Coinshares, a digital asset management firm based out of London, has just published its semi-annual report on trends in the crypto industry for the first half of 2019. It finds that retail investing is “at a low ebb”, but that the fundamental push that is driving Bitcoin prices further north is coming from institutional investors. The report points to large institutions as the ones in charge, which have primarily focused on Bitcoin. Other altcoins have benefited from the recent rally, but not as much as Bitcoin. BTC’s dominance of market share has increased from 66.4% to 68.5% in the recent past.
The report also looks back to the parabolic rally in 2017 to discover if any of the same factors are present this go around. Much has been written that 2019 looks eerily similar to 2017, but Coinshares noted that there were significant differences: “Four factors that were present during the 2017 bull run have been conspicuously absent during the current rally: widespread media attention; spikes in ‘bitcoin’ searches on Google; spikes in tweets about Bitcoin; and the aforementioned corresponding rally in altcoins.”
In 2017, the participation of institutional interests was but a dream, but much has changed in the space of two-years time. Fidelity Investments is opening its doors and custodial services, bit by bit, to institutional clients, but holding back the floodgates on its multi-million level of retail customers. The Intercontinental Exchange, owners of the New York Stock Exchange, are in the final testing mode of its cutting-edge Bakkt crypto exchange, while ErisX and LedgerX are racing to issue physically settled futures contracts, as well. And then there is Facebook’s Libra and its political backlash.
Coinshares is not that bothered by pushback from government officials and regulators. These groups are responding as they must to protect the public interest, but the report still believes that Libra shows much promise: “While Libra is centralised, permissioned, trust-based, not censorship resistant, not scarce, and arguably not even a cryptocurrency at all (though this term is poorly defined…) it does offer potential benefits to the world’s unbanked that currently don’t have access to services we take for granted in the West, such as online shopping.”
The report concludes that institutional money has been drawn to Bitcoin and other tokens, as well, due to the fundamental inroads that are being made to accommodate their unique needs for security and technical tools to manage market positions. The report has also followed trends in the stablecoin arena, more specifically with Tether, where nearly $4 billion has been stashed for further deployment. Decrypt, a crypto data analysis firm, has determined that, “Vast sums of tether are bought wholesale in advance of massive trades, by large over-the-counter trading desks”. These OTC desks typically support institutional buyers or “Whales”, who have multi-million dollar accounts.
Aside from Bitcoin, the report also speaks to trends in Ethereum (ETH) and Ripple (XRP). As for ETH, the crypto industry has been anxiously awaiting its next significant upgrade, the launch of Ethereum 2.0 or “Serenity”. Unfortunately, the development effort has been bogged down in what can best be termed as “internal disagreements”. Although ETH has delivered a healthy return of 54% for the year to date, it is nowhere near the 220% return that Bitcoin has enjoyed.
XRP, aka Ripple, is a completely different story. It has posted a negative 10% loss for 2019. The company seems to be always embroiled in a competitive squabble with central banks and the SWIFT network over its proposed cross-border payment service. There have been favorable comments from global policymakers, like Christine Lagarde, the head of the IMF, but valuations have still suffered.
Last week, the Fed announced its “FedNow” service for quicker payments, but XRP fell from $0.33 down to $0.31. Senior executives of Ripple sit on the Fed steering committee for the new service, and it seems that Ripple’s blockchain architecture may serve as part of the Fed’s final solution, but the market is not convinced.
Coinshares’ opinion: “It is not entirely clear if these positive views apply to XRP the digital asset, or if they are simply made in reference to the company Ripple, their RippleNet product suite, or all of the above.” One thing to keep in mind, according to Coinshares, is that Ripple management occasionally sells XRP coins to fund its current development activities.