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2018 Q3 Review – Consolidation

Since 2012, the strongest BTC price movements have come in Q4, even when excluding the unusual bull runs in 2013 and 2017. This bodes well for the current period of decreasing volatility, a common trait before large price moves.

The total crypto market cap over the past quarter has been marked with decreasing volatility and fresh yearly lows. Of the large cap coins, Stellar (XLM) and Ripple (XRP) were among the largest gainers this quarter while ETH and IOTA were the biggest losers. Bitcoin dominance, which can be used as a market wide confidence index, rose dramatically and peaked at over 57% on September 12th.

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Source: [https://www.coinsignals.trade/](https://www.coinsignals.trade/)

There was a moderately positive price correlation between all coins during Q3. BTC correlated most positively with Litecoin (LTC) and most negatively with Gold. ETH correlated most positively with LTC and most negatively with Gold. Monero (XMR) and Gold had the strongest negative correlation among the assets surveyed.

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Source: [https://www.sifrdata.com/cryptocurrency-correlation-matrix/](https://www.sifrdata.com/cryptocurrency-correlation-matrix/)

Most Network Usage Metrics Continue to Decline

Transaction counts, daily active addresses (DAA), and average transaction values have declined or remained flat for most coins over the past three months. All three metrics point to decreased or flat network use. BTC’s transactions per day have begun to increase slightly since April, whereas ETH’s transactions per day and DAA continue to remain muted.

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Transactions per Day

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Daily Active Addresses

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Average Transaction Value

ICO Raises Down, ETH Treasuries Near Empty

The Initial Coin Offering (ICO) phenomenon has slowed significantly in Q3, with 212 ICOs raising US$3.69 billion. However, the entire year of 2017 saw a mere US$3.88 billion raised. The month of September saw the fewest ICOs of the entire year at 54. The trading and investing platform tZERO, a subsidiary of Overstock.com, was the largest ICO of the quarter, raising US$134 million.

A recent report by Bitmex Research found that 75% of all ETH raised by ICOs has been sold or moved out of ICO addresses as of October. The report also concluded that even at current ETH prices "projects are still sitting on unrealized gains, rather than losses." The DigixDAO project and Golem are the two largest holders of ICO ETH, with 764,450ETH between them, or US$171.23 million at current prices.

Coinbase says, "what bear market?"

Despite depressed prices, Coinbase continued to establish crypto business dominance market wide with several new hires, acquisitions, and products. A recent funding round gives Coinbase an US$8 billion valuation and brings continued whispers of an IPO or Security Token Offering. Rumors of a merger and acquisition with a FAANG company have also been permeating crypto back channels.

In July, Coinbase launched a custodial service for institutional investors. Custodial services are necessary for institutional players to enter the arena and Coinbase had attracted 25 clients as of October 3rd. As one investor put it, "you need somebody to sue" if something goes wrong. In mid July, Coinbase confirmed suspicions that the company would add several new assets to its platform. Cardano (ADA), Basic Attention Token (BAT), Stellar Lumens (XLM), Zcash (ZEC), and 0x (ZRX) are now all available on the trading platform. In August, Coinbase added full buy and sell support for Ethereum Classic (ETC) and in late September, they introduced Bundles, which allow for a simple market cap-weighted basket purchase of all currencies on the platform.

ETF Rejection Jamboree

A slew of regulatory decisions have come down from the US Securities and Exchange Commission (SEC) this quarter. The existence of a BTC-backed ETF would likely prove to be extremely bullish for crypto over the long term, as it would provide uncomplicated asset exposure to a much wider audience.

In July, the Winklevoss COIN ETF was rejected for the second time, with the regulator stating its mission, "is designed to prevent fraudulent or manipulative acts or practices and to protect investors." In August, five ETF applications from the same company were denied by the SEC. That decision was stayed a day later and no new information has been provided. On September 20th, the SEC postponed a decision on the VanEck/SolidX bitcoin ETF until later this year. In the meantime, a rumored Coinbase and BlackRock ETF may also be in the mix within the next few months.

‘Tis The Season

Since 2012, the strongest BTC price movements have come in Q4, even when excluding the unusual bull runs in 2013 and 2017. This bodes well for the current period of decreasing volatility, a common trait before large price moves. Whether or not BTC price structure represents a bullish Falling Wedge or bearish Descending Triangle remains to be seen, but a definitive answer to that question will likely come before the end of the year. Understanding price movements in BTC is important as the largest coin by market cap tends to dictate the direction of the entire crypto market.

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