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The Hard Fork – Weekly Market Commentary

This Week’s Topics:
1) USDC outpaces stablecoin rivals
2) Ether on-chain activity failed to set new highs in 2019
3) Blockchain ETF filed with Chinese regulators


Indices Round-up
TradeBlock Index Asset1 Price ($) 7d∆2
XMRX Monero 55.96 21.53%
ZCX Zcash 33.05 16.10%
BCX Bitcoin Cash 263.16 12.19%
XRX XRP 0.21 9.64%
ECX Ethereum Classic 5.05 9.31%
ETX Ethereum 142.00 7.02%
XLMX Stellar Lumens 0.05 5.74%
LTX Litecoin 45.12 5.53%
EOSX EOS 2.80 5.26%
XBX Bitcoin 7,557.11 3.65%
1. Underlying asset sorted in descending order by 7 day price movers.
2. 7 day price movers monitored from 12/30/2019 06:00 ET thru 01/06/2020 06:00 ET.

7 day price movers

Digital currencies posted a modest rally on the week. Among our indexed currencies, XMRX rose the most, gaining 21.53%. Conversely, XBX rose the least, adding 3.65% on the week. Recent concern in Iran, following a US strike in Iraq, may be partially responsible for the rise in bitcoin, as traders anticipate a greater inflow into less regulated digital currencies if government instability increases in Middle Eastern nations. Traditional assets saw mixed results on the week, after the US strike reverberated across financial markets. Risk-off assets, such as gold, traded higher as well as defense stocks and oil, whereas risk-on assets traded lower on longer term growth concerns.


USDC outpaces centralized stablecoin rivals

Various centralized stablecoins launched to considerable fanfare in 2018 and saw a surge in interest in early 2019 as Facebook’s Libra coin pushed stablecoins into the spotlight. In the second half of 2019, however, many of these stablecoins saw a decline in market cap as competition and limited interest slowed adoption. In the figure below, we diagram market cap share over time across the largest Ethereum based centralized stablecoins. USDC has gained the most share, with Paxos following, while both Gemini Dollar and TrueUSD lost share as they experienced a decline in market cap.

Figure 1: Stablecoin market capitalizations share over time

Data for chart sourced from the TradeBlock Professional Platform

As shown in the figure above, USDC has seen a steady rise in market share whereas other rivals have continuously lost ground or remained nearly flat. In recent months, Circle, the company behind USDC, has focused its resources behind its stablecoin project. Late last year, Circle exited various other business, including spinning off its Poloniex exchange and selling its OTC trading desk to Kraken. Despite the growth USDC has seen relative to highly comparable stablecoin projects, other stablecoin projects such as Tether and the decentralized project, Dai, continue to gain in market cap as well.


Ether transactions and hash rate fail to set new records in 2019

The Ethereum network saw a decline in on-chain activity in the second half of 2019 despite a strong start earlier in the year. While Ethereum’s decline in activity in 2H 2019 mirrors other blockchain networks, such as Bitcoin, the Ethereum network failed to breakout to new all time highs in 2019.

As we reported last week, the Bitcoin network recorded new all time highs in hash rate and transaction count in 2019, just edging out those of 2017. Ethereum activity, however, was on pace to surpass its 2017 levels before seeing a decline in activity beginning in the summer of 2019. In the figure below, we diagram Ethereum transaction count and hash rate since the network’s inception. As shown, 2017 and 2018 remain the high water mark years for on-chain activity for the network.

Figure 2: Ethereum network transaction count and hash rate over time

Data for chart sourced from the TradeBlock Professional Platform

It is important to note that the decline in hash rate is likely in part impacted by Ethereum’s eventual move to proof-of-stake, which is having the effect of reducing miner participation rates ahead of the transition.


Blockchain ETF application filed with Chinese regulators

China could see its first exchange traded fund (ETF) designed to track the performance of blockchain focused publicly listed companies. Asset management firm, Penghua Fund, submitted the application to Chinese regulators late last month. If approved, Penghua Fund’s ETF would be the first blockchain themed ETF comprised of Chinese listed companies.

The application comes as Chinese regulators and companies continue their push into the blockchain sector. While regulators appear positive on closed source blockchain enterprises, they have been more stringent on decentralized blockchains and digital currencies. Last week we noted Chinese regulators’ latest clampdown on companies conducting business in digital currencies.

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