The TIE
December 07, 2020

The TIE Weekly Insights (Dec 7)

Highlights from last week:

Video Interview

YouTube - Betting $100M+ on Bitcoin Mining in North America

Mike Colyer (CEO of DCG Foundry) joins The TIE's Fundamental Value Podcast to discuss Digital Currency Group's $100M+ investment in North American cryptocurrency mining, providing financing to miners, miners (shrinking) influence over price, why producing new equipment is so difficult, and so much more.

Watch here

Market Overview

The overall cryptocurrency market cap decreased by -1.81% over the past 7 days from $591.3B to $580.6B. Crypto once again saw an influx of institutional interest over the past week, as BlackRock CEO Larry Fink and AllianceBernstein both discussed the merits of Bitcoin and its place in the global financial system. Microstrategy continued to build its Bitcoin treasury, the firm filed with the SEC that it had purchased an additional 2,574 Bitcoins ($50M USD).

Crypto Market Cap

Bitcoin was the best performer asset among the majors this past week, with a +6.4% return. Trading volume and Tweet volume were down for all major assets, with the average coin seeing a -33% dip in trading activity and a -17% dip in social activity.

Market Overview

Weekly Performance of DeFi Tokens

DeFi tokens outperformed the majors this past week, with a median return of +6.1%. 14 out of the top 20 tokens saw a positive increase, with SUSHI leading the way at +52.6% following the announcement of its merger with Yearn Finance.

DeFi Performance

Bitcoin This Week

BTC traded within a 10% range, from the low of $18,901 to the high of $19,915 (on Coinbase). This was Bitcoin’s 8th week out of the last 10 weeks that it closed up/green.

Despite high volatility early in the week, the market chopped around inside the range that was created on Tuesday. Early on Monday, BTC’s price attempted to break it's all-time-high but came up short by less than 1%. On Tuesday, BTC broke upwards again, breaking it's all-time-high on Coinbase. After seeing a -10% sell off shortly after breaking the high, investor sentiment started to become more negative as indicated by The TIE’s sentiment score.

Bitcoin Performance this week

Bitcoin Sets New All-Time-High.. But Did It Really?

Bitcoin’s all-time-high price is difficult to define, because the price of BTC varies depending on the exchange you’re trading on. Our friends at Kaiko just published an insightful piece on this topic, you can find it here. The two charts below show a comparison of Bitcoin’s prices by exchange. The first chart is Bitcoin’s ATHs in 2017, the second chart shows the recent highs in 2020.

Looking at 2017 data, it is immediately evident that there is a clear difference in the price of BTC on each exchange. On December 17, 2017 when BTC initially hit its ATH price, the spread between the highest and lowest exchange price was $1,624. CEXio hit the highest price of $21,284 while Kraken had the lowest of $19,660.

Bitcoin ATH 2017

By comparison, spreads as Bitcoin approached its ATH in 2020 have been significantly lower, demonstrating the increased efficiency of the market. On December 1st, the spread between the highest and lowest exchange price was $68. Bitfinex traded at the highest price of $19,956 while Kraken was once again the lowest.

Bitcoin ATH 2020

So, has Bitcoin hit a new all-time-high? Yes, on most major exchanges.

Bitcoin ATH prices

Bitcoin Ends Nov at Highest Closing Price in its History

Bitcoin ended the month of November at $19,714, its highest monthly closing price in its history. November was also BTC’s highest return (+43%) since May of 2019.

XRP Twitter users

Long Term Sentiment

XRP currently has the highest long term sentiment score among the major cryptocurrencies. Investor sentiment has become increasingly more positive for XRP and LTC over the past month.

Long term sentiment score is a measure of how positive or negative conversations on Twitter have been about a particular coin over the last 50 days vs. the previous 200 days. A score above 50 implies that conversations have been more positive during the past 50 days vs. the previous 200. A score below 50 implies that conversations are becoming more negative. 

Long term sentiment scores

The chart below shows the change in long term sentiment scores since the beginning of 2020. Sentiment has increased by 314% for Ethereum while Tezos has decreased by -15%, being the only major to decrease YTD.

YTD Changes

When we first started tracking Chainlink, LINK averaged 50 tweets per $1M in trading volume (the average crypto had approximately 1 tweet per $1M in trading volume). In other words, ChainLink had about 50x more tweets as a mutiple of trading volume as opposed to the average cryptocurrency, suggesting the asset might be overhyped. . Link's hype-to-activity ratio (social volume as a multiple of trading activity) has since fallen to 1.3 tweets/$1M volume, in line with most other major assets, and suggesting that the assets trading volume is now in line with its social hype Hype-to-activity ratio measures the number of tweets a particular coin has per each $1M in reported trading volume of that coin. Hype to Activity Ratio = (30 Day Average Tweet Volume / (30 Day Average Trading Volume / 1M))

LINK

The successful launch of Eth2 has caught the media's attention this past week. Eth2 will allow anyone to become a validator in the network by depositing ETH in multiples of 32, and earn ETH rewards in exchanges. Coinbase announced that they will support Eth2 Beacon chain staking. Yearn Finance has continued on its merger spree, partnering with SushiSwap on Monday.

SushiSwap and Yearn Finance Merge

The recent merger between Sushiswap & Yearn Finance has caused Twitter conversations to soar! Within 48 hours after the announcement, Tweet volumes increased by +288% for SUSHI & +61% for YFI. SUSHI even surpassed YFI tweet volume for the first time in its short history.

These conversations became increasingly more positive after the merger announcement, as indicated by The TIE's Hourly Sentiment Score. Investor Sentiment on SUSHI had spiked from 57 to 93 before cooling off to around 76. YFI was positively impacted as well, but more muted.

Decentralized Exchanges

Uniswap continues to dominate decentralized exchanges in trading volume. Over the last 7 days, Uniswap experienced 35% more volume than the next top 10 DEXs combined.

DEX volume

Additionally, Uniswap had nearly 100,000 active traders on the platform over the last 7 days while the combined total of the next top 10 DEXs barely surpassed 10,000.

DEX Traders

Price Surges After Genesis Block Ventures Acquired OMG Network

On Friday, Genesis Block Ventures acquired OMG Network. The TIE's SigDev platform notified clients of the announcement one-hour and thirty minutes mins prior to the price of OMG surging by +18%. OMG also experienced a +442% increase in tweet volume within 10 hours after the news.

OMG gets acquired by GBV

The Launch of DCRDEX Sparked Excitement Within the Decred Community

On Oct 21, Decred released DCRDEX on mainnet. Since the announcement, the price of DCR climbed from $11.8 to $25.8 (+119%) in 40 days to reach a new yearly high. Following the news, DCR tweet volume spiked 197%, reaching a new 2-year high.

Decred Launched DCRDEX

Retail Investors Continue to pay Significant Premium for Crypto Exposure

According to data from TradeBlock, premiums on Grayscale's product line remain significant. While GBTC has seen inflows in the billions this year, so too has retail investors interest in holding the product. GBTC's premium-to-NAV remains at a hefty 22.7%.

Premiums on Grayscale's other products are even more significant. ETHE, Grayscale's Ethereum product is trading at a 143% premium to NAV. In other words, investors are currently paying over $1,400 per ETH (as compared to a market price of $591) for exposure to the asset.

Currently investors are paying an insane, 3,000% premium for exposure to Litecoin through LTCN. The nav of LTCN $7.85 and the product is trading at $243 a share.

Other Premiums Grayscale Ethereum Classic Trust (OTCQX: ETCG) - 47% Grayscale Bitcoin Cash Trust (OTCQX: BCHG) - 1,164%

This begs the question, are investors seriously willing to pay such high premiums for easy exposure to these cryptocurrencies in their retirement accounts, or are retail customers unaware of the premiums that they are currently paying? The incentive is clear for institutional and accredited investors to continue pouring money into these products and if premiums hold, we expect the trend to continue. According to TradeBlock's Hard Fork newsletter, nearly 3% of BTC's entire supply is locked in GBTC. For comparison, SPY, the most popular ETF for exposure to the S&P 500 only has 1.25% market penetration.

Notable News

Dow Jones Indicies to Launch Cryptocurrency Index

Visa Partners to Launch Worlds 1st Bitcoin Rewards Credit Card

Kevin O'Leary is Ready to Put 5% of His Portfolio into SEC Approved Bitcoin ETF

This Week's Podcast Episodes

Ep. 30 - Crypto Compliance and Growth with Chen Arad (Solidus Labs)
In our thirtieth episode Chen Arad (COO at Solidus Labs) discusses shared-surveillance as a fundamental infrastructure necessity for regulated crypto growth. Listen here

Ep. 31 - Investing in Crypto Funds with Matthew Edwards (Dalpha Capital)
In our thirty-first episode Matthew Edwards (CEO and CIO at Dalpha Capital) discusses conducting due diligence on and investing in crypto funds, the traits he looks for in fund managers, how he handles funds with small track records, and benchmarking performance. Listen here