The Hard Fork – Weekly Market Commentary

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This Week’s Topics:
1) Augur prepares for V2 launch
2) Goldman Sachs says crypto is not an asset class
3) Coinbase listing pump is back as Maker rallies

Indices Round-up

 

TradeBlock Index Asset1 Price ($) 7d∆2
ETX Ethereum 236.98 17.38%
ZCX Zcash 51.50 14.71%
XLMX Stellar Lumens 0.07 14.10%
XBX Bitcoin 9540.55 9.76%
LTX Litecoin 45.96 7.64%
EOSX EOS 2.68 7.13%
XMRX Monero 64.66 6.72%
BCX Bitcoin Cash 241.57 6.18%
XRX XRP 0.20 5.78%
ECX Ethereum Classic 6.96 3.28%
1. Underlying asset sorted in descending order by 7 day price movers.
2. 7 day price movers monitored from 05/25/2020 06:00 ET thru 06/01/2020 06:00 ET.

 

7 day price movers

Digital currencies broadly traded higher on the week. Among our indexed currencies, ETX traded up the most, rising more than 17%. Conversely, ECX traded up the least rising a more modest 3.28%. In traditional markets US equities ended the week higher, with the S&P 500 trading up more than 3%. In early morning trading, however, US equities are trading flat to down.
 

Augur prepares for V2 launch

In a posting this week, the development team behind the Augur project has announced that additional development issues have been fixed as the project prepares for its V2 launch. Augur ranks as one of the leading decentralized betting platforms, with users able to bet on a multitude of events ranging from political elections to sporting competitions. The platform found sizable engagement in 2018 during the US midterm elections with daily user activity reaching an all-time high.

Activity on the platform slowed as the development team behind Augur worked on a new version, V2, which will bring considerable changes and efficiencies to the platform. The largest change to the platform will allow betting activity via stablecoins. The prior version of Augur required ETH for transactional activity on the platform.

Over the past month, the Augur project has been relying on the community to submit bug fixes as the platform enters its final stages in preparation for launch. Github commit activity peaked earlier this year with development activity rising in anticipation for the event which is set to occur in the coming months.
 

Figure 1: Augur Github commits over time

Data for chart sourced from Github

 

Goldman Sachs says crypto is not an asset class

The investment management arm of Goldman Sachs’ critiqued digital currencies in its conference call (US Economic Outlook & Implications of Current Policies for Inflation, Gold, and Bitcoin) last week, calling into question the space’s ability to function as an independent asset class. The firm recommended investors not to allocate capital towards bitcoin or gold, criticizing their ability to act as inflation hedges. While the firm stated that traders could see value in trading the asset class for its momentum properties, fundamental value should be called into question. Goldman’s principal concerns around bitcoin are outlined below from a leaked slide deck.
 

Figure 2: Goldman Investment Management’s crypto critiques

Screenshot sourced from Mike Dudas’ Twitter account

 

The investment bank’s critiques have limited merit, given that various digital currencies do in fact generate ‘cash’ flows such as exchange tokens which often pass value on to investors in a manner similar to dividends or buy-backs. Additionally, our past research has demonstrated that adding bitcoin to a traditional equity/bond investment portfolio had considerable diversification benefits, with portfolios maintaining even a modest allocation to bitcoin seeing outsized risk-adjusted returns. Lastly, bitcoin’s ability to act as an inflation hedge, while currently limited, is likely too early to have conclusive results. Over the last several years inflation has been relatively mild and the benefits of hard money assets, such as bitcoin and gold, will have been limited.
 

Coinbase listing pump is back as Maker rallies

The governance token behind the Dai stablecoin, Maker, rallied more than 40% this week on news Coinbase was listing the asset. In a posting initiated on May 29th, Coinbase announced the exchange would begin trading support for the Maker (MKR) token. Immediately following the announcement, MKR saw extended gains on increased volume. Dai is the largest ‘near fully decentralized’ stablecoin in the space, by market capitalization.

While listing announcements on Coinbase and other major exchanges saw increased price gains back in 2017, listing announcements saw limited price gains in 2018 and 2019 as the space entered a bear market. Interestingly, price increases after major exchange listings are now occurring again. Earlier this month, the token, OmiseGO (OMG), rallied more than 90% after a Coinbase announcement that the OMG token was to be listed on the exchange.
 

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