The Hard Fork – Weekly Market Commentary

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This Week’s Topics:
1) The rise of crypto oracles
2) Ethereum Classic suffers two 51% attacks
3) Square Inc reports record high bitcoin volumes

 

Indices Round-up

 

TradeBlock Index Asset1 Price ($) 7d∆2
ZCX Zcash 91.52 9.86%
XMRX Monero 91.55 5.87%
XBX Bitcoin 11696.02 4.41%
BCX Bitcoin Cash 297.96 2.93%
EOSX EOS 3.04 1.67%
ETX Ethereum 390.50 1.30%
LTX Litecoin 57.18 -0.82%
XLMX Stellar Lumens 0.10 -1.96%
ECX Ethereum Classic 7.02 -2.77%
XRX XRP 0.29 -3.30%
1. Underlying asset sorted in descending order by 7 day price movers.
2. 7 day price movers monitored from 08/03/2020 06:00 ET thru 08/10/2020 06:00 ET.

 

7 day price movers
Large cap digital currencies traded modestly higher on the week, while certain small caps saw impressive price gains, in particular ‘oracle projects’ (see topic 1 below). Among our digital currency indices, Zcash rose the most, gaining 9.86%. Meanwhile, XRP traded down the most, losing 3.30% on the week. Price moves recently resemble those in early to mid 2017, when smaller cap alts saw momentous price rises while the space at large still remained below the radar of mainstream financial media outlets.

In traditional markets, gold hit a new all-time high trading above $2,050 per ounce on expectations of increased monetary expansion. US equities ended the week up, with the S&P 500 hitting 3350, just shy of its all-time highs which were reached before the widespread COVID-19 outbreak.
 

The rise of crypto oracles
Crypto oracle projects have become the darlings of the digital currency space, with the two largest oracle tokens by market cap, ChainLink and Band Protocol, seeing accelerated price gains over the past several weeks.

As decentralized financial services (DeFi), which are reliant on smart contracts, have grown, there has become an increased need for decentralized oracle networks to interact with on-chain activity within DeFi. Oracles allow for off-chain data to be integrated with the smart contract parameters that exist on public blockchains. In the figure below, we compare price gains between ChainLink (LINK) and Band Protocol (BAND) over the past three months.
 

Figure 1: ChainLink and Band Protocol percentage price change over time


 

In our report last month, we highlighted the recent growth in DeFi, which now claims more than $4 billion in deposits across smart contracts within the sector. Additionally, several decentralized exchanges closed funding rounds this past week, with the popular IDEX exchange raising $2.5 million in seed funding.
 

Ethereum Classic suffers two 51% attacks
Over the past week, Ethereum Classic was hit by two re-org attacks that resulted in the double spending of more than $5 million in ETC tokens. 51% attacks occur when a single mining entity or organization possesses a majority of the total network hash power in order to reorganize alternate transaction histories, allowing the attacker to double spend tokens.

Attacks such as these require extensive capital in order to gain enough hash power required for such an attack. However, as the Ethereum Classic network hash rate has fallen, it has become less capital intensive in order to orchestrate an attack. A similar attack on the Bitcoin network would be more difficult to accomplish, as the bitcoin network hash rate has now risen back to all-time highs.

The legality of 51% attacks are unclear, and the development team behind Ethereum Classic have hired a law firm and a blockchain forensics firm in order “to assist in the investigation and pursuit of criminal charges against the perpetrators of the recent attacks on ETC.”
 

Square Inc reports record high bitcoin volumes
Square Inc released its Q2 shareholder letter this past week. The payment firm reported $875 million in bitcoin sales on total net revenue of $1.92 billion and gross profit of $597 million in the second quarter of 2020. Bitcoin revenue for the quarter was up 600% YoY while profit rose more than 700% YoY. In the figure below, we highlight Square’s bitcoin revenues each quarter.
 

Figure 2: Square Inc bitcoin revenue over time


 

Square has beat expectations consistently over the past several quarters and its stock has become one of the highest outperformers of 2020, trading up more than 130% YTD. In the figure below, we diagram Square Inc’s share price over time.
 

Figure 3: Square Inc share price over time


 

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