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The Hard Fork – Weekly Market Commentary

This Week’s Topics:
1) Facebook is reportedly developing a stablecoin for its WhatsApp messenger
2) Tether loses market share to new stablecoins on US exchanges
3) Proposed US bill would exempt digital tokens from securities registrations


Indices Round-Up

TradeBlock Index Asset1 Price ($) 7d∆2
BCH Bitcoin Cash 195.47 145.35%
ETX Ethereum 128.59 50.91%
EOSX EOS 2.76 43.67%
XMRX Monero 52.90 35.32%
ECX Ethereum Classic 4.95 29.63
XRX XRP 0.36 27.41%
ZCX Zcash 64.47 27.24%
XLMX Stellar Lumens 0.12 27.17%
LTX Litecoin 32.96 26.51%
XBX Bitcoin 3,960.85 23.25%
1. Underlying Asset sorted in descending order by 7-Day Price Change.
2. 7-Day Price Change monitored from 12/16/2018 17:00 UTC thru 12/23/2018 17:00 UTC.

7 day price movers

Digital currencies are broadly rallying this morning after posting strong gains over the past seven days. The past one week period saw the largest rise in digital currency prices since July, while traditional assets, conversely, saw one of the largest declines in prices since 2008 amidst global de-risking, geopolitical concerns, and rising interest rates.

Bitcoin and digital currencies in general have often had a changing relationship with traditional assets. In the past, we have found bitcoin to demonstrate a modestly positive correlative relationship with risk-off assets such as gold. We have also found, more recently, a modestly positive relationship between bitcoin and risk-on assets, such as US small cap tech equities–the recent one-week divergence in prices breaks from this relationship however.

Among our indexed assets, the largest price risers this week were Bitcoin Cash and ether, which gained 145% and 51% respectively. Bitcoin rose the smallest amount among our indexed assets, trading up 23% over the week.


Facebook is reportedly developing a stablecoin for its WhatsApp messenger

On December 21, 2018 Bloomberg first reported that the popular social networking giant, Facebook, is developing a stable digital currency that will be used on its WhatsApp messenger application. Stablecoins have received significant attention recently as multiple new coins have launched in the past six months: USD Coin (USDC), Paxos Standard Token (PAX), and Gemini Dollar (GUSD). At time of writing, nearly 110 projects are building out a stablecoin offering.

The launch of Facebook’s stablecoin is likely not imminent as the company is still considering different custody plans, overall strategy, and which type of assets will be used to back the stablecoin. The new stablecoin offering would allow Facebook to enter the payment processing space and challenge firms such as Venmo/PayPal. In 2014, Facebook hired then President of PayPal and previous founder of the mobile payment platform, Zong, to run the WhatsApp messenger enterprise.


Tether loses market share to new stablecoins on US exchanges

We analyzed trading volume for different stablecoins across multiple US based digital currency exchanges over the past six months. Since the launch of several high profile new stablecoins, we found that Tether (USDT) has lost sizable market share, primarily to Circle’s/Coinbase’s USD Coin. As the first prominent stablecoin to market, Tether had by far the largest market share of any other stablecoin until earlier this year.

In the chart below, we diagram trading volume market share for bitcoin (XBT) pairs across Bittrex, Coinbase Pro, Kraken, and Poloniex exchanges.

Stable Coin Market Share

Data for chart sourced from the TradeBlock Professional Platform


Proposed US bill seeks to exempt digital tokens from securities registrations

This past week, a bipartisan bill was put forth by two congressmen to amend US securities laws. Notably, the bill would seek to exclude digital currencies from the definition of a security. While the bill does not appear to exempt all ICOs from securities registration, it would classify digital tokens used on a fully functioning network as exempt from filing. The SEC has in the past classified certain digital currencies as securities, such as Air Token and Paragon Coin, while describing that bitcoin and ether do not qualify as securities.

If such a bill were passed, it would usher in a period of lighter regulation to a space that has seen multiple high profile SEC actions recently. Over the past couple months, we have highlighted multiple instances of SEC statements and actions towards ICOs and exchanges which have likely applied downward pressure on digital currency prices.

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