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July Market Outlook

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1. Crypto outperformed stocks and gold in Q2 but underperformed for the month of June

Overall, crypto outperformed stocks and gold in Q2. In the second quarter Bitcoin (BTC) and Ethereum were up 43.4% and 70.1%, respectively, with gold (+12%) and equities (+26%) also performing well (Table 1).

However, both BTC and ETH were down slightly for June, whereas stocks (particularly tech stocks) were up for the month. Gains in some growth stocks, such as Tesla (TSLA), which is now up ~5x over the last twelve months, contrast dramatically with a nearly flat BTC price over that same period.

Table 1: Price Comparison (% Change): Bitcoin, Ethereum, Gold, US Equities, Long-dated US Treasuries, US Dollar

Sources: Blockchain.com, Google Finance

The relatively greater volatility and price action of some equities is likely having a negative impact on crypto trading interest. For the second month running we saw major cryptocurrencies trading relatively flat and entering what could be characterized as a “don’t just do something, stand there” phase (Figure 1).

Figure 1: Bitcoin’s price has been largely range bound between ~$9,000-$10,000 for the past two months

Source: Blockchain.com

Bitcoin has seen a dramatic decline in volatility in the three months since crypto’s Black Thursday on 12 March of this year. Indeed, bitcoin’s volatility is beginning to approach levels of some major fiat currencies, such as British pound sterling (GBP) (Figure 2).

Figure 2: Bitcoin’s declining volatility trending towards some “emerging market” currencies (eg British £)

Source: The Bitcoin Volatility Index

How long will crypto prices remain flat, and which direction will they break?

While nothing in these monthly outlooks should ever be construed as investment advice, we did want to comment on historical periods when bitcoin’s price entered a seemingly similar “holding pattern”. For example, in early 2019 bitcoin’s price hovered around ~$4,000 for approximately four months before breaking upward ao approximately $13,000 (Figure 3).

Figure 3: Past instances when BTC’s price entered a multi-month “holding pattern” (consolidation phase) have often been followed by large upward moves

In 2015–16 we also saw another extended period of relative bitcoin price stability: in 2015 bitcoin’s price was hovering in the ~$250 range for an approximately six-month period, then climbed into the ~$400 range for a number of months (Figure 4). Towards the end of 2016, around the time of the last US presidential election, the price then started more rapidly ascending to ~$1,000, setting up a dramatic ~20x price increase in 2017.

Figure 4: BTC’s record setting upward price move coincided with the last US presidential election

While the above two examples highlighted periods when relative price stability was followed by significant upward price moves, it is important to note that there have also been instances where the reverse occurred. For example, for much of the second half of 2018 bitcoin’s price was trading largely in the $6,000-$7,000 range, until breaking sharply downward towards the end of the year and plummeting close to $3,000 in December 2018.

What would sustained lower volatility mean for crypto in the longer run?

Previously we have highlighted the numerous benefits of outsized cryptoasset price volatility, but it is also worth noting the double-edged nature of price volatility (Figure 4).

Figure 4: Outsized volatility is a double-edged sword for crypotasset adoption

Overall, it is our view that outsized volatility has been net positive for cryptoassets during the first decade+ of bitcoin’s existence, and that continued outsized volatility in the near-term may very well continue and remain a net positive.

However, as cryptoassets continue to mature and grow in terms of technology, size, liquidity, and sophistication (eg options and derivatives markets, greater institutional participation), it would be reasonable to expect volatility to trend down from historical levels over the longer-term. Also, as we discussed last month, lower volatility may also play a constructive role in the future regulation of cryptoassets as financial stability and systemic risk regulators consider how to respond to significant increases in cryptoasset usage and market size. In short, if change occurs too swiftly this could prompt a sudden regulatory backlash, whereas steadier changes may reduce the likelihood of a regulatory crackdown.

In sum, relatively lower volatility going forward is not necessarily something to view unfavorably, but may actually play a constructive role in increasing cryptoasset adoption.

Each month we dive into on-chain data to explore interesting trends or movements on the Bitcoin network.

We start at a high level with a look at network activity in June compared to May. Overall, after observing significant increases in network activity in May we saw June figures stabilize, with a slightly decreased market capitalization, slightly more transactions, and a lower number of active addresses (Table 2).

Table 2: Bitcoin network activity — June vs May

Source: Blockchain.com

When we look at average network fees we can see there was significantly less network congestion and a resultant lower average fee per transaction in June, with the average fee per transaction at $1.28 as compared to $3.36 in May.

Trending countries⁴

Another question we’re often curious about is how crypto usage is trending at the country level. In June we saw a number of countries increase their fraction of total Blockchain wallet transactions, most notably Vietnam, Bangladesh, and the South Africa (Table 3)

Table 3: Trending countries: increase in use in June over May

Source: Blockchain.com internal data

Continuing from May, Nigeria, South Africa, and Dominican Republic were once again in the Top-10 increasing country list. Bangladesh flipped from the Top-10 decreasing to increasing use, and the US dropped out of the top-10 increasing list.

Meanwhile, the fraction of transactions sent from China, Latvia and Belarus have decreased by 39.2%, 19.7% and 16.6% in comparison to April. China saw the largest decline in use in June and was the only country that remained from May in the list of top-10 decreasing use countries.

Table 4: Trending countries — decrease in use in June over May

Source: Blockchain.com internal data

Bitcoin ownership concentration

Bitcoin ownership distribution, as measured by the number of unique addresses owning a material quantity of bitcoin, continued to expand. The number of addresses holding at least 0.1 BTC was up +1.3% over May, and addresses holding at least 1 BTC increased +0.4% over May⁵:

  • 3,078,873 addresses (10.1% of total addresses) have more than 0.1 BTC, and represent 98.9% of total bitcoins
  • 819,587 addresses (2.7% of total addresses) have more than 1 BTC, and represent 95.0% of total bitcoins

Recently legendary investor and author Jim Rogers said that if cryptocurrencies like bitcoin ever become too successful that governments will “eliminate” them.

As remarkable as the rise of bitcoin and crypto has been in just a little over a decade — from zero to tens of millions of users and hundreds of billions in value — is Rogers correct that crypto is ultimately doomed? Will bitcoin become a victim of its own success, or be out-competed by central bank digital currencies?

Will “Investment Biker” author and bitcoin skeptic Jim Rogers be proven right?

A number of investors share Rogers’ skepticism around continued regulatory tolerance towards crypto, and this view has served as a justification for some to sit on the cryptocurrency sidelines. After all, what is the point of studying and investing in a new technology and asset if you believe any future success will either be capped or ultimately crushed by the long arm of the law?

However, as time passes there are more and more reasons to be skeptical of the view that governments will one day coordinate en masse and attempt to eliminate cryptocurrencies if they grow past some large, undefined size.

First, today’s “disunited nations”, and the decline in global cooperation that characterizes our present world, make it unlikely that hundreds of countries will simultaneously arrive at a unanimous regulatory view on cryptocurrency. There is also the difficulty of implementing globally any such crackdown given the decentralized nature of cryptocurrency.

But a perhaps equally important reason to be skeptical of Rogers’ view is the existing evidence of how cryptocurrency technology is already being regulated in key jurisdictions, particularly the United States, which continues to maintain outsized global influence over financial and technology regulation.

The dawn of significant cryptocurrency regulation, which many date to the 2013 US FinCEN guidance, set the tone for much of what has followed: regulators have generally attempted to strike a balance between fostering innovation while attempting to line up cryptocurrencies with various regulatory frameworks. The evidence of this more balanced approach by US authorities has continued to be seen across a number of key regulatory and legal developments, including:

While some smaller countries such as Switzerland have gone even further in creating an attractive regulatory environment for cryptocurrency, the US is by no means the only large country to create space for cryptocurrency use and growth:

Overall, most lawmakers and regulators around the world have not sought outright bans of cryptocurrency. This is at least partly due to the growing recognition of the innovative potential of cryptocurrency to help modernize our antiquated and inefficient financial system.

This brings us to the topic of a programmable US digital dollar, viewed by some as a potential existential competitive threat to cryptocurrency.

As we described recently on our blog, the topic of introducing a US digital dollar has become a high priority for several reasons, including the many inadequacies in our monetary and financial system painfully revealed by the ongoing COVID-19 pandemic. Billions of stimulus dollars already appear to have been wasted due to various errors and inefficiencies, while a significant number of people have not been able to obtain the financial assistance they have been offered and so desperately need.

In the last year Libra & COVID-19 helped prioritize a US digital dollar, but China is arguably the biggest factor

With a US digital dollar now appearing inevitable and possibly imminent, is there a chance that central bank digital currencies will obviate the need for cryptocurrencies like bitcoin?

While there is much still left to determine about the ultimate nature and feature set of a widely used digital dollar, our view is that it is highly unlikely a US digital dollar will “copy and paste” all major cryptocurrency features, or serve as anything remotely resembling a replacement for bitcoin.

Indeed, looking at a list of features often cited for bitcoin’s success and growth it is not clear a US digital dollar would seek to fully imitate even a majority of bitcoin’s key characteristics:

Even incorporating the bearer nature of US dollar banknotes/coins into a US digital dollar is by no means a settled question, as some leading digital dollar proposals call for a highly centralized digital dollar system based on the Federal Reserve’s existing centrally controlled account system.

Cryptocurrency characteristics much more likely to be included in a US digital dollar are technical resiliency, payments efficiency, and programmability. But a US digital dollar that only overlaps across these handful of dimensions would not destroy the entire value proposition of relatively more decentralized cryptocurrencies like bitcoin.

Further, there is even the possibility that blockchain networks like Ethereum may underpin a US digital dollar, much as blockchain networks today serve as the rails for many USD-pegged stablecoins. Other leading US digital dollar proposals call for a broad public-private partnership, where private sector corporations and platforms lead on technology development and deployment and play a critical role in the functioning of a US digital dollar. Such a partnership model would be attractive to many central banks, like the Federal Reserve, that are hesitant to convert into full service banks and offer accounts and services to millions of citizens.

Finally, it is also worth noting how rising US-China tensions factor not just in accelerating the rollout of a US digital dollar, but in how open blockchain networks like Bitcoin and Ethereum will increasingly come to be viewed from a geopolitical perspective. Nations such as the US that support the right of open expression and free movement of capital are in greater alignment with the censorship resistant nature of public blockchain networks than countries with more restrictions on speech and financial flows, such as China. In other words, the existence and growth of public blockchain networks have the potential to augment US values across an increasingly tense international stage and may find political support for these reasons as well.

Image source: The New York Times

Today, June 9th, 2020, marks the first year since the beginning of Hong Kong protests where around a million people initially marched against Beijing’s extradition law to Mainland China. Over the past year, the protests rapidly intensified and fueled widespread unrest the month following the start of the demonstrations — especially due to police inaction the night a mob attacked a group of pro-democracy protestors.

The Amun research team has investigated how this unprecedented movement has gradually led to behavior changes regarding the use of cryptoassets, chiefly USD-pegged stablecoins, as a major investment vehicle for promptly fleeing capital controls in an attempt to preserve the wealth of Chinese individuals.

China Money Flowing to Singapore and Stablecoins

Over the past decades, the Asia Pacific region has accounted for almost 40% of the global billionaire population, with China being among the hottest wealth-generating hubs in the world — creating two new billionaires every week. Family offices have increasingly become popular vehicles to manage the wealth of high-net worth families in China or as a means to set up offshore accounts. But in the midst of capital controls and anti-corruption campaigns, there has been an increasing desire from less-wealthy Chinese families and individuals to move their capital out of China.

The emergence of a China-centred blockchain system, which would undoubtedly make it easier for the Chinese government to oversee and track the financial activity of its citizens, will not meet the rising need for financial freedom among some within China. The recent demonstrations have significantly triggered money flows to primarily Singapore — due to advantages such as long standing rapid air connections with China prior to the COVID-19 pandemic.

Although as an inherently digital, censorship-resistant, and neutral asset, Bitcoin has not been the first cryptoasset of choice to flee renminbi-denominated assets due to market volatility. USD-pegged stablecoins have ended up being just as attractive assets for those seeking to avoid losing large portions of their wealth due to price fluctuations over the short and medium terms. As a matter of fact, QCP Capital a Singapore-based cryptoasset trading firm, has witnessed Hong-Kong-based investors fleeing to Singapore and trading stablecoins, predominantly Tether, in an attempt to preserve their wealth.

According to QCP, 80% of capital has poured into stablecoins while the remaining 20% has gone into Bitcoin. This information is unfortunately not publicly available as much of crypto adoption in Asia happens underground especially following the crackdown on crypto exchanges by the Chinese government starting in 2017. For example, in Hong Kong, QCP Capital reported that investors trade Tether physically. This method is mainstream so that they are able to move money away cheaply and quickly compared to setting up an offshore account which might take almost a month due to stringent know-your-customer and anti-money laundering procedures. To mitigate counterparty risk, due to ongoing issues with identity fraud, QCP Capital follows KYC procedures and asks for collateral denominated in stablecoins.

The rising demand for encrypted messaging apps for public gatherings

In an effort to evade public gathering restrictions, as pro-democracy rallies raged in the territory, Hong Kong-based protesters have started to coordinate their actions using encryption-enabled messaging applications such as Telegram. In a similar manner, to meet and initiate trades QCP users communicate via a Telegram group, and many other similar groups owned by OTC desks or ran by regular investors, following a similar trend of building out their community via word-of-mouth growth.

Source: SensorTower

The behavior changes we’ve seen due to these demonstrations are here to stay in the foreseeable future especially as crypto exchanges and other liquidity providers prevent China-based investors from opening accounts due to specific clauses in their terms and conditions — a phenomenon the 21Shares research team discovered in this study.

It is safe to say that stablecoins are becoming a pain-killer product for many investors in such situations. This capital outflow from renminbi-denominated assets to USD-pegged stablecoins will strengthen the US dollar hegemony as the world’s reserve currency. Nonetheless, with interest-bearing accounts like the one launched by Blockchain.com, there could eventually be capital flowing from stablecoins to Bitcoin by Chinese institutional investors and high-net-worth individuals, especially among tech-savvy cohorts

Crypto

Beyond crypto

Source: https://medium.com/blockchain/blockchain-com-july-market-outlook-the-cryptocurrency-endgame-91ba0e640488?source=rss—-8ac49aa8fe03—4

Blockchain

Dogecoin is Everywhere: from Elon Musk to Mark Cuban to John McAfee

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Dogecoin has become the center of attention of famous individuals once again. Mark Cuban said that his NBA team had become the largest DOGE merchant, Elon Musk made an electronic-god reference, while John McAfee used its growing popularity to defend his alleged pump and dump schemes.

McAfee Touted DOGE Before Musk

The love story between the CEO of Tesla and SpaceX and the popular meme coin is well-known within the cryptocurrency space. Musk has outlined his support for the asset on multiple occasions.

While some believed that the positive engagements with DOGE came from his trolling nature on social media platforms, Musk has repeatedly found different ways to promote the token. The latest one came on Saturday, as he said that “Doge spelled backwards is Egod.”

His support brought more famous individuals to the scene as well – names such as Snoop Dogg and Gene Simmons. Despite the long-term relationship between Musk and Doge, though, John McAfee recently highlighted that he touted the asset long before Tesla’s CEO.

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McAfee was indicted days ago from the US DOJ for multiple criminal offenses, including his alleged involvement in pump and dump schemes with his “Coin of the Day” campaign. Several years ago, the former antivirus tycoon promoted small-cap altcoins that he supposedly believed were undervalued, but US authorities claimed that he made more than $13 million from illicit schemes.

McAfee argued that the allegations are “overblown” and that he indeed considered those coins to have immense potential. One of them was Dogecoin, which, in his words, “has increased well over 1,000% since I chose it.” Ultimately, he concluded that this was “not a pump and dump.”

Mavs Are the Biggest DOGE Merchant

Another Doge-related engagement from high-net-worth individuals came from the owner of the Dallas Mavericks – Mark Cuban. The billionaire and his NBA team recently announced that they had started accepting Dogecoin payments for game tickets and merchandise on the online store.

A few days later, Cuban updated the community on the performance of this new initiative. He said that the Mavs had received more than 20,000 DOGE in transactions, making them “the largest Dogecoin merchant in the world.”

Furthermore, the start of the reality TV series Shark Tank predicted that DOGE will “definitely” reach $1. With a current price of $0.056, the asset would need a 1,700% increase to reach that milestone.

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Source: https://cryptopotato.com/dogecoin-is-everywhere-from-elon-musk-to-mark-cuban-to-john-mcafee/

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Brad Garlinghouse: XRP Will Continue Trading Even if Ripple Goes Away

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With the impending legal battle between the SEC and Ripple, the CEO of the payment processor said that XRP will endure even if the company doesn’t.

Simultaneously, Jesse Powell, the CEO of the veteran US exchange, Kraken, believes that offering XRP trading carries “huge asymmetrical risk.”

XRP Will Endure, Says Ripple CEO

Ever since the US Securities and Exchange Commission brought charges against Ripple for conducting an unregistered security offering, the company’s executives have tried to defend their position multiple times.

During the latest such attempt, the CEO, Brad Garlinghouse, called the lawsuit “misguided” and noted that XRP had traded in the US for eight years before the allegations emerged.

Furthermore, he laid his case on why Ripple’s native token is not a security and promised that the asset will survive even if Ripple ceases to exist.

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“If you own a security, it gives you ownership of a company. If Ripple goes away, XRP will continue trading.”

Garlinghouse explained that numerous other countries, such as Singapore, Switzerland, and Japan, all have “clarity and certainty” that XRP is not a security. In contrast, the US is “the only country on the planet that has suggested that XRP is a security.”

Consequently, the executive doubled-down on a previous narrative stating that the lawsuit against Ripple is “bad” for the entire cryptocurrency industry, not just the payment processor. This is pushing entrepreneurs to seek other options as they plan to leave the US.

It’s worth noting that Ripple is one of those companies that contemplated moving outside the US even before the SEC’s charges became official.

Trading XRP Carries Asymmetrical Risk

While Garlinghouse believes that XRP will continue trading even if Ripple is no more, Kraken’s CEO recently highlighted the potential “asymmetrical” risks for exchanges during these uncertain times for the token.

He assumed that the Commission has acted in “good faith” when bringing the charges and believes that judges ultimately “tend to side with agencies.”

As such, Powell asserted that if the SEC wins, then the watchdog would “say that exchanges should have known.”

Although Kraken took its time before making it official, the veteran US exchange joined the list of trading venues that removed XRP in January this year.

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Source: https://cryptopotato.com/brad-garlinghouse-xrp-will-continue-trading-even-if-ripple-goes-away/

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Ultra (UOS) hits a new all-time high as blockchain gaming and NFTs boom

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Video games and online gaming have become some of the largest industries on the planet over the past thirty years as digital technology and the internet have interconnected people from around the world and transformed us into a global society. 

Decentralization and blockchain technology are gathering steam as a transformative new way to operate and build an ecosystem, and Ultra (UOS) is one gaming-focused project that has been gaining momentum in recent months.

Ultra, a blockchain-based PC game distribution platform, is created for gamers and game developers and it allows users to develop multiple revenue streams, including the ability to resell games and in-game items.

Developers for the project have created a customized version of the EOSIO blockchain designed to offer free user account creation and higher transaction throughput through better resource allocation.

Data from Cointelegraph Markets and TradingView shows that UOS surged 225% over the past month as the price rallied from $0.132 on Feb. 1 to an all-time high of $0.42 on Feb. 22.

UOS/USDT 4-hour chart. Source: TradingView

As seen on the chart above, UOS trading volume hit a record $31 million on Feb. 21 and Feb. 22 following its listing on Bithumb.

NFT popularity provides a boost to Ultra

Non-fungible tokens are one of the fastest-growing trends in cryptocurrency currently and UOS has benefited from their growth. The developers at Ultra have been focused on the technology underlying NFTs as they can enable unique in-game items to be resold in multiple marketplaces and eventually on decentralized exchanges. 

Interoperability between blockchain platforms is also a major topic in the crypto ecosystem, and the team at Ultra is developing and beta testing a new mainnet that will retain the ability to operate on Ethereum.

While UOS is interoperable with the EOSIO blockchain, Ultra developers are also exploring NFT interoperability with several other blockchains including The Sandbox (SAND) and Elrond (EGLD). The project also has an evolving partnership withTheta that will enable live streaming gameplay and cross-chain NFT transfers.

Aside from its main association with the gaming giant Ubisoft, recent partnerships with globally recognized companies like semiconductor manufacturer AMD and Atari have also helped propel UOS price higher in 2021.

Big-name partnerships, cross-chain interoperability and the growth of the NFT sector have Ultra well-positioned to benefit from the bullish momentum in the cryptocurrency market.

The games sector is expected to continue its exponential growth for the foreseeable future and as blockchain gaming becomes more popular, UOS could benefit from having the first-mover advantage. 

The views and opinions expressed here are solely those of the author and do not necessarily reflect the views of Cointelegraph.com. Every investment and trading move involves risk, you should conduct your own research when making a decision.

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Source: https://cointelegraph.com/news/ultra-uos-hits-a-new-all-time-high-as-blockchain-gaming-and-nfts-boom

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