This report presents data on the crypto market fluctuations over 2018, with special attention given to the analysis of trends seen in July 2018.
Information as of August 6, 2018
This report was created by:
- Professor Dmitrii Kornilov, Doctor of Economics, Member of the Russian Academy of Natural Sciences, and Leading Analyst at ICOBox;
- Dima Zaitsev, PhD in Economics, Head of International Public Relations and Business Analytics Department Chief at ICOBox;
- Nick Evdokimov, Co-Founder of ICOBox;
- Mike Raitsyn, Vision Director of Snowfox Technology
- Anar Babaev, Co-Founder of ICOBox;
- Daria Generalova, Co-Founder of ICOBox
This report presents data on cryptocurrency market changes during 2018. Special emphasis has been placed on an analysis of the changes that took place in July 2018.
1. General cryptocurrency and digital assets market analysis. Market trends.
1.1 General cryptocurrency and digital assets market analysis (for the month).
Table 1.1. Trends in capitalization of the cryptocurrency market and main cryptocurrencies from April 1, 2018, to August 5, 2018*
|Parameter||1-Apr-18||1-May-18||MoM, %||1-June-18||MoM, %||1-July-18||MoM, %||1-Aug-18||DoD, %||5-Aug-18||DoD, %|
|1||Total market capitalization, USD billion||263.9||423.2||60.4%||331.3||-21.7%||257.7||-22.2%||277.8||7.8%||253.8||-8.6%|
|2||Altcoin market capitalization, USD billion||145.2||265.8||83.1%||203.2||-23.6%||147.9||-27.2%||144.3||-2.4%||132.9||-7.9%|
|Altcoin dominance, %||55.0%||62.8%||–||61.3%||–||57.4%||–||51.9%||–||52.4%||–|
|3||Bitcoin price, $||7 003.1||9 251.5||32.1%||7 500.7||-18.9%||6 411.7||-14.5%||7 769.0||21.2%||7 031.1||-9.5%|
|Bitcoin market capitalization, USD billion||118.7||157.4||32.6%||128.0||-18.6%||109.8||-14.2%||133.5||21.6%||120.9||-9.5%|
|Bitcoin dominance, %||45.0%||37.2%||–||38.6%||–||42.6%||–||48.1%||–||47.6%||–|
|4||Ethereum price, $||397.3||670.5||68.8%||578.7||-13.7%||455.2||-21.3%||433.9||-4.7%||407.4||-6.1%|
|Ethereum market capitalization, USD billion||39.1||66.5||69.8%||57.7||-13.1%||45.7||-20.8%||43.8||-4.1%||41.2||-6.0%|
|Ethereum dominance, %||14.8%||15.7%||–||17.4%||–||17.7%||–||15.8%||–||16.2%||–|
|5||Bitcoin Cash price, $||688.0||1 348.6||96.0%||995.7||-26.2%||749.2||-24.8%||780.0||4.1%||696.1||-10.8%|
|Bitcoin Cash market capitalization, USD billion||11.7||23.1||96.6%||17.1||-25.9%||12.9||-24.5%||13.5||4.4%||12.0||-10.7%|
|Bitcoin Cash dominance, %||4.4%||5.5%||–||5.2%||–||5.0%||–||4.8%||–||4.7%||–|
|6||Litecoin price, $||116.9||148.3||26.9%||118.0||-20.4%||81.5||-30.9%||80.4||-1.4%||73.4||-8.7%|
|Litecoin market capitalization, USD billion||6.5||8.4||27.9%||6.7||-19.8%||4.7||-30.4%||4.6||-0.6%||4.2||-8.6%|
|Litecoin dominance, %||2.5%||2.0%||–||2.0%||–||1.8%||–||1.7%||–||1.7%||–|
|7||Volume (24h) 4 crypto, USD billion**||6.4||11.8||84.2%||7.7||-35.0%||7.1||-7.1%||7.5||5.4%||5.6||-25.7%|
|Market cap 4 crypto, USD billion||189.7||279.7||47.5%||226.9||-18.9%||186.7||-17.7%||207.9||11.4%||190.9||-8.2%|
|ZAK-4 Crypto index||3.4%||4.2%||–||3.4%||–||3.8%||–||3.6%||–||2.9%||–|
|4 crypto dominance, %||71.9%||66.1%||–||68.5%||–||72.4%||–||74.8%||–||75.2%||–|
|8||Volume (24h) 8 crypto, USD billion**||7.2||16.0||121.3%||9.2||-42.4%||8.2||-10.5%||8.7||5.2%||6.4||-25.9%|
|Market cap 8 crypto, USD billion||208.7||319.5||53.1%||255.9||-19.9%||205.9||-19.5%||228.2||10.8%||209.3||-8.3%|
|ZAK-8 Crypto index||3.5%||5.0%||–||3.6%||–||4.0%||–||3.8%||–||3.1%||–|
|8 crypto dominance, %||79.1%||75.5%||–||77.2%||–||79.9%||–||82.1%||–||82.5%||–|
* Data as of August 6, 2018 (all figures calculated at 03:00 UTC)
** Adjusted Volume – Volume from spot markets, excluding markets with no fees and transaction mining
*** Since December 1, 2017, the ZAK-4 index has been calculated using the cryptocurrencies Bitcoin, Ethereum, Ripple, and Bitcoin Cash.
**** When calculating the ZAK-8 index, the cryptocurrencies with the largest capitalization are used. At present (August 6, 2018), the cryptocurrencies Bitcoin, Ethereum, Ripple, Bitcoin Cash, Cardano, Litecoin, Stellar, and EOS are used to calculate the ZAK-8 index.
Data source: coinmarketcap.com
During July 2018 cryptocurrency market capitalization increased from $257.7 billion to $277.8 billion (as of 03:00 UTC), i.e. by $20 billion or 7.8% (see Table 1.1, Fig. 1). Bitcoin dominance grew noticeably during July, from 42.6% to 48.1%, meaning the increase in cryptocurrency market capitalization was basically due to the price growth of the leading cryptocurrency (by $23.7 billion), with the aggregate impact of altcoins on capitalization being negative (-$3.7 billion).
The dominance of the four and eight largest cryptocurrencies as of 03:00 UTC on August 1, 2018, equaled 74.8% and 82.1%, respectively.
During July cryptocurrency market capitalization fluctuated from $243.6 billion (min) to $303.3 billion (max) (Fig. 1a), i.e. within a range of $60 billion. For its part, bitcoin capitalization fluctuated from $106 billion (min) to $143.6 billion (max), i.e. within a range of $37.6 billion.
The first days of August (August 1-5, 2018) saw the latest downward adjustment to $253.8 billion (as of 03:00 UTC on August 5, 2018).
The most significant changes in cryptocurrency market capitalization since the start of July 2018 are shown in Fig. 1a. Some of these changes can be tied to a number of events (see the comments below and in Table 1.4).
Figure 1a. Cryptocurrency market capitalization since July 1, 2018
Data source: coinmarketcap.com
Figure 1b shows bitcoin capitalization (red line) superimposed on cryptocurrency market capitalization (blue line). The lines are practically identical up to July 18, but the gap between them starts to widen after this date. This is due to increased bitcoin dominance and its faster price growth compared to the prices of most altcoins. This time, however, bitcoin did not pull the entire market along with it, if anything the opposite, and by August 5 capitalization had fallen below the level at the beginning of July.
Figure 1b. Capitalization of the cryptocurrency market (blue) and bitcoin (red) since July 1, 2018
Data source: coinmarketcap.com
Price trends of the cryptocurrency market leaders during July 2018
Table 1.2 presents the price trends of 10 cryptocurrencies in July 2018 (not including Tether). The price fluctuations ranged from 21% to 94% (High/Low). Ethereum, Ripple, and Litecoin showed the most stable prices of the ten presented currencies. For example, the range of price fluctuations of Ethereum (High/Low: 513.43/422.81=1.21) and Ripple (High/Low: 0.52/0.43=1.21) equaled 21%. Stellar and Cardano experienced the most significant fluctuations. The high and low prices for these cryptocurrencies differed by a factor of 1.5, and ranged from $0.18 to $0.35 and from $0.12 to $0.19, respectively (see Table 1.2).
Table 1.2. Price changes in the top 10 cryptocurrencies by capitalization during the period from July 1-August 1, 2018
|№||Name||Price Open, $||MoM,||Price change during July||High/Low|
|Jul 1, 2018||Aug 1, 2018||%||High, $||Low, $||D, $|
|Portfolio 10 crypto||+3.3%|
Data source: coinmarketcap.com
Thus, during July 2018 the price change of the leading cryptocurrencies by capitalization compared to the start of the month (Fig. 2) ranged from -11.6% (TRON) to +44.2% (Stellar). The average portfolio return (Portfolio 10 crypto) for July for a portfolio consisting of equal shares of the top 10 cryptocurrencies was insignificant, and equaled +3,3%. Overall, cryptocurrency market capitalization increased during July from $257.7 billion to $277.8 billion, i.e. by 7.8%.
Figure 2. Price change in the top 10 cryptocurrencies by capitalization during July 2018 (not including Tether), %
(on the left the cryptocurrencies are ranked by the level of price depreciation over the month, and on the right – by the amount of capitalization as of August 1, 2018)
The value of a portfolio consisting of the top 10 cryptocurrencies by capitalization remained practically the same during July, showing a 3.3% growth despite the fact that the price of six of the 10 cryptocurrencies fell. The price drops were not huge, and ranged from 1.4% for Litecoin to 11.6% for Tron. EOS and Tron showed the worst performance indicators. Tron continued its downward adjustment, which started several months ago after a jump in price in late April, while the depreciation of EOS can be explained by the discovery of vulnerabilities in the code of the main network.
The other four cryptocurrencies increased in price, but the gains of Cardano and Bitcoin Cash were not significant (the prices of the coins changed by a mere 3.5% and 4.1%, respectively).
The biggest gainers during the month were Bitcoin and Stellar. On Tuesday, July 24, the price of the first cryptocurrency passed the psychological barrier of $7,800, and then $8,000, thereby consolidating the gains that were achieved throughout the previous week. However, the bitcoin price subsequently fell below $8,000 on the news that the SEC had once again rejected the bitcoin ETF proposal of the Winklevoss brothers (Coinspeaker).
The main news items for Stellar this month were rumors on its possible listing on Coinbase, as well as its partnership with IT giant IBM, which chose the Stellar platform for the creation of its cryptocurrency (Forbes), as well as the news that Stellar was the first cryptocurrency approved by Sharia law, which might cause spikes in demand on the part of the Islamic population (Cointelegraph)
Calculation of the index of trading activity on cryptocurrency exchanges
To analyze trading activity on cryptocurrency exchanges, the ZAK-n Crypto index is calculated (see the Glossary). In early August the 24-hour trading volumes (Volume 24h) for the four and eight dominant cryptocurrencies were approximately half of what they were in early May, and roughly equal to the amounts in early June (Table 1.1).
The values of the ZAK-4 Crypto indices are presented in Tables 1.1 and 1.3. In May the 24-hour trading volumes (Volume 24h) for the four dominant cryptocurrencies (Bitcoin, Ethereum, Bitcoin Cash, Ripple) equaled from $4.6 billion to $10.8 billion (Table 1.3). The value of the daily ZAK-4 Crypto fluctuated from 2.5% to 5.2% of capitalization. The highest trading volume was seen on July 24. One of the reasons for the increased activity was the expectation of decisions from the US Securities and Exchange Commission (SEC) on applications on the launch of bitcoin ETFs, specifically two (1, 2) official announcements of the SEC. Activity gradually fell after the publication of these announcements, and by August 5 the 24-hour trading volumes for the four dominant cryptocurrencies equaled $5.6 billion, i.e. 2.9% of their market capitalization (Table 1.3).
Table 1.3. Daily ZAK-4 Crypto index calculation (from July 1, 2018, to August 5, 2018)
|Crypto||Bitcoin (BTC)||Ethereum (ETH)||Bitcoin Cash (BCH)||Ripple (XRP)||4 Crypto|
|Price Open||Volume (24h)||Market cap||Price Open||Volume (24h)||Market cap||Price Open||Volume (24h)||Market cap||Price Open||Volume (24h)||Market cap||Volume (24h) 4 crypto*||Market cap 4 crypto||ZAK-4 Crypto index|
|Date*||$||USD billion||USD billion||$||USD billion||USD billion||$||USD billion||USD billion||$||USD billion||USD billion||USD billion||USD billion||%|
|Aug 5, 2018||7 031||3.7||120.9||407||1.4||41.2||696||0.3||12.0||0.43||0.2||16.8||5.6||190.9||2.9%|
|Aug 4, 2018||7 439||4.3||127.9||418||1.5||42.3||723||0.3||12.5||0.44||0.2||17.3||6.2||200.0||3.1%|
|Aug 3, 2018||7 562||4.6||130.0||413||1.7||41.7||733||0.4||12.7||0.43||0.3||16.9||7.0||201.2||3.5%|
|Aug 2, 2018||7 634||4.2||131.2||421||1.6||42.5||768||0.4||13.3||0.45||0.2||17.6||6.4||204.5||3.1%|
|Aug 1, 2018||7 769||4.8||133.5||434||1.9||43.8||780||0.5||13.5||0.44||0.3||17.1||7.5||207.9||3.6%|
|Jul 31, 2018||8 181||5.3||140.6||457||1.8||46.2||817||0.4||14.1||0.45||0.2||17.5||7.8||218.4||3.6%|
|Jul 30, 2018||8 222||5.6||141.2||467||2.1||47.2||829||0.6||14.3||0.45||0.2||17.8||8.5||220.5||3.9%|
|Jul 29, 2018||8 206||4.1||141.0||467||1.6||47.1||821||0.6||14.2||0.46||0.2||18.0||6.5||220.2||2.9%|
|Jul 28, 2018||8 169||4.0||140.3||470||1.5||47.4||821||0.5||14.2||0.45||0.2||17.9||6.2||219.8||2.8%|
|Jul 27, 2018||7 950||5.2||136.5||464||1.7||46.8||804||0.6||13.9||0.45||0.2||17.7||7.7||214.9||3.6%|
|Jul 26, 2018||8 177||4.9||140.4||472||1.6||47.7||831||0.6||14.3||0.46||0.2||18.1||7.3||220.5||3.3%|
|Jul 25, 2018||8 380||5.8||143.9||480||1.9||48.4||863||0.7||14.9||0.46||0.3||17.9||8.7||225.1||3.9%|
|Jul 24, 2018||7 717||7.3||132.5||451||2.3||45.5||786||0.9||13.6||0.45||0.3||17.5||10.8||209.0||5.2%|
|Jul 23, 2018||7 415||5.1||127.3||459||1.6||46.3||790||0.6||13.6||0.45||0.2||17.7||7.5||204.9||3.7%|
|Jul 22, 2018||7 418||3.7||127.3||462||1.3||46.6||788||0.5||13.6||0.46||0.2||17.9||5.7||205.4||2.8%|
|Jul 21, 2018||7 353||3.7||126.2||451||1.5||45.4||768||0.5||13.2||0.45||0.2||17.5||5.9||202.4||2.9%|
|Jul 20, 2018||7 467||4.9||128.1||469||1.8||47.3||823||0.6||14.2||0.48||0.3||18.7||7.7||208.4||3.7%|
|Jul 19, 2018||7 378||5.1||126.6||481||2.1||48.4||828||0.7||14.3||0.49||0.3||19.1||8.2||208.5||3.9%|
|Jul 18, 2018||7 315||6.1||125.5||501||2.4||50.5||850||0.7||14.7||0.51||0.4||19.8||9.6||210.4||4.5%|
|Jul 17, 2018||6 740||6.0||115.6||480||2.3||48.4||803||0.8||13.8||0.48||0.3||18.9||9.4||196.7||4.8%|
|Jul 16, 2018||6 357||4.7||109.0||450||1.9||45.4||724||0.5||12.5||0.45||0.3||17.5||7.4||184.4||4.0%|
|Jul 15, 2018||6 273||3.3||107.6||436||1.4||43.9||703||0.3||12.1||0.44||0.2||17.2||5.1||180.8||2.8%|
|Jul 14, 2018||6 248||2.9||107.1||435||1.2||43.7||696||0.3||12.0||0.44||0.1||17.2||4.6||180.1||2.5%|
|Jul 13, 2018||6 235||3.8||106.9||431||1.5||43.4||687||0.4||11.8||0.44||0.2||17.1||5.8||179.2||3.3%|
|Jul 12, 2018||6 397||3.8||109.7||447||1.5||44.9||707||0.3||12.2||0.45||0.2||17.7||5.8||184.4||3.1%|
|Jul 11, 2018||6 331||3.6||108.5||435||1.4||43.7||689||0.3||11.9||0.45||0.2||17.5||5.6||181.6||3.1%|
|Jul 10, 2018||6 739||4.1||115.5||476||1.8||47.9||733||0.4||12.6||0.47||0.2||18.6||6.4||194.6||3.3%|
|Jul 9, 2018||6 775||3.7||116.1||489||1.5||49.2||752||0.3||12.9||0.48||0.2||18.7||5.8||197.0||2.9%|
|Jul 8, 2018||6 858||3.4||117.5||492||1.3||49.5||776||0.3||13.4||0.49||0.2||19.3||5.3||199.7||2.6%|
|Jul 7, 2018||6 669||4.0||114.3||474||1.4||47.7||737||0.8||12.7||0.48||0.2||18.8||6.3||193.4||3.3%|
|Jul 6, 2018||6 639||4.3||113.7||474||1.6||47.7||748||0.4||12.9||0.48||0.2||18.9||6.6||193.2||3.4%|
|Jul 5, 2018||6 600||5.0||113.1||467||1.8||47.0||763||0.5||13.1||0.49||0.3||19.3||7.6||192.4||3.9%|
|Jul 4, 2018||6 551||4.2||112.2||464||1.5||46.6||758||0.4||13.0||0.49||0.3||19.1||6.5||191.0||3.4%|
|Jul 3, 2018||6 597||4.7||113.0||475||1.7||47.8||775||0.5||13.3||0.49||0.4||19.1||7.2||193.2||3.8%|
|Jul 2, 2018||6 380||4.4||109.3||454||1.6||45.6||739||0.4||12.7||0.46||0.3||18.1||6.8||185.7||3.6%|
|Jul 1, 2018||6 412||4.8||109.8||455||1.5||45.7||749||0.6||12.9||0.47||0.3||18.3||7.1||186.7||3.8%|
* Adjusted Volume – Volume from spot markets, excluding markets with no fees and transaction mining
** All figures given as of 03:00 UTC of the corresponding day
Data source: coinmarketcap.com
Table 1.3 shows the adjusted trading volumes (Adjusted Volume*). However, if you take into account all data on cryptocurrency trading, the indicators would be much higher. This is due to the growing popularity of fee mining. New cryptoexchanges have unexpectedly started to shoot to the top in terms of trading volumes. Specifically, the Singapore-based BitForex cryptoexchange (registered in the Seychelles), trading on which began in June 2018, is already the outright leader in trading volume (see Fig. 3b). Last week the 24-hour trading volume on BitForex exceeded $14 billion, and on July 26 the Volume 24h on CoinBene and Bit-Z equaled nearly $2 and $1.5 billion, respectively, surpassing the trading volumes on Binance. Before the launch of the trans-fee model, Binance had been the leading cryptoexchange by 24-hour trading volume, which equaled around $1 billion.
The trans-fee model (or Trade-to-mine, Trans-fee mining) proposes the issue of tokens to traders by exchanges as a reward for trading. This mechanism allows traders to lower the cost of trading, and the exchange to quickly attract new clients and increase turnover. Trading platforms distribute their tokens, which traders can use to pay transaction fees or for sale in the future. For example, BitForex (BF) returns 80% of its transaction fees to the owners of BF tokens.
As reported by cryptoglobe, with reference to Binance CEO Zhao Changpeng, the Trans-fee model represents a disguised initial coin offering, with the CEO stating that: “If an exchange doesn’t get revenue from transaction fees and solely profits from the price of its token, how would it survive without manipulating the token price? Are you sure you want to play against a price manipulator? The same price manipulator who controls the trading platform?”
Figures 3a and 3b show the rating of cryptocurrencies by trading volumes with and without the adjustment, according to the data of coinmarketcap.
Figure 3a. Top 5 cryptocurrencies by 24-hour trading volume with adjustment*
Data source: coinmarketcap.com (July 6, 2018)
* Adjusted Volume – Volume from spot markets, excluding markets with no fees and transaction mining
Figure 3b. Top 5 cryptocurrencies by 24-hour trading volume**
Data source: coinmarketcap.com (July 6, 2018)
** Reported Volume
Table 1.4 shows the main events that took place since the start of July 2018 that had an impact on both the prices of the dominant cryptocurrencies and the market in general, with an indication of their nature and type of impact.
Table 1.4. Key events having an influence on cryptocurrency prices in July and early August 2018
|№||Factors and events
(link to source)
|Date of news||Description||Nature of impact||Type of impact|
|1.||Japan’s Financial Regulator Considers Revising Crypto Exchange Regulation: Report [source: ccn.com]||July 4, 2018||The Japanese regulator may change the legal status of cryptocurrencies due to the security problems on the country’s cryptoexchanges.
|2.||‘A New Era for Capital Markets’: The Swiss Stock Exchange is Launching its Own Cryptocurrency Exchange [source: uk.businessinsider.com]||July 6, 2018||Switzerland, together with Gibraltar and Malta, heads up the list of the most crypto-friendly countries in Europe. It is not surprising, then, that this country was one of the first to decide to unite the digital and traditional financial spheres.||Market ⇑
|3.||Binance Exchange Backs First-Ever Decentralized Bank in Malta [source: coindesk.com]||July 12, 2018||Founders Bank will be the first decentralized bank in the world belonging to the cryptocurrency community. All of its token holders will be considered the owners of the organization.||Market ⇑
|4.||Coinbase Confirms SEC Approval To List Digital Tokens As Securities [source: Coinspeaker]||July 17, 2018||American regulators have approved the listing by the Coinbase exchange of securities tokens. To do so, the company will purchase several dealers that work with securities and create new divisions.||Market ⇑
|5.||South Korea Makes 2018 the Year of Bitcoin and Cryptocurrency Acceptance [source: dailyhodl.com]||July 20, 2018||The Financial Innovation Bureau will be responsible for “new developments, challenges, and cryptocurrencies,” as well as for regulating the fintech sector.||Market||Uncertain|
|6.||Bitcoin Climbs Above $8000, A Few Reasons Behind This Surge [source: Coinspeaker]||July 24, 2018||On Tuesday, July 24, the price of the first cryptocurrency passed the psychological barrier of $7,800, and then $8,000, thereby consolidating the gains that were achieved throughout the previous week.||Market ⇑||Favorable|
|7.||Bitcoin Futures Trading Volume Reaches $572M on Wall Street [source: cryptovest.com]||July 26, 2018||On July 25 the average daily trading volume of bitcoin futures on the Chicago commodities exchange (CME Group) equaled 12,878 contracts. This is an all-time record.||Market ⇑||Favorable|
|8.||Bitcoin Slips Below $8000 As SEC Rejects Bitcoin ETF Proposal From Winklevoss Twins [source: Coinspeaker]||July 27, 2018||For the second time, the US Securities and Exchange Commission (SEC) has rejected the proposal of the brothers Cameron and Tyler Winklevoss to create an exchange-traded fund tied to bitcoin.||Market ⇓||Unfavorable|
|9.||Ethereum Is Testing Code for Its Next Hard Fork [source: coindesk.com]||July 27, 2018||Constantinople will be the second stage of the Metropolis hard fork and is expected to improve the performance and lower transaction fees on the Ethereum network. It was also confirmed today that its activation will take place at the Devcon4 conference, which will take place from October 30 to November 2 in Prague.||Market ⇑
|10.||UniCredit Completes First Blockchain Transaction Via we.trade [source: cryptovest.com]||August 2, 2018||Italian banking giant UniCredit has performed its first blockchain transaction. It was also the first such operation on the Germany market. The transaction was performed on the we.trade platform, which was specially created for this type of transactions.||Market ⇑||Favorable|
|11.||G20 Crypto Regulations Could Unleash Real Blockchain Change [source: coindesk.com]||August 3, 2018||So far, the financial community does not have a uniform approach to the topic of crypto regulation, but the first decisions are expected to be prepared as early as October, and their implementation will change the crypto environment (first and foremost, by allowing institutional players to enter the ecosystem).||Market||Uncertain|
|12.||John McAfee’s ‘Unhackable’ Crypto-Wallet Allegedly Hacked in a Week [source: cnet.com]||August 3, 2018||Software developer Ryan Castellucci called the Bitfi wallet a “cheap, stripped down Android device,” and crypto enthusiasts OverSoft announced that they had hacked the McAfee wallet.||Market||Uncertain|
|13.||Bank of Thailand Allows Banks to Open Subsidiaries for Crypto Dealings [source: cointelegraph.com]||August 4, 2018||But they still cannot “perform cryptocurrency transactions.”||Market ⇑||Favorable|
Most of the events in July had a positive impact on the cryptocurrency market, leading to its growth. As already noted, July saw an increase in bitcoin dominance on the cryptocurrency market from 42.6% to 48.1%. An important problem for the cryptocurrency market is decentralization, including in the cryptocurrency mining process. The share of the largest mining pools (BTC.com and Antpool) in the overall hash rate of the bitcoin network is being widely discussed, as it reached 42-43% in July according to coin.dance. In our previous report we mentioned the largest Chinese crypto mining company Bitmain, which was appraised at $12 billion, and the value of which might increase to $15 billion by the end of July after the completion of the next round of financing (series C) with the attraction of another $1 billion. The crypto mining giant Bitmain owns Antpool, and also controls BTC.com. Figure 4 shows data on bitcoin mining and indicates the share of the hash rate of the first cryptocurrency network accounted for by various pools on July 30 and August 6.
Figure 4. Bitcoin mining and the share of mining pools
Data source: coin.dance (on July 30, 2018, and August 6, 2018, respectively)
According to the data of CoinDance, on July 30 the BTC.com and Antpool mining pools belonging to the crypto mining giant Bitmain accounted for 19.8% and 12.8% of all bitcoin blocks, respectively, and on August 6 – for 22.22% and 16.67%. Therefore, the company that controls them has access to around 32.6-38.9% (and previously 42-43%) of the hash rate of the first cryptocurrency network. Sharp changes in the shares of companies may be associated with the partial transfer of capacity for the mining of Bitcoin Cash (BCH), since bitcoin and BCH have an identical algorithm.
In other words, it is safe to say that China and its companies have a considerable impact on the bitcoin mining process. TheStreet summed up the results of the conference Insight Conference Stifel Financial 2018. According to Ripple CEO Brad Garlinghouse, bitcoin is controlled by China, which is why the largest pools for its mining are found there.
During a downward adjustment on the cryptocurrency market there is usually a fairly close correlation between the overall trend and the prices of most cryptocurrencies. According to the resource sifrdata.com (Fig. 5), this close correlation has been seen over the past three months between the indicators of crypto market leaders Bitcoin, Ethereum, Ripple, Bitcoin Cash, and Litecoin and the other cryptocurrencies (area highlighted in red).
Figure 5. Correlation between cryptocurrencies
Data source: sifrdata.com (on August 2, 2018)
It is thought that the closer the correlation coefficient is to 1, the higher the similarity of changes in cryptocurrency price trends. If the coefficient is around zero, there is no correlation between the indicators. If the indicator is around -1, there is an inverse relationship.
In the blue zone there is no correlation. Therefore, no direct dependency between the cryptocurrencies and the S&P 500 Index (^ SPX), the CBOE volatility index (^ VIX), the shares of SPDR Gold (^ GLD), and CBOE 10-year treasury bonds (^ TNX) was seen over the past 90 days.
Table 1.5 gives a list of events that could impact both the prices of specific cryptocurrencies and the market in general.
Table 1.5. Events that could have an influence on cryptocurrency prices in the future
|Factors and events
(link to source)
|Date of news||Description||Nature of impact||Type of impact|
|1.||EU Regulators See Blockchain As A Viable Identity And Cross-Border Trading Solution [source: bitrazzi.com]||July 4, 2018||According to officials, distributed ledger technology solves a broad range of problems. The only drawback of its use remains the lack of legal regulation, which hinders the resolution of points of contention, especially if partner firms are registered in different jurisdictions.
|2.||Hong Kong Launches Blockchain-Based Trade Finance [source: uk.businessinsider.com]||July 15, 2018||The new platform makes it possible to reduce the time needed for certain transactions tenfold, and also frees banks from bureaucracy by allowing them to switch to electronic document management.||Market ⇑
|3.||India to Have Comprehensive Crypto Regulations by September, Official Says [source: financemagnates.com]||July 24, 2018||By September the Indian Supreme Court will issue a set of draft laws regulating the cryptocurrency industry. The future norms will not include a direct ban on cryptocurrencies.||Market ⇑||Favorable|
|4.||Japan Self-Regulatory Crypto Exchange Association Considers Trading Cap for Some Clients [source: cointelegraph.com]||July 28, 2018||The Japan Virtual Currency Exchange Association (JVCEA) has developed a number of measures obligating cryptocurrency exchanges to establish a maximum limit on trading volumes for certain groups of traders.||Market ⇓||Unfavorable|
|5.||Korea’s Financial Watchdog Calls for Stock Trading on a Blockchain [source: ccn.com]||August 3, 2018||South Korea is studying the experience of the world’s largest stock exchanges — the country’s regulators are advocating the replacement of old technologies with blockchain and would like to launch share trading on blockchain.||Market ⇑||Favorable|
1.2 Market trends
The weekly cryptocurrency and digital asset market trends from December 31, 2017, to August 5, 2018, are presented as graphs (Fig. 1.1-1.5).
Table 1.6. Legends and descriptions of the graphs
|Total cryptocurrency market capitalization, USD million||Fig. 1.1||This figure shows cryptocurrency and digital asset market capitalization trends from December 31, 2017.|
|The rate of market change (as a % to the beginning of 2017)||Fig. 1.1||This figure shows the % change in cryptocurrency and digital asset market capitalization compared to December 31, 2017.|
|Change in the market capitalization (in USD million compared to previous period)||Fig. 1.2||This figure shows the weekly change in USD million (increase or decrease) in cryptocurrency and digital asset market capitalization from December 31, 2017.|
|The rate of market change (as a % compared to the previous period)||Fig. 1.2||This figure shows the % of weekly change (increase or decrease) in cryptocurrency and digital asset market capitalization from December 31, 2017.|
|Number of cryptocurrencies and digital assets||Fig. 1.3||This figure shows the trends in the increase of the number of cryptocurrencies and digital assets circulating on cryptocurrency exchanges. On January 1, 2017, their number was 617, and as of August 5, 2018, this number had already reached 1,646 (coins and tokens on which there is information on capitalization and/or turnover were considered).|
|Average market capitalization, USD million||Fig. 1.3||This figure reflects the growth in the average cryptocurrency and digital asset market capitalization from December 31, 2017, i.e. the ratio between the market capitalization of all cryptocurrencies and digital assets and their number.|
|Forecast of total cryptocurrency market capitalization||Fig. 1.4, 1.5||This figure shows the time trend (forecast) change in cryptocurrency and digital asset market capitalization.|
* NB! Average daily data are given in the graphs below. For this reason, the figures in the graphs may differ from the data in Table 1.1, where all figures were calculated at 03:00 UTC.
These differences in the values may be significant during periods of high cryptocurrency market volatility.
Data source: coinmarketcap.com
Figure 1.1. Total cryptocurrency market capitalization (weekly trend)
*Average daily data (according to the data of coinmarketcap.com)
Figure 1.1 shows a graph of the weekly cryptocurrency market change from December 31, 2017, to August 5, 2018. Over this period, market capitalization dropped from $572.5 billion to $253.8 billion, i.e. by 56%. Last week (July 29-August 5, 2018) cryptocurrency market capitalization decreased from $297.4 billion to $253.8 billion (as of August 5, 2018, based on the average figures from coinmarketcap.com).
Figure 1.2. Change in market capitalization (weekly trend)
The market is susceptible to sudden and drastic fluctuations. During the first week of January, market capitalization increased by approximately $250 billion, or 44%. The largest weekly fall in the first quarter of 2018 was $136 billion, or 23%, during the week of January 28-February 4, 2018.
Nine of the thirteen weeks in the first quarter of 2018 were “in the red”, i.e. capitalization fell based on the results of each of these weeks.
Six of the thirteen weeks in the second quarter were “in the red.” The market grew based on the results of the other seven weeks. As noted earlier, a growth was seen in April, while in May and June there was generally a reduction in capitalization. The weekly fluctuations ranged from USD -72 billion to USD +62.2 billion.
Three of the past five weeks in the third quarter have shown a growth in capitalization (with due account of average daily data of coinmarketcap.com, see Fig. 1.2).
Figure 1.3. Number of cryptocurrencies and digital assets (weekly trend)
Data source: coinmarketcap.com (coins and tokens on which there is information on capitalization and/or turnover were considered)
Since December 31, 2017, the total number of cryptocurrencies and digital assets considered when calculating market capitalization has increased from 1,335 to 1,646. Over the past week their number increased from 1,605 to 1,646, i.e. by 41, and average capitalization fell to $154.2 million. In total, over the past month 151 new coins and tokens have appeared on coinmarketcap.com. However, it should be noted that a number of other coins and tokens were also excluded from the list. Among the tokens that were added to coinmarketcap.com last week, BHPCash, Six Domain Chain, Vexanium, Webcoin, ATC Coin, BitKan, and VeThor Token showed high trading volumes.
Figures 1.4 and 1.5. Forecast of total cryptocurrency market capitalization
CoinDesk presented the position of UBS Investment Bank, which believes that at present bitcoin is neither money nor a viable asset class. However, they confirm that if bitcoin can resolve its scalability problem and receive regulatory support, it could become a “viable payment mechanism and/or a legitimate asset class in which even the most conservative and traditional investors can participate.”
Business insider Nordic writes that in its report the Goldman Sachs investment strategy group says that the bitcoin price will continue to decline. “Our view that cryptocurrencies would not retain value in their current incarnation remains intact and, in fact, has been borne out much sooner than we expected,” the team led by Chief Investment Officer Sharmin Mossavar-Rahamani said.
There were also previous reports with more optimistic opinions. It its Twitter program CNBC’s Fast Money, the television channel CNBC presented an interview with BitMEX cryptoexchange CEO Arthur Hayes. He feels that bitcoin has “hit bottom,” and believes that the cryptocurrency price could rise to $50,000 by the end of the year. NewsBTC reports, with a reference to a group of researchers, that with the appearance of bitcoin exchange-traded funds (ETF) the price of the first cryptocurrency could find itself in the range of $25,000 to $44,000. Exchange-traded funds could quickly ensure a new inflow of financial funds into this market segment.
|Market capitalization||Value of an asset calculated based on its current market (exchange) price. This economic indicator is used to assess the total aggregate value of market instruments, players, and markets. [Source: https://en.wikipedia.org].|
|Cryptocurrency market capitalization||The market value of an individual coin or token circulating on the market.|
|Total cryptocurrency market capitalization||The market capitalization of cryptocurrencies and digital assets, i.e. the aggregate market value of cryptocurrencies and digital assets (coins and tokens) circulating on the market.|
|Dominance||Market share, i.e. the ratio of market capitalization of a particular cryptocurrency (coin, token) to total cryptocurrency market capitalization. Expressed as a %.|
|A coin that is not mineable. The term is used for cryptocurrencies (coins, tokens) which cannot be mined or issued through mining.|
|Pre-mined||A pre-mined coin. The term is used for cryptocurrencies (coins, tokens) which are issued through mining, and a certain number of coins (tokens) have been created and distributed among certain users at the start of the project.|
|The rate of market increase (as a % compared to the beginning of the year)||The rate of market increase (as a % compared to the start of the year), i.e. by how many % points did market capitalization increase compared to the start of the year.|
|The growth rate of the market (as a % to the beginning of the year)||The rate of market growth (as a % compared to the start of the year), i.e. by how many times did market capitalization grow compared to the start of the year.|
|Increase in market capitalization (in USD million compared to the previous period)||Increase in cryptocurrency and digital asset market capitalization (in USD million compared to the previous period), i.e. by how many USD million did market capitalization increase over the period.|
|The rate of market increase (as a % compared to the previous period)||The rate of market increase (as a % compared to the previous period), i.e. by how many % points did market capitalization increase over the period.|
|The market growth rate (as a % compared to the previous period)||The market growth rate (as a % compared to the previous period), i.e. by how many times did market capitalization grow compared to the previous period.|
|Number of cryptocurrencies and digital assets||Number of cryptocurrencies and digital assets. At the beginning of 2018 over 1,300 cryptocurrencies and digital assets (coins and tokens) were circulating on the market.|
|Average market capitalization||Average market capitalization, i.e. the ratio of the market capitalization of all cryptocurrencies and digital assets to their number.|
|ZAK-n Crypto index||The index is calculated as a percentage and represents a ratio between the trading volume (transactions) on cryptocurrency exchanges per day (Volume 24h) for n dominant cryptocurrencies to their total market capitalization.
ZAK-4 Crypto index calculations include four dominant cryptocurrencies with the greatest market capitalization: Bitcoin, Ethereum, Bitcoin Cash, and Ripple.
ZAK-8 Crypto index calculations include the trading volume and market capitalization for eight cryptocurrencies.
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