Zug June 16th 2019
The crypto asset market is much changed since the boom bust cycles of 2013 and 2015, market cap stood at $1bn and $3bn respectively vs the $260bn it boasts today. The regulatory landscape has also vastly improved and in 2018 (yes Crypto Winter!) over $30bn of investment capital was spent supporting the ecosystem. Next week we may also be witnessing the mighty Facebook entering 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 2 weeks ago a head at $9k had been formed on the BTC chart. A retrace below $8k formed a right shoulder of a head shoulders pattern suggesting a sustained break below $7.5k would’ve brought the current bull run in to question. On 4 occasions the level was tested until bullish price action resumed with the yearly high of $9k our next resistance level. Resistance cleared post production of this briefing, 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 July 22nd. With sentiment as well as technical indicators supporting bullish price action, a sustained break above $9k would renew calls of $10k in the market goading the FOMO crowd. Remember fresh capital can also be used to short as well as go long.
Facebook has been working on their own payment functionality for sometime now, in 2014 they hired David Marcus, the then President of Paypal, while overseeing FB Messenger payments he took a Board seat at Coinbase late 2017. March 2018 he stepped aside from Messenger to focus on Faccebook blockchain that has become known as Project Libra.
Our expectation is 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 $10m which likely acts 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 the network governance will also ease regulatory nerves and avoid Facebook holding too much power over a potential global currency.
In the context of Bitcoin we look favourably on Facebook entering the market where particularly payment services are reliant on community adoption. With a 2.5bn global user base a modest 10% usage of the Facebook coin would introduce 250m+ new adopters thus increasing the education rate of crypto assets. Furthermore, Facebook holds a concentration of users in emerging market countries with poor a/o corrupt banking infrastructure which is a prime use case for decentralized financial services. Although the Venezuelan Petro crypto currency failed the substantial uptake of Bitcoin in the country thereafter supports this theory.
Written by Richard Wynn, Institutional Services and Sandro Huwyler, Trade Desk of Bitcoin Suisse AG