GDA Newsletters

Welcome back to GDA’s official industry newsletter. After last week’s partnership announcement with MYNTD, we have begun to roll out a global portfolio of financial, consulting and advisory services. Now, we have a new partnership to announce with Aquifer, a financial consultancy.

Aquifer Partnership Announcement

To perform these tasks to the best of our abilities, objectivity is always required. That is why this week we will be formalizing an agreement to work with one of Canada’s leading financial consultants, Aquifer Services. This engagement allows GDA to provide clients with objective corporate due diligence from a non-biased third-party.

aquifer

Aquifer is a part-time/fractional CFO consulting firm catering only to startups and SMB’s. The firm offers to set up accounting processes and systems, VC standard financial modeling while also providing 24/7 support for any CFO related questions regarding operations and capital fundraising.

To date, the Aquifer team has over +15 years of financial experience, has raised $60M of Venture Capital, and executed several M&A transactions. Assisting small and medium-sized businesses across a spectrum of industries, including fin-tech, blockchain, payments and many more, Aquifer understands the fluid nature of tech businesses in today’s economy and works with them to scale or reposition their resources in a lean and efficient manner.

Want more access to industry news and expert analysis?

Subscribe to our investor newsletter ‘The Digital Asset Digest’. Every week we provide readers with proprietary insights on market trends, industry news, and technical analysis, giving you all the information you need to make informed investment decisions. 

Digital Asset Digest – Volume 8

Welcome back to eighth edition of ‘The Digital Asset Digest’. Last week, we provided our network with an exclusive post-halvening analysis, ensuring all of our readers can follow the market in the days following the historic update to bitcoin’s consensus protocol. As we progress toward the end of May, we will be providing an overview of the markets and how they look as we prepare for June.

Overview of the Markets

Digital Assets – Bitcoin closed at $9,110 on Friday morning, cooling off after almost crossing the $10,000 again on Tuesday. This represented a fall of 4.46%, driven by rumours that Satoshi Nakamoto may finally be cashing out after forty early-mined Bitcoins traded hands for the first time last Wednesday. The crypto market as a whole was relatively unmoved, with Ether sitting just above the $200 mark rising 1.3% while XRP trailed Bitcoin down 1.0%.

Indices – The S&P 500 closed up 3.2% after a volatile week as Sino-U.S. trade tensions came back to the forefront. Industrials drove equities as optimism surrounding airlines improved after TSA reported higher traveler throughput throughout the week. On the Canadian side, the S&P/TSX Composite rose 1.9%, although the Health Care sector saw massive gains as cannabis names got a boost from Aurora’s Q3/F20 earnings and the closing of its $40 million acquisition of Reliva.

Commodities – Another stellar week for oil as WTI futures rose 12.6% with Brent trailing slightly behind at 8.1% on improved investor sentiment and optimism around storage and demand shortages. For precious metals, bullish sentiment is brewing around silver as futures rose 3.6% while gold was down 1.1%.

overview of the markets

Crypto faithful flip out on speculation Satoshi sold Bitcoin

Source: Bloomberg

“Crypto Twitter was ablaze Wednesday after the sale of some Bitcoin was reportedly linked to the account of the token’s mystery founder. The price of the largest digital token plummeted on speculation its anonymous creator, who goes by the pseudonym Satoshi Nakamoto, was moving coins mined in early 2009, an act perceived by some as a near-sacrilegious offense. Twitter account @whale_alert, which posts real-time transaction data, was among the first to report of the sale, tweeting that the coins in the transaction were mined in the first month of Bitcoin’s existence.”

Bitcoin mining difficulty drops by 6% in first adjustment after halving

Source: CoinDesk

“The bitcoin network just fine-tuned a key parameter to coax back miners who quit after last week’s halving hammered their profits. More than 20 exahashes per second (EH/s) of computing power – the equivalent of around 1.5 million older-generation mining machines – has been switched off from Bitcoin since the network’s halving. The seven-day rolling average of bitcoin’s hashrate has dropped over 20% from around 122 EH/s just prior to the halving on May 11 to now 97 EH/s. The once-in-four-years event reduced miners’ block rewards from 12.5 to 6.25 bitcoin (BTC) per block.”

China’s Congress proposes blockchain development fund

Source: CoinTelegraph

“National People’s Congress, China’s parliament and Chinese People’s Political Consultative Conference, the most powerful political advisory body in the country, have recently begun their annual sessions. These are widely referred to as the “Two Sessions” or “lianghui” meetings. These meetings have been ongoing since May 22. The National People’s Congress, or NPC, is China’s top legislative body. Nearly 3,000 delegates from around the country meet once a year to submit proposals during the meetings. According to a Beijing News’ report on May 23, Jieqing Tan, deputy to the NPC, suggested setting up a special fund for blockchain industry development. If accepted, this fund would be led by the government.”

Bitcoin miners double revenue: Fees spiked over 200% in 10 days since the halving

Source: Bitcoin.com

Bitcoin (BTC) miners earned 44% more in transaction fees in the nine days since the halving than they did for the whole of April. If this continues miners will have more than doubled their income from transaction fees going forward. According to data from Coinmetrics, miners have collected the equivalent of 1,176 BTC in transaction fees since Bitcoin’s third supply cut on May 11. That compares with 818 BTC earned as fees in April and 1,251 BTC in March, the figures show. Miners reap fewer bitcoin with each halving. The latest event slashed rewards paid to miners by 50% to 6.25 BTC, leaving some operators on the brink of collapse. The bonuses are a major revenue source for mining companies.”

OmiseGO is a network built on speed. With transaction speeds of up to 4,000 TPS, OmiseGO’s P2P network is one of the fastest networks on the market today. The company’s eWalletSuite is an open-source, complete digital asset management tool built for institutional use that allows businesses to manage their digital assets. By engineering the infrastructure in advance, OmiseGO focuses on UI/UX, allowing businesses to integrate seamlessly and get set up nearly instantaneously. OmiseGO also boasts lower operational costs, claiming that users pay up to 90% lower fees than Ethereum, but uses Ethereum-level security to guarantee the safety of users’ assets. Clients already on the platform include Burger King Thailand, Shinhancard, and Hoard Exchange.

The company is run by CEO Vansa Chatikavanj, a former consultant at the World Bank and a graduate of Columbia University. On Thursday, OmiseGO officially launched on Coinbase, and on its first day of trading saw significant premiums over Binance before crashing, sparking accusations of insider trading. OmiseGO officially launched in June 2017 and trades at $1.75 with a market capitalization of $245.8 million.

market overview

Top Gainers

Top Losers

Cryptocurrency Weekly Performance

Indices & Commodities

weekend opinion

We need more software engineering and less financial engineering

Source: Anthony Pompliano

A big difference between Silicon Valley and Wall Street is that Silicon Valley actually encourages failure. The idea is that if no one is failing, then the pace of innovation is not being pushed fast enough. This is a mindset throughout the technology industry. It is also built into the business models of the financial backers. Venture capital funds are predicated on the idea that majority of the companies they invest in will likely lose their money, but the select few that end up working out will create enormous economic value that makes up for the losses.”

technical review

Source: Trading View
Contributor: Samuel Poon

On the technical side, indicators are neutral for Bitcoin coming into the week. RSI, which we treat as one of BTC’s most important indicators, as at an unmoved 50, which indicates that the trend is weakening slightly. Our eyes are on the $8,500 level this week as a clear double top has formed over the last two weeks. If BTC manages to close below support, we will change to a more bearish stance, although for now we are on the sidelines. Indicators are not giving a clear signal this week, which is why we have opted for a neutral position.

As the halvening eliminated the profitability of several small mining groups, it wasn’t a surprise that the price of bitcoin went down. However, the next few weeks are critical for the health of the bitcoin network as investors will carefully be awaiting to see if the network can surpass the notorious $10,000 marker. 

Digital Asset Digest: Volume 7

Almost three weeks ago, we provided our readers with a pre-halvening market analysis. Now, with the halvening in the rearview mirror, it is time to present our post-halvening findings relating to miner revenue, hash rate, and price swings! 

Today’s edition of the Digital Asset Digest will be dedicated to bitcoin’s halvening as we dive into several key metrics including trading volume, mining revenues, and hash rates, amongst other trends. 

hash rate

On May 11th, bitcoin underwent its third halving, paving a new era as its block reward was cut from 12.5 BTC to 6.25 BTC. The event was widely anticipated across the crypto market, and in a time when interest in Bitcoin seemed to be waning by the day, the halvening was a much-needed reminder to investors about its long term potential and the truly disruptive nature of blockchain and decentralization.

Since the BitMEX incident on March 12th, bitcoin has been steadily on the rise. In fact, since the low of $4,107 YTD, bitcoin is up over 135%, dwarfing the returns of the equity market so often reported by the media.

bitcoin performance

Let’s start with mining. During our pre-halvening newsletter, we pointed out that the total hash rate on the network tends to fall drastically post-halvening as marginally profitable miners are pushed out of the network. The halving this year was no different, as we saw mining activity fall to late-April levels.

hash rates

Miner Revenue & Hash Rate

Also as expected, miner’s revenue sharply fell post-halvening given the lower block reward. Interestingly, miner’s revenue also took a dive after BitMEX’s DDoS attack on March 12 and only recovered to March levels before plunging again after the halvening. In the chart above, you can see how miner activity dramatically increased in the week prior to the halvening as miners were racing to earn the last few 12.5 BTC blocks before the reward sum was irreversibly halved.

Unlike the hash rate, you’ll notice in the graph below that miners’ revenue tends to recover much more slowly than the hash rate. This is because although the block reward is reduced, the major miners will continue to mine as long as it’s profitable, propping up the hash rate. On the other hand, the number of blocks mined per day is determined by difficulty, which is adjusted every 2,016 blocks. This means that total revenue from mining is also more or less fixed, leaving transaction fees as the main driver of miners revenue.

After the second halving, it took around eight months for the total revenue from miners to return to their pre-halving level. Driving this was a massive rally in BTC, which boosted profitability for miners on the network. We forecast that this halving will be no different. Unless we see a massive surge in BTC as we did in 2018, we expect miner’s revenue not to return to this year’s level until the end of 2020/early 2021.

As we mentioned in our pre-halvening Digital Asset Digest, now that mining only returns 6.5 BTC per block, hobbyist miners can no longer expect to mine profitably. Mining pools and institutional players are now the dominant force in bitcoin mining. Due to the monopolization of the mining sector, we expect concerns surrounding a potential 51% attack to become a much more common narrative in the coming years.

On the trading side, we saw increased volumes across the board as the halvening approached. However, we note that the increase in trading activity was particularly close to the BitMEX DDoS attack in mid-March.

trading volume

Which brings us to the key question: Was BTC’s rally really caused by the halvening? Or was it a natural recovery from the damage of the BitMEX attack? Based on volume, it would certainly seem like the DDoS attack in March had a much greater impact than the halvening. However, both events occurred suspiciously close to one another, so we are reluctant to definitively attribute the increase in trading volume to either situation until more data becomes available.

While we wait for the market to continue adjusting to a post-halvening environment, we will keep a particular eye on how large mining operations and institutions will adjust their strategies. Since bitcoin’s supply has been irreversibly diminished, this presents a lucrative opportunity for the firms who are not sleeping behind the wheel and are ready to act. 

THE HALVENING IS UPON US.

Yes, after much hype, the infamous bitcoin halvening has come and gone. The next 210,000 blocks will now yield 6.25 bitcoins per block reward.

Does this call for a hooray? Not Yet. Before we get too excited, we need to see how this will impact the market, and only time will tell.

Our analysts will be glued to their monitors sifting through the candlesticks to find new trends to bring to you. So make sure you tune in next week for our post-halvening analysis. Until then, enjoy this week’s volume 6 of ‘The Digital Asset Digest’. As always, we will be touching on all things crypto. Enjoy!

market summary

Bitcoin – Bitcoin closed at $9,895 on Friday morning, up 12.4% for the week just days before the third halving. The surge seemed to have been constrained to Bitcoin alone as opposed to the cryptocurrency market as a whole. Ether was completely unmoved for the week and XRP closed down 0.18%.

Indices – The S&P 500 was up 3.5% for the week as increased optimism surrounding the coronavirus and U.S. – China trade relations drove returns. These returns were largely driven by gains in energy and information technology, with WTI futures rebounding a stellar 25.1%.

Commodities – Gold was up slightly, again crossing the $1,700/oz mark. Silver, on the other hand, boasted an impressive 5.9% return.

Bonds – Treasury yields were more or less unmoved for the weekend, with the 10-year yield rising 5 bps for the week. Despite the rally in equity markets, fear continues to be the prevalent sentiment, and the market will be watching coronavirus figures closely as the U.S. and countries in the EU begin to lift lockdown restrictions.

Billionaire Paul Tudor Jones: ‘My bet is it will be bitcoin’ as the best inflation hedge
Source: MarketWatch

“Billionaire investor Paul Tudor Jones made a prescient call on bullion in 2019; now he’s saying that bitcoin, the controversial digital currency, reminds him of gold in the 1970s, and may be the best hedge against inflation in the age of coronavirus. The famed hedge-fund investor, writing in a recent research note, cited unprecedented money-printing and stimulus measures by the Federal Reserve and the U.S. government amid the COVID-19 pandemic as key reasons behind his newfound appetite for the world’s most prominent cryptocurrency.”

Bitcoin mining markets heat up: Ebang’s $41M deficit, Bitmain’s alleged 2020 revenue
Source: Bitcoin.com

“Bitcoin mining is feverishly hot these days, especially just before the great Bitcoin reward halving that will take place on or around May 12, 2020. During the last six months, there’s only a handful of ASIC mining rig manufacturers and all of them stem from China. This includes companies like Bitmain, Ebang, Strongu, Innosilicon, Microbt, and Canaan. There are a few other manufacturers, but the firms are not nearly as sizable as these six businesses. Just recently, the company Ebang filed for a $100 million initial public offering (IPO) in the U.S. and the company will await a decision from the SEC. Although, the firm’s prospectus shows that Ebang suffered from some losses in 2019, and it may reflect the IPO’s initial raise.”

Bitcoin miners sell BTC months after halving, on-chain data suggests
Source: CoinTelegraph

“Bitcoin’s third halving is less than a day away and the cryptocurrency community remains divided on whether the price will rise or drop after the event. Interestingly, on-chain data from previous halvings suggests that after the halving Bitcoin price may not see an immediate drop. Google Trends data shows that searches for the halving have already surpassed previous all-time highs, and the crypto community has been issuing a variety of price estimates for the post halving price.

ExtStock is a cryptocurrency exchange based in the U.K. founded in 2018. The company boasts over 20,000 traders and claims that its API can process up to 1,000 applications per second, making it a useful platform for high-frequency traders and scalpers. XT is ExtStock’s proprietary cryptocurrency that fuels the exchange. It’s an ERC-20 token whose main use is to pay for trading commissions on ExtStock. ExtStock also pays 100XT for every trader that registers through a referral link after passing KYC verification.

XT went through the first stage of its IEO on January 15, where it sold 100 million XT tokens in less than a minute. The token went through the second stage of its IEO in March, although they were unable to offload all of its tokens (92% of tokens offered were sold). The company claims that this was caused by a sharp collapse of quotes. A third and final stage is in the works, although for the time being, it has been postponed indefinitely.

Despite the success of its token, the company suffers from several allegations of fraudulent activity. No record of a founder can be found on its website, nor can any employees be traced on LinkedIn. Lisk reported in a tweet that several of its users had issues withdrawing funds from the exchange and cautioned users to be cautious. ExtStock has also been accused of inflating volume by quoting a higher price on BTC to induce transfers from users. In May, Cointelligence reviewed the exchange and rated it a scam.

XT currently trades at $0.27 with a market cap of $164.9 million. Please note that these token highlights are not a recommendation. We highly encourage readers to engage in their own due diligence before purchasing tokens.

Top Gainers


Top Losers


Cryptocurrency Weekly Market Performance

Indices and Commodities

The Security Trilemma and the Future of Bitcoin
Source: CoinDesk

“The imminent halving of the “block subsidy” exposes a fundamental threat to Bitcoin. Whenever a new block is added to the blockchain, a quantum of new bitcoins is created and paid to the miner adding the block. As miners compete for this subsidy, they drive up the system’s difficulty, making it harder for so-called 51% attacks to succeed. But the subsidy is set to diminish over time, halving very soon to 6.25 bitcoins per block, so that the total supply of coins will eventually reach 21 million. And as the subsidy shrinks, Bitcoin could fall victim to 51% attacks, just as smaller cryptocurrencies already have.”

Technical Review and Market Summary

Indicators are pointing towards a bearish continuation this week. During last week’s Technical Review, we forecasted that indicators were pointing towards a bearish reversal and cautioned traders to watch for when BTC’s RSI crossed below 70. On Saturday, RSI finally crossed, triggering our prediction. Optimism surrounding the halving was clearly short-lived, as traders pushed BTC down from 9.5K to almost 8K in the span of a single day. Now that Bitcoin is in freefall, we predict that it’ll be a while before BTC finds support. In the meantime, we are bearish and will be sitting on the sidelines until a more positive signal starts to emerge.

Finally, a week of sustained gains in the non-crypto markets! Last week we said it was comfortable to see traders adjusting to operating in a COVID-19 world. Now, after last week’s market performance, I think they might be getting more than comfortable. However, the bearish sentiment towards Bitcoin, even in the midst of the halvening is troubling. Is the market truly disinterested, or are retailers just slow to react? 

Make sure to check out our post-halvening analysis next week to find out!

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.


GDA joins DigitalBits Ecosystem to bring Branded Cryptocurrencies to Enterprise

Source: CoinSpeaker

“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 sees revenues soar 11x after mining 1,300 Bitcoin in 2019

Source: CoinDesk

“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 cyberspace regulators approve 224 blockchain ventures

Source: CoinTelegraph

“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.”

Older mining machines turn profitable again as Bitcoin rises ahead of halving

Source: CoinDesk

“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 staking upgrade can trigger ETH price rally

Source: CoinTelegraph

“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.

market assessment

Top Gainers

Top Losers

Cryptocurrency Weekly Performance

Indices & Commodities

market perspective

Opinion: A business crypto is dangerous and inevitable

Source: CryptoVantage

“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.”

Source: Trading View

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. 

The Halvening, What You NEED to Know

If you have been following our previous DAD issues or just regularly follow the crypto market, you’ve probably heard of “the halvening” and its supposed impact on the price of Bitcoin starting in May. This is a unique event that happens every four years, and barring extreme circumstances, Bitcoin’s halvening is scheduled to occur on May 11th-12th of this year. Today, we want to give an overview of the halvening and offer an evidence-based view of its impact on Bitcoin’s trading economics.

An unfortunate amount of online commentary centered around the halvening borders on lies, speculation and pure myth. Our goal in this edition of The Digital Asset Digest is to separate the facts from fiction, so you can make an educated decision in your own portfolio.

Before we jump into the halvening, we need to talk about mining. Mining is the process by which cryptocurrency transactions are anonymously verified, and new cryptocurrency enters circulation. Mining follows the verification protocol known as Proof-of-Work (POW).

Every day, hundreds of thousands of Bitcoin transactions are performed and broadcasted to the Bitcoin Network. These transactions are bundled together into what we call blocks. Bitcoin is effectively thousands of blocks linked together in a chain, which is where the term blockchain comes from.

For a block to be accepted by the rest of the network, each miner must submit a proof-of-work along with the block. To generate a proof-of-work, a miner must input the block’s contents into a hash function and generate a hash that is smaller than a target set by the network. Miners do this by adding a number to the block (called a nonce) that changes the block’s hash. Since miners are competing against each other to submit a proof-of-work and earn the block reward, they will spend substantial amounts of capital on equipment and electricity, so they can have a faster throughput and be the first to submit the proof-of-work. If/when a miner successfully accomplishes this, the miner announces it to the network, who verifies this by trying the nonce themselves. If the nonce is valid, the miner is rewarded with Bitcoin, which is how new Bitcoin is put into circulation.

The elegance of the proof-of-work protocol speaks to the elegance of bitcoin and decentralization. Proof-of-work creates a dollar value on the securitization of the network. To compromise a blockchain you need to control 51% of the miners hashing power. So, based on how much each miner spends on electricity and equipment to mine, you can determine what the dollar cost attached to their hashing power is. From this, you can calculate how much it would cost to control 51% of the network’s hashing power. For advanced networks such as Bitcoin though, this is a near-unimaginable sum.

An important figure with respect to mining is Bitcoin’s hash rate. In short, the hash rate measures how many hashes are being performed over a set period. The higher the hash rate, the higher the mining activity across the Bitcoin network. Currently, the standard unit for measuring hash rate is terahash per second, or TH/s. One terahash is equal to a billion hashes, so if the hash rate on a certain date is 20 TH/s, there are 20 billion hashes being performed on the Bitcoin network every second. As expected, given the lower reward for mining, the hash rate tumbles as miners’ incentives drop. As such, there is a direct correlation between the hash rate and price and the hash rate is often used as a key indicator for market performance.

What does any of this have to do with the halvening? When we talk about the halvening, we really mean that the number of Bitcoins a miner receives for submitting a proof-of-work is going to be halved. Bitcoin was designed so that a halvening would occur every 210,000 blocks. Since a block is mined approximately every 10 minutes, a halvening should occur every four years. The halvening this May will be the third halvening in Bitcoin’s history. Currently, miners are rewarded 12.5 BTC for successfully mining a block. Post-halvening, this reward will drop to 6.25 BTC.

The reason for instituting a halvening mechanism is to limit the total number of circulating Bitcoins, creating artificial limits on supply, and preventing miners from owning a disproportionate percentage of all Bitcoins. As you may be aware, Bitcoin’s supply is capped at 21 million, and as of today, over 18.3 million Bitcoins have already been mined. This means more than 87% of all Bitcoins have been mined into existence. With over 620,000 blocks mined, had there been no halvening mechanism in place, we would have surpassed Bitcoin’s supply cap by 10 million.

The impact of Bitcoin’s halvening this May is highly contentious. We have two prior halvening’s to analyze, but the crypto landscape has changed significantly over the last four years and it’s debatable whether we should expect the same to occur this time around.

The traditional argument is that Bitcoin’s price should rise as the halvening approaches. Proponents of this argue that while the demand for Bitcoin remains the same, the incoming supply will shrink, boosting Bitcoin’s price. They point to rallies before previous halvening’s as evidence of this.

“Imperium Investments is a Private equity fund focused on monetizing energy. We use Bitcoin, via one of the largest mining operations in North America, as the arbitrage vehicle to convert energy to cash. We maximize results by being the lowest cost Bitcoin producer. We achieve this through our expertise in international capital markets, financial products, and large scale industrial operational excellence. 

Imperium Investments believes Bitcoin miner capitulation is likely to occur given the current macroeconomic backdrop (COVID-19). We believe it is unlikely that retail investors prop up Bitcoin’s price, in the form of speculation, as free cash flow is contracting for the global consumer. The majority of the middle class no longer has the ability to put more money to work in the form of financial investments and this free cash flow is being used to pay monthly expenses. Instead, the driver for future Bitcoin price increases will be from real supply-side shock both from the guaranteed 50% decrease in block rewards as a result of the halvening (12.5 to 6.25 Bitcoin per block), as well as the intentional decision of industrial-scale miners with strong cash balance sheet positions not to sell. 

Imperium Investments believes there will be a multi-month capitulation effect that will come into play post-halving as the majority of Bitcoin mining businesses are forced to liquidate their holdings to weather the storm of depressed prices. Therefore It is the opinion of Imperium Investments that there is a high likelihood of bankruptcies and consolidation to occur across the global landscape of Bitcoin mining. However, after this large consolidation event occurs our team believes that we will be seeing Bitcoin reach all-time highs 6-18 months after the end of the capitulation event. This will result in significant opportunities for well-positioned mining firms to capitalize on in the form of distressed asset purchases.”

halvening

The sheer existence of the halvening will undoubtedly have a psychological impact on the market. The irreversible decrease in block-rewards has attracted corporate and retail entities to Bitcoin, and we expect those adoption trends to continue in the wake of the third halvening.

Moreover, the halvening is an event that creates a lot of attention around bitcoin. No matter the spin, this is a positive for the asset. Like in any industry, promotional/marketing activities are key for growth so the more focus the news-cycle puts on the halvening, the larger the audience and the greater the chance someone will hear about bitcoin and decentralization for the first time, so we view the upcoming halvening as an excellent growth opportunity for Bitcoin. 

We expect this year to be no different, forecasting that hash rates will tumble post-halvening. However, we expect the 2020 halvening to be notable as the mining landscape has become increasingly competitive. Hobbyist miners have long been pushed out and large-scale operations have had mixed results due to Bitcoin’s volatile performance over the last year. At current levels, transaction fees make it difficult for miners to scale their operations and compete with the larger firms, so post halvening we expect the consolidation of the mining industry to continue.

There are some experts that think  the market has already accounted for retail excitement and that this anticipated influx in trading volume is already priced into current figures.

All this being said, we are still bullish on Bitcoin as the halvening approaches, albeit cautiously and with a skeptical eye. We expect increased volatility similar to prior halvening’s and warn against letting fear dictate trading decisions. Since the halvening is a catalyst for Bitcoin alone as opposed to the broader cryptocurrency market, we expect Bitcoin’s dominance in the market to improve (as of today, BTC accounts for 64% according to CoinMarketCap).

For investors with a higher tolerance for volatility, increasing exposure to Bitcoin over the next few weeks is a sensible manoeuvre in our view. However, with the crypto markets ubiquity and accessibility, bull & bear runs happen quickly. Therefore, we encourage readers to find a reliable liquidity on-ramp ahead of the halvening.

With just under 2-weeks left until the halvening, GDA will be focusing its resources on analyzing the market to make sure our readers are as well-positioned as they can be. Make sure to tune in next week and to follow our twitter to stay updated on all halvening news and analysis!

Welcome to Volume #3 of The Digital Asset Digest. The last two weeks have been a whirlwind for crypto and if you did not get a chance to read last week’s edition of the Digital Asset Digest feel free to get caught up here.

This week both the fiat and digital asset markets underwent extremely volatile trading periods, hopefully creating some lucrative opportunities in the market which we address below: 

MARKET SUMMARY

Digital AssetsBitcoin closed at $7,110 on Friday, seeing low levels of activity as it continued its consolidation within the $6,500 to $7,500 range for the third week in a row. Ether saw comparatively higher levels of growth, closing up 8.4% for the week at $172. XRP trailed Bitcoin, ending up 1.3% over the same period.

Commodities – WTI crude closed at a staggering -$13.10 on Monday. On the heels of OPEC’s announcement that demand for crude will fall to its lowest level since 1989, coupled with the lack of storage cause from this demand drop-off, the market spoke volumes about current consumer sentiment. In other commodities news, Gold rallied earlier in the week before selling-off on Friday, closing down 1.2%.

Indices – The S&P 500 continued its rally this past week, rising 3.0% for the week as President Trump unveiled a three-stage process for states to end the coronavirus shutdown. Conversely, U.S. jobless claims rose to over 22 million for the month and China’s Q1 GDP contracted 6.8%, the first decline since the country began publishing quarterly data in 1992.

NEWS OF THE WEEK

Binance Chain releases white paper for a smart contract-enabled blockchain
Source: CoinTelegraph
“Binance Chain developers have proposed specifications for a new blockchain that would enable complex smart contract functionality within the Binance Coin (BNB) ecosystem. The specifications are available in its white paper, released on April 17… The Smart Chain will thus allow projects in the Binance ecosystem to build complex DApps based on Ethereum’s Virtual Machine. The team said that this was an often requested feature from projects in its ecosystem.”

Facebook-backed association revamps Libra following regulatory concerns
Source: TechCrunch
“The Libra Association, the consortium created by Facebook to oversee all things Libra, has updated its white paper to make some changes. The association is abandoning its original plan to create a global stablecoin directly tied to a basket of fiat currencies and securities. The Libra Association now plans to release several stablecoins — each of them will be backed by a fiat currency, such as USD, EUR, GBP or SGD. There will be a multi-currency Libra “coin,” but it won’t be a cryptocurrency per se — it’ll be a digital composite of those single-currency stablecoins.”

Grayscale now holds 1.7% of Bitcoin supply after record $500M quarter
Source: CoinTelegraph
“Almost 2% of the world’s Bitcoin (BTC) supply is now under the control of a single company: Grayscale and its Bitcoin Trust (GBTC). In its latest quarterly report on April 16, Grayscale revealed that GBTC now contains 1.7% of the circulating supply of Bitcoin. In terms of assets under management as a proportion of the total cryptocurrency market cap, Grayscale controls 1.2% of the world’s crypto… Overall, Grayscale’s ten crypto funds attracted over $500 million in investments, making it its best quarter on record.”

TOKEN HIGHLIGHT:
ENIGMA (ENG)

Enigma is a decentralized, open-source protocol specializing in privacy for DApp development. Smart contracts on traditional blockchains are public and cannot use data that must remain confidential. Enigma circumvents this issue by introducing the concept of a secret contract. The Enigma protocol does this by breaking up encrypted sensitive data and distributing it across “secret nodes” on the network. This way, nodes perform computations on seemingly random pieces of data, but never the data in its entirety, so the raw data is never exposed.

The concept behind Enigma was first described in 2015 by CEO Guy Zyskind’s MIT thesis. The firm has an ongoing R&D partnership with Intel to improve privacy preserving computation technologies using Intel SGX (Software Guard Extensions). As of today, ENG trades for $0.16 with a market capitalization of $11.7 million.

MARKET MOVERS

TOP GAINERS

TOP LOSERS

Source: CoinMarketCap
*Only includes top 100 cryptocurrencies

BITCOIN ANNUAL PERFORMANCE

Source: CoinMarketCap

CRYPTOCURRENCY PRICES

Source: CoinMarketCap

INDICES & COMMODITIES

digital asset digest
Source: S&P CapitalIQ

WEEKEND READING: OPINION

First mover: Coronavirus trillions get Bitcoiners wondering if halving still matters
Source: CoinDesk
“Before the coronavirus hit, bitcoiners were looking forward to next month’s “halving” – a once-every-four-years reduction in new supplies of the cryptocurrency – as the primary factor that would drive prices higher, potentially even a 13-fold increase from current levels. Since the coronavirus pandemic hit, however, the market’s focus has shifted instead to the trillions of dollars of emergency aid and money injections pledged by the world’s governments and central banks. Those are seen as enhancing bitcoin’s appeal as a hedge against inflation, similar to the traditional arguments for buying gold.”

TECHNICAL REVIEW

Indicators on Bitcoin are neutral for the upcoming week as the cryptocurrency continues to consolidate within the $6,500 to $7,500 range. An ascending channel has clearly formed and as Bitcoin trades near the lower bound, this may be an indicator of some upwards potential. However, with the ADX near its low YTD, we find this trade uncompelling. A breakdown in the lower end of the channel may indicate a reversal and confirm our bearish sentiment from last week.

QUOTE

“The Web as I envisaged it, we have not seen it yet. The future is still so much bigger than the past.”
Tim Berners-Lee

The market seems to be going green, red and everywhere in between. What is happening across commodities borders on unprecedented. However, we have never been in a situation where a natural disaster has prevented mass amounts of people from being on the road for this long, so the sell-off was expected. Like everything else, once we start to see normalcy in our lives, so to will we see it on the balance sheets and trading dashboards.

Want us to cover a specific market or digital asset? Reach out to us here.

Welcome back to the second volume of ‘The Digital Asset Digest’, Global Digital Asset’s official market newsletter.

Last week we narrowed our focus onto COVID-19 and its impact on the equities and crypto markets. If you missed the release you can catch up here. This week, we will be broadening our scope and taking a glimpse into the crypto & equity markets at large. 

Market Summary

Digital AssetsBitcoin closed at $6,470 Friday, up 4.4% for the week after Congress passed a historic $2.2 trillion stimulus package to fight the devastating economic impacts of COVID-19. Ether was relatively unmoved, rising 0.90% while XRP closed up 12.3% over the same week.

Equities – The S&P 500 rose 12.1% last week, driven by gains in real estate, materials, and financials as new COVID-19 cases in the US and key European regions have seemed to level off. Treasury yields rose slightly in response. 

Commodities WTI Crude dropped 19.7% for the week as analysts debated whether Saudi Arabia and Russia’s deal to cut oil production would sufficiently offset the lack in demand caused by the coronavirus pandemic. Gold is up 6.5% as deflationary fears linger.

News of the Week

Bitcoin Cash halving met with 11% price surge; BSV follows with 19%

Source: CoinTelegraph

“Bitcoin Cash (BCH) went through with its first block reward halving this past Wednesday, with the coin price gaining 11.2% on the day. Those gains were exceeded by Bitcoin SV (BSV), which gained 19.4% over the same period. Bitcoin SV scheduled its own block reward halving on Friday, April 10th, the excitement around this protocol change was most likely the catalyst for the coin’s price surge last week.

Both Bitcoin forks were the only cryptocurrencies in the green as the market came to a close this past week. However, those gains look to be short-lived, as the market is already trading a few points below Friday’s price.

Crypto trading volumes rise in India after the banking crisis, COVID-19 lockdown

Source: CoinDesk

“India, the world’s second-most populous country, is increasingly embracing cryptocurrencies amid domestic economic issues and the nationwide coronavirus-related lockdown. It started on March 4 when the country’s highest court quashed a Reserve Bank of India (RBI) order dated April 6, 2018, which prohibited banks from providing services to entities dealing with cryptocurrencies. Activity on exchanges immediately picked up… Crypto banking services platform Cashaa noted a spike of 800 percent in trading volumes in the 48 hours following the decision. “The platform also registered a volume of 600+ BTC in the first 24 hours,” said Cashaa CEO Kumar Gaurav.”

Cryptocurrency investors sue exchanges, issuers in New York

Source: Bloomberg

“A group of investors sued four cryptocurrency exchanges and seven issuers claiming they sold billions of dollars of unregistered digital tokens and other securities in violation of U.S. securities laws. The lawsuits name exchanges Binance, Bibox, BitMEX and KuCoin, and issuers Block.one, Tron, Bancor, Civic, Kybercoin, Quantstamp and Status, according to attorneys for the plaintiffs. The suits, filed late Friday in Manhattan federal court, seek to represent classes of cryptocurrency investors.”

China will ‘undoubtedly’ pursue digital Yuan, central bank says

Source: CoinDesk

“China’s central bank has sent one of its strongest signals yet of a commitment to creating a digital version of the yuan. “The People’s Bank of China (PBoC) will undoubtedly further its research and development of the national digital currency with enhanced top-down design,” the bank said in an April 4 notice. The notice is a summary of the 2020 National Currency Gold Silver and Security Work Video and Telephone Conference, convened on Friday by Yifei Fan, the central bank’s vice governor. One of the annual meeting’s goals was to lay out top priorities for the bank in this coming year.”

Token Highlight: Seele (Seeletech)

Seele is a token developed by SeeleTech that describes itself as blockchain 4.0, building on top of previous advances in Bitcoin, Ethereum, and the lightning network. The team’s priorities in building the token are scalability, security, and efficiency. To accomplish this, Seele developed a Matrix-Proof-of-Work consensus algorithm, which forces miners to solve for determinants of matrices constructed with hashes rather than the brute-force hashing methods used by Bitcoin. The algorithm is designed to prevent ASICs and GPUs from dominating the entire network.

Seele completed their ICO in April 2018. Two weeks ago, the team released its Seele Stem subchain beta 1.0, which enables unlimited groups of users to build their own blockchain and interact with the Steele mainnet. As of April 10, SEELE traded at $0.065 with a market capitalization of $45.6 million.

MARKET MOVERS

TOP GAINERS

TOP LOSERS

BITCOIN ANNUAL PERFORMANCE

Source: Yahoo Finance, CoinMarketCap

CRYPTOCURRENCY PRICES

Source: CoinMarketCap

INDICES & COMMODITIES

Source: S&P CapitalIQ

WEEKEND READING: OPINION

The pandemic couldn’t have provided a better environment for crypto

Source: CoinTelegraph

“Had anyone presented the current situation to a crypto enthusiast in December, they likely would have said that they couldn’t have imagined a scenario more conducive to crypto’s macro narrative. That scenario may not be all sunshine and rainbows, though… We may be witnessing a fundamental shift in legacy market sentiment — specifically, the cozy relationship between the government and corporations. The stimulus package revealed that corporations were woefully unprepared for any type of supply/demand shock and had abused low-interest loan rates to buy back their own shares.”

Technical Review

Source: TradingView

Indicators on Bitcoin are bearish heading into the new week after a month-long rally, as BTC broke below the 50-day EMA on Friday. Though RSI seems to signal that there’s still room to rally, MACD convergence paints a bleaker picture, along with weakening momentum signaled by a tumbling ADX. A new high for the month was established at the $7,500 mark, so if resistance is confirmed, this would be a strong indicator of a potential reversal.

QUOTE

“The chief value of money lies in the fact that one lives in a world in which it is overestimated.”

– H.L Mencken

Although the market sentiment is still somewhat bearish, the unprecedented levels of fear and uncertainty from previous weeks have subsided, and so too have the aggressive sell-offs. We hope that the continued perseverance we have seen on a global scale will continue as COVID-19’s economic uncertainty remains. 

Welcome to The Digital Asset Digest, GDA’s official market newsletter! The Digital Asset Digest will be providing curated insights about the crypto and equities market, amongst other macroeconomic trends. While this newsletter will typically provide a holistic overview of the market, we wanted to narrow our focus today. Therefore, the first volume of The Digital Asset Digest will cover COVID-19, and the grip it currently has on the world’s socio-economic fabric.

With all of that being said, we would like to share some unique insights about COVID-19’s impact on the cryptocurrency markets and how we expect the industry to evolve during these tumultuous times. The sell-off in March was certainly aggressive, but there are a few positive identifiers worth addressing.

BITCOIN VS. COVID-19

Figure 1: Bitcoin YTD Performance

Source: CoinMarketCap

1. As the only true “free market” crypto should be praised, not criticized for its bear run.

Cryptocurrency, in the purest sense, is a ‘free market’; trading desks operate all over the world and stay open 24 hours a day, 7 days a week. Given this context, the sell-off could have been much worse.

Let’s contextualize the crypto markets’ performance by comparing it against conventional equities markets such as the S&P 500 index. Unlike crypto markets, equity trading can be halted by circuit breakers after intraday trading deficits of 7% or more. Even with these preventative measures, the S&P 500 was down 12.5% in March.

Figure 2: S&P 500 1-Month Performance*

Source: Yahoo Finance

*Annotations indicate days on which a circuit breaker was triggered

Comparatively, Bitcoin (BTC) the largest cryptocurrency by market capitalization was down [22%] over the same period. Although on the surface, this disparity is high, when considering crypto operates in an unregulated 24/7 market and equities trade in a highly regulated market with 8-hour trading periods, crypto’s sell-off could have been much worse.

Moreover, if we dive deeper, crypto actually has some positive performance metrics worth highlighting:

  • The sell-off is fuelled by what we at GDA are calling strategic necessity. Mining firms and other institutional entities in the crypto space receive a substantial amount of their revenue in cryptocurrency. But like any other business, they have overhead expenses (rent, salary, equipment) to pay in fiat. So this aggressive sell-off is the direct by-product of firms liquidating their crypto assets to protect their businesses as COVID-19 continues to sink its teeth into the world’s socio-economic treads. We know crypto’s institutional players have a fiduciary responsibility to their stakeholders to sell off their assets and protect their business. But what about on the retail side? Our analysts show that retailers’ long-term sentiment is actually quite bullish.
  • A recent study found that Coinbase users bought 67% more than they sold, which shows that the market sees this sell-off as overly reactive, and retailers are trying to increase their position.

Figure 3: Bitcoin vs. S&P 500 March Performance

Source: CoinMarketCap, Yahoo Finance

2. The argument that Bitcoin is no longer a ‘non-correlated’ asset is untrue.

Another conversational note our anaylsts have seen across headlines is that Bitcoin is no longer an uncorrelated asset. This is simply untrue.

Bitcoin and other altcoins have been in a bear trading period, just like the rest of the securities and equities markets. However, this is not indicative of crypto no longer being an uncorrelated asset or a hedge against traditional investments. Instead, crypto’s market performance is a product of one thing, fear. When traditional fear arises, there is only one asset that goes up, cash. When fear takes a grip on society, people lose interest in growing their portfolio and instead focus on purchasing essentials like food and water, which can only be done with cash. So the main catalyst for Bitcoin’s bear run is not because it is suddenly correlated to traditional equity markets. Rather, Bitcoin’s bear run is a product of people liquidating their non-cash assets because of rising levels of fear as people race to purchase essential goods.

In the graph below, analysts have plotted the 30-day rolling correlation between Bitcoin and the S&P 500. The correlation between Bitcoin and the overall equity market is clearly in a constant state of flux and our analysts are unconvinced that the sell-off in cryptocurrency and equity markets this month is indicative of their future relationship.

Figure 4: Bitcoin vs. S&P 500 30-Day Rolling Correlation

Source: Yahoo Finance

Although the socio-economic factors affecting the international economy are obvious, we have seen a more aggressive resistance by the market then what could have been expected. We can only hope that this is a sign of continued perseverance by the global economy against the uncertainty of COVID-19. 

At GDA we encourage everyone to be diligent and follow the market. Although the outlook is grim now, we anticipate some lucrative entry points in the near future.

Until then, practice social distancing, isolate whenever necessary, and stay safe.

Warm regards,

Global Digital Assets

Quote:

“The risk of a wrong decision is preferable to the terror of indecision.”

– Maimonides