The Weekly Update

Week 28, 2020

Provided by
 Market Update
▪ Bitcoin has remained flat the last week, while some altcoins have
1 seen large moves. Most notably, Dogecoin had an extremely
volatile week driven by TikTok-induced pumping.

▪ While bitcoin’s narrative as “digital gold” has increased in

popularity, the leading cryptocurrency is struggling to
outperforming the real gold.
Bitcoin Tokens on Ethereum
▪ The bitcoin trading volume is dying out, but the volatility trend
may indicate that we are about to see some action again. 16,000 14 961 BTC

14,000
Valuation
2 ▪ While BTC has been moving sideways for several weeks, the
weekly candles are giving us an indication of the trend. The
12,000
weekly candles indicate a short-term bullish outlook for bitcoin, as
they have started to trend upwards lately.

Number of BTC
10,000

▪ BTC Option traders are positioned more towards short-term

contracts than ETH options traders. 8,000

6,000
HBTC
imBTC
4,000 pBTC

Blockchain Activity renBTC

sBTC
3 ▪ The theorized “mining death spiral” following the Bitcoin halving
has been debunked, as the Bitcoin 7-day hashrate reached a new
2,000
WBTC
all-time high, alongside the Bitcoin difficulty.
0
▪ The amount of BTC locked into off-chain solutions is growing Nov 18 Jan 19 Mar 19 May 19 Jul 19 Sep 19 Nov 19 Jan 20 Mar 20 May 20 Jul 20
rapidly. The Lightning Network has seen moderate growth the last
quarter, while BTC locked into Liquid has grown by 413% so far
this year.

▪ Yet, BTC off-chain is largely dominated by tokenized BTC on the

Ethereum. The ongoing DeFi hype has led to a 1439% YTD growth
of tokenized BTC.
 How long can this continue?
Bitcoin Correlation:

ETH XRP GOLD S&P500

90-day correlation
▪ Last week, we speculated that the market would finally start moving, but (weekly change included)

was yet again left with a flat week.

BTC 0.856 -0.006 0.723 -0.051 -0.014 0.0326 0.269 0.014

Source: coinmetrics.io
▪ This sideways price action for bitcoin is starting to get extraordinary.
However, altcoins across the board are flying and there is without a doubt
enough for traders to look at these days. Top 3: Percentage Change in Price Over the Last Week

▪ But how long can this continue? The price range for bitcoin is getting
tighter, and as we’ve highlighted for several weeks, a large move will
come, sooner rather than later.

▪ The minor pullback yesterday corresponded unpleasantly with the drop in

the stock market and shows that the co-movement is still present between
the two markets.

5.7% $0.196

Best Performing Price Last week Last month YTD

ChainLink 7.249 31.45% 79.02% 301%
Cosmos 3.865 27.37% 36.17% -11%
Stellar 0.088 24.26% 20.89% 95%

0.5% $237.7
Worst Performing Price Last week Last month YTD
Compound 162.918 -15.19% 12.93% 13%
-0.8% $9,184
Kyber Network 1.498 -9.95% 29.99% 714%
LEO Token 1.133 -9.60% -2.56% 37%

Last week of top 50 by market capitalization

Source: Digital Assets Data
Source: cryptowat.ch

Jul 14, 2020 3 Provided by

 The “digital gold” is struggling with the real gold

▪ Bitcoin’s position as a digital gold and a safe haven

during uncertainty have really been tested this
year.

▪ No one can deny that bitcoin failed this test in

March, but has later recovered strongly.

▪ Even gold took a hit in March, but bounced quickly

and has climbed further since.
45%

▪ Looking at a two-year window, bitcoin have more 44%

or less the same return as gold, but has been
significantly more volatile. So why would
investors go for the “digital gold”, that is struggling
to outperform its competitor?

• Bitcoin is actually more scarce than gold, and has a

lower yearly production after the halving occurred
this year.

• We need to remember how important time frame

is. While bitcoin has struggled with gold over the
past two years, the leading cryptocurrency has
been a great investment compared to gold if you
look at a 5-year horizon.

Source: Digital Assets Data

Jul 14, 2020 4 Provided by

 Mid Caps enjoying a flat market
BTC dominance keeps dropping
Percentage of Total Market Capitalization

BTC ETH BCH LTC XRP DASH NEM XMR IOTA NEO
Market
61.34% 9.71% 1.56% 1.05% 3.23% 0.25% 0.15% 0.43% 0.25% 0.28%
Share
Weekly
Change*
-1.50% -0.02% -0.05% 0.00% 0.20% 0.00% 0.01% 0.01% 0.00% 0.01%

July looks pretty much the same as June, expect that the Mid Caps
Source: Coinpaprika.com
Index has taken the role of the Small Caps Index and has been flying * Weekly change in percentage points
lately.

35% Monthly Performance of Market Capitalization Weighted Indexes

▪ The Mid Caps Index is now up over 25% in the two first weeks of July.
This index includes coins like ADA, DOGE and VET, all performing well 30%
this month.
25% 25.91%

▪ The other indexes are still relatively flat, with bitcoin ranging around 20%
zero over the last two weeks.
15%
▪ As highlighted last week, bitcoin’s market share has been dropping
10%
lately and continues down this week – now close to 61%. 6.01%

5% 5.75%
▪ This is the lowest dominance for BTC since the market top
1.83%
in February. We’re now getting close to the 60% mark, which 0%
hasn’t been broken since the price peak in June last summer.
-5%

-10%
30 Jun 3 Jul 6 Jul 9 Jul 12 Jul

Large Mid Small Bitcoin

Source: Bletchleyindexes.com (Jun 13)

Jul 14, 2020 5 Provided by

 Market sentiment stays below neutral
The market sentiment has not moved much over the past week, ranging below the neutral state. We would need more price action and increased trading volume to
push the sentiment up in a more positive area. With the sideways price action and low volume lately, the sentiment is staying in the same area, as investors cannot
decide what to think of the market right now.

Fear & Greed Index YTD

Extreme Greed

43

Fearful market for

more than a month

Now Last week Last month

Extreme Fear Fear (43) Fear (40) Fear (38)

Source: Alternative.me, Digital Assets Data (Jul 6)

Jul 14, 2020 6 Provided by

 Bitcoin volume dying out
The 7-day average real trading volume* continues to trend downwards this week, a natural result of a sideways
moving market. While the overall trading volume in the crypto market is looking more stable than the bitcoin
volume, it is certainly concerning to see this steady downwards trend for the market leader.

3,500

3,000
Trading Volume ($ million)

2,500

2,000

1,500

1,000

500

Real BTC Daily Volume (7-day average)

0
Jan 20 Feb 20 Mar 20 Apr 20 May 20 Jun 20 Jul 20

Source: Messari, Skew *as defined by Arcane Research. Read more here.

Jul 14, 2020 7 Provided by

 Volatility keeps dropping
7-day flips 30-day, trend shift incoming?
As highlighted last week, the 30-day volatility is at yearly lows and drops even further this week. We’re currently at the lowest levels since April 2019. However, the 7-
day volatility just flipped the 30-volatility. This indicate that bitcoin’s daily moves on average have been larger over the past week than the average over the past
month. Are we about to see a trend shift in volatility?

15%
Daily Return
30-Day Volatility
7-Day Volatility
10%

5%

1.66%
1.58%
0%

-5%

BTC-USD Volatility
-10%
1 Jan 17 Jan 2 Feb 18 Feb 5 Mar 21 Mar 6 Apr 22 Apr 8 May 24 May 9 Jun 25 Jun 11 Jul

Source: cryptowat.ch

Jul 14, 2020 8 Provided by

Valuation

Provided by
 Weekly candles indicate bullish outlook

▪ While BTC has been moving sideways for several

weeks, the weekly candles are giving us an ?
indication of the trend.

▪ Last week closed higher than the previous two

weeks, and we are starting to see higher lows for
the weekly wicks. Weekly support

▪ This is opposite from most of June, where we saw

lower lows for the weekly wicks. Turning point?

▪ In addition, the weekly support has not been

broken once.

▪ Although a retest of the weekly lows around $8,700

could surely be on the line, the short-term weekly
trend is looking bullish.

Source: Tradingview, Coinbase

Jul 14, 2020 10 Provided by

 Retail premiums rising towards the CME levels
BTC September 2020 Futures Contracts - Annualized Premium Rates
16% (Historically)

As the bitcoin price stays flat, the premiums on the

September future contracts remain stable.
12%
▪ The gap between CME and the retail-focused
platforms is shrinking, as the CME premium
approaches its quarterly average, and the retail
premium is rising.
8%
▪ The sentiment seems to be turning more bullish
among retail traders as the premium rates has 6.87%
climbed steadily upwards the past four weeks.

4.61%
4%

Premium Rates for BTC Futures Contracts

September 2020
0%

CME
CME 1.41%
Other platforms
Other platforms 0.95% Average CME
Average Others

Other platforms: Average of Bitmex, Deribit, FTX & Kraken -4%

23 Apr 30 Apr 7 May 14 May 21 May 28 May 4 Jun 11 Jun 18 Jun 25 Jun 2 Jul 9 Jul

Source: CME, Bitmex, Deribit, FTX, Kraken

Jul 14, 2020 11 Provided by

 BTC options traders focusing on short-term contracts
BTC Options
▪ Open interest for BTC and ETH options show
structural difference in where traders place their 60
money.
50

▪ The open interest for BTC options shows that

traders are mostly focused on short-term positions, 40
with almost 40% of the OI focused on July expiry,
and only 9% of the positions are for the December 30
close.
20
▪ ETH options paint a different picture. More than one
third (34%) of the total open interest is for the 10
December expiry.
0
13 Jul 20 14 Jul 20 17 Jul 20 24 Jul 20 31 Jul 20 28 Aug 20 25 Sep 20 18 Dec 20 24 Dec 20 25 Dec 20 26 Mar 21 25 Jun 21 31 Dec 21
▪ ETH traders have a longer-term perspective than
BTC traders for their options trades, with as little as
23% of OI focused on the July expiry. ETH Options
250
▪ Keep in mind that the open interest for BTC options
are above $1 billion and a much more liquid market 200
than ETH options, where the total OI is as low as
$160 million.
150

▪ Hence, the difference in open interest

structure could be driven by some large 100
players for the ETH options, as the total OI
is relatively low. 50

0
13 Jul 20 14 Jul 20 17 Jul 20 24 Jul 20 31 Jul 20 28 Aug 20 25 Sep 20 18 Dec 20 24 Dec 20 25 Dec 20 26 Mar 21 25 Jun 21 31 Dec 21
Source: Skew (Jul 13)

Jul 14, 2020 12 Provided by

 Dogecoin pumps on “TikTok hype”
Shows the danger of manipulation in illiquid markets

▪ Last week, a couple of teenagers on the popular

app TikTok decided to pump the price of the old, +115%
but still highly valued, Dogecoin.

▪ Some even referred to it as a “stock” and it seems

like some of the “TikTok pumpers” don't even know
what cryptocurrencies are.

▪ Dogecoin was launched in 2013 and is simply based

on the popular “doge” internet meme and has a
Shiba Inu on its logo.

▪ Started as a joke in late 2013, the “cryptocurrency”

is now valued at $400 million.

Why are we highlighting this? -35%

• The recent pump (and dump) shows the danger of

illiquid markets, which is common among altcoins.

• This is pure manipulation and extremely dangerous

for unexperienced participants in the space, and
will likely cause great economical harm.

Source: Tradingview, Binance (Jun 13)

Jul 14, 2020 13 Provided by

Blockchain Activity

Provided by
 Bitcoin Hashrate climbs after halving
New 7-day average all-time high

▪ The Bitcoin hashrate dropped sharply after the BTC Hashrate

halving in May, but has now climbed back up to the
highs we’ve seen earlier this year.

▪ When looking at the 7-day average, the hashrate is

actually at a new-all time high.

▪ At the same time, it is now more challenging than

ever to mine bitcoin, as the difficulty just jumped to
the highest level seen.

▪ While some speculated in a loss of miners after the

halving in May, we can certainly say that miners
are still present – perhaps more than ever. Death
spiral?

▪ Some of the recent increase in network difficulty

can be related to the rainy season on Sichuan,
China, leading to unusually low electricity cost.

Source: Digital Assets Data

Jul 14, 2020 15 Provided by

 Bitcoin sidechain gaining traction
Liquid BTC supply up over 400% YTD

The Liquid Network was launched by Blockstream in 2018 as a L-BTC in Circulation

solution to the difficult conundrum of scaling bitcoin. The Liquid
3000
Network is a bitcoin sidechain that aims to offer fast and
confidential transactions between the major trading platforms.

2476
▪ The Liquid Network enables faster and confidential transactions 2500
by utilizing its L-BTC token, a token that is 1:1 backed by bitcoin.

▪ The Liquid Network is overseen by a federation of nodes, 2000

typically hosted by large OTC trading desks or crypto
exchanges.

1500
▪ The first year following the launch Liquid saw a modest growth.
By December 1st 2019, there was 97 L-BTC in circulation.

1000
▪ In one month this number jumped by a six-fold to 600 L-BTC by
January 1st 2020. 600

▪ The growth has continued, and since January 1st, the L-BTC 500
supply has grown by 413%, a clear sign of user adoption.

0
Sep 18 Nov 18 Jan 19 Mar 19 May 19 Jul 19 Sep 19 Nov 19 Jan 20 Mar 20 May 20 Jul 20

Source: Liquid.net

Jul 14, 2020 16 Provided by

 A brief dive into the state of the Lightning Network

The Lightning Network has been proposed as a solution to Bitcoin’s Lightning Network
scaling issues. It works on top of the blockchain as a 2nd layer payment
protocol. Its value proposition is to enable off-chain microtransactions 45000 Public channels 1200
in order to avoid blockchain congestion and to make BTC
micropayments economically feasible by reducing fees. 1104 BTC
Lightning 973 BTC
40000 Network
Capacity
▪ Following the launch of the lightning testnet, the protocol saw 14 1000
months of continuous growth. By March 2019 the network had reached
40 000 open public channels, with a peak bitcoin capacity of 1100 BTC. 35000

▪ But, since March 2019 there was a net reduction of public payment 30000 800
channels, and the lightning network capacity fell by 27% to 800 BTC in
the months following the peak.
25000

#public channels

BTC Capacity
▪ Now the tide shows signs of turning again, as active public channels 600
are on the rise and the network capacity once again approaches 20000
1000 BTC.

▪ Lightning is based on local consensus, making it possible to open 15000 400

private channels between parties that are not publicly broadcasted.
Thus, it is possible that the adoption of the lightning protocol is higher
than what’s indicated by the public channels. 10000
▪ According to BitMEX Research, 28% of the channels of the Lightning Network 200
are private.
5000
▪ Despite a flat period in terms of visible adoption, VC funds has been
eager to invest into lightning development teams, indicating that
investors see high potential into its ability to solve Bitcoin’s scaling 0 0
issues. Jan 18 Apr 18 Jul 18 Oct 18 Jan 19 Apr 19 Jul 19 Oct 19 Jan 20 Apr 20

Source: Bitcoin Visuals

Jul 14, 2020 17 Provided by

 Ethereum - the leading off-chain destination for bitcoin

Whereas Liquid and Lightning are created as solutions for scaling bitcoin, an
entirely different off-chain destination has spurred amidst the growth of DeFi - Bitcoin Tokens on Ethereum
The Ethereum Network.
16000 14 961 BTC
▪ The motivation of tokenizing bitcoin as an ERC-20 token is to enable
functionality which is not natively supported on the Bitcoin blockchain, such as
compatibility with the Ethereum DeFi ecosystem. 14000

▪ ERC-20 tokens, fully backed by bitcoin, have been the most dominant off-chain 12000
solution in terms of BTC locked, vastly outpacing Liquid and Lightning.

10000
▪ The hard money properties of bitcoin makes it useful in the DeFi system,
especially in the lending sector as collateral for loans.

Number of BTC
8000

▪ Currently, data from Nansen shows that 14,961 BTC are locked into tokenized
Bitcoin protocols on the Ethereum Network. This is 4x the combined size of 6000
HBTC
Liquid and Lightning.
imBTC

4000 pBTC
▪ Wrapped BTC (wBTC) is the largest bitcoin token on Ethereum with 11,136 BTC renBTC
being locked into the protocol.
sBTC
2000
WBTC 1 040 BTC
▪ Following the rapid influx in DeFi innovations this year, the tokenized BTC
supply has skyrocketed by 1439% YTD. 0
Nov 18 Jan 19 Mar 19 May 19 Jul 19 Sep 19 Nov 19 Jan 20 Mar 20 May 20 Jul 20

▪ ERC-20 bitcoin tokens account for 81.2% of the off-chain BTC supply
(ERC+LN+Liquid). Source: Nansen

Jul 14, 2020 18 Provided by

Provided by