Market Dashboard

This Week in the Market

The sell-off slowed down this week with the market losing 3% of its value. This brought the overall market cap from $204 to $198bn. The underperformance was more pronounced in the smaller cap cryptos with the token economy bearing the brunt of the loss. The equal weighted index (DCEX) declined by 4.6%, well below the 2.5% drop of the large cap index (DCX). Bitcoin’s annualized volatility continued to decrease reaching an all time low of 36%, well below its 110% historical volatility. Ethereum sell-off continued at full steam adding -8.2% to its already large losses.
 
Observation of the week: Ethereum has been on a wild ride over the past year and a half. Beginning in 2017 with a price tag of $11, and then reaching an eye popping $1,400 in Jan 2018. Since Ethereum has been in an almost straight line descent to its current level of $243. So, what happened? Market participants attribute this erratic price action two primarily 3 effects: 1) the ICO craze of 2017 generated an unprecedented demand for ETH, 2) these same ICOs began selling their ETH once funds have been raised, (e.g. TrustNodes have sold 160k ETH in the past 10 days), and 3) BitMex’s, one of the largest crypto derivative exchanges, expanded their product line to include ETH swaps which led to many investors piling into short positions against the crypto asset. We agree with the market’s perception, and would add to this that current prices still do not reflect the underlying reality of fundamentals. Despite our belief that Ethereum’s potential is immense, we think that further adjustment needs to take place to reconcile the price with reality.

News Brief

Morgan Stanley Plans to Offer Bitcoin Swap Trading for Clients – Bloomberg
Summary: Morgan Stanley is planning on offering clients Bitcoin trade swaps, charging a spread for each transaction.

Why it Matters: This comes at the heels of other Wall Street giants such as Goldman SachsNasdaq and even CitiGroup this week who have all expressed interest towards facilitating the demand for cryptocurrencies. Trading swaps, however, is growing in popularity with many larger investors since with samps investors don’t actually holding cryptocurrency directly and consequently don’t have to adsorb any hacking risk.


Nasdaq Said to Be Building Tool to Predict Crypto Price Movements – Coindesk
Summary: Nasdaq is preparing to add tools for predicting the price movements of crypto assets to its Analytics Hub. The hub, launched last year, draws on machine learning and natural language processing capabilities to parse through social media and other alternative data sources to give investors a better way to assess market movement.

Why it Matters: Nasdaq might be on the cusp of giving institutional investors an analytical edge on trading hundreds of crypto assets. What this also tells us is that Nasdaq sees a demand for this product from its constituents which lends support to the belief that widespread adoption from institutional investors is forming.

The Winklevoss stablecoin is one small step toward crypto acceptanceTechcrunch

Summary: The Winklevoss announced the Gemini Dollar — a regulatory compliant stablecoin backed by the US dollar. The Ethereum-based token was approved by the NY Department of Financial Services, is subject to monthly audits by an external third party, and has all US dollars held in a FDIC-insured State Street account.

Why it Matters: Despite there being a lot of competition in this market, this presents the first fully regulated stable coin that has been launched. This news is huge as it provides investors a regulated blockchain-native crypto asset where to park their investments during periods of market stress. At the same time, this could lead to the first widespread use of retailers for a cryptocurrency since it would have all the desirable properties of Bitcoin without its volatility, which is the thing that many believe, with good reasons, is holding back Bitcoin from widespread adoption.  

U.S. Judge Says Initial Coin Offering Covered by Securities Law – Bloomberg
Summary: A federal judge has ruled that U.S. securities laws may cover an initial coin offering, handing the government a legal victory in its effort to regulate billions of dollars in cryptocurrency offerings much like stocks.

Why it Matters: Although many argue the SEC has not been sufficiently clear on weather ICO are securities,  this will not stop US court from hearing cases that allege securities laws violations.

Articles Worth Reading

A New Age for Trade and Supply Chain Finance – World Economic Forum (pdf version)
 
Why you should read it: This article provides concrete examples of how the blockchain technology could narrow the current trade finance gap of $1.5 trillion, representing roughly 10% of global merchandise trade volumes.
 
Interesting chart: Distributed ledger technologies like Blockchain could increase volume of trade via the reduction of paperwork costs and the removal of frictions.

What Is Blockchain Technology? – CB Insights
 
Why you should read it: A nice primer on blockchain and the major crypto assets.
 
Nice infographic: The crypto ecosystem.

Crypto & the Rational Investor – Pantera Capital
 
Why you should read it: An answer to the question – Why should we recognize cryptocurrencies as money or currencies when they are created from nothing and no one stands behind them?
 
Interesting quote: “the success or failure of one or more cryptocurrencies will not ultimately be determined by renegade early adopters theorizing a better form of money or by institutional gatekeepers looking to protect their authority, but — ironically — by the operational success or failure of those same institutional third-party trust agents that have become critical to ongoing fiat viability.“
 
How Crypto Will Grow Into an Institutional Asset Class – Fortune
 
Why you should read it: This article describes what is some of the necessary missing infrastructure for institutional investors to finally step into crypto and why the current system is not quite prime time ready for large players.
 
Interesting infographic: The two kinds of financial infrastructures that could be built using blockchain technology.

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