Crypto Market Forecast: W/C 31st August 2020

A mixed result in major crypto markets last week with the Bitcoin price falling by ~1%, while the Ethereum price was up ~7%. The XRP price was down 2%. The overall crypto market cap for all coins was up ~2% – essentially reversing the losses of the previous week.

The dominant narrative in crypto news continues to the gains in the booming decentralized finance (DeFi) token ecosystem. DeFi projects utilize smart contracts instead of third-party intermediaries to power financial products on decentralized platform blockchains such as Ethereum. Primarily these DeFi tokens are designed to act as governance tokens that empower holders to vote on proposals to update the DeFi protocols they are native to. In recent times they have gained value as speculative assets. For example, the native tokens of the defi protocols Aave (LEND), UMA (UMA), Synthetic Network (SNT), and Compound (COMPOUND) rose 40%, 150%, 25%, and 28% respectively in the last week. Asset valuations in the sector are also soaring. YFI, the governance token of DeFi protocol yearn.finance, for example rose 172% in the last week and now trades at US$33,801 – nearly three times the price of Bitcoin.

Yearn.finance aggregates the yields from a variety of lending and borrowing DeFi protocols into a single platform. It also lets users invest in ‘vaults‘, where they can earn yields for providing market liquidity together. As well as earning yield or interest, users earn YFI for investing in vaults, creating a ‘loyalty’ system where users of the system earn rewards for their participation in the protocol. According to data from defipulse, the total USD value of assets locked in yearn.finance currently sits at ~USD944 million and has increased 377% since the start of August.

Also last week the Ethereum classic blockchain suffered yet another 51% attack. This is the third time the network has by this kind of attack in a month. A 51% attack refers to an attack where a group of miners is able to capture more than 50% of the network’s mining hash rate or computing power. When they manage to do this they can reverse or double-spend transactions that were completed on the network.

According to a tweet by Austrian mining firm Bitfly the attack reorganized 7000 blocks or two day’s worth of mining, making it nearly twice as severe as the previous two attacks. American exchange Coinbase took action to safeguard its users after the first two attacks by extending deposit and withdrawal confirmation times for ETC to approximately two weeks.

Crypto news for the week ahead

31st August– Celo token launches for trading on Coinbase Pro. The Celo platform is designed to make it easy for anyone with a smartphone to send, receive, and store stablecoins without needing a crypto wallet and only using phone numbers. Coinbase has announced that it will begin accepting inbound transfers of Celo (CGLD) the cryptocurrency that acts as a utility and governance token for the Celo platform on Monday. Once sufficient supply of Celo is established on the platform, trading on CGLD-USD, CGLD-BTC, CGLD-EUR and CGLD-GBP will launch.

31st August – CME Bitcoin futures contract settlement. This Monday marks the settlement day for the CME XBT BTCQ20 March to September futures contract. The nature of futures contracts means they need to be settled on a predefined date, based on a contract. All contracts will have to be traded, or settled, before this date. There is generally a fall in the trading volume of futures around expiration, which coincides with a rise in volatility and a potential short/long squeeze. CME Bitcoin futures hit new highs over the past week, potentially signaling an increase in institutional interest in Bitcoin.

Top 10 Crypto Summary

It was a varied week for large-cap assets with a few standout gainers. Chainlink (LINK) enjoyed healthy double digit gains. Last week it was announced that the decentralized oracle provider has acquired DECO from Cornell University, a technology that optimizes HTTPS/TLS for data transmission across the internet. Over the weekend Oasis Network also announced that it would be integrating with the Chainlink Oracle network to enable privacy-focused DeFi applications.

Bitcoin Price Chart

The Bitcoin price was steady over the week, ending close to where it began. Twice there were spikes in buying volume as the price dropped towards USD11,250, suggesting that there is strong support around this price level. Onchain Data provider Glassnode reported on August 28th that the number number of addresses holding at least 0.1BTC just reached an ATH of 3,132,493, suggesting that network wealth continues to become more widely distributed.