Monex Crypto Market Weekly: March 22

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This post is a translation of the weekly cryptocurrency analysis by Crypto Lab, a wholly owned subsidiary of Monex Group (Tokyo, Japan). Monex is the parent of TradeStation Group.

Summary

  • Bitcoin (BTC) followed a quick rally in Bitcoin cash (BCH) early in the week. It reached about $4,000 before stabilizing.
  • The move in BCH appeared speculative rather than fundamentally driven.
  • Japan decided on a proposal to amend the Financial Settlement Act and the Financial Instruments and Exchange Act, which incorporates measures to strengthen virtual-currency regulations.
  • Attention will focus on the $4,000 zone for BTC next week. Can it break out amid CME futures expiration and as Huobi launches a new token?

Market Trends This Week

BTC rallied at the beginning of the week and reached $4,016. Under some scenarios, it may have downside risk on profit-taking.

Cboe announced last week it will temporarily stop offering BTC futures trading. However, the impact on prices may be limited because its volumes are smaller than CME’s contract.

The third edition of Binance’s (BNB) token sale was also held. BNB didn’t rise sharply and there was no impact on the cryptocurrency market price as a whole.

The reason for BCH’s rally is unclear, but it apparently results from speculative trading.

This week, Coincheck announced the grant of BitcoinSV (BSV), which arose from BCH’s hard fork last November. The transaction was denominated in Japanese yen.

Bitcoin (BTCUSD), with hourly candles.

Bitcoin (BTCUSD), with hourly candles.

Topics This Week

  • Cboe suspends offering of Bitcoin futures (@XBT). (3/15)
  • The former president of Mt. Gox was given a suspended sentence after being found guilty of data manipulation. (3/15)
  • Coincheck announced that it will deliver Bitcoin SV in Japanese Yen. (3/18)
  • IBM issues stable coin with six banks and enters the international remittance market in earnest. (3/18)
  • Coinbase lists Stellar (XLM) on Coinbase.com. (3/18)
  • The virtual currency exchange Cryptopia resumes service after hacking. (3/18)
  • Is Bithumb planning a major restructuring? (3/18)
  • CoinMarketCap starts offering its Fundamental Crypto Asset Score as a rating service. (3/18)
  • Shenzhen’s subways begin issuing electronic invoices using block-chain technology. (3/18)
  • GMO announces the results of a questionnaire conducted by about 10,000 virtual-currency users. (3/19)
  • Startbahn raised 3.1 billion yen ($37 million) through third-party allotment. (3/19)
  • Binance announces Binance Lite Australia, which enables BTC purchases at newspaper outlets. (3/19)
  • Binance sells CELR, which will be the third token sale. (3/19)
  • Swiss online retailer Digitec Galaxus starts accepting BTC payments. (3/19)
  • US technology company Avnet (AVT) cooperates with Bitpay to receive virtual-currency payment. (3/19)
  • Bitmain announces new mining equipment for Zcash. (3/19)
  • SBI establishes the new company Money Tap to promote cashless transactions. (3/20)
  • Japanese Finance Minister Taro Aso: “There is no change in the tax system even though the cabinet decided on a draft proposal related to virtual currency.” (3/20)
  • The virtual currency index provided by CoinMarketCap is listed on NASDAQ, Bloomberg and Reuters. (3/20)
  • Sirin Labs, a developer of block chain-based smartphones, affiliates with MyEtherWallet. (3/21)
  • Alibaba (BABA) cooperates with software development Aerospace Information for block-chain service development. (3/21)
  • Hedge fund Numerai of AI raises $11 million in an initial coin offering (ICO). (3/21)
  • Version 1.5 of Cardano is successfully launched on Mainnet. (3/21)

Next Week’s Market Forecast

Is the buying opportunity above $4,000?

BTC has pushed higher, led by alt-coin gains, since February. Next week, Binance will be followed by Huobi’s first token sale. Attention will focus the price of the Huobi Token (HT), which has risen significantly since this week’s announcement. Depending on the situation, there is also a possibility that BTC will begin a more steady appreciation. Also noteworthy are price movements around the last trading day of CME futures. At present, shorts are dominant in CME, and it is possible that covering of bearish positions will increase buying pressure.

If BTC can break $4,000, the next level to watch is roughly $4,180.

Next Week’s Topics

  • 3/26: OKEX C2C Network launch event will be held in Istanbul.
  • 3/26: Huobi Prime token-sale platform will start with TOP.
  • 3/27-28: C3 Crypto Conference 2019 will be held in Berlin.
  • 3/29: Expiration for the March CME Futures (BTCH19).

Industry Related Trends

Regulatory Trend: Japanese Cabinet Decides on Revised Virtual Currency Regulations

Nikkei reported on March 15 that the Japanese cabinet decided to amend the Financial Settlement Law and the Financial Instruments and Exchange Law. It will incorporate measures to strengthen virtual-currency regulations.

This revised proposal follows recommendations from a study group on virtual-currency exchanges held by the Financial Services Agency last year. Key points included the application of the MFI, the application of the ICO with strong investment, and the renaming from “virtual currency” to “cryptographic assets”.

After the scheduled implementation date of April 2020, even if a vendor was already registered as an exchange business, it will have to register under the Gold and Commercial Law to continue margin trading.

In addition, the revised proposal set a deadline for registration examination under the Gold and Commercial Law. Companies that can not formally obtain registration approval 18 months after enforcement will be unable to provide services.

The revision effectively provides legal clarification of Japan’s virtual-currency regulation. While this will force industry players to respond, it will also probably draw more established firms into the industry. We’ll probably see more companies entering and exiting the market by the deadline for registration examination in September 2021.

Technology Trend: Lightning Labs Releases Alpha Version of Lightning Loop

On March 20, Lightning Labs released the alpha version of “Lightning Loop” on GitHub. The company is developing technology for LightningNetwork (LN) to improve BTC’s scalability.

In the current LN, the limit capacity of each channel depends on the deposit amount when the channel is opened. Users must reopen the channel to conduct transactions exceeding the capacity. The new Lightning Loop program solves the problem.

The alpha version implements a Loop Out function, letting users increase reception capacity by offloading LN funds while the channel is open. As a next step, Lightning Labs plans to release the opposite, a Loop In feature. That will let the LN be refilled while keeping the channel open.

With the development of Lightning Loop, users will no longer have to open and close channels in line with their trading capacity, and significant improvements in network efficiency can be expected. That will lead to the practical application of LN.

Company Trend: Huobi Global Officially Launches ‘Huobi Prime’

On March 20, China’s leading virtual-currency exchange hub Huobi Global announced that it will officially launch its funding platform “Huobi Prime” on March 26.

Huobi Prime will support projects according to the its SMART-Chain 2.0 evaluation model. Although the details of SMART-Chain 2.0 are unclear, it’s reportedly an evaluation algorithm built after hundreds of project surveys by the same group. Ultimately, the goal is to help promote the industry’s ecosystem.

The first currency listed on the Huobi Prime is TOP Network’s TOP token. It’s designed to reduce costs and promote the interface of communication applications such as messages, calls, streaming, VPN and storage. According to press reports, token sales are divided into three stages, each with a fixed price limit to reduce volatility. Users can purchase TOPs with the Huobi Token (HT).

Just as Binance’s token sales have boomed recently, large exchange-led token sales are highly credit-secured and easy for users to buy. Will the first Huobi Prime scheduled for next week be successful?

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David Russell is VP of Content Strategy at TradeStation. Drawing on nearly two decades of experience as a financial journalist and analyst, his background includes equities, emerging markets, fixed-income and derivatives. He previously worked at Bloomberg News, CNBC and E*TRADE Financial. Russell systematically reviews countless global financial headlines and indicators in search of broad tradable trends that present opportunities repeatedly over time. Customers can expect him to keep them appraised of sector leadership, relative strength and the big stories – especially those overlooked by other commentators. He’s also a big fan of generating leverage with options to limit capital at risk.