CRYPTO GOLD WEEKLY UPDATE
Week of Monday February 12, 2018
- Last week, Bitcoin (USD) fell -1.6%, finishing Friday, February 9 at $8,689.84, down from $8,827.63 on Friday, February 2.
- Ethereum’s Ether (USD) underperformed, falling -9.4% to $852.38, with the broader crypto market (CAMCrypto30) dropping nearly -4% over the last week.
- Despite its own historic volatility, cryptoassets provided some stability compared to other asset classes during the past week, as volatility concerns turned to legacy financial markets, with the S&P 500 index dropping over -5%.
- While their outperformance was muted, traditional safe-haven asset classes still faired better than Bitcoin and other cryptoassets during the period, with the dollar, yen, 10-year treasury bond, and gold moderately outperforming.
Recent Trading History / Current Trading Range
- As a cryptoasset benchmark, the price of Bitcoin (USD) has fallen -56.1% from its December 17th high of $19,783.21, but is still up a staggering +725% over the last 12 months.
- After hitting a 4-month low of $5,922 on 2/6 (off roughly -70% from its all-time highs), Bitcoin has recovered nearly +50% to current levels.
- On the technical front, however, Bitcoin (USD) is currently facing an 8-week bear cyclical trend, stuck within a downward trading channel (blue dotted lines), bouncing around a roughly 3,500-point range (~$6,000 – $9,500) in February thus far.
Crypto Market Drivers:
(*Level of Importance/Weight in Descending Order)
SHORT-TERM (ST) DRIVERS:
- Speculation and investment
- Regulatory crackdowns in China and South Korea
- South Korea introduced measures to tackle speculation in the sector, banning the use of anonymous bank accounts in cryptocurrency trading.
- South Korea would move to ban cryptocurrency trading via exchanges.
- Indian Finance Minister Arun Jaitley said recently that his government will take measures to “eliminate” the use of cryptocurrencies in “illegitimate activities or as part of the payment system.”
- Bank of Japan issuing warnings on ICOs and direct cryptocurrency ownership
- Introduction of Bitcoin futures products in December (CME / CBOE)
- Security concerns
- Criminal activity
- Fraud (i.e. ICO’s)
- Manipulation (Futures, Tether)
- Non-threatening approach to cryptocurrencies by U.S. regulators
- Encouraging tax legislation proposals
- Banks (i.e. Bank of America, JP Morgan Chase, Lloyd’s of London) cutting off services to companies and individuals dealing with crypto
- Shutting down bank accounts, turning off crypto-loaded credit cards, shutting down merchant accounts and freezing assets
- Exchange counterparty risk
- Cryptocurrency lending and exchange firm Bitconnect said it was shutting down its platform after it received cease-and-desist letters from securities divisions in Texas and North Carolina.
- Restrictions and exchange withdrawal limits
- Off-chain channels (i.e. Bitcoin’s Lighting Network and Ethereum’s Raiden Network / Plasma)
LONG-TERM (LT) DRIVERS:
- Speculation and investment
- Wall Street and institutional money entering the crypto space along with further financialization (i.e. ETFs)
- Formation and evolution of a new technology and asset class
- Decentralization / Disintermediation is likely to be strong long-term trend
- Prolonged lack of volatility in legacy financial markets
- Scaling the technology for real-world application
- Proof-of-Work (PoW) consensus algorithm (slow, insecure (non-aBFT*), and expensive)
- Improving blockchain (i.e. Proof-of-Stake, etc.)
- Alternative forms of Distributed Ledger Technology (i.e. DAGs)
- Government crackdowns
- Regulatory and IRS tax crackdowns
- Individual and merchant adoption of crypto (“medium of exchange” and/or “digital gold”)
- Decentralized governance
- Current stakeholders: core developers, profit-driven miners, enterprises, users
- Forking (contentious forks, oversupply, etc.)
- Geopolitics / Macroeconomic forces (Risk-on / Risk-Off)
Major Events This Week:
- Cryptocurrency events in St. Petersburg (Russia), Calgary, Silicon Valley, Dubai, Acapulco, and Dallas are set to dominate cryptocurrency headlines throughout the week.
Wild Crypto Story of the Week:
- HODL – an acronym for “hold-on-for-dear-life,” which has become a major Internet meme in the Bitcoin community referring to keeping (i.e. holding) onto cryptocurrency versus selling it.
- BFT – Byzantine Fault Tolerant (BFT), which means three things with respect to decentralized consensus formation in computer science: 1) consensus within the network will absolutely be reached; 2) the network will know exactly when consensus is reached; and 3) consensus will never be wrong – the network is mathematically guaranteed that all nodes will reach the exact same consensus. BFT can be either asynchronous Byzantine (aBFT) or partially asynchronous Byzantine depending on the level of assumptions made by the network.