Monex Crypto Market Weekly: May 10

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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) rallied on news of Facebook (FB) joining the crypto industry. It pushed above $6,000 for the first time since mid-November. Binance hacking incidents had only a limited impact.
  • Ethereum (ETH) surged on hopes the U.S. Commodities Futures Trading Commission (CFTC) would approve ETH futures. But it still ended lower for the week when priced against BTC.

Market Trends This Week

Excitement over FB joining the cryptocurrency market lifted BTC to $6,000. Buying continued after the news.

The move began after FB CEO Mark Zuckerberg declared the “future is private” in late April. The name of the virtual currency project became clear on May 2, and a week later related advertising rules were tightened. Now a sense of full-scale entry is spreading.

Other positives this week were the surge in ETH and coverage of Fidelity’s institutional services. It also seems that efforts to raise funds in the virtual currency market have increased. That happened against the backdrop of declining equity markets.

A Binance hacking incident weighed slightly on prices, but the impact was limited because of its small size and an established compensation system.

ETH soared on May 6 on reports senior CFTC officials are positive on ETH futures approval. However, since then, prices fell because of the Binance incident and continued strength in BTC.

Bitcoin (BTCUSD), with hourly candles.
Bitcoin (BTCUSD), with hourly candles.

Topics of the Week

  • Myanmar’s central bank warns the public against making virtual-currency transactions after receiving fraud reports. (5/3)
  • New York’s state attorney general orders Bitfinex to submit a document on a loan from Tether. (5/4)
  • Bloomberg reports that Fidelity will begin a BTC transaction service for institutional investors in a matter of weeks. (5/6)
  • Data provider CoinMarketCap excludes public data from Bitfinix. (5/6)
  • Hyperledger releases the new blockchain base “Hyperledger Iroha 1.0”. (5/6)
  • An official statement from the CFTC raises hopes that ETH futures will be approved. (5/6)
  • Binance reports that 7,000 BTC ($40 million) were stolen by hackers. (5/7)
  • The Beacon Chain testnet for an initial stage of Ethereum 2.0 is launched. (5/7)
  • WeChat bans cryptocurrency transactions in its payment policy. (5/7)
  • Developers release the BIP-Taproot proposal to improve the privacy of BTC transactions. (5/7)
  • Bitmain’s hash rate has dropped by nearly 80 percent since last release. (5/7)
  • Anique launches a digital-ownership service for the public to own pop-culture art using blockchain technology. (5/8)
  • Blockchain infrastructure developer Blockstream announces the addition of 14 new members to its Liquid Network, including DMM Bitcoin, Huobi and TaoTao. (5/8)
  • Facebook eases restrictions on virtual currency and blockchain ads. (5/9)
  • European Central Bank President Mario Draghi says cyptocurrencies are not real currencies. (5/9)

Market Forecast For Next Week

The big question going forward is whether BTC can maintain its uptrend.

Price action has remained positive amid some bad news. The past week saw problems with Bitfinex’s volume data, Tether’s legal issues and the Binance hack. BTC’s grind higher against those headwinds demonstrates the industry’s steady improvement. That includes the rise of other stable coins and the enhancement of the exchange-compensation system. Furthermore, BTC’s gains have revived investor interest in the market. While we should be on guard against volatility spikes, there is still room for improvement.

Under some situations, BTC may face risk of drop below $6,000. The next level to watch is roughly $6,180, above which it’s been consolidating since last night.

Next Week’s Topics

  • 5/13-5/15: Coindesk’s Consensus 2019 conference in New York.
  • 5/13: BitTorrent (BTT) and TRON (TRX) hold community events in New York.
  • 5/14: Bytom (BTM) holds a community event in New York.
  • 5/14: Bytom (BTM) to carry out air drop at Bittrex International.
  • 5/15: Bitcoin ABC (BCH) will be implemented as a hard fork.
  • 5/15: IExec RLC (RLC) plans to release IExec V3.
  • 5/15: Support for Bitcoin SV (BSV) and Blockchain Wallet ends.
  • 5/15: Digital Asset Summit will be held in New York.
  • 5/18-19: Crypto Latin Fest 2019 will be held in Colombia.

Industry Related Trends

Regulatory Trend: Korea Monetary Commission Allows Nine Blockchain Companies to Offer Unregulated Services

The Korea Financial Commission (FSC) is allowing nine blockchain companies to test their services as part of a regulatory sandbox, The Korea Times reported on May 2. The program helps startups in the financial sector deliver innovative services using next-generation technologies such as blockchain and 5G. Target companies will be exempted from regulation for up to four years.

FSC launched the program in January 2018 to emulate the U.S. startup environment, and has attracted more than 100 applications so far. One of the firms, Finda, provides information services to help customers choose the right loan based on their credit rating.

At the development stage, it’s unclear how new technologies like blockchain can be applied in society. Stricter regulations run the risk of impeding growth without good reason. Therefore, it can help when emerging countries designate special zones and use cases for the private sector to develop technology.

Technology Trend: Microsoft Announces New Blockchain Development Support Services

On May 2, U.S. software giant Microsoft (MSFT) announced “Azure Blockchain Service.” The new offering provides complete management of the construction and operation of a consortium-type blockchain network. It also includes governance-related functions like member addition, authorization and authentication of user applications.

MSFT also announced a strategic partnership with JPMorgan Chase (JPM), which is developing the Quorum blockchain technology. Quorum will be the first distributed-ledger platform available through the Azure Blockchain Service, with features seamless cloud integration. Their agreement includes MSFT consulting to encourage corporate adoption.

Individual Company Trend: The Tokenized Stock Exchange Currency Dot.Com Officially Launches

On May 3, Currency.com launched as an exchange for tokenized financial products. The Belarus-based company’s platform allows settlement in BTC and ETH without use of fiat currency. Associated iOS and Android apps were also released.

Currency.com beta-tested the platform since January and had 150,000 people on its waiting list. (For background, the major exchange Binance grew to over 6 million users in half a year.) The current launch includes a 50 percent margin close out and selling at loss.

The company’s tokenized products are linked to the underlying market prices of common financial products like stocks, indices and commodities around the world. Estonia’s virtual-currency exchange DX.Exchange, which opened in January, is similar. The spread of such services is expected to eliminate the barrier between the virtual currencies and the existing financial market. However, the virtual-currency tax rate in Japan is different from the tax rates of other financial assets. That could cause some issues before the regulatory environment is finalized.

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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.