It’s Here! Broker’s Beat Issue #1

broker's beat

Secure Digital Markets started as a two-person startup in 2017. Since those humble days over three years ago, we have grown genuine relationships with over 200+ clients, facilitated over $1+ billion in digital asset liquidity on their behalf, and created a home for over 10 employees that we are proud to call our family. 

Naturally, any journey that is worth enduring has its highs and lows, and SDM’s journey is no different. However, with that came the experience that shaped us into the firm that is proud to serve over 200 clients in 25+ countries today. 

Introducing the Broker’s Beat

Now, as we gear up for the next phase in our firm’s journey we want a way to share all that we have learned with our community. So without further ado, welcome to ‘The Broker’s Beat’, a blockchain-focused newsletter written by traders, for traders. 

The Broker’s Beat will be a weekly newsletter. In it, you will find recurring topics such as cryptocurrency news and updates, technical analysis on key markets, mining analysis, as well as featured op-eds and other guest contributions. 

We are excited to take this journey with you and we hope you enjoy the first edition of The Broker’s Beat.

blockchain news

Does China actually control Bitcoin?

Source: Decrypt

“Since Chinese miners control almost two-thirds of the Bitcoin hash rate, it’s safe to say that they have majority control over around two-thirds of newly minted Bitcoin. Because of this, if almost all of the miners operating in China decided to launch a 51% attack against the Bitcoin network, the odds are high it would succeed. However, such a feat would require an extraordinary feat of collusion between miners, and would likely be less profitable than simply mining as usual.”

New Grayscale Report: Digital Assets Fund Adds $905M in Record Quarter

Source: CoinTelegraph

“Grayscale Investments has just released its quarterly report which shows that institutional demand for Bitcoin and other digital assets is still on the rise despite the lack of action from Bitcoin price (BTC). The report shows that Grayscale had yet another record quarter for its digital asset products with $905.8 million dollars invested over that time period.”

Here’s Why DeFi Tokens Are Leaving the Price of ETH in the Dust

Source: Crypto Briefing

“Yield farming, in particular, has been a significant contributor to the latest DeFi rally. The launch of Compound’s governance token marked a new era for the niche as the protocol quickly absorbed funds from across DeFi and is en route to $2 billion in lending.

What’s surprised most market participants at this juncture is ETH’s muted price action. Ethereum is the base layer for DeFi as it stands today. To interact with DeFi, one must have an Ethereum browser wallet funded with ETH to pay for transactions.”

Crypto Trust’s 50% Price Collapse Highlights Liquidity Hazard

Source: Bloomberg

“The price of the Grayscale Ethereum Trust, which invests in the the world’s second-largest cryptocurrency, has tumbled more than 50% this week even though the value of the token has increased slightly.

The collapse is happening because so-called accredited investors such as hedge funds are liquidating holdings after their mandatory 12-month lockup for new placements into the trust has ended, said Nic Carter, co-founder of researcher Coin Metrics. The trust had traded at 800% premium to net asset value, he said.”

Price Analysis

Last week we discussed the emerging trend of rapidly dropping Bitcoin trading volumes. Our references to a recent report by CryptoCompare showed Bitcoin trading volumes dropping from 14.9mn in May to 6.47mn in June. One theory of the cause is that “hodlers” are taking over and Bitcoin, at least for now, is overbought. 

Everyone who had funds to invest in Bitcoin when it dropped have deployed their funds, and won’t be buying as much in the future. One likely read on this is that with daily trading volumes for Bitcoin continuing to drop, Bitcoin is readying itself for another big market shift as it leaves this current consolidation period.

We are generally long-term bullish on Bitcoin, but right now, there is a strong sideways trend that even appears to go downwards in the chart above. You can see bitcoin testing lower and lower levels, as it fails to sustainably break through the $9,300 mark. This is eroding confidence about breaking through the $10,000 price level anytime soon. 

Some are calling this moment an echo of the loss of momentum and subsequent crash that occurred in 2018, but that ignores the larger economic significance of the times we’re in. COVID and protests have led to fundamental changes in the economy, and even though Bitcoin is currently running at a 65% correlation with the S&P 500, that could change at any minute. In which direction, we don’t know.

As we mentioned last week, BTC’s hash rate had just hit a new high of 125.99 terahashes per second. Many were looking at this as having a potential breakout effect on the price of Bitcoin, but nothing materialized (something we’ve already discussed above).

Another factor we emphasized was how China’s rainy season often correlates with a higher hash rate. When the price of electricity goes down, that allows many of the less efficient mining rigs to run profitably.

hash rate

Now, we’d like to discuss one more important factor: network difficulty. On July 13th, this measure spiked to an all-time high of 17.35 trillion. This is often a leading indicator of a drop in the hash rate, since difficulty means less frequent rewards, so it will be interesting to see what comes next week.

network difficulty
broker's beat

Trading volume has been going through a harsh downward trend in the last few months. June saw a 36% and 53% drop in volumes for Top Tier coins and Lower Tier coins, respectively. Additionally, crypto derivatives volumes dropped 35.7% in June to $393 billion, which represents the lowest monthly volumes so far in 2020. 

With Bitcoin market capitalization dominance at 63.52% at the time of publishing, Bitcoin has maintained its high level of dominance through this period. Now it might be time for an altcoin rally.

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