By Matrixport Research

Summary

  • BTC Price Trend: Based on the 5 key BTC price indicators and data as of 9 August, the overall BTC price trend is displaying signs of short-term bearish.

  • Market Trends: According to sources, Coinbase, a cryptocurrency platform, has begun to prepare for its public listing. If Coinbase is successful in its attempt, this could signify that the regulatory authorities are increasingly acceptant of the cryptocurrency market, providing new channels for investors to enter the crypto market.

  • Abnormal Activity Tracker: There are three possible reasons for the abnormally high network fees on the ETH blockchain: (1) ETH price has been on the rise, resulting in an increase in demand for transfer activities between wallets; (2) The rapid rise of DeFi and Yield Farming might result in an increase in demand for ERC20 transfer; (3) Many users are attempting to secure newly launched tokens on Uniswap, bidding for the highest transaction fees to allow their transactions to be packed by miners at the earliest possible time.

BTC Price Trend

Based on the 5 key BTC price indicators and data as of 9 August, the overall trend is displaying signs of short-term bearish. Overall:

  • NVTS is a short-medium term bull/bear indicator. Current NVTS value is 100.3, on the higher end of the scale, indicating that BTC is currently overvalued;

  • MVRV is a short-medium term bull/bear indicator. Current MVRV value is 1.92, which is relatively high, suggesting that BTC is currently overvalued；

  • Mayer Multiple is currently 1.3 and has been on a rise lately, however it has yet to hit critical value；

  • Bitcoin Difficulty Ribbon is a short-term buying indicator and is currently expanding. However, considering the impact of halving and wet period, the index will not be considered this time；

  • Although funding rate has been higher than usual, it has not pass 0.25%, therefore it will not be considered this time.

As discussed per our previous report “Price Indicators Deep Dive and Bitcoin Price Analysis”, there are limitations to the aforementioned indicators, and these indicators should only serve as suggestions and not investment advice.

Market Trend

On 18 July, based on news reports, Didi, Meituan, and Bilibili have entered into strategic partnerships with People’s Bank of China (PBoC) to push out the Digital Currency Electronic Payment (DCEP) project. Other companies such as ByteDance are also in talks for potential collaboration.

Follow-ups:

On 21 July, based on a decrypt news, France’s central bank selected eight Fintech companies to take part in experiments trialing a digital euro Central Bank Digital Currency (CBDC). The participants include HSBC, Accenture and Seba Bank, where participants seek to modernize the interbank settlement via CBDC.

Commentary: Based on BIS 2020 annual survey, 10% of the central banks in the world plan to launch digital currency in the near future. Currently, other than Venezuela’s crude oil-based digital currency, most CBDC are still in the research and pilot phase. According to speech made in May by PBoC Chairman Yi Gang, DCEP will be trialed internally in Shenzhen, Suzhou, Xiong’An, Chengdu, and the upcoming 2022 Winter Olympics.

On 9 July, based on sources, cryptocurrency platform, Coinbase, has begun preparing for its initial public offering.

Commentary: Should Coinbase be successfully listed, this could signify that regulatory authorities are increasing acceptant of cryptocurrency, and this could encourage other qualified crypto exchanges to go public too. In addition, Coinbase’s success will not only lead to greater awareness of cryptocurrency, it will also provide a new channel for investors to enter the crypto market. According to rumors, Coinbase may issue some kind of token when it is listed, realizing the ICO and IPO combination. Should it work, this could spark a new innovative financing method.

On 22 July, Korea’s Ministry of Strategy and Finance announced its 2020 tax reform proposals. As of Oct 2021 onwards, the Korean government will collect 20% capital gain tax on virtual assets (cryptocurrency) for any profits above KRW2.5m (approximately US$2,000). Previously, based on the figures reported by Korea’s finance ministry, the average daily cryptocurrency dollar trading volume in Korea was KRW1.33 trillion (approximately US$1.11b).

Commentary: The proposed tax regime remains a distance away and is unlikely to have much impact on the near term cryptocurrency prices. In addition, the proposal could possibly be amended. However, a noteworthy point is, should the government officially implement the tax on Oct 2021, there could be a wave of mass liquidation by many investors before the stipulated date as they seek to avoid paying taxes.

Grayscale’s asset under management (AUM) has been on the rise. As of 31st July, Grayscale total AUM reached US$5.1b, with BTC accounting for US$4.34b and ETH of US$0.59b.

Commentary: The main investors in Grayscale are institutional participants. With the increase in AUM, this implies an increase in institutional interest in cryptocurrency. However, an important point to note is, the increase in AUM doesn’t mean that Grayscale has been continuously buying BTC in the market. The reported news “Grayscale buying 1.5x the amount of Bitcoin being mined” has been extremely misleading as many readers mistakenly believe that Grayscale been purchasing BTC in the secondary market. The truth is the increase in BTC has been partially due to customers exchanging BTC for GTBC, while the secondary market purchases only account to 20-40% of the increase.

Abnormal Activity Tracker

In the recent two months, the ETH network fees have been abnormally high. At the peak, the total network fees to daily block rewards ratio was 50% or higher. There could be 3 possible reasons:

  • With the rise of ETH prices, there been a strong demand for trading, resulting in an increase demand in transfers between wallets;

  • Due to the popularity of DeFi and the use of yield farming to distribute tokens, the demand of ERC20 transfers has increased;

  • The permissionless nature of listing tokens on Uniswap has attracted many projects to list their tokens on it. The parabolic increase in the prices of the tokens of some projects have attracted a segment of investors, resulting in a craze where these investors scramble to bid for the newly listed tokens on Uniswap. Due to Uniswap’s use of the “Constant Product Market Maker Model”, the earlier investors who purchased the tokens have a distinct advantage (assuming no one is selling the tokens). This has resulted in many users increasing their transactions fees on the network in hopes of getting their transactions through at the earliest possible time.

Disclaimer

Matrixport provides this analysis as general information only. Matrixport accepts no responsibility for the accuracy or completeness of any information herein contained and Matrixport shall not be responsible for any loss arising from any investment based on any forecast or other information herein contained. The contents of this materials should not be construed as an express or implied promise, guarantee or implication by Matrixport that the forecast information will eventuate. The cryptocurrency market is highly volatile. Buying, selling, holding, or investing in cryptocurrencies or related product carries various risks and is not suitable for all investors. Please seek expert advice, and always ensure that you fully understand these risks before participating in the cryptocurrency market. Matrixport is not acting as a financial adviser, consultant or fiduciary to you with respect to any information provided. Any information available here is “general” in nature and for informational purposes only.