The Week: Bitcoin Pauses for Breath, Craig Wright Sheds a Tear for the Asset’s Lost Innocence

Over the past week, Bitcoin continued to defy bears by making new highs and reaching a level of dominance not seen since March 2017, a major 2018 ICO changed its mind about crypto, Craig Wright failed to produce records of his early Bitcoin mining efforts, and the Trump administration is seeking to use blockchain to solve the Israel-Palestine conflict. Wait, what? 

Parabolic rise makes even ardent Bitcoin bulls uneasy

Prominent Bitcoin bull Mike Novogratz admitted that he’d sold some of his holdings ahead of Thursday’s pull back. The price of bitcoin reached a high of $13,7k - a $66 billion increase in market capitalisation - before a sudden drop back to the $11k - $12k range. Novogratz said he intends to buy back in around $10k.

Craig Wright unable to access $10 billion Bitcoin fortune

Controversial figure Craig Wright told a Florida judge he’s unable to produce addresses for the $10 billion he supposedly mined during Bitcoin’s infancy. Reiterating his claim as being Bitcoin’s creator, Wright cried while expressing his regret that the asset began being used for nefarious purposes such as the now-defunct Silk Road.

TD Ameritrade opens Bitcoin Futures trading

One of the US’s largest brokerage firms, TD Ameritrade, this week opened margin trading on Bitcoin. Seen as one of the ‘Big Four’ brokers, the digital trading platform manages around $1.297 trillion of client funds. To trade Bitcoin, users must have a minimum account balance of $25,000.

The Long Take: Wen altszn??

Bitcoin’s market dominance this week hit 62.5% - its highest in more than two years. The asset’s staggering rise – 320% from low to high so far in 2019 – has brought a renewed sense of confidence to the space. The inevitable question that follows from crypto enthusiasts – will alts begin a similar moon mission?

For those unfamiliar with the concept of ‘alt season’, the chart below will provide some indication of why it attracts such eagerness among crypto traders. Between May 2017 and January 2018, boosted by the ICO boom, the combined market capitalisation of altcoins grew from around $5 billion to nearly $500 billion. The dopamine rush of altcoins growing to many multiples of their value versus BTC was firmly flushed away in the 2018 bear market and, aside from some outliers such as Binance coin (BNB) and Chainlink (LINK), has yet to be repeated.

 

Crypto Total Market Cap.png

 

With the altcoin market sitting currently around $113 billion in value, traders and investors are getting itchy fingers. On one hand, the return of alts seems a near certainty. Many coins have dropped to their pre-2017 boom levels and even high cap coins such as XRP, TRX, XLM and ADA are more than 80% down from their USD all time highs (ATH). Ethereum, long considered the bellwether of an impending alts boom, is 78.8% off its USD high, set at the peak of the alts bubble. While it has regained some of its USD value in recent months, it would still need to quadruple in sats value to reach a new BTC ATH.

With a raft of once-desirable alt coins at depressed price levels and trading on thin volumes, is the scene set for a 2019 alts boom?

In their defence, the altcoin bulls will point to previous chart history. The boom in January ’18 came after a major Bitcoin rally the previous month. BTC hit a high of nearly $20k in December before pulling back to around $11,300 at the end of the month. Liquidity flowed rapidly into alts, dramatically increasing trading volumes and sending prices to unimaginable highs. Binance, one of the major beneficiaries of the boom, is crossing its fingers for history to repeat. This time, however, feels slightly different.

The market conditions in 2017 were favourable for alts. The flow of new money into ICOs helped swell the market caps and sentiment around the possibilities of tokenised economies gave investors confidence in buying tokens. As Larry Cermak point out, there is little indication that new money is entering the space. Further, the US regulators have seemingly clamped down on Binance, forcing the company to move US investors to a new local site. Whether this will serve to reduce – or at least delay -  a swell in trading activity in one of Binance’s largest markets remains to be seen. 

So, is Bitcoin’s current dominance a reason to buy alts or a reason to stay the hell away? That, dear reader, is up to you to decide.

Tweets of the week

 

 

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