2019 January 14 - Volume.3 Issue.1

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2019 January 14 - Volume.3 Issue.1

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Bitcoin Mining Pool Dominance Dwindles, Shifts to Unknown Miners

Unkown miners closed December having solved a whopping 22% of the total blocks up from 6% at the start of last year. The Bitcoin network is currently less likely to experience an attack given the fact the BTC.com controlled pools have lost dominance over the network.


Bitcoin miner revenues surpassed $5.8Bn in 2018 but the big number isn't all that meets the eye. In January 2018 miners earned a shattering $1.2Bn but closed off the year 83% down brining in only $210Mn in December.

Efforts of small miners turned sour in September 2018 as record hash power made profitability near non-existent with Bitcoin's falling price (Diar, 8 October).

|| FEAR OF THE UNKNOWN?

The small miner exodus could be a possible positive for Bitcoin's network security as smaller miners joined to the hip of large pools began turning off their computing power resulting in a decline in mining pool dominance (see chart).

There could be concerns too. Miners have no obligation to share details on the pools they've joined. Unknown miners could still potentially be part of a pool having opted to not share such details.

At the start of last year, Bitmain led pools, as well as ViaBTC, in which the behemoth hardware company has invested in, controlled 53% of the networks hash power. 2019 kicked off with 39%.

The decline comes despite the three pools combined seeing a massive 55% increase in pooled resources last year as the networks hash power grew unabated hitting 275% in August versus the start of 2018 before it began to peter out.

|| WAITING FOR PRICE BOOST

An increase in Bitcoin's price from $3200 to over $4000 last month resulted in a hash power increase as miners switched on idle equipment. The network this month saw an uptrend for the first time since August recording nearly 50% increase last week with the reversal of the decline that started a little over a month ago (see chart). However this is unlikely to be a sustainable growth should Bitcoin's price fall much further.

|| OVERT ASICBOOST TO THE RESCUE?

Miners running on Bitmain's AntMiner S9 have found a small window of opportunity when the manufacturer released firmware allowing them to run ASICBoost that would see 10-15% in energy savings last October. And this could result in a further increase of hash power as more pools begin to support the upgrade.

But the gains would still not be enough for small miners with wholesale electricity costs to return to market at a sub $5000 BTC.

Unknown Miners Become Largest Group Securing Bitcoin Network
% of Blocks Mined (2018)


Bitcoin Hash Power Growth on Price Spurt


Blocks Mined with overt ASICBoost Hits 35%


Sources: Blockchair, Blockchain, asicboost.dance


Cryptocurrency Exchanges Mark Record Year in Bear Market

Retail investors may have felt the heat in 2018, as did the whole cryptocurrency industry, but exchanges have come on top closing the year with record transacting volumes. And while commissions have entered a lower ticket, trade count have remained healthy. 2019 outlook is likely to go below 2017 levels for spot markets despite exchanges looking to increase their portfolio.


Bitcoin remains to be the lions share of traded volume across all major exchanges as cryptocurrency token markets plummeted last year.

Volumes on Binance are quite telling as traders began selling off tokens from June when Bitcoin accounted for only 39% of the exchanges volumes. For the year, Bitcoin dollar-pegged markets accounts just shy of 50% of the total on the largest exchange.

The same can be said for all major exchanges. Coinbase BTC/USD markets accounted for 46%, slightly down from 2017 when it stood at 48%. Combined with Ethereum markets however, the two majors accounted for 75% of total trades two years straight. US Dollar markets hit over $83Bn in trading volume for Coinbase last year, up from $67Bn in 2017.

The popular exchange does have plans however to add more tokens, though will unlikely make much of a difference (Diar, 10 December). 2018 cryptocurrency additions only account for 0.7% of the trading venues volumes noting however that the majority were added only late last year.

And while tokens may remain to find some volume, punters are unlikely to deviate far from Bitcoin and Ethereum in 2019 either.

Coinbase USD Markets See 21% Increase 2018 vs. 2017


Coinbase Number of Trades Hold Steady (All Markets)


Kraken USD Markets Trading Volume Soars - 192%+ in 2018 vs 17

2018: Binance Dollar Market Trading Volumes $190Bn


2018: Binance Trade Count Steady Rise (All Markets)


Bifinex Trading Volume 50% Up from 2017


Source: CoinAPI


Stablecoin Markets Move into Growth as Traders Find New Options

The stablecoin investment rage of 2018 is showing signs of paying off as the outstanding supply of the greenback-crypto now stands at double versus the start of 2018. Tether remains the lions share of the stablecoin market, but that has slowly declined month-on-month with multiple new options coming to market.


Last October saw Tether's dominance over the stablecoin market plummet by 16% - the equivalent of nearly $1.1Bn on the back of banking woes (Diar, 22 October).

Traders opted to move funds into Bitcoin taking on volatility risk, but have since then found a plethora of new options, many of which having found the backing of major cryptocurrency exchange operations that are State-side.

Outstanding stablecoin supply at the start of last year stood just over $1.3Bn. This year kicked off at double that and stands at $2.8Bn as of press time (see chart).

While Tether remains to control 69% of the supply, Circle/Coinbase-backed USDC has taken over 13% of the stablecoin market in less than 3-months - a cool tally of over $372Mn. In total there has been a 26% growth in outstanding stablecoins since the start of November following the mass Tether burn.

Still, cryptocurrency trading is still highly concentrated on Tether. January so far has seen daily Tether trading of $4Bn while USDC is averaging under a tiny $20Mn according to data collected by Diar.

This too however is likely to go the way of outstanding supply as more cryptocurrency exchanges begin to add more stablecoin pairs.

Outstanding US Dollar Pegged Stablecoins


HSBC Moving Billions
Banking giant HSBC announced Monday that it has been operating an in-house Distributed Ledger Technology platform to facilitate forex transactions. Since February the bank has said to have facilitated over 3Mn transactions - a total tally of $250Bn. Last year also saw JP Morgan roll-out their blockchain platform enrolling 76 banks - the largest use of the technology at such scale as of yet from financial firms.
Malaysia Classifies Crypto
A notice published by the Malaysian Securities Commission has lumped together the classification of Digital Currencies and Digital Tokens as securities and set to go into effect this week. The order is unlike that of the US Securities and Exchange Commission (SEC) which has made a distinct differentiation between currencies such as Bitcoin, and ERC-20 tokens that have conducted an Initial Coin Offering. [More]
ESMA Concerns
From the European Securities and Markets Authority: "Regulation of crypto-assets and related activities may have trade-offs, such as risking legitimising crypto-assets and encouraging wider adoption....ESMA advises to focus the regime for crypto-assets that are not financial instruments on warning buyers about the risks of those crypto-assets, instead of a more elaborate regime that could legitimise crypto-assets."
Neo Bank Win
Germany's N26 mobile bank has secured itself $300Mn for further expansion at a $2.7Bn valuation making it as one of the most prized FinTech operations. Operating in European markets, the company plans to expand into the United States. The 'Neo Bank' is already offering traditional banking services in several countries such as overdraft protection and consumer loans, with plans to roll out in the UK this month.

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