CryptoAM: Binance Buys, Northern Trust expands into crypto, and Bitcoins usage

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Happy hump day CryptoAMers, hope your week is going well. If it’s not, I think I know why.

3 things you need to know:

One: Binance makes it’s first public acquisition. Binance has bought a U.S based crypto company, Trust Wallet. Trust Wallet is an open source, anonymous, and decentralized wallet that supports Ethereum (ETH) and over 20,000 different Ethereum-based tokens (ERC20, ERC223, and ERC721).

  • ICOs eating ICOs: Moving forward, I see ICOs buying up similar and competing projects. Binance is interesting because they're one of the view ICOs with true revenues, but most just have massive war chests and are looking to use them in some manner. The trend of larger crypto companies cannibalizing smaller ones will likely continue forward until we see some key consolidation in the space. Want to start a company? Find an underserved crypto niche…

  • Decentralization: Continuing our discussion yesterday on decentralized exchanges, we’re seeing centralized exchanges move towards decentralized models. Most crypto companies understand that the general crypto investor has a distaste for centralized organizations, and that to keep mindshare they will need to pivot away from their current models.

Two: Northern Trust is helping hedge funds account for their crypto. Northern Trust, which has $10.7 Trillion in assets under management, has continued its ventures into the crypto space. While Northern Trust is not offering crypto custody services, it is offering to help reconcile hedge fund’s crypto assets and help funds prepare for the future of digital assets.

  • Money Quote: “I do believe that governments will ultimately look at digitizing their currencies, and having them trade kind of like a digital token — a token of the U.S. dollar — but the U.S. dollar [would still be] in a vault somewhere, or backed by the government,” said Cherecwich, who worked at State Street for 20 years before joining Northern Trust. “How are they going to do that? I don’t know. But I do believe they are going to get there.”

  • Going deeper: Earlier this year Northern Trust announced a partnership with PWC, focused on the creation of blockchain tools that make accounting data more transparent and easy to access.

  • What this means: Northern Trust is a well respected company in traditional finance. They manage large amounts of assets for well capitalized clients, and have an incredibly amount of connections in the industry. For them to dedicate significant resources for a cryptocurrency project signals the broader confidence of the market in the digital asset class. The institutions are coming…

  • Read more…

Three: Bitcoin’s use in commerce has been plummeting since September. The decline in use for payments coincided with the massive spike in interest during the Nov - January bull run. If you remember, transaction fees were insanely high during that period, and although they have come back to earth, the ensuing crash and volatility have shaken people out of the market.

  • Takeaway: Adoption is key. We need actual usage of these cryptocurrency platforms if we want to see value. In addition to usage falling, price has been falling of a cliff too. Until we get people willing to use and transact with Bitcoin and crypto regularly, it will be difficult for prices to increase. If you want a good indicator as to whether Bitcoin is over/undervalued, check out our NVTG series.

Also in the news:

What I’m reading today:

Brendan Bernstein@BMBernstein

1/ Are “alts actually back”? The crypto market moves in well defined cycles, and we just completed the 3rd major one. Inspired by @fundstrat, below is the best metric I've seen to show it: the % of alts (top 5-100 by MCAP) increasing 200% over 90 days.

April 18, 2018
How to tell if “Alts are back”

  • Look at % of Top 5-100 alt coins increasing more than 200% over the past 90 days.

  • In the 2016 bull run it peaked at 10%. In the early 2017 bull run it peaked at 35%. In the late 2017/early 2018 bull run it peaked at 70%.

  • During the last bull run, BTC peaked 27% of the way into the cycle. Alts peaked 54% of the way into the cycle. This was a solid month of alts growing while BTC did not, reducing BTC dominance.

  • Before an altcoin bull bull run, BTC price increases, increasing BTC dominance. This is because Fiat to BTC is by far the most easy and accessible way to get into crypto. Once sufficient wealth is created by a booming bitcoin, money flows first into large cap alts and then into the smaller, riskier investments.

So where are we now?

Well if we look at the strength metric from our fear & greed index we see that 0/100 of the top 100 coins have made all time highs in the last 90 days. Looking at the speculation metric we see that Btc and Ethereum are still outperforming alts. On top of that, Bitcoin is still sitting well below the 19k-20k high we saw back in December. 

TL;DR, alts are not back, and won’t be for a while.

Around the corner:

Market Outlook:

Quick Take

After breaking 7.7k, we hit my target of 7.5k last night, and I closed out short positions. We’re currently a “no-trade zone”, so I’m in fiat mostly.

I’m waiting to see whether we break down past 7.5k (which would lead me to believe 6.8k is the next target) or break above 7.8k (which would signal a run back to 8.1k). It’s coin flip right now. The next 2-3 days will be a crucial indicator for the next month of price action. A breakdown here could signal a run to lower lows (<5.8k).

Daily Chart

The market structure has turned bearish, and as discussed yesterday we will likely need a catalyst to resume the run. I’m bearish unless sentiment surrounding the ETF begins to push positive. I believe it’s more likely to continue the trend downwards, so will be shorting if we break down to 7.5k again.

Fear & Greed

We've just crossed into overly fearful right territory. We may see a small bounce here do to the oversold nature of the mature.

Here’s a reminder of what these criteria mean

Overall Picture

We need to break the continued lower highs in order to confirm bullish structure. As of now, the trend has been a slow grind downwards. On the flip side, a break above 9k would cause a strong reversal of market as new capital would likely flow in.

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