Zug, 6 June 2019
The crypto asset market is much changed since the boom-and-bust cycles of 2013 and 2015, when market cap stood at $1 billion and $3 billion, respectively, versus the $260 billion it boasts today. The regulatory landscape has also vastly improved, and in 2018 (yes, crypto winter!) over $30 billion of investment capital was spent supporting the ecosystem. Next week we may also witness the mighty Facebook enter the space. After a solid +145% year-to-date performance, a healthy correction to BTC would further evidence its maturity and avoid a resemblance to the formative years. At the time of our last update two weeks ago, a head at $9,000 had been formed on the BTC chart. A retrace below $ 8,000 formed a right shoulder of a head and shoulders pattern, suggesting a sustained break below $7,500 would have brought the current bull run into question. The level was tested on four occasions until bullish price action resumed, with the yearly high of $9,000 our next resistance level. Resistance cleared post-production of this briefing, and at the time of writing BTC is trading at $9,160. Bitcoin network fundamentals remain steady; this past week saw the daily active addresses for BTC reach 1 million, the highest figure since November 2017. Regulated Bitcoin futures trading, a measure of institutional participation, also sits at the all-time-high, and Bakkt announced its regulated future exchange will begin testing on 22 July. With sentiment as well as technical indicators supporting bullish price action, a sustained break above $9,000 would renew calls of $10,000 in the market, goading the FOMO crowd. Remember, fresh capital can also be used to short as well as to go long. Facebook Facebook has been working on its own payment functionality for sometime now. In 2014 it hired David Marcus, the then President of Paypal, who, while overseeing FB Messenger payments, took a board seat at Coinbase in late 2017. In March 2018 he stepped aside from Messenger to focus on Facebook blockchain, which has become known as Project Libra. Our expectation is that the Facebook coin will be transferrable at zero cost via Facebook products including Messenger and WhatsApp, and likely include incentives for use at merchants. The cost of participation in the blockchain’s governance (being a node) was reported to set you back $10 million, which will likely act as seed funding for a physically backed Facebook stablecoin. A list of backers of Project Libra notes Visa, Mastercard, Uber, Paypal, Vodaphone and Ebay, demonstrating the coin’s use case for payment, e-commerce, and – we also anticipate – gaming. Distributing network governance will also ease regulatory nerves and avoid Facebook holding too much power over a potential global currency. Within the context of Bitcoin we regard Facebook entering the market as favourable, where payment services in particular are reliant on community adoption. With a 2.5-billion global user base, a modest 10% usage of the Facebook coin would introduce more than 250 million new adopters, thus increasing the education rate of crypto assets. Furthermore, Facebook holds a concentration of users in emerging market countries with a poor and/or corrupt banking infrastructure, which is a prime use case for decentralized financial services. Although the Venezuelan Petro cryptocurrency failed, the substantial uptake of Bitcoin in the country subsequent to this supports this theory. Written by Richard Wynn, Institutional Services, and Sandro Huwyler, Trade Desk of Bitcoin Suisse AG
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