Market Update 27th May – 2nd June 2020

In Markets

As President Trump was threatening a military crackdown this morning, Bitcoin was spiking above the psychological US$ 10,000 mark. Things are moving fast but at the time of writing Bitcoin was trading just over A$ 14,800 to be 14.1% up for the week. Ethereum finished the week up by 20.1%. The past week has also been positive for the rest of the top ten: XRP (7.2%), Bitcoin Cash (11.2%), Bitcoin SV (9.7%), Litecoin (12.4%), EOS (11.3%). Stellar was up 16.8%.

Bitcoin price 2020-06-02
Source: Independent Reserve Bitcoin/AUD chart

In Headlines

Ether is undervalued

Contributing to Ether’s 20% rise this week was Blockfyre’s report looking at four different indicators they believe demonstrate ETH is significantly undervalued: developer activity, gas used, number of hodlers and the tendency of miners to hold onto their coins at the current price. “Ethereum’s progress and several further indicators are very promising” Blockfyre concluded. Meanwhile crypto writer António Madeira took a deep dive into Ethereum’s record breaking gas use. He points out that the number of transactions is far from the ATH and the gas usage is mainly due to stablecoins and DeFi (they’re more complex and thus use more gas). Fees have risen from 11.8 cents in January to around 60 cents currently as miners prioritise transactions with higher fees.

Institutional investors bullish on Bitcoin

Crypto fund manager Grayscale Investments is accumulating Bitcoin at 1.5 times the rate new coins have been created by miners since the halving. Since May 11, Grayscale has bought 18,910 BTC, while only 12,337 Bitcoins have been mined. Less bullish is the news that in the past week Bitcoin miners have sold 11% more coins than they generated, according to Bytetree.


Grayscale buying up Bitcoin

Old scale tech

Remember Plasma? It was meant to be to Ethereum what Lightning is to Bitcoin (although more recently Ethereum devs have turned to Optimistic Rollups). The Plasma-based OMG Network has just launched – a second layer solution that provides “thousands of transactions per second at a third of the cost of the same transaction on Ethereum”. It uses Proof of Authority and is operated by a single entity, although outside ‘watcher’ nodes verify transactions are legit. Tether will be available on OMG, although only Bitfinex supports it right now.

Crypto and turmoil

The turmoil in America has attracted the attention of the crypto community. Anthony Pompliano called for changes to the legal system so it applies equally to all races and wealth levels. Quantum Economics’ Mati Greenspan said the fact stocks have risen throughout the pandemic and riots is due to the Fed’s money printer which is “exacerbating the inequality that exists in our economy… (it) only serves to highlight one of the protesters’ main points of frustration, systemic injustice.” Dr Doom, Nouriel Roubini, said he’d predicted the economic impact of the pandemics would lead to riots back in March. Many are labelling bitcoin as the non-violent way to protest.

Stuck in the past

Goldman Sachs’ investors call on Bitcoin turned out to be a bust, rehashing the same old tired criticisms. We wondered last week if Chief Investment Officer Sharmin Mossavar-Rhami’s views had evolved since 2018 when he said he saw no value in Bitcoin or other cryptocurrencies. They haven’t. Bitcoin rallied 8% the next day in a nice piece of symbolism. Gemini’s Tyler Winklevoss tweeted: “Crypto used to be where you ended up when you couldn’t make it on Wall Street. The quality of Goldman Sachs’ recent research on Bitcoin demonstrates that there has been a talent flippening. Today, Wall Street is where you end up when you can’t make it in crypto.”

Hodlers be hodling

According to Glassnode data, 60% of the total supply of Bitcoin hasn’t moved in a year. LookIntoBitcoin’s Philip Swift said: “This is an indication of significant hodling. The last time this happened was in early 2016, at the start of the bull run.”

To infinity and beyond!

Bitcoin was above the psychological US$10K mark at the time of writing, but it’s had trouble holding there before. In October 2019 and February this year it briefly topped the level, only to drop dramatically afterwards. However, in May it peaked above $10K without a big drop and has been consolidating for some time, increasing the possibility of a breakout. Crypto trader Benjamin Blunts said: “When BTC finally does break out of this range it’s going to be explosive, I’d say $11K within 3 weeks and possibly $12K within a month.” (That’s around A$17,650.) Credible Crypto this week declared the past 900 days since Bitcoin’s record high in December 2017 had simply been “one massive accumulation phase before the run to $100K Bitcoin and the consolidation structure will soon be broken. Are you prepared?”

Until next week, happy trading!

Independent Reserve Trading Desk