THE WEEKLY UPDATE WEEK 51

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2Dec 17, 2019

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• “The weekly update” (the report) by Arcane Research is a report focusing on cryptocurrency, open blockchains and fintech. Information published in the report aims to spread knowledge about developments in the market for cryptocurrencies. All content that is published is for informational purposes only and no content is intended to be a recommendation for making financial transactions or investments. We do not provide financial advice and are not responsible for readers losses in the market

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3Dec 17, 2019

1 Market Update• Price drops in all major cryptocurrencies this

week

• Market sentiment continues downwards

• The real bitcoin volume has now fallen-

down to levels we haven’t seen since May

• Open interest at Bakkt are at an all-time

high once again.

2 Valuation

3 Blockchain Activity

• Are scammers the reason for the fall in

bitcoin price over the last 6 months?

• A bottom may be in for the bitcoin price if

we zoom out

• Long positions on Bitfinex are now at an all-

time high. Long squeeze approaching?

• Futures premium rates getting close to 0%

• Bitcoin miner fees continue down and are

now at March levels

• The growth for Bitfinex’s lightning node

slows down

0

500

1,000

1,500

2,000

2,500

3,000

3,500

Jan 19 Feb 19 Mar 19 Apr 19 May 19 Jun 19 Jul 19 Aug 19 Sep 19 Oct 19 Nov 19 Dec 19

Real Bitcoin Volume (7-Day Average)

Do

llar

(Millio

n)

Real BTC-USD Volume (7-day average)

THE NEWSROOM

Santander Exec Claims Blockchain

Success as Bank Redeems

Ethereum-Issued BondSpanish banking multinational Santander has redeemed

a bond worth $20 million that it issued on the public

ethereum blockchain in September.

Fidelity to Expand Institutional

Crypto Business to EuropeFidelity Investments, one of the world's largest asset

managers, is setting up a new entity to serve European

institutional investors in digital assets.

State Street move into the

cryptocurrency industryState Street Corporation has announced a new joint

project in collaboration with cryptocurrency exchange

and custodian Gemini Trust Company. They aim to

combine digital asset holdings with State Street’s back-

office reporting..

5Dec 17, 2019

Bearish week - Most cryptocurrencies drop down over 10%

Bitcoin Correlation:S&P500 correlation keeps increasing, while gold falls back.

Last week of top 50 by market capitalization

Source: coinmetrics.io

Source: cryptowat.ch

-16%

-14%

-12%

-10%

-8%

-6%

-4%

-2%

0%

2%

10 Dec 11 Dec 12 Dec 13 Dec 14 Dec 15 Dec 16 Dec 17 Dec

Top 3: Percentage Change in Price Over the Last Week

ETH

XRP

BTC

Source: cryptowat.ch

6Dec 17, 2019

Top ten by market capitalization Last Last week Last month YTD

Bitcoin 6717.51 -7.18% -21.52% 74%

Ethereum 127.59 -11.84% -30.79% -10%

XRP 0.19 -11.88% -26.73% -47%

Bitcoin Cash 186.59 -9.03% -30.57% 15%

Litecoin 38.63 -11.66% -35.03% 21%

EOS 2.30 -11.68% -32.35% -14%

Binance Coin 12.61 -13.78% -37.14% 106%

Bitcoin SV 83.68 -10.30% -31.81% -10%

Tezos 1.63 14.14% 40.08% 249%

Stellar 0.05 -14.97% -37.72% -62%

Best performing Last Last week Last month YTD

MINDOL 4.03 39.22% 235.00% 398%

Tezos 1.63 14.14% 40.08% 249%

Hedgetrade 1.06 6.78% 41.21% 657%

Crypto.com Chain 0.03 6.58% -12.13% 52%

FTX Token 1.86 5.48% 25.93% 8%

Worst performing Last Last week Last month YTD

Vechain 0.00 -20.77% -34.41% 16%

Nano 0.65 -18.61% -30.82% -31%

IOTA 0.17 -17.28% -36.13% -55%

ChainLink 1.80 -16.46% -37.60% 501%

0x 0.19 -15.97% -33.42% -40%

BTC 0.862 0.028 0.651 0.048 0.167 -0.021 0.113 -0.012

90-day correlation

(weekly change included) ETH XRP GOLD S&P500

-14%

-12%

-10%

-8%

-6%

-4%

-2%

0%

2%

4%

1 Dec 10 Dec

Large Mid Small Bitcoin

All indexes tumble downwards after another red week

▪ After a couple of slow weeks in terms of price actions, this week kicked off with another sell off.

▪ All indexes are now down between 7-12% in December.

▪ Bitcoin is still performing better than the others, as many of the Large Caps are loosing market share to other cryptocurrencies.

▪ These market shares may be moving to Small Caps, as they have performed better than the other indexes over the last week.

Source: Bletchleyindexes.com

Percentage of Total Market Capitalization

Monthly Performance of Market Capitalization Weighted Indexes

Source: Coinpaprika.com

7Dec 17, 2019

BTC ETH BCH LTC XRP DASH NEM XMR IOTA NEO

Market

Share66.49% 7.66% 1.88% 1.34% 4.56% 0.22% 0.16% 0.45% 0.26% 0.31%

Weekly

Change0.3% -4.2% -0.4% -5.3% -5.1% -6.8% 1.9% -3.6% -8.7% 2.3%

0

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60

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90

100

January 19 February 19 March 19 April 19 May 19 June 19 July 19 August 19 September 19 October 19 November 19 December 19

Extreme Greed

Extreme Fear

The Fear & Greed Index has continued down over the last week and is

now back to “Extreme Fear”. With bitcoin going through another price

drop, investors are getting more nervous. Still, the sentiment is above

the lows seen in the end of November.

Now Last week Last month

Fear (23) Fear (26) Fear (38)

Source: alternative.me

Market sentiment continues down with the price drops

23

8Dec 17, 2019

Lowest bitcoin volume since the beginning of May

The 7-day average real trading volume* could not hold the $500 million levels

last week. What looked like an upwards trend is now looking flat again, or even

downwards. These levels have not been seen since the beginning of May.

At that time, the bitcoin price was around $5,500-$6,000.

0

500

1,000

1,500

2,000

2,500

3,000

3,500

Jan 19 Feb 19 Mar 19 Apr 19 May 19 Jun 19 Jul 19 Aug 19 Sep 19 Oct 19 Nov 19 Dec 19

*as defined by Bitwise Asset Management. ItBit exchange excluded.

Do

llar

(Millio

n)

9

Real BTC-USD Volume (7-day average)

Source: cryptowat.ch

Dec 17, 2019

Volume is down 88%

from the top in June

0%

1%

2%

3%

4%

5%

6%

7%

Feb 19 Mar 19 Apr 19 May 19 Jun 19 Jul 19 Aug 19 Sep 19 Oct 19 Nov 19 Dec 19

Small uptick in bitcoin volatility – larger move incoming?

▪ The 30-day bitcoin volatility is slowly starting to point upwards again,

after seeing a slow period.

▪ It will be interesting to see if this week’s price drop will be the start of

a larger volatility change for bitcoin.

Source: cryptowat.ch

10

BTC-USD Volatility (30-day average)

Dec 17, 2019

?

0

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600

800

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1200

0

1,000

2,000

3,000

4,000

5,000

6,000

23-Sep 30-Sep 7-Oct 14-Oct 21-Oct 28-Oct 4-Nov 11-Nov 18-Nov 25-Nov 2-Dec 9-Dec

Open

InterestVolume

Volume (BTC)

Open Interest (BTC)

1,020

Open interest to new all-time high

Just one week went by before a new record was set at

Bakkt. The total weekly volume ended at 9,256 BTC,

but the open interest went up to new highs.

▪ Last week’s volume was -7.6% lower than the previous

week.

▪ Open interest ended last week at 1,020 and is a new all-

time high, both in dollar and BTC terms.

▪ A drop in open interest is expected, as expiry of

December contracts are coming up this week. It will be

interesting to see if more contracts are held to expiry

this month.

▪ Bakkt’s cash-settled futures went live last week in

Singapore and has already seen daily volumes between

1,000-2,000 BTC.

▪ It could seem like the appetite is still larger for cash-

settled bitcoin futures among investors.

No trades have been done for the daily BTC futures

contracts over the last ten weeks.

Source: Intercontinental Exchange

11

Bakkt ™ Bitcoin (USD) Monthly Futures Contract

Dec 17, 2019

VALUATION

▪ Bitcoin have been falling since the top this summer, and a new sell-off was seen on Monday this week.

▪ A new report from Chainalysis points towards a Ponzi scheme called PlusToken.

▪ PlusToken attracted over $3 billion worth of cryptocurrency, which have been cashed out through independent OTC brokers on the exchange Huobi, after six individuals were arrested in June.

▪ This indicates that one or more of the scammers are still at large and selling off their crypto funds.

▪ Chainalysis reveals that spikes in on-chain flow to OTC brokers and rise in bitcoin-to-Tether volume have been correlating with drops in bitcoin’s price.

▪ They conclude that PlusToken cash outs correlate with drops in bitcoin’s price.

▪ While Chainalysis cannot prove causation, these observations points toward a possible reason for the sell-off we have seen since this summer.

13Dec 17, 2019

Can a scam be the reason behind the bitcoin sell-off?

Source: Chainalysis

▪ The last couple of weeks have seen the bitcoin price hoovering around the $7,000 level.

▪ The short-term picture for the bitcoin price can be challenging to analyze, and it is often important to zoom out and look out the bigger picture.

▪ Looking at the weekly log-chart for bitcoin, the price may be close to a bottom in an ascending channel that has been forming since 2014.

▪ If this channel hold, history tells us that the bitcoin price may approach levels around $100,000 -$200,000 during the next bull run.

▪ On the other hand if it does not hold…

14Dec 17, 2019

When in doubt, zoom out!

?

Source: Tradingview

▪ On Nov 23, long positions on Bitfinex started skyrocketing, and has not stopped since.

▪ There are now almost 45,000 opened long positions on Bitfinex, which is a new all-time high. The number of short positions is just above 8,500.

▪ This kind of activity is not seen on other platforms like BitMEX and Binance, where investors are actually net short.

▪ Unlike the 100x leveraged futures exchange BitMEX, Bitfinex offers comparatively low leverage of 3.3x on bitcoin and will be less affected and prone for liquidations.

▪ However, a possible “long squeeze” may be approaching. High levels like this have previously led to liquidations of longs, and a drop in the bitcoin price.

▪ It is not easy to give an answer for this outstanding rise in long positions, and it can be several different answer:

▪ Are someone hedging, and opening their short positions on another platform?

▪ Or are Bitfinex traders long-term optimistic, and view the current price drop as a buying opportunity?

15Dec 17, 2019

BTC long positions to all-time high on Bitfinex

Source: Tradingview

December 2019 March 2020

CME 0.38% 1.49%

Other

platforms0.05% 0.50%

CME 6,860

Other platforms 6,888

6,700

6,800

6,900

7,000

7,100

7,200

7,300

7,400

7,500

Dec 19 Jan 20 Feb 20 Mar 20

CME

Kraken, Bitmex, Deribit (Average)

Last week

Last week

A flattening forward curve - Futures premium rates almost gone

▪ With the recent price drop in bitcoin, the futures

premium rates have been following.

▪ Investors are also turning more bearish on the price

movements in bitcoin until March 2020, with the

premium rates dropping this week.

▪ The premium rate at Bitmex, Kraken and Deribit is

now only 0.5% on average for March contracts, down

from almost 2% last week.

Source: Kraken, CME, Bitmex, Deribit

BTC Futures Contracts Settlement Prices (Dec 17 – Mar 20)

16

Premium rates for BTC contracts

Dec 17, 2019

*On BitMEX

BLOCKCHAIN ACTIVITY

300

500

700

900

1,100

1,300

1,500

1,700

1,900

2,100

Jan 19 Feb 19 Mar 19 Apr 19 May 19 Jun 19 Jul 19 Aug 19 Sep 19 Oct 19 Nov 19 Dec 19

Confirmed Estimated USD Transaction Value: 7 Day Average

On-chain Bitcoin activity (7-day average)

Source: Blockhain.info, Coin Metrics

• No significant changes in Bitcoin transaction activity over the last week, except of a

continued drop in miner fees.

• Both the number of transactions and the transaction value for Bitcoin have been

flattening out over the past weeks.

• The 7-day average for Bitcoin miner fees is down to $153,496, which is the

lowest levels since March this year.

• As explained last week, this doesn’t necessarily need to be negative and can have

natural explanations. This could be more effective transactions, a lagging effect of

less transactions or better fee estimation by wallets.

• Last time the miner fees were this low, the price of bitcoin was around $4,000.

Bitcoin miner fees continue to drop - now at March 2019 levels

250,000

270,000

290,000

310,000

330,000

350,000

370,000

390,000

Jan 19 Feb 19 Mar 19 Apr 19 May 19 Jun 19 Jul 19 Aug 19 Sep 19 Oct 19 Nov 19 Dec 19

Confirmed Transactions Per Day: 7 Day Average

18Dec 17, 2019

Last Last week Last month YTD

Transaction Value (bUSD) $0.871 -8.89% -8.12% 90.17%

Transaction Count 304,139 -2.11% -3.53% 10.96%

Miner Fees (kUSD) $153,496 -7.90% -37.85% 165.53%

Active Addresses 728,978 1.61% 3.72% 31.41%

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180

3 Dec 4 Dec 5 Dec 6 Dec 7 Dec 8 Dec 9 Dec 10 Dec 11 Dec 12 Dec 13 Dec 14 Dec 15 Dec 16 Dec

Bitfinex Lightning Node – Channel Count

Growth slows down for Bitfinex’s lightning node

• After a promising start, the growth for Bitfinex’s lightning node has now slowed down.

• The capacity of the node is now close to 17 BTC, equaling 2% of the total capacity of the network.

• With 169 active channel, that is a slight weekly growth of 5.6%.

• Moreover, Bitfinex’s node has 147 connected nodes, which equals 2.4% of all active nodes.

• It will be interesting to see if other well-known exchanges follow Bitfinex in 2020.

19Dec 17, 2019

Capacity Channels

16.7 BTC 169

Weekly Change +6.6% +5.6%

Source: 1ML

Contact: research@arcane.no

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