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The Hard Fork – Weekly Market Commentary

This Week’s Topics:
1) Ripple raises $200 million in its Series C
2) DEXs see a decline in trading activity in 2H 2019
3) Binance takes stake in FTX equity and its FTT token

 

Indices Round-Up
TradeBlock Index Asset1 Price ($) 7d∆2
ECX Ethereum Classic 0.06 -2.66%
XBX Bitcoin 7,525.17 6.66%
EOSX EOS 2.53 0.40%
LTX Litecoin 42.02 -1.58%
XMRX Monero 48.01 -4.41%
BCX Bitcoin Cash 195.72 -4.60%
ETX Ethereum 132.76 -5.58%
XLMX Stellar Lumens 0.05 -7.26%
XRX XRP 0.19 -7.62%
ZCX Zcash 29.20 -8.64%
1. Underlying asset sorted in descending order by 7 day price movers.
2. 7 day price movers monitored from 12/16/2019 06:00 ET thru 12/23/2019 06:00 ET.

7 day price movers

Digital currencies posted mixed results on the week amidst decreased volatility and lower trading volumes. Among our indexed currencies, ECX rose the most, gaining 10.43%. Meanwhile, ZCX traded down the most, declining 8.64% on the week. In traditional markets, US equities rose modestly, with the S&P 500 gaining 1.1% despite the recent presidential impeachment articles that were passed in the US House of Representatives. This morning it was revealed that China will be cutting tariffs on more than 850 products, as it prepares for phase 1 of a trade deal with the US beginning January 1, 2020.

 

Ripple raises $200 million

The company behind the XRP token, Ripple, ,a href=”https://ripple.com/insights/ripple-caps-record-year-with-200-million-series-c-funding/”>raised $200 million in its Series C financing round which closed this past week. The raise places the company valuation at ~$10 billion, making it one of the most highly valued companies in the blockchain space. Meanwhile the XRP token itself has a market cap of just over $8.5 billion. Tetragon led the round with SBI Holdings and Route 66 Ventures also participating.

Ripple intends to use proceeds from the equity raise to increase its penetration in the cross border payment sector for large corporations. According to the firm, Ripple’s global payments network, RippleNet, had its strongest year yet, with its customer base growing to more than 300.

In addition to equity financing rounds, Ripple has also sold XRP tokens in the past to acquire fresh capital. Ripple received more than $68 million from XRP token sales in 3Q 2019, with the majority of these tokens being sold directly in institutional sales. The financing round, however, comes as Ripple has recently declared its intentions to become less reliant on token sales. In Q1 and Q2 2019 Ripple sold $169 million and $251 million respectively in token sales, considerably higher than the amount sold in Q3. Ripple has received pushback from the community with its token sales in the past, which have the effect of increasing the circulating token supply, and thus potentially impacting price.

 

DEXs see decline in trading activity in 2H 2019

At the beginning of 2019, decentralized exchanges (DEXs) saw significant hype, but started off the year with limited trading activity. DEXs experienced a slow uptick in trading activity until the summer of 2019 when trading activity across DEX platforms reached a local high, before then declining in the second half of 2019. The recent decline across DEXs mirrors activity on centralized exchanges, such as Coinbase, which have fallen off in the latter part of the year.

In the figure below, we diagram notional trading volume across Ethereum based DEXs over time. Notional trading volume includes all active pairs across Ethereum based DEXs. While 2019 saw an increase in volume vs 2018, Ethereum based DEXs still transact in considerably less trading activity than centralized exchanges. In 2019, across all trading pairs, aggregate DEX volumes were less than 10% of the aggregate trading volume for the most liquid pair (XBT/USD) across the five largest US accessible exchanges. Daily trading volumes at US accessible centralized exchanges are publicly available on the TradeBlock platform.

Figure 1: DEX notional trading volume over time

Data for chart sourced from Dexwatch

 

Binance takes stake in FTX and its FTT token

This past week, Binance announced that the exchange has taken a strategic equity stake in Alameda Research backed derivatives platform FTX. In addition to Binance’s equity position in FTX, Binance has also taken a stake in FTX’s digital token, FTT. A share of revenue from the FTX exchange (33% of all fees on FTX) is designed to flow back to FTT token holders, with token repurchases occurring on a weekly basis. FTT has a market cap of around $215 million. The FTT token model functions similarly to Binance’s and Bitfinex’s token models in which revenue is used to buyback and burn tokens.

According to Binance’s press release, FTX will also help build out product offerings across Binance’s platforms, including increasing liquidity for its exchange and OTC trading desks. Launched in early 2019, FTX has grown to be one of the largest and most liquid digital currency derivative exchanges. The stake gives Binance an increasing position in the derivatives market, with the company’s core business still revolving around its spot exchange.

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