Black Thursday analyses of BTC and ETH
Hi everyone, wow — this past week in crypto, and in the world overall, is nothing like any of us has ever seen before. I hope you and all your loved ones are safe and, when you have a choice, doing your best to social distance. I also want to thank all of my listeners who work in health care and are working hard to help fight this virus. And I’m glad to see that many government leaders are also stepping up to the plate. Thank you as well.
This week, on the podcasts, we had a fabulous essay by Chris Burniske, which was written before the market turbulence of last week, but seems especially timely now as we all take stock of our health and our wealth and what really matters. And on Unconfirmed Emily Parker reads a great essay that also is on the nose, given that some of the narratives about crypto didn’t necessarily play out during last week’s market meltdown.
As for this week’s newsletter, we get a look at some analyses of the Black Thursday events, particularly in Bitcoin, Ethereum and MakerDAO, plus look at some other big events on the horizon, such as the Bitcoin halving and the Bakkt consumer app launch.
This Week’s Crypto News…
As I’m sure many of you know, last Thursday was a crazy day in the crypto markets, when Bitcoin plunged to as low as $3,600 on BitMEX and could have possibly gone even lower if it hadn’t been for BitMEX going offline for maintenance. Coin Metrics had a good analysis of the types of sellers who were driving Black Thursday. Using on-chain data, the analytics firm showed that the vast majority of activity in Bitcoin on that March 11th and 12th involved Bitcoin that had been held for less than a year, with about 281,000 Bitcoin that had been untouched for 30 days going back into circulation, versus only 4,300 Bitcoin that had been untouched for at least a year being revived.
Among the other metrics they evaluated, one was the market value to realized value, which compares the crypto asset’s market cap to its realized cap. The realized cap is an estimate of the asset’s aggregate cost basis. Coin Metrics says, “BTC’s MVRV fell by 0.5 on the 12th, which is the largest one-day drop since December 2013. In hindsight, the past periods where MVRV dropped below one have been the best times to accumulate BTC at a relatively discounted price.”
Santiment, a cryptocurrency behavior analytics platform, did a similar analysis to the Coin Metrics one, except on the Ethereum blockchain. Santiment found that all MVRV cohorts — short, mid- and long-term holders — are down on their initial investment. It looked at whale behavior in Ethereum and found that many at first dumped into a rally, but then bought back in at the bottom and then dumped again. However, retail investors have been accumulating at between 0.1 and 100 ETH. and developer activity on Ethereum has been unaffected by Black Thursday and is even up slightly.
On Black Thursday, MakerDAO underwent a massive stress test, only it was the very real plunge of ETH by 50% in a few minutes. Because many of the Maker Vaults are collateralized by ETH, this sent users scrambling to avoid having their Maker vaults liquidated. Unfortunately, the Ethereum blockchain became congested at this time, so a lot of liquidations weren’t even being included in blocks. Some very clever and opportunistic traders took the opportunity to liquidate some vaults with bids of 0 ETH but paid higher gas prices to be sure they would be executed. They made off with what research firm Whiterabbit says was $8 million.
One of the emergency measures MKR holders adopted was to usher in USDC, a stablecoin backed by actual dollars in reserve, as a collateral type, among a few other solutions. Not everyone welcomed USDC as a collateral type. Kain Warwick of Synthetix tweeted, “
When I woke up this morning Ethereum had two permissionless stablecoins, now we have 1…” And Eva Beylin tweeted, “Dai has Daied.”
Bakkt announced that it has raised $300 million in Series B capital from Intercontinental Exchange, Microsoft’s M12, PayU, Boston Consulting Group, Goldfinch Partners, CMT Digital and Pantera Capital. The company also updated its website to give a sneak preview of the app that it plans to launch this summer that hopes to give new life to loyalty and rewards points, in-game assets and cryptocurrencies. Frank Chaparro of the Block says in an analysis that the retail app couldn’t come at a better time. Given the drop in airline stocks due to the coronavirus, he notes that the app will enable people to convert their airline miles into cash and writes, “airline points remain a big liability on the balance sheet of banks. The ability to convert points into cash reduces airlines’ liability.”
CoinDesk reports that the Black Thursday Bitcoin price crash is casting a pall over the upcoming halving, calling into question whether mining farms will continue to be profitable. The article says, “According to data from mining pool PoolIn, even the most efficient equipment on the market, such as MicroBT’s WhatsMiner M20S and Bitmain’s AntMiner S17 Pro, is generating daily profits at a gross margin below 50 percent.” The cofounder of Poolin said that prior to the price crash, he expected Bitcoin’s hash rate would gradually rise but that now he expects computing power on the network to decline by up to 30%.
If you had whipped out the popcorn to listen to my Unconfirmed a few weeks ago with Brady Dale about the war between Justin Sun and the Steemit network, you’ll be interested in this update. By the time you hear this, the Steemit community may have already hard forked into a new chain called Hive in order to remove Steemit, which was recently acquired by Justin Sun of Tron. The fork is scheduled for 10am EST on March 20th, which is just several hours after this podcast is published. Binance and Huobi announced they plan to support Hive, and the price of Steem tokens jumped.