked in the DAI project jumped by 60% since mid-June, an impressive gain of interest from investors looking to leverage their position, or benefit from the framework’s savings rate. Despite MakerDAO’s rocket growth, the Compound protocol, a DeFI newcomer in the digital lending business, might threaten DAI’s dominance. Compound launched the COMP token this week, distributed freely and daily to all Compound’s participants, in the context of a business model that is still difficult to grasp, and has yet to be determined by the community. From a market perspective, it is worth noting for either MakerDAO or Compound, that the overwhelming Ethereum supply (~300% collateralization for MakerDAO, and a utilization rate near 0% for Compound) is the ultimate indicator of a growing buy and hold community, looking for passive income, at least for now…
On the retail side (Wirex), there is still a positive BTC interest this week. The ratio of BTCs bought over BTCs sold is at 1.26, but lower than last week’s (1.5). It is also positive and decreasing for ETH (1.09 versus 1.18 last week) and XLM (1.4 versus versus 3.0 last week). It is positive and increasing for XRP (1.99 versus 1.87 last week). Whales have been increasing their XRP positions in the past months as reported by crypto news flash. The XRP/BTC price has yet to confirm a positive trend as it still remains stable and low. Finally DAI interest soared (ratio at 2.99), in line with MakerDAO’s growing locked value.
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.