The Hard Fork – Weekly Market Commentary

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This Week’s Topics:
1) Facebook coin reportedly launching in 2019
2) Ethereum’s upgrade goes live
3) Bitcoin trading volume declines to lowest level since 2017

 

Indices Round-Up

TradeBlock Index Asset1 Price ($) 7d∆2
LTX Litecoin 47.89 9.78%
XLMX Stellar Lumens 0.09 7.79%
XRX XRP 0.31 3.66%
XBX Bitcoin 3,790.53 0.84%
BCX Bitcoin Cash 129.72 0.71%
ECX Ethereum Classic 4.20 0.69%
ZCX Zcash 50.41 0.35%
XMRX Monero 7.95 -0.21%
EOSX EOS 3.49 -1.23%
ETX Ethereum 131.24 -4.52%
1. Underlying asset sorted in descending order by 7 day price movers.
2. 7 day price movers monitored from 02/24/2019 17:00 UTC thru 03/03/2019 17:00 UTC.

7 day price movers

Digital currencies are selling off this morning after broadly trading flat to modestly up this past week. Earlier in the week, XRP saw positive price movement when Coinbase, the largest US domiciled digital currency exchange, listed XRP/USD pairs. Digital currencies have been known to experience a near term price rise upon first listing on Coinbase–although this effect has been diminishing over time. XRP rose 3.66% on the week. The largest price riser among our indexed assets this week was litecoin which traded up 9.78%.

Ether traded down the past week as the network prepared for the highly anticipated Constantinople and St. Petersburg upgrade (see topic 2 below). Ether declined 4.52% on the week–declining the most among our indexed assets, in a sign the market may be uncertain about the latest upgrade. This comes in contrast to previous upgrades in the Ethereum Network. Following the last major upgrade to the network in 2017, Byzantium, ether prices rallied nearly 13%.

 

Facebook coin reportedly launching in 2019

This past week it was reported that Facebook may be launching its own digital currency as early as the first half of 2019. Facebook’s digital currency would likely be used in transactions on the company’s WhatsApp messenger. While the currency was initially expected to be a stablecoin pegged to the US dollar, it has not been confirmed whether Facebook’s coin would in fact be a stablecoin. Facebook’s expected currency launch comes on the heels of other large institutions which have launched a similar product. This month, JP Morgan, the largest US bank by assets, launched a stablecoin dubbed, JPM Coin.

Despite the attention new stablecoins have received in recent months, stablecoin trading volume has declined year-over-year, inline with a broad collapse in digital currency trading volume. In the chart below, we diagram stablecoin trading volume on US digital currency exchanges over time. For more information on stablecoins, read our latest in-depth report on the sector.

Figure 1: Stablecoin Notional Trading Volume Year-over-Year

Stablecoin Notional Trading Volume Year-over-Year

Data for chart sourced from the TradeBlock Professional Platform

 

Ethereum’s long awaited upgrade goes live

The Ethereum Network’s Constantinople and St. Petersburg upgrade went live on February 28th at block height 7,280,000. The launch was originally slated for last month, but was delayed due to an unexpected potential vulnerability. The upgrade is set to be a major amendment for the network and will, among other aspects, reduce block reward issuance from 3 to 2 ETH. The previous fork, Byzantium, reduced issuance from 5 to 3 ETH. The reduction in block reward issuance will effectively reduce new ETH token supply.

Despite the reduction in supply moving forward, this information was likely already priced into ether as the digital currency did not experience an uptick in price following the upgrade implementation. Supply reduction schedules are often known well in advance allowing the market ample time to price this information in. The supply reduction comes during a time when demand for ETH on decentralized finance platforms has reached a record high. Despite the potentially positive aspects of the upgrade, ether prices have declined since Feb. 28th following a successful implementation.

 

Bitcoin trading volume declines to lowest level since 2017

Digital currency exchanges continue to face headwinds, as trading volume falls to nearly a two year low. Since bitcoin prices reached a peak in December 2017, trading volumes have declined month over month, with a few exceptions, as prices have fallen. November 2018 saw a brief rise in trading volume, as bitcoin experienced a rapid sell-off, following enforcement actions from the SEC against several projects which had raised capital through an ICO.

We tracked bitcoin trading volume at the largest US accessible digital currency exchanges since Jan. 2018. Our findings demonstrate that notional spot trading volumes for the month of February, 2019 were the lowest monthly levels during this time. While some volume may be moving off exchanges and towards OTC trading desks, the downward trend mirrors other digital currency activity as well. In a recent report, we diagrammed how bitcoin futures trading volume at both the CME and Cboe remains near yearly lows.

Figure 2: Bitcoin Trading Volume Over Time

Bitcoin Trading Volume Over Time

Data for chart sourced from the TradeBlock Professional Platform

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