Dear Friend,
My apologies for the delayed market commentary, we've had a spontaneous issue with our mailing provider and have just restore service. So here it is...
31 days ago, the flagship cryptocurrency's market cap sat at $103 billion: since then, it's up over 30% over the last month: and having sprung from under $5,000 on April 4th to over $7,700 at the time of writing, the case for the new bull market looks stronger than ever.
Conferences were lively, and while panelists preach patience and caution, everyone seems more positive and at ease. Consensus NY was quite different than the previous year and the ICO fundraising teams were not lurking around every corner ready to pitch the next sole that walks by. This of course was a personal relief but it does say something about the state of the primary market for token sales.
Everyone in the industry looks to have collectively exhaled after fighting for survival over the past 6 months. People are looking ahead to a brighter future. My conversations with folks i met during the conference were deeper and higher in quality overall.
Has it been a rough 24 hours? Maybe so. But corrections are part of market dynamics, and the overall trend is far more important than a daily blip.
Market Analysis
Traders are brimming with optimism, with Bitcoin being the center of attention.
No amount of negative news seems to bring them down as any pullback is seen as a buy low opportunity. With new money starting to flow in, it appears that FUD is out and FOMO is back in.
With Bitcoin's dominance topping 60% at one point this month, the major crypto looks to have gained full control over the spring rally. It's back to: as bitcoin goes, so does the market. The bitcoin steamroller has been knocking out short positions en masse, further strengthening its run.
The market capitalization of entire cryptocurrency market peaked at around $285,000,00,000, after starting the trading month around the $175,000,000,000 level. To give some context to rapid recovery seen in digital assets this year, the market capitalization of the entire market fell to close to the $110,000,000,000 level in early February.
Bitcoin started the trading month around the $5,500 level before eventually peaking just above the $9,000 resistance level towards the end of the month. The number one cryptocurrency was exceptionally well supported on any technical pullbacks, further underscoring the high buying demand for this digital asset at present.
Despite a pullback over the last 24 hours, the big psychological number on traders' minds will undoubtedly be the $10,000 resistance level. A confirmed breakout above this key area could spark the next wave of heavy technical buying, with the daily time frame chart showing only limited resistance for the BTC/USD pair until the $11,600 level once clearly above the $10,000 level.
Bullish patterns on the daily time also suggest that the BTC/USD pair could eventually test towards the $12,800 to $13,000 levels, while major technical support for the number one cryptocurrency is currently found at the $7,500 and $6,500 levels.
This month also saw a substantial amount of movement among the top ten cryptocurrencies by market capitalization, with Ethereum and Litecoin continuing to build on their strong early year trading gains. Ethereum fell just short of the $300.00 resistance level, before succumbing to downside pressure.
Looking ahead for the second largest cryptocurrency, Ethereum traders will well remember the significance of the $500.00 level, although at present the $280.00 level has become a key pivot point for the ETH/USD pair. Further gains above the $280.00 level may prompt a continuation of the bullish trend upside towards the $325.00 and $380.00 levels, while major technical support now comes in at the $220.00 and $190.00 levels.
Litecoin has also remained on traders' radars, with the popular cryptocurrency peaking just above the $120.00 level this month. The struggle with the $100.00 resistance level appeared to be over before the recent pullback in the LTC/USD pair took hold.
Going forward, major technical resistance for the LTC/USD pair is now found at the $125.00 and $160.00 levels, with further extended resistance at the $180.00 level. To the downside, key technical support is located at the $100.00 and $90.00 levels, with critical support found at the $77.00 level.
Ripple also deserves a notable mention this month, as the third largest cryptocurrency by market capitalization staged an impressive recovery towards the $0.4750 level after sliding into dangerous territory below the $0.3000 handle at the start of the month.
Technicals on the daily time frame for the XRP/USD pair indicate a bullish breakout is currently underway, with the $0.5500 and $0.6000 levels the key upside targets at present. To the downside, support for the XRP/USD pair is currently found at the $0.3600 and $0.3300 level.
Other notable gainers amongst the top coins included EOS, Binance Coin, Bitcoin Cash, Cardano and Bitcoin SV. Cosmos had a roller-coaster month, after initially coming under some heavy downside pressure before recovering to a new all-time record high.
PundiX and Holo both performed major technical breakouts this month, with PundiX making triple-digit gains after establishing a major price floor in early month trading. The breakout in Holo was no less impressive, as the Holo/USD pair made significant gains and easily surpassed its all-time trading high.
Looking ahead for June, the dominant theme is likely to be Bitcoin and the major coins as they lead the crypto charge forward. The big market action is likely to occur if Bitcoin breaks above the $10,000 level, this may cause a knock-on effect, bringing back levels of crypto euphoria not seen since late December 2017.
Security is still a major concern
With the market seemingly doubling in size over the last few months, security vulnerabilities are once again in the spotlight. The 7,000 BTC hack of Binance rocked the market early in the month. BNB had a precipitous albeit short-lived drop in price.
BNB Price Drop After the Hack (via Coinmarketcap.com)
Binance stopped withdrawals and promised to cover the losses, but when trading restarted the market saw a major sell-off. The hack underscored that no centralized exchange is truly safe, and that Binance is fast approaching the too-big-to-fail status.
In addition, the SIM swapping attacks have started to gain attention. Michael Terpin won his case against Nicholas Truglia over $75 million fraud. The NBC Bay Area story further shed light on this particular danger facing crypto adopters.
While these dangers hurt the overall market space, they are beneficial for some. For example, Ledger has seen its sales skyrocket in the wake of the recent events. As security becomes a bigger concern, companies offering to provide related products and services will see their revenue increase.
As the dApp market begins to grow and smart contract security flaws once again gain spotlight we may see a similar trend with smart contract auditing and security service providers.
The centralized nature of DLT
Another thing that came out of the Binance hack, was the reinvigoration of the decentralization debate. The idea that Binance could facilitate a reorg to undo the damage of the attack once again highlighted how truly centralized the industry is. In the BCH ecosystem mining pools actually used the power of 51% to undo malicious transactions.
However, PoW networks are not the only ones dealing with this issue. With the Stellar network faltering and being unable to process transactions for several hours, the industry was faced with a very practical usability issue stemming from centralization.
Decentralization is supposed to be one of the key principles of the industry. However, as it stands, the space is far from it in practice. While these issues were easy to sweep under the rug in a bear market, as the capitalization of the projects grows the risks and dangers of centralization may once again receive attention.
Start to build it and they will come
2018 was more than just a year of crypto hardship, it was also a time of silent building. A number of projects dropped down the CMC 100 and out of the spotlight, while their engineers toiled in the shadows. Now that some of the fruits of their labor are starting to blossom, the big boys from the traditional industries are starting to pay attention again.
The blockchain platform TradeLens, conceived by IBM and Maersk, has had two new big players, MSC and CMA CGM, join. The project represents one of the tangible commercial implementations of the blockchain technology to date.
A number of traditional companies have teamed up with blockchain projects. Jaguar Land Rover's integration with IOTA at the end of April has been made more potent by the recent news of the Coordicide protocol. LVMH is getting into the blockchain space as well with the Aura project. There is also Qtum's partnering with Google's Cloud Platform. However, the big news has been surrounding Facebook's GlobalCoin. There is talk of one of the most centralized companies in the tech space, potentially spearheading global adoption of cryptocurrency.
The growth in blue chip company involvement in the space has increased the overall excitement and optimism in the industry. However, it is important to remember, that pilots offer no guarantees of commercial success and coins offered by centralized players often fall far short of the decentralized ethos.
Nevertheless, at the very minimum this growing dynamic should generate increased awareness for the technology and the associated projects.
Notes from the development shops
We are starting to see the emergence of specialized chains. While 2017-2018 were big on the all-purpose, fix-all-problems chains, 2019 is seeing more targeted niche solutions. This is an important trend in both public and private chain branches. Going forward this may put the spotlight on the layer 2 interoperability solutions, as likely these specialized chains will need to be able to interact in order to unlock maximum value for users.
Also, it is interesting to note the heavy development effort involving Stellar. As DeFi is once again seen as relevant, Stellar may be uniquely positioned to take advantage. The vote of confidence from the entrepreneur and development communities could explain why XLM's price has ignored the Stellar's network issues.
Also, it should be noted that while Tron has been getting a lot of heat for being more marketing than tech, it has been reviewed rather positively by developers. If the skepticism regarding Tron's tech is proven to be unmerited, the perception of the project may significantly change.
The chase for self-fulfilling prophecies
Despite some encouraging signs of maturity, the industry is still susceptible to speculation driven price manipulations. It has become common practice for projects to hype-up releases and upcoming news, significantly in advance of an event, thereby creating a bull run out of thin air. Arguably no one has been better at this than Justin Sun, whose tweets, like the one about upcoming BitTorrent news, create enormous price action.
TRX Price Spike After the Justin Sun Tweet (via Coinmarketcap.com)
EOS, another major layer 1 player, has been building anticipation of its June announcements for several months now, with the latest reminder coming at the end of May. The tweet about Block.one RAM purchase is a great example of social media being used to stir up demand, and it worked great.
However, the most egregious case of speculation driven price action occurred with BSV as it more than doubled at the end of the month because of fake news. The industry has grown accustomed to drama-filled headlines surrounding BSV. Earlier this month, Craig Wright was granted copyright registration in the US for the Bitcoin whitepaper, marking another chapter in his battle to establish himself as Satoshi Nakamoto. While this doesn't appear to have ended the debate, as not long after Wei Liu also filed for copyright registration, it has provided some additional fuel for the BSV bull run.
In a traditional industry, these projects could get a call from the SEC, and project leaders could find themselves in similar legal trouble to Elon Musk. However, for now, the space remains an unregulated Wild West.
Still it is these questionable activities that could be making it difficult to get the ETF proposal approved. The SEC appears to be expanding its reach in the industry and coming after projects for past digressions. FATF's Recommendation 16 looms threateningly over the space. If the industry does not start to actively self-regulate it would be natural to expect government regulating buddies to step in.
And just today, the SEC did exactly that - taking on 'Defend Crypto' project Kik Interactive, and suing the company for an alleged illegal ICO. The company has raised almost $5M to force the SEC to re-examine the Howey Test, but now finds itself truly on the defensive.
What does this all mean?
The space is expanding. There is a real development, real growth and emerging market penetration. However, price action is still misaligned with regards to project fundamentals.
Investors chasing short term gains are often more interested in flashy tweets than real development. However, as the industry is growing we are beginning to see that fundamentals are starting to play a larger role in price discovery.
Conferences are now attracting professionals who are discussing go-to-market strategies for projects, instead of the color of the luxury cars they are planning to purchase. Momentum is no longer the only factor, but rather something that offers opportunity or presents a threat.
The market will continue to swing, but as more and more of its value will be derived from fundamentals the swings will become less violent.
The future looks bright, but we must not forget that we live in the present. So, as always, we urge you to do your own research.
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