Crypto Market Forecast: W/C 5th October 2020

It was a quiet week of price action in crypto markets with the Bitcoin price and Ethereum price falling by just 0.6% and 0.2% respectively. Elsewhere in altcoin markets, a number of DeFi governance tokens suffered heavy losses with the Uniswap (UNI) token falling by ~22% and the native token of Yearn.Finance (YFI) falling by 34%. Nonetheless, the overall crypto market cap fell by just ~1% over the last week.

Bitcoin markets recovered after a price dip on Thursday following news that US authorities had filed charges against Bitcoin derivatives exchange Bitmex and its founders of allowing unregistered trading and ongoing violations of US anti-money laundering laws. The price of Bitcoin dipped to as low USD10,431 on October 2nd but subsequently ended the week near the USD10,600 level.

Five entities and three individuals that manage the exchange were charged with violating multiple CFTC regulations including failing to implement anti-money laundering procedures. US-based co-founder Samuel Reed was arrested while the other defendants, CEO Arthur Hayes, and co-founder Ben Delo, remain at large. The platform appears to be working normally with withdrawal and deposit requests still being processed.

In the eight hours following the announcement of the charges open interest (which is an indicator of capital flowing in an out of a market) in Bitmex dropped by ~16% and hit new yearly lows at 45,112BTC. Additionally ~48,400BTC – or about 25% of the total Bitcoin held by the exchange – was withdrawn by Bitmex traders. A chunk of these withdrawals appears to have been captured by the Binance and Gemini exchanges. In a statement on its website, Bitmex says it will defend against the allegations ‘vigorously’ and views them as ‘heavy-handed’.

Another factor in the sell-off may have been the announcement that US President Donald Trump and the First Lady had tested positive for COVID-19. The news saw the price of BTC lower alongwith prices in the US and European equity markets. Prices in the Nasdaq composite fell by ~1% on Friday while the European STOXX 600 SXXP fell by 0.6%. Gold, considered to be a strong safe-haven investment during times of economic and political uncertainty was up by ~0.3% outperforming other markets. Bitcoin has shown an increasing correlation with US stock markets in 2020 as pandemic news has pushed prices down and government interventions pushed equities up.

President Trump announced in a new twitter video that he is getting “great reports” from his doctors. Trump made the briefing just before the Dow Jones futures market was set to open and markets responded positively to the news.

Crypto news for the week ahead

6th October – REN and Balancer listing on Coinbase Two DeFi tokens powering Balancer (BAL) – an automated market maker, and Ren (REN) – a protocol for transferring digital tokens between blockchains, will begin trading on Coinbase Pro on October 6th as long as liquidity conditions are met. Trading will launch with a BAL/USD, BAL/BTC, REN/USD and REN/BTC pairs and the exchange will begin inbound transfers the day before.

12th October – Final Ethereum 2.0 testnet Zinken launches
After issues following the Spadina testnet, Ethereum devs will conduct one more dress rehearsal titled Zinken, prior to the Eth2 genesis. Ethereum researcher Danny Ryan says the testnet is “primarily looking for a clean client release process and minimal headaches for users”. The dress rehearsal testnets were set up to give Ethereum stakers a trial run to practice moving ETH into the Ethereum 2.0 deposit contract, a key step for the new network.

Top 10 Crypto Summary

Price-performance for large-cap cryptocurrencies on the Brave New Coin market cap top 10 was a mixed bag this week. BNB coin(BNB) was a clear alpha performer rising by ~10%. The recently launched Binance smart chain which is used to power smart contracts and decentralized applications and is powered by the BNB coin, has just introduced a new rewards program to encourage Dapp development and building within its ecosystem.

Bitcoin Price Chart

Bitcoin markets were able to recover from a late-week slump to end the week near where it began. In the last week, the number of non-zero BTC addresses hit an all-time high. Onchain analyst Willy Woo has suggested that while onchain metrics imply Bitcoin has new investors “unfettered trading games on derivative platforms is holding the price down.”