Crypto Corner - Summary of the Week 25/05


*Data taken at 11:35am 29/05/2020

Every week our very own Yves from Wirex, will be doing an opinion piece, summarising some highlights from the past 7 days in the Crypto universe.

So without further ado, Yves, over to you…

This past week offered probably some of the most bullish signals for the digital economy, strengthening the feeling that cryptos are here to stay.

The most encouraging signal that started back in January with the bank of international settlements (BIS), is leading the IMF and the Central Banks to openly embrace the future of digital currencies (CBDCs). Practical solutions around public/private partnerships are considered and debated. The COVID-19 pandemic also seems to accelerate adoption, as physical cash is perceived as a vector for this terrible disease. And it is hard to believe that this new way of life, unfolding before our eyes, would not reward the most trusted and renowned cryptocurrency, namely Bitcoin.

42% of the BTC supply has not moved in over two years and the portion is continuously growing. HODLers don’t seem to be too keen to sell their Bitcoins around the $10K levels that were reached again recently, if they are looking to sell at all. HODLers are exactly the ones we imagine them to be: retailers. This week at Wirex, there are 16% more BTCs bought than BTCs sold by retailers (ratio at 1.16), against an 11% excess in BTCs sold the previous week (ratio at 0.89). The BTC/USD market rebounded this week from the $8630 mark to the $9625 mark, up 11.5% over three days, holding its positive trend since the coronavirus crash on March 12th.

If the BTC market seems to be resilient. It is also more volatile this month. And the cause might be found in the emerging BTC derivatives market. The CME recorded a sharp increase in BTC derivatives trading this month, especially around the halving event on May 11th, which led us inexorably, this Friday, to the largest bitcoin futures and options expiration to date. In general, sophisticated institutional investors contribute significantly to the higher volatility. They are also the main cause for the high correlation with Equity markets (e.g S&P500 Index) since the start of the health crisis.

The only downside this week came from Goldman Sachs taking an old stance that reminds us that Bitcoin is not an asset class, and that a “security whose appreciation is primarily dependent on whether someone is willing to pay a higher price for it is not a sustainable investment”, even drawing the already (in)famous parallel between Bitcoin and the Tulip bulb, but in the end, choosing to ignore the very foundations of the technology, the proof of concept that could shake the world, leading for instance to the CBDC trend. A work of art in limited edition. Purists would consider that Bitcoin has actually nothing to do in a Goldman Sachs presentation.

On the altcoins front, prices in USD tend to be very correlated to the BTC/USD pair. XRP, XLM and NANO are mostly riding the Bitcoin trend.

In particular this week, XRP’s capitalization is struggling with Tether (USDT) to keep its third position on CoinmarketCap. Tether, as the most successful safe haven of the digital economy, has been in high demand this month, although Ripple has been working hard towards institutional integration, releasing a new cloud solution. Proof of its developing integration could be found in the growing ratio of volumes traded on business days against the volume traded on week-ends that is now 6-fold, but volatility remains extremely high: on May 25th, the price range on Bitstamp in percentage (above 12%) was three times the range recorded on Bitcoin.

*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.

4 Likes