Crypto Market Forecast: W/C 7 December 2020

It has been another week of steady gains in digital asset markets. The Bitcoin price rose ~5% in the last week and now trades comfortably above the USD19,000 price level. At the same time the Ethereum price was up ~2% and the Ripple Price ended up 4%. The overall market cap for crypto rose by ~4% for the week.

Data from crypto sentiment platform Santiment indicates that there has been a spike in mentions of the term ‘Stablecoin’ in the last week. This is likely thanks to the announcement of the Stablecoin Tethering and Bank Licensing Enforcement (STABLE) Bill on Wednesday. If passed, this draft bill in the US congress would amend the Federal Deposit Insurance Act and require stablecoin issuers to acquire banking charters, get approval from the Federal Reserve, and hold FDIC insurance. It is highly unlikely that any of the existing stablecoins would be able to meet these requirements. The bill views stablecoins as a continuation of the systemic ‘shadow banking’ risks that crippled the global financial system in 2008-2009.

Additionally, if the law does pass it may criminalize individuals who validate and maintain public decentralized networks like Ethereum which stablecoins operate on top of. Peter Van Valkenburgh research director of digital currency advocacy group Coin Center explains in a blog post that while the bill does not target the smart contracts that manage and make stablecoins functional, it would make potentially make running the software that processes smart contracts for stablecoins such as Dai or USDC, illegal.

On Twitter, Rohan Grey, the assistant professor at Willamette University College of Law who assisted with drafting the bill, clarified that nodes validating blocks with stablecoin transactions in them may be legally liable for their consequences under the new law. It appears that in Grey’s view even if stablecoins are issued on a decentralized network like Ethereum, there are still accountable parties that could to be targeted for facilitating the flow of stablecoin transactions. Advocacy groups like Coin Center are now concerned because of how deeply Stablecoins are interwoven across the Ethereum network, through Decentralized Finance and money market protocols like YFI and Curve that include Stablecoins as part of their core solutions.

Despite the systemic implications of the STABLE act, Ethereum enjoyed healthy price gains last week. Michael Sonnenshein, managing director at Grayscale Investments told Bloomberg in an interview on December 4th, “Over the course of 2020 we are seeing a new group of investors who are Ethereum first and in some cases Ethereum only.” This year the network has underpinned a booming Defi ecosystem and successfully implemented a milestone upgrade. The price of ETH has risen over 350% YTD and Sonnenshiem suggests “Ethereum has along the same lines of the staying power Bitcoin has.”

Crypto news for the week ahead

8th December – Haven protocol fork

Haven (XHV), a privacy-focused stablecoin network currency, is set to conduct a major network upgrade by hard-fork this Tuesday. The release will upgrade Haven’s codebase to Monero v0.16 and this should improve performance and transaction verification. The upgrades would allow for the launch of the Haven Web vault software with complete functionality for xUSD ( the network’s US dollar stablecoin) conversions and transactions. The price of XHV has risen 4% in the last week.

12th December – Spark token Airdrop distribution (XRP holders)

As previously announced the Flare network plans to airdrop 45 billion of its native ‘Spark’ token to XRP holders at a 1:1 ratio this Saturday. The Spark token is native to the Flare network platform and allows users and developers to run smart contract services on XRP, using a virtual machine powered by Ethereum. A key goal of the Flare network is to create a two-way bridge between the Ethereum and XRP networks. The airdrop has lead to a surge in new sign-ups and account activity on the XRP ledger. The price of XRP has risen ~140% in the last 30 days.

Top 10 Crypto Summary

It was a mixed week for large-cap assets on the Brave New Coin market cap top 10. Litecoin (LTC) the digital silver to Bitcoin’s digital gold, was the best performing asset on the list. Some have described Litecoin in the past as a ‘glorified testnet for Bitcoin’ Onchain data suggests, however, that the number of daily transactions on the Litecoin blockchain has risen by 198% implying growing interest in transacting on the network.

Bitcoin Price Chart

Bitcoin enjoyed another bullish week of price action rising by just over 5%. Glassnode reports that 12.9% of the circulating Bitcoin (2.4 million BTC) is currently held in exchange wallets- down from 16% at the beginning of the year. Coins moving off exchanges is a bullish sign that holders are not immediately seeking to liquidate out of their BTC holdings into other crypto or fiat currencies and may instead be willing to be keeping them privately or with other custodians.