2018 December 10 - Volume.2 Issue.48

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2018 December 10 - Volume.2 Issue.48

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Coinbase Gearing Up for Paradex Bulletin Board Expansion?

Last week saw Coinbase announce the exploration of an additional 31 tokens that could possibly end up being listed on the cryptocurrency exchange. It's unlikely by coincidence that half of the tokens have already been listed on Paradex, a decentralized exchange geared bulletin board, that was acquired by Coinbase earlier this year.


In the largest cryptocurrency exchange reveal yet, Coinbase broke away from its conservative nature and has announced the 'exploration' of an additional thirty-one cryptocurrencies, inclusive of the two previously mentioned this year, Stellar and Cardano (Diar, 3 December).

Only moments after the announcement, Coinbase added four of the mentioned cryptocurrencies to their Pro platform - a usual path the exchange takes before allowing retail investors to be able to purchase the newly added cryptocurrencies (see table).

The news is a departure for Coinbase from the similar path US-based exchanges have taken so far.

|| REGULATORY HURDLES MEET ENGINEERING PROWESS

When Coinbase purchased Decentralized Exchange Paradex in May, it was a purposeful strategic move to address regulatory uncertainty by shifting the trading mechanism from a matching engine to a Bulletin Board akin to Over-The-Counter equity markets allowing it to overcome US watchdog hurdles.

Either Coinbase has found clarity from the US Securities and Exchange Commission (SEC), as well as the Financial Industry Regulatory Authority (FINRA), or the exchange is nearing completion of complex engineering that would address the US and International markets differently.

How and if Coinbase's platform will interact with the Paradex engine remains unclear. But the exchange did note in their announcement, as they had done previously, that the "listing process may result in some of these assets being listed solely for customers to buy and sell, without the ability to send or receive using a local wallet."

|| KNOW-YOUR-CLIENT UNLESS?...

Beyond Paradex being potentially excluded by the SEC as a traditional exchange, the inability for tokens to be stored in local wallets could also indicate a needed work-around to Know-Your-Client (KYC) challenges that Decentralized Exchanges face as solutions addressing the regulatory requirement remain off-chain. But the exchange is aiming to provide such a solution having acquired Distributed Systems that's focusing on decentralized identity.

|| PRETTY BIG LEAP OF FAITH

The possible listings haven't come without scrutiny from the vocal cryptocurrency community who hold Coinbase accountable to a high standard - a role and image the exchange itself wishes to portray in terms of security, insurance and ease of use.

And for the time being, at the very least, the criticism as far as utility of the potential listings isn't without merit. For the most part, the tokens remain purely speculative with no utility as few projects have released a working product let alone demand for the coins.

|| ADD COINS YOU LOSE, DON'T ADD COINS YOU LOSE

While Coinbase's coffers would allow for the exchange to weather dwindling earnings from low trading volumes, as any business, it still needs to address revenues. The short-term gains from increased trading activity could come at the expensive price of Coinbase's own reputation should, when or if these projects fail to pick up any demand and burn unstudied retail investors.

|| WITH GREAT POWERS COMES GREAT RESPONSIBILITIES?

Ultimately, however, this was the opted route for a trading venue - not a token watchdog or investment advisor. Whether or not the expansion plan results in more peril than profits is a risk Coinbase seems willing to take on.

Coinbase / Paradex Cryptocurrency Overlaps

wdt_ID Token Ticker Coinbase Paradex
1 Bitcoin BTC +
2 Bitcoin Cash BCH +
3 Ethereum Classic ETC +
4 Loom LOOM +
5 Zcash ZEC +
6 0x ZRX + +
7 Basic Attention Token BAT + +
8 Civic CVC + +
9 Decentraland MANA + +
10 district0x DNT + +


Coinbase Potential Additions with Paradex Overlaps

wdt_ID Token Ticker Coinbase Paradex
1 Aragon ANT ? +
2 Augur REP ? +
3 BreadWallet BRD ? +
4 Dai DAI ? +
5 Kin KIN ? +
6 Kyber Network KNC ? +
7 Maker MKR ? +
8 OmiseGo OMG ? +
9 Request Network REQ ? +
10 Status SNT ? +


Coinbase Potential & Listed Paradex Tokens

wdt_ID Token Ticker Coinbase Paradex
1 Aeternity AE ?
2 Cardano ADA ?
3 ChainLink LINK ?
4 EnjinCoin ENJ ?
5 EOS EOS ?
6 Golem GNT ?
7 IOST IOST ?
8 Loopring LRC ?
9 Mainframe MFT ?
10 NEO NEO ?


Source: Coinbase, Paradex


Fiat-Backed Stablecoins Begin Finding On-Chain Traction

Stablecoins have found massive growth in adoption in the past several months as many began coming online. Concerns around Tether escalated last month which highlights a key-factor in users switching over to a different pegged cryptocurrency.

A whopping 1032% increase in on-chain transactions took place in November vs. September breaching the $2.3Bn mark at the close of last month.

Paxos, which has raised over $93Mn, has recorded over $1.8Bn on the Ethereum blockchain alone in the past three months - double that of Coinbase/Circle backed USDC.

To date, all four major stablecoins, USDC, TUSD, GUSD, and PAX, have breached the $5Bn in on-chain transactions within a short 3-month period.

|| DIFFERENT DOLLAR, DIFFERENT PURPOSE?

While TrueUSD was the only Dollar-pegged cryptocurrency to see a slight decline in the total on-chain transactions value, it did indeed double in the number of transactions vs October. TrueUSD has been able to find market share having began trading in early March.

November-2018 Transaction Count



Bitcoin Trading Volume Share Evening on Token Exchanges

Bitcoin trading volumes have taken a hit across major token exchanges over the course of 2018 (see chart). While Binance remains to have dominance over the space as a whole, their share of Bitcoin volumes have dropped from a peak of 47% to 32% in November. Volumes now are fairly shared across token exchanges in comparison to the start of the year.

But it is State-side exchanges that have suffered the biggest loss. Both Bittrex and Poloniex now account only for 2.7% of Bitcoin trading volumes across token exchanges - a massive 400% from their peak at the start of the year.

With the majority of tokens now having little liquidity, and hype all over, it's likely that global share of Bitcoin trading to continue in decline as the industry reboots from the bear market (Diar, 26 November).

% Share of BTC/USD Trading Volumes


Initial Coin Offerings Reaching Last Breaths

Initial Coin Offerings (ICO) are all but over with November seeing total raised funds at $65Mn. ICOs in 2018 have raised over $12.2Bn but have now petered out from regulatory backlash fears, as well as a slow-down in cryptocurrency markets with token prices plummeting leaving retail investors with a bitter taste.

|| COMEBACK HOPES?

In a speech last week the US Securities and Exchange Commission (SEC) Chairman Jay Clayton said that he believes that "ICOs can be effective ways for entrepreneurs and others to raise capital. However, the novel technological nature of an ICO does not change the fundamental point that, when a security is being offered, our securities laws must be followed."

It's unlikely the contentious fund raising mechanism, at least in its current unregulated format, to garner much interest moving forward with regulated tokenized securities platforms paving the way for a new realm of finding investor capital.

2018 Initial Coin Offerings Total Raised


Source: TokenData


Bitcoin ETF Decision Delayed
In what has become a recurring theme in the past year and a half, the US Securities and Exchange Commission (SEC) has once again delayed the decision on a Bitcoin Exchange Traded Fund (ETF) into the new year. The announcement comes on the back of comments made by crypto-friendly commissioner Hester Peirce days earlier who said "don’t hold your breath. I do caution people to not live or die on when a crypto or bitcoin ETF gets approved."
Exchanges Eye Institutions
Cryptocurrency exchanges now suffering from low trading volumes after mass expansion last year are gearing to address institutional clientele. Both Binance and Poloniex last week released client facing APIs to assist institutions to trade cryptocurrencies. The competition to gain traction from institutions is now plentiful with all major exchanges having established institutional tools for trading. Whether or not there will be demand however remains to be established.
ErisX Bags $27.5Mn
Cryptocurrency derivatives focused exchange ErisX has landed major investment for its platform in its Seed B round bagging $27.5Mn. The funding round was led by Fidelity and Nasdaq, having already found the interest of other major players in the industry. The raise is more than double what competitor LedgerX secured last year. ErisX now awaits the approval of the Commodity Futures Trading Commission before it launches spot markets by 2Q19 and futures contracts by mid-2019.
Ethereum Upgrade Date Set
Ethereum's development team have come to agreement that the Constantinople upgrade that will see 5 improvement proposals take shape is to happen mid-January of next year. The planned upgrades will address how code is processed allowing for better scaling, reduces gas costs with a processing differentiation between short-term storage rather than on the blockchain, introduces state channels for better resources management and decreases the block reward from 3 to 2 ETH.

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