Market assessment as we move into May
Welcome back to the fifth edition of ‘The Digital Asset Digest’. Last week, we provided our network with an exclusive halvening analysis, ensuring all of our readers have the information they need to make educated decisions about the upcoming halvening and how it relates to their portfolio. As we jump into a new month, our focus today will be to provide a complete market assessment and look into how various asset classes have performed over the past few months.
Digital Assets – Bitcoin closed at $8,800 Friday morning, surging 17.6% for the week and reaching a two-month high after a month of consolidation. Much of the week’s gains were driven by a steep rally Wednesday where the coin rose 12.7%. Ether trailed slightly, posting gains of 13.0% while XRP rose 11.8% over the same period.
Indices – The S&P 500 closed down 0.21% for the week following the biggest monthly gain in more than 30 years in April, driven by tech earnings and the reemergence of trade tensions between the US and China. This is somewhat contrasted by the S&P/TSX Composite, who managed to scrape by with a 1.4% return over the same period.
Commodities – WTI crude jumped 16.8% in one of its most volatile periods in history as the recent agreement between major oil producers to cut production officially came into play. Gold fell slightly as investors sold risk-off assets to catch the rally in the equity markets.
“Global Digital Assets (GDA), the first merchant bank in North America with a specific focus on blockchain and digital assets, announced today that it will be joining the DigitalBits ecosystem to further enterprise adoption for branded cryptocurrencies. GDA, in collaboration with other ecosystem participants, will provide the infrastructure necessary for consumers, merchants, brands and payment providers to benefit from branded cryptocurrencies, inclusive of the emerging subcategory of branded stablecoins.
“Argo Blockchain, a bitcoin mining firm listed on the London Stock Exchange, reported stellar 2019 earnings Wednesday. The company attributed its success to cutting off its consumer-facing arm and focusing on mining some 1,330 bitcoin (BTC) on the year. In its full-year results, Argo said 2019 revenue was up 11-fold from the year before, a dramatic spike from $948,000 to $10.7 million. Argo’s earnings before interest, tax, depreciation and amortization (EBITDA) came to $1.74 million, compared to a $4.56 million loss in 2018.”
“China’s Office of the Central Cyberspace Affairs Commission (OCCAC) has announced its third round of blockchain projects to receive approval from the country’s regulators. 224 distributed ledger technology (DLT) ventures have been added to the commission’s registry, which includes major tech firms Alibaba, Baidu and China Mobile. The news appears to have been broken by Twitter user ‘AliceolaCrypto’, who posted a screenshot of the OCCAC’s announcement on April 27. She wrote that of the 224 approved projects, approximately 40% hail from Beijing. Roughly one-quarter of projects will target the fintech sector.”
“With bitcoin’s price jumping to a two-month high above $9,000, even mining equipment thought obsolete is becoming profitable again, at least for a short time. According to the miner profitability index, tracked by mining pools PoolIn and F2Pool, older mining rigs, such as Bitmain’s AntMiner S9 or Canaan’s Avalon A851, can now generate a 10% to 20% gross margin at an average electricity cost of $0.05 per kilowatt-hour (kWh). For those that have adopted miner efficiency improvement methods, such as merging two S9s into one or lowering voltage to boost efficiency, gross margin could increase to as much as 30% to 40% at bitcoin’s current price.”
“Ethereum 2.0 has dragged its feet. But when it does finally ship, it could provide the “largest economic shift in society” — or so it’s believed. The launch of ETH 2.0 is tentatively penned for July, transforming Ethereum from a no-frills proof-of-work protocol to a fully-fledged staking platform. After that, instead of competing against each other to solve puzzles, users who accrue the most wealth, or stake, will be in charge of validating transactions. It’s this fundamental development that some experts believe could catalyze a bull run for Ether (ETH).”
DigitalBits™ is an open-source project supporting the adoption of blockchain technology by enterprises. The technology (commonly known as branded cryptocurrencies) enable enterprises to tokenize assets on the decentralized DigitalBits blockchain; transfer & trade those tokenized assets on-chain; and enable fast payments & remittances.
Considered the 2nd generation of stablecoins, branded currencies create a new form of engagement between brands and consumers, improving market intelligence, allowing companies to create more targeted marketing campaigns and develop stronger insights into consumer needs.
Forked from the Stellar Protocol in 2017, DigitalBits introduces key modifications to support brand and enterprise adoption and currently trades at $0.02 with a market capitalization of $7.8 million.
Cryptocurrency Weekly Performance
Indices & Commodities
“It is only a matter of time before there exists a cryptocurrency that serves the interests of business. In early 2019, Facebook announced that it will be deploying a cryptocurrency called Libra. The mission statement of libra is to “Provide people everywhere access to safe and affordable financial services”. This is a noble goal, with 25% of the world living without reliable access to financial services. The problem though, is who has control over the financial system, and what sort of implications that has.”
Indicators on Bitcoin are signalling a bearish reversal over the upcoming week. In our Technical Review two weeks ago, we correctly forecasted that there was slight upwards potential as BTC traded between an ascending channel. Since the rally on Wednesday, BTC broke out and closed above the upper channel line. Along with the breakout, RSI closed above 70, indicating that BTC rallied too much too soon and that it may be overbought. Traders will be watching RSI closely given that the last time BTC crossed under 70 in February, the coin dropped 53%. We caution traders to trade diligently this week as the upcoming halving may skew the applicability of technical analysis.
It’s clear that COVID-19 is a long-term economic event. Its distress on the economy is clear, but markets can’t bleed forever. This week we saw some capital crawl back into the market and fight against the fear and uncertainty that plagued commodities and other key sectors in weeks past. Although we still have a long way to go, it is comfortable to see that traders and institutions alike are getting used to operating in a COVID-19-impacted economic environment.