2019 April 22 - Volume.3 Issue.11

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2019 April 22 - Volume.3 Issue.11

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Coinbase Moves into Utility Phase, Awaits 'Utility'

Last week saw Coinbase announce their move into new key cryptocurrency markets, as well as a broader outreach into emerging economies. In its attempt to bring new use cases into crypto, not all meets the eye as the drive into the new countries are limited to crypto-to-crypto trading pairs and mostly bypass the important fiat on/off ramp that would be beneficial for the new markets. On a positive note, however, Coinbase is set to hit a near 1-year trading high after coming off its worst month since mid-2017.


Earlier this year then-Vice President for international expansion Dan Romero told Diar in an interview that the popular US-based exchange was eyeing a footing into new territories that have been underserved by traditional financial infrastructure, as well as limited access to crypto (Diar, 11 February).

"Our mission is to build out the ecosystem so that we can move away from the narrative of crypto only being a speculative investment" Mr Romero said.

And while last week's announcement from San Fransisco sounded a similar tune, the lack of fiat on and off ramps allowing only for crypto-to-crypto trading falls short off the mark for a primary potential use case: remittances.

While Coinbase now aims to serve customers in Argentina, Mexico, Peru, Colombia, Chile, India, Hong Kong, South Korea, Indonesia, the Philippines and New Zealand, the bells continue to echo investment opportunities rather than actual use case as the tokens offered by the exchange serve little purpose outside of transfer of value.

And even that opportunity is muted since, outside of Europe and the United States, only a third of the supported countries will have the ability to actually buy using local currency via credit/debit card or bank deposit. To make matters slightly even less useful is the fact that selling cryptocurrency will also not be an option in the new countries apart from Indonesia.

|| INVEST TODAY, IMAGINE TOMORROW

"As crypto moves from the current “investment phase” into what we call the “utility phase,” a host of new use cases will present themselves. This could take the form of decentralized versions of traditional financial services like lending or micropayments or truly novel crypto applications that no one has even thought of yet" the statement said.

|| THAT'S IRONY, RIGHT?

While Coinbase is primarily a cryptocurrency exchange, the outfit has its tentacles across the board sliding into practically every area possible from staking and voting support, to institutional grade offerings.

And though, for the most part, revenue streams remain reliant on the sale or administration of cryptocurrency, Coinbase has invested and integrated into its own wallet all of the Decentralized Finance (DeFi) products currently on-chain that have been showing promise. Ironically, the DeFi products don't have a token Coinbase can sell.

Coinbase Trading Vol. Likely to Hit 11-Month High End of April 2019


Notes: Trading up to and including 20-April-2019. All Things Equal, At $76Mn Average Daily Volume, Likely to Pass Jun-2018.


While % of Trading on Coinbase from Crypto Pairs Hits All-Time-High...


...Trading Majority Remains in BTC Despite USDC Having More Pairs


Source: CoinAPI


Low Demand Continues Downward Pressure on Dai Peg Hopes

For the sixth time in 2019, MakerDAO has had to increase its stability fee in an attempt to decrease a growing supply that has kept throwing Dai off its intended US Dollar peg throughout this year. While Decentalized Finance applications garnering traction could bring in new dynamics, it's likely to be a temporary patch should the stablecoin fail to find actual use-cases that increase actual demand beyond the thin trading volumes sitting on the books of Decentralized Exchanges.


The stability fee on Dai that moved into double-digit territory only a week ago, was once against revised upwards from 11% to what now stands at a whopping 14.5%.

The stability fee, now almost double what it was less than a month ago, and 2800% higher than the start of the year, has only caused supply to decrease by 3.5% since the end of March leaving nearly 88Mn Dai minted.

At peak, supply stood above 95Mn Dai days before the stability fees went from 3.5% to 7.5%. That hike saw a larger 4.7% decrease in supply than what was witnessed as of the latest stability fee increase.

|| WHAT IS IT GOOD FOR?

On-chain transactions have taken a nose dive since the start of the year when the stablecoin began facing its dollar-tethering problem (see chart).

Without much use, for the time being at the very least, Dai will likely face precipitous changes in the stability fee as it continues to trade well below its desired US Dollar peg. And this comes despite Decentralized Exchanges increasing in trading volume month-on-month this year, although still a far cry from trading peak (see story below).

|| SECONDARY MARKETS TO THE RESCUE?

It has now in fact become slightly cheaper to borrow Dai off Compound Finance, a decentralized lender/borrower match maker, than it is to open a Collaterlized Debt Position (CDP) on Maker that would mint new Dai. The same can be also said for Dharma at an even lower rate of 8.5% (see chart).

This could potentially be the mark of a plateau and turn of events for Dai should users opt to borrow at lower rates on DeFi applications than mint new Dai that would increase an already inflated supply. As it stands, a whopping 9.1% of Dai is locked-up on Compound Finance.

But not all is of sound mind in crypto leaving predictions in any direction almost futile. At the start of February, 9.8% of Dai sat on Compound with almost 2.5Mn Dai borrowed off the platform at 6.6% higher than opening a CDP.

Dai Supply Outpacing On-Chain Transactions Since Peg-Break


Stability Fee Hike Jolts Dai North, But Far Off Peg


Dai Borrow Rates - New Plateaus?


DEX Volumes Move into Growth

After falling from grace from peak trading in May 2018, Decentralized Exchanges have seen on-chain trading return into growth month-on-month for 2019. April is set to be the highest month already matching the US Dollar value traded on DEX in March of over $100Mn.

ETH volumes have also increased. In comparison to January 2019, February saw a 32% increase in traded volume. And March increased an additional 9% over that.



Source: Diar Calc., Dex.Watch

ZCash Hashrate Sky Rockets

Privacy-geared cryptocurrency Zcash is having its moment with the network now being secured by 42% more Hash power than it had at the start of this year.

Since the start of 2018, Zcash's hashrate has grown by a whopping 950% as miners flock towards the cryptocurrency that has yet to face its very first halving slated for late 2020. Transactions however have remained at a steady plateau for the past 7 months.



Source: BitInfoCharts.com

Coinbase UK Visa Card Crutches
Cryptocurrency payments remain a far off dream unlikely to gain much speed any time soon. And stablecoins, one of which, USDC, the second largest outstanding tokenized-dollar which is spearheaded by Coinbase itself, has also failed to find such a use case in its audience beyond trading. The popular exchange's British branch and now launched a visa card linked to users crypto wallets negating the actual inbuilt mechanism of crypto. But is it calling it quits or a smart effort to slowly bridge the possibility?
Goldman Sachs Crypto Plans in Question
"We never had plans to open a cryptocurrency desk" rang in the ears of the US House of Representatives as the wall street major's CEO David Solomon uttered words contrary to reports that have been coming out since late 2017. Other than facilitating some client requests, Goldman Sachs has said to simply have its ear walled to the board to see the developments in the space. This latest tidbit is also likely to be an indicator of similar feelings across other major institutional outfits.
Coinbase Continues New Cryptocurrency Listings
Augur, Maker and EOS have all made it onto the largest US-based exchange after Coinbase announced their additions onto their Pro platform last week. The exchange now has nearly 20 cryptocurrencies, though, the majority of the demand remains on the Bitcoin and Ethereum side. This could be due to the limiting pairings of the most recent additions with USDC, the exchanges own stablecoin project alongside Circle. Likely due to securities label fears, Mkr is not going to be tradable in the US.
Largest Fund Polychain Portfolio Value Dip
One of the largest and oldest cryptocurrency investment portfolios has seen its value drop below $1Bn, according to filings seen by the Wall Street Journal. Polychain has remained notoriously quiet on its investment, though, some major projects have championed the hedge fund's involvement. The WSJ says that the value dip was not due to Polychain investors taking flight, but due to the ongoing bear market that has wiped out a massive 70% of the portfolio's value throughout the past few years.

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