July 27, 2018    Market Update

July 27, 2018 Market Update

During the past week the digital asset market was relatively flat overall, but the capital flows in were primarily to Bitcoin.

In past broad based rallies, generally money enters through Bitcoin, as it is the largest by market cap and has by far the most liquidity.

Last year, much of the managed money that came in made it fairly easy to follow, as one could see large blocks of BTC being purchased, and investors and traders could by another cryptocurrency, and often times it would increase by a larger amount.

There are a couple of stories behind the scenes which I will talk about today, on why this is happening, and what my thoughts are on the future.

Bitcoin percentage of the total blockchain  market hit a high for 2018 this past week, and was 46.9% of the total market valuation.  At the same time the total market cap of the digital commodity space hit a one month high.

 

In many of the prior market updates, rallies were moving in tandem with BTC Dominance falling, and selloffs would see the BTC market share rise.

Since some of the readers prefer to price coins in dollars, and other in Bitcoin Satoshi terms, I will put charts of the whole market, as well as key coins, and it will give a visual perspective on what went on over the past week.

 

This is the total digital coin market cap.  Note how each dip was bought and a new high for the week was made within 24 hours.  Lower right to upper left, traditional rally chart.

I would also note, that many of the short term algos and traders are in the capitulation mode trying to buy BTC and sell anything else, all while not decreasing the sum of the parts.

 

Here is the chart of all coins not named Bitcoin.  We see here how all of the other coins lost some valuation.  Highly unusual to see a one month high for the entire market, while the great majority of currencies are closer to the past weeks lows.  We will get to that part a little later on in the blog.

 

Bitcoin, one week chart.

 

 

The next charts, are individual coins, and they have both the dollar chart and the bitcoin satoshi chart so we can see the tale of two different markets.

 

 

Litecoin, one week.  In BTC terms, this has been under pressure all week, as the managed money is focusing a great deal of its energy and capital on long Bitcoin only and any pop in other assets they are long has been sold.

 

DOGE, one week.  Recall, in the prior week, Dogecoin surged nearly 60%, and in US Dollars, the price was fairly range bound between the the 33 and 36 handles, but one again, the sell side pressure in BTC terms.

 

 

$pac, one week.  Very similar to Dogecoin in both Dollar and Bitcoin pricing.

More than 81% of the volume in Paccoin in dollar terms traded in the 43, 44 and 45 handles, and had lower than normal volatility.  In the $pac – btc pairing, Bitcoin outperformed as it did with nearly all of the other pairs I follow.

 

When I made my first transaction in the digital currency space, I often would simply look at the pairing that I had made a purchase in, and that was it.  Despite being on Wall St for nearly two decades and knowing that the currency market are similar to a puzzle that is in perpetual motion, I had the the horse blinders on.

Put simply, when looking at price in Bitcoin terms, one should be very cognizant of where the underlying price of your entry point asset, (in this case BTC,) is trading.

A few of the stories surfacing about the capital inflows to Bitcoin and Bitcoin alone are as follows.

One, funds are putting large amounts of new capital to work in existing cryptocurrency portfolio’s via BTC purchases.  They already have length in other coins, but do not want to start a panic buynig moment until they have large enough positions.  Hence when they buy Bitcoin and the other algos try and buy another alt coin, the funds are selling there other longs to smaller investors, creating a perception than assets are decreasing and hoping to get some guys to throw in the proverbial towel.  This applies primarily to the leveraged individual who is given a reduced margin  by doing pairs trades in the crypto markets, but when the pair continues to go against that said trader, then he or she is forced out.

Two,  Multiple large financial institutions in the United States are rumored to have had their proposals for Bitcoin ETF’s accepted.  Many traders thrive on volatility, and with equity, fixed income and commodities overall in an extended period of low vol, the need for something that has volatility, can generate fees, and will cause a buzz with the public is needed, did I mention that with an ETF and futures as well as the cash market in Bitcoin, this will add a whole new set of market participants, the HFT (High Frequency Trading,) arbitrage algos.  It also allows firms to trade larger, as a long future and short ETF position, traditionally is has a very low maintenance margin, and since a few of the clearing houses are some of the banks rumored to be the ones to issue the first and second Bitcoin ETF’s, it works for them.

I could get into the fact that you will soon see a daily volume on cash, ETF and Futures market’s volume exceed the actual number of BTC in existence and I could also explain how the ETF’s asset’s held will be a fraction of the NAV, but I’d rather wait until the prospectus is public and the BTC ETF has had a few days of trade under it.

In closing, the BTC only buying the markets have experienced over the past few weeks, is not normal in an upward market, but the date range I tend to look back at is the November-December 2017 time frame.  This occurred in those months, as the public had to own Bitcoin prior to the launch of the CBOE and CME futures.  What ensued was a huge broad based rally and the Bitcoin Dominance moving down rapidly as investors and money managers looked at other projects and coins and realized the tremendous value.

Leave a Reply