Crypto Catch Up: Winter Is Here

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Crypto Catch Up: Winter Is Here

We haven’t written about bitcoin and crypto currencies since late August, so here is an update:

#1. There is little momentum in the 2 key indicators we watch to predict future price moves:

  • US Google searches for “bitcoin” are at their lows for the year just now, down 93% from their December 2017 highs.
  • Worldwide searches are at similarly low levels, down 91% from their highs.
  • September bitcoin wallet count will come in at about a 2.3% growth rate. This is slower than August’s 4.1% growth rate and July’s 4.7% rate.
  • Takeaway: there is little interest in the space just now, which explains the recent difficult performance across most cryptos.

#2. Even with that decline in engagement, bitcoin is still by far the most recognized crypto currency:

  • Worldwide Google searches for “bitcoin” outnumber those for “ethereum” by 8:1. Ethereum is the second largest crypto currency by market cap with a $22 billion valuation to bitcoin’s $111 billion total value.
  • Searches for bitcoin run 4x the number of queries for “XRP/Ripple”, the third largest crypto by total value ($19 billion).
  • Among US searches, XRP/Ripple does slightly better (bitcoin only outpaces it by 3x) but ethereum search counts look the same as the worldwide numbers.
  • Takeaway: this is why bitcoin has held up modestly better than most other cryptos this year.

#3. To give you a sense of scale between global crypto currencies and a market you likely know well – US listed ETFs – here are a few comparisons:

  • There are now almost as many crypto currencies as there are ETFs trading in US markets: 1,993 cryptos versus 2,136 ETFs.
  • The largest ETF (SPY) is larger than the entire crypto currency ecosystem, with a market cap of $280 billion versus $209 billion in value for all crypto currencies.
  • While the SPY represents 8% of all US ETF assets, bitcoin is 53% of the value of all crypto currencies. Recall that both were the “first movers” in their respective spaces (SPY launched in 1993, bitcoin in 2009).
  • Takeaway: this is why every bitcoin investor dreams about an ETF.

#4. “Stable coins” – those that seek to tie the value of a crypto currency to the dollar and other fiats – are one “next big thing” in the space:

  • Right now, the USD-tied Tether crypto has a $2.8 billion valuation. There is a long running controversy about whether there are actual greenbacks to back this up. Still, the crypto world remains supportive; Tether has not “broken the buck” by more than a penny in the last 90 days.
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    A recent academic paper also disproved the notion that Tether is just a bitcoin price crutch. Link here: https://www.coindesk.com/tethers-impact-on-bitcoin-price-not-statistically-significant-study-finds/
  • Takeaway: stable coins make sense to us as a way to harness the security and efficiency of the blockchain while mitigating price volatility.

Bottom line: we remain cautious on bitcoin and crypto currencies generally.Many technologies go through a “winter” – a phase in between the initial flush of enthusiasm and real-world impact. That’s where we are now. Still, there is plenty of investment from smart money still flowing into the space. Spring will come.