$PAC Market Update May 2, 2018

During the past week, the digital currency markets traded new multi month highs above the 440-billion-dollar mark and since then, have small amounts of profit taking.  Bitcoin’s percentage of the total market share also traded a multi month low briefly touching 36.5%, this was in the same 15-minute interval as the total market traded above 440 billion.  To echo a point, I have made in the great majority of my pieces, in order for continued broad based rallies in the digital commodity sector, BTC market share will need to continue to decrease.  The all time low is in the 32% area which was set in January of 2018, when this asset class traded all time highs.  I am look for Bitcoin “Dominance” to decrease under 25%, and head closer to 10% by the end of 2019.

A few market standouts last week worth noting, were the following digital assets.

EOS which gained nearly 3 billion dollars in market cap and is maintaining a strong hold on the number five valuation ranking according to coin market cap.

TRX which had a tremendous 35% gain and is now valued as the #9 digital asset.

Last but not least, Aeternity, AE which posted a whopping 70% gain which pushed it’s market valuation over One Billion Dollars.  As of this writing, Only 27 cryptocurrencies have market capitalizations of over one billion dollars.

In other asset classes:

US equities were down fractionally as they posted huge gains over 48 hours and then gave up those gains in the following days.

The US Treasury Complex edged up, and yields were down a few basis points.

Crude Oil (WTI) has now trade in the 67,68 and 69 handle for two weeks, ranges are getting tighter and the bands are being coiled even further setting up another large scale move.  In regards to “Crude,” in the states, the media generally refers to WTI as Crude, whereas the rest of the world generally looks at Brent as the benchmark.  Brent is currently $6 more than WTI as Brent is $74 and WTI is $68.  When larger media talks of “$70 Crude,” please note that the global oil benchmarks have been well above $70 in most of the G-20 nations for months.

Gold continues to be sold and was down 1.5% in the past seven days.  Gold is now at a new low for 2018 and has not traded below $1,300 since December 27, 2017.

The Dollar Index pushed higher yet again and is trading at multi month highs last seen in January of 2018.

This leads to my next thought on the cryptocurrency markets.  Although I have heard many make the arguments they are moving some capital to the digital asset markets to diversify from the “fiat” system, but there are two striking points to me that bear noting.  First, when many institutional trading desks want to be flat or mitigate risk they move from higher volatility cryptocurrencies to Tether, aka USDT, aka crypto proxy for the US Dollar (unofficially.)  Why, I can not answer for the mass of those involved in this space, but I would say it is the same belief of that in the equity, commodity, fixed income and other more developed market.  As this digital asset continues to grow, I have wondered will the media try and spin strength in the dollar as a negative for digital currencies?  After all, Tether, aka the US Dollar proxy in the crypto sphere is consistently in the top five in terms of trading volume.  Tether is also one of the only Digital assets which I see time and time again trade well over 100% of its float on a daily basis. Since the beginning of 2018, on average Tether has trade 150% of its total circulation on a daily basis.  In comparison, BTC and ETH trade 6% of their outstanding shares per day.  Coming from a derivatives background, it has always intrigued me when ultra-low volatility assets have extremely high volume.  What I look at in Tether is the growth in number of shares outstanding as well as the trading volume.  In my opinion Tether is a proxy for the amount of interest in the Digital Commodity Markets.

Finally, I had never heard the term FUD until I became involved in the digital commodity asset class.  While many not familiar with the Equity markets may not know a great deal about the VIX.  I won’t bore you with the definitions, the VIX is also know as the Fear index in US Equities.  It tends to be highest at bottoms and lowest at top.  Translate that to the cryptocurrency markets.  When Bitcoin was $20,000 and the total digital asset class was over 800 billion was there a lot of FUD?  How about during the last month?  I urge you to learn a little about the VIX and look back over social media and other venues, you may be surprised at the correlations.

As always, I  have some charts below, and a new addition to the usual’s is Tether.  Note over the past year it is tether which has had the  lowest volatility of any cryptocurrency and largest increase percentage wise in  trading volume.   One year ago, tether had 63mm shares outstanding and daily volume of near 24 million dollars, while the entire cryptocurrency market had a total valuation of 38 billion dollars.

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