February 2019


Cryptocurrency Market News

 

J.P. Morgan announced on February 14th that its was rolling out a cryptocurrency called “JPM Coin” built on Quorum. The coin could be used for instant international payments between the bank and its institutional clients, for securities transactions with large investors, and for companies using the bank’s treasury services. The JPM Coin will be a stablecoin pegged to the U.S. dollar and its value won’t fluctuate. Predominantly, it aims to be an instant alternative to the established and decade-old SWIFT network for USD payments.

In an article dated February 9th, Cointelegraph reported that Argentina’s public subway system now accepts Bitcoins to top up electronic travel cards.

Kraken announced on February 4th that it had acquired futures trading firm Crypto Facilities in a deal valued at more than USD 100 million.

Cambridge Associates, a pension and endowment consulting firm, published a report stating that “it is worthwhile for investors to begin exploring the cryptoasset area today, with an eye toward the long term”. The firm cites “booming” investment activity and structural developments as key reasons to view the space as developing, rather than faltering.

Bitmain has announced a new bitcoin mining chip that is around 30% more power efficient than its predecessor.

Samsung released the first official specs of its new Galaxy S10 phone on February 22nd.  The phone will include a “Blockchain Keystore” which will allow payments to merchants, digital signatures and crypto storage and transfers. The Blockchain Keystore generates and stores a private keys based on blockchain technology in a secure enclave built into the device. It can securely sign and store cryptocurrency transactions using the blockchain.

 

 

 

Cryptocurrencies Market Update

 

The cryptocurrency market rallied during February while trading volumes rose. Bitcoin was trading at USD 3,810 on February 24th (as per coinmarketcap), up +6.0% from January, after briefly reaching USD 4,200 (the high of the month) on the same day. The top 10 cryptocurrencies by market capitalisation rose +12.2% on average. Total market capitalisation for the largest 200 coins stood at USD 125 billion, up +7.0%. EOS posted the largest price increase, up +50.0% for the month, while Binance Coin made its debut in the top 10 table, in 10th position with a market capitalisation of USD 1.4 billion.

Data source: www.coinmarketcap.com

Bitcoin’s market dominance remained stable at 54% this month, while Ethereum regained the second spot (11%) pushing Ripple back to third position (10%). At the end of February, BTC, ETH and XRP represented 75% of total crypto market capitalisation. 

Data source: www.coinmarketcap.com

The one month realised volatility of BTC reached a low of 34.0% on 16 February, before closing at 47.3% on February 24th, a level similar to the end of last month. The price of BTC traded in a USD 743 range, +26% greater than in January. The month of February was marked by longer periods of calm during which prices hardly moved, punctuated by short periods of sharp increases or declines.

Data sources: Bloomberg, www.coinmarketcap.com

We witnessed a substantial increase in 24 hour trading volumes during February, from USD 16.1 to USD 38.0 billion (+135%). Optimistic market participants commented that this increase was correlated to the rise in cryptocurrency prices, and are predicting further price rises based on this signal. Interestingly, USD Tether moved up to top rank in terms of trading volumes, ahead of Bitcoin which now stands second.

Data sources: Coventure, www.coinmarketcap.com

 

When considering trading volumes, we believe some caution is required as exchanges may be tempted to manipulate the numbers they report to paint a better picture. In come cases, bots may be used to automate buy and sell orders at the same price, without the underlying asset changing ownership (this is sometimes referred to as wash trading). A metric that may indicate if an exchange engages in such practice is the ratio between average daily visitors and average 24 hour volume (see chart above). This may explain at least in part the rise in trading volumes this month.

Having said that, bots buying and selling at the same price have been around for some time and it is possible that January trading volumes reflected a similar activity. It remains difficult to prove involvement in wash trading by a trading venue, and in any event daily trading volume is not an accurate reflection of liquidity. Order book depth (the amount of capital it takes to move a market down by for example 10%) may be a better reflection of liquidity on an exchange.

 

 

 

 

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Past performance may not be a reliable guide to future performance.

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