What’s been happening to Bitcoin?
The word that’s been on everyone’s lips during the first quarter of 2020. The effective ‘monetary policy’ of bitcoin has been clear from its beginnings: mining rewards decrease by 50% every four years. Because of this, the supply of bitcoin into the market will slowly decrease over time, making it intrinsically deflationary. This contrasts very clearly with central banks such as the Fed, whose monetary policy has been to increase money supply into the economy for the past 10 years. On top of this, in light of recent events, the Federal Reserve has announced its plans for further cash-printing to combat the economic slump caused by extended periods of closure in sectors such as the service industry, widespread sick leave and supply chains breaking down. Everyone has their own opinion on what effect the halving will have on the price of Bitcoin, but only time will tell whether the bulls or bears will have their way in the foreseeable future.
Bitcoin Price in Dollars, with Previous Halvings Highlighted
The Search for Satoshi
To this date, one of the biggest mysteries in the world of cryptocurrency is the identity of the creator of the very first blockchain and its respective asset: Bitcoin. The creator(s) of Bitcoin goes by the pseudonym ‘Satoshi Nakamoto’, and published their white paper outlining how the cryptocurrency would function in 2008. Following the creation of the first blockchain, Satoshi mined approximately 1.1 million Bitcoin, currently worth around $9bn, nicknamed the ‘tulip fund’, which have not moved from their original wallets since 2009.
Since Bitcoin’s rapid growth in popularity over the past ten years, several people have tried to claim they are behind the Nakamoto moniker. Amongst these is Craig Wright, an Australian businessman who says he was part of a team that developed the cryptocurrency, however he has yet to able to prove this.
In one of the largest ongoing court cases in the space, the estate of Dave Kleiman, a computer forensics expert known to be involved in the early days of Bitcoin, is suing Wright for half of the million Bitcoin he allegedly owns.
In April of last year, Wright submitted an email conversation between himself and Kleiman to the court that indicated Kleiman had given up his share of the mined Bitcoin. However, the digital signatures of the email dated back to 2014; Kleiman passed away in 2013.
Eventually, a Florida judge suggested that Kleiman was entitled to half of the mined Bitcoin, leading the two parties to agree to a settlement.
On the 13th of January 2020, the judge announced he would give Wright just under one month to provide the keys from the ‘mysterious figure’ he had mentioned earlier in the case to the court. However, despite claiming that the courier would deliver the keys required to access the funds, Wright has instead only provided the public addresses of the 16,000 wallets that the funds are divided up into. Although these funds are inaccessible without the private keys to open them, the Kleiman estate’s counsel has requested a delay to the case to allow them to plan their next move.
The full effects of this case are still yet to be seen.
Upon the news that Wright’s courier had arrived arrived with the tulip fund wallet information on the 14th of January, the price of Bitcoin SV, Craig Wright’s hard fork of Bitcoin Cash, rose almost 100%
The great price crash
The unfortunate spread of the Coronavirus around the world has had an enormous impact on traditional financial markets. Capital markets saw some of the biggest losses in history, and Bitcoin was no exception. After maintaining a steady price of $10,000 around mid-February, March saw Bitcoin trading as low as $3,600 on some exchanges. The move challenged a lot of long-held assumptions around the supposed lack of correlation between the cryptocurrency market and the stock market. With this, we suggested two possible contributing factors to the sudden turn around in bullish price action: the PlusToken scam and derivatives exchanges’ (particularly BitMEX) use of automatic liquidation engines.
Plustoken was started in 2018 and posed as a cryptocurrency wallet. Users who deposited (or ‘invested’) money were promised monthly returns of around 15%. However, after becoming unable to withdraw their funds in June 2019, it quickly become clear the whole project was an elaborate Ponzi scheme.
On Saturday, 7th of March 2020, one of the wallets associated with the PlusToken scheme moved 13,000BTC, worth approximately $110m, to a ‘mixer’. Over the next few days, Bitcoin’s price would fall more than 50%. For this reason, many speculated that those behind PlusToken were selling-off (or ‘dumping’) a large volume of their acquired Bitcoin in a very short space of time. Selling a large volume of any asset will theoretically drive the price down due to supply far outweighing demand.
Automated liquidations can occur whenever a trader has entered a position with leverage, this is usually through buying/selling futures contracts (e.g. on a derivatives exchange such as BitMEX). Since there is no concept of a broker making a margin call, the automatic liquidation engine of the exchange simply closes the trader’s position for them once their collateral runs out.
Therefore, when a the majority of leverage is skewed towards the bullish side, a sudden price movement downwards (such as the one earlier this month) can be the trigger of a lot of automatic liquidations. Of course, to close these long positions, the liquidation engine must create sell orders, compounding the already saturated sell-side, pushing the price down even further.
BitMEX liquidations, March 12th
The problem was exacerbated further by market makers who played the increased volatility by placing their orders further away from the touchline in order to avoid the higher risk of getting stopped out
Many discretionary crypto trading funds were liquidated after this drop and moved away from BitMEX. Since that time, Binance futures have taken the number one spot in crypto derivatives trading volumes.
The open interest on BitMEX dropped by almost 50% on March 12th
What’s been happening in Alts?
In general, Altcoins tend to follow Bitcoin when it comes to their price movement. Therefore, by extension, when the price of Bitcoin dropped dramatically in March, many other cryptocurrencies went with it. Whilst this may have put the rumoured ‘#AltSeason’ on a temporary hiatus, it does not preclude the eagle-eyed investor from making a healthy return.
Due to the breadth of the market, I’ve picked out some points of interest that have had people talking in the past months.
As mentioned above, ‘Satoshi Vision’ saw mammoth gains to the tune of approximately 300% on the news that its creator, Craig Wright, had supplied the court with the identifying information for the wallets containing Satoshi Nakamoto’s original mined Bitcoin. These gains were short lived as the prevailing tone within the crypto community pointed to flaws in Wright’s story and warned of certain fundamental flaws in the technicals of the currency itself.
Regardless, since the fiasco in January, the coin has impressed by managing to maintain fairly healthy position above the $175 mark (excluding the March Covid crash).
Investors should keep an eye on how the price of BSV hold up over the next few months as the strain of Coronavirus (hopefully) eases off. If it drop below the $150 mark it could be a slippery slope back down to levels around $80. However, if it maintain its current levels, it could re-establish a new basis in the high $100’s or possible even $200 range.
Tezos is a cryptocurrency that has has experienced the thrilling highs and the devastating lows that come with being part of the still-young cryptocurrency market. The protocol itself is innovative in that its proof-of-stake ‘allows users to directly control the rules of the network’. Stakeholders are able to vote on protocol updates that are automatically added into the source code.
Although Tezos had an extremely successful ICO, interest dwindled in the following months as legal disputes delayed the launch of the Tezos platform itself.
However, the past 12 months have been, overall, very positive for Tezos for several reasons:
Several large cryptocurrency exchanges have listed Tezos for trading including Binance, Okex & Coinbase
Several cryptocurrency exchanges made staking Tezos more accesible within their platform, allowing users to gain an annual yield of approximately 6% (very useful when interest rates around the world are so low)
And importantly, in Q1 2020:
3. Tezos settled their ongoing class action lawsuit with early investors who claimed their ICO was unregistered securities offering.
The class-action lawsuit in Q1 helped Tezos regain some of the market-wide losses encountered by the rapid spread of COVID-19 in early March. Settling in a case such as this means no admission of guilt and has allowed the coin to begin its climb back to price levels around $3.
For investors looking to add some exposure to Alts, as Bitcoin shows signs of losing some of its dominance (-3.5% in Q1), Tezos is an attractive bet, with strong fundamentals, an effective interest paid for staking & a transparent source code development approach.
Ripple has been around since 2012, and was created by Jed McCaleb (who also founded the Stellar protocol). The Ripple network uses the digital currency XRP to aid in cross-currency payments, the idea being to allow users to transfer money regardless of whether it is fiat or cryptocurrency for low cost/low energy.
However, since reaching it’s all-time high in early 2018, Ripple has consistently under-performed compared to other high market-cap cryptocurrencies.
In 2019, among the top 10 cryptocurrencies by market-cap, Ripple performed the worst overall, losing almost 50% of its value. On top of this, it seems the ‘Ripple army’, those who strongly believe in the coin and propagate it where they can, is dwindling in size, with around 60% of their Telegram community leaving for good.
The first quarter of 2020 looked to be a clean slate for the currency, however, with more institutional partners, including the National Bank of Egypt, looking to utilizing their ‘On-Demand Liquidity’ instant settlement service. On top of this, BitMEX, the largest digital derivatives exchange by volume, listed an XRP/USD perpetual swap contract in early February.
Despite this, during Q1 2020, Ripple has, yet again, been the worst-performing of the top 25 cryptocurrencies. Between the 1st of January and 31st of March, Ripple made a loss of approximately 10%.
Investors should think carefully before attempting to pick up ‘cheap’ XRP during this dip, as sentiment has been strongly bearish for such an extended period of time that it will be difficult for the coin to pick up any sort of upwards momentum any time soon.
What’s been going on at APEX:E3HQ?
Emerging from Stealth
In February this year, the APEX team launched the first fully-functional beta version of our data analytics platform. We were overwhelmed with the reception we received from traders within the community and news outlets who documented our progress. We are currently working hand-in-hand with the existing community to make the system as robust and useful as possible, and to determine what new features people want to see from us. Read more…
A robust market screener that allows a user to quickly ascertain an overview of over 5,000 markets has always been a must-have on our roadmap at APEX:E3. However, we decided to go a step further and implement advanced filters such as ‘Fibonacci retracement levels’ so that users can bring their own personalized laser-focus to our platform. Want to find that Golden Cross before anyone else? We’ve got you covered. Read more…
Any trader worth their salt knows you can’t make a trade with quantitative data alone. A good trader keeps one eye on current events happening in the world around them and the other watching other players in the market to attempt to predict how they will respond. That’s why we combined real-time a global news feed and feeds from major social platforms to bring together all the quantitative data in one place. These feeds are filterable by keywords and assets, with more data and filters to come in the future.
One of the most asked-for features in the community is an aggregated orderbook. Bringing together all bids and offers from over 10 different exchanges into one orderbook was not an easy task. However, since finding a solution, the feedback has been extremely positive. Being able to see where large walls of orders lie on exchanges you may not have the capacity to monitor, will stop you being caught by surprise when the knock-on effects are felt on the exchange you trade on. Read more…
Realtime Orderbook Analytics
Being able to provide users with access to the orderbooks from all of the top cryptocurrency exchanges was one of our top priorities from the offset. However, the volume of data being processed can be somewhat overwhelming for a user who is not used to dealing with this sort of analysis. For this reason, we’ve come up with proprietary mathematical functions to do some of the legwork for the user. This includes showing users where large orders are being placed & where bid/offer walls are forming across the market. We continue to work on new analytics to give our users the leading edge. Read more…
Since many members of our trading community reside on twitter, we decided to challenge ourselves to produce something the community there could use. That’s why we developed our Twitter alerts bot. Want to get price alerts without having to sign up to a new app? Simply tweet @APEXE3_Alerts and wait for a reply. Read more…
Try our platform HERE to access real-time Digital Asset analytics, related news and social media content.
Credit: Stuart Moore