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The Hard Fork – Weekly Market Commentary

This Week’s Topics:
1) Grayscale sees surge in inflows
2) Bitcoin trading market share hits highs
3) Growth in stablecoins pushes up demand for ETH


Indices Round-Up

TradeBlock Index Asset1 Price ($) 7d∆2
ECX Ethereum Classic 6.35 15.68%
LTX Litecoin 95.99 7.93%
BCXtd> Bitcoin Cash 314.81 7.23%
XLMX Stellar Lumens 0.09 5.06%
XRX XRP 0.32 2.92%
XMRX Monero 83.09 2.30%
XBX Bitcoin 10,451.31 1.05%
EOSX EOS 4.21 -1.90%
ETX Ethereum 220.62 -2.83%
ZCX Zcash 73.91 -5.29%
1. Underlying asset sorted in descending order by 7 day price movers.
2. 7 day price movers monitored from 07/15/2019 06:00 ET thru 07/22/2019 06:00 ET.

7 day price movers

Digital currencies experienced elevated volatility on the week, as market participants closely followed political developments around Facebook’s digital currency. On Tuesday and Wednesday, Facebook’s blockchain lead and head of Libra, David Marcus, testified in front of the Senate and House of Representatives regarding the Libra stablecoin.

Both sides of the aisle sharply criticized Facebook, but there were mixed responses to stablecoins, bitcoin, and digital currencies in general. While some lawmakers criticized digital currencies as primarily useful in the transaction of illicit goods and services, others heralded them as innovative and the future of financial payments. Later in the week, as digital currency markets began to stabilize, it was revealed that the CFTC initiated an investigation into BitMex, one of the largest digital currency derivative exchanges, for servicing US customers without a license.

Among our indexed currencies, Ethereum Classic traded up the most, gaining 15.68%. Conversely, Zcash saw the steepest decline, losing 5.29 % on the week.


Grayscale sees surge in inflows

Grayscale has reported one of its strongest quarters yet, for its digital currency investment products, as new capital flowed in at an accelerated pace. Additionally, assets under management (AUM) saw a rapid uptick in 2019, as market prices of digital currencies rose in the first half of the year. AUM across all Grayscale digital currency investment products nearly tripled, rising from $926 million to $2.7 billion.

Grayscale saw nearly $85 million of inflows, posting its strongest quarterly inflow since Q2 2018. The investor profile has skewed institutional, as 85% of new inflows were from institutional investors–the highest percentage since July 2018. Digital currency market participants have long awaited the rise of institutional investment into the space, which now appears to be increasing as bitcoin (and digital currencies) become more mainstream.


Bitcoin trading market share hits highs

Last week we highlighted the acceleration of bitcoin’s dominance, as measured by its market cap relative to alt-coins. Additionally, we found that bitcoin’s trading volume relative to alt-coins has increased considerably.

In the figure below we diagram notional trading volume market share between the top-five largest digital currencies by market cap. As shown, bitcoin has seen a recent uptick in trading volumes relative to alt-coins. While bitcoin trading volumes have risen MoM since March 2019, the top alt-coins saw a peak in trading volume in May 2019, before declining. Trading volumes are from the following US accessible exchanges: Bitstamp, Bittrex, Coinbase Pro, and Kraken.

Figure 1: Trading volume market share over time

Data for chart sourced from the TradeBlock Professional Platform


Growth in stablecoins pushes up demand for ETH

As we highlighted in our stablecoin report last week, stablecoins have seen a significant increase in on-chain transactions for 2019. Nearly all leading stablecoins are ERC-20 tokens, representing iterations on top of the Ethereum blockchain. When these stablecoins are used in transactions, Ethereum’s native token (ETH) is required to pay gas fees in order for each transactaction to be confirmed.

We tracked the top-five largest ERC-20 stablecoins and the amount of fees paid in stablecoin transactions since January 2018. Our findings demonstrate that the amount of fees paid to Ethereum network participants has increased considerably over time, inline with a growth in on-chain stablecoin transactions (see Figure 2 below).

As interest in stablecoins grows and demand for their use in a transactional capacity increases, the demand for ETH rises as users are required to purchase Ethereum’s native asset to pay gas fees.

Figure 2: Ethereum network fees spent by stablecoin

Data for chart sourced from TradeBlock and Etherscan

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