Bitcoin On-Chain Volumes Move Back into Growth Following Lows
Bitcoin on-chain transaction values have hit new lows quarter-on-quarter since coming of media attention age mid-2017. Still, however, monthly US Dollar value transacted on-chain has reversed the downtrend with April hitting a 10-month high. But this remains, in all likelihood, the cause of trading increasing due to Bitcoin’s recent price surge rather than actual use-case.
Numbers from blockchain data provider TokenAnalyst show real Bitcoin volumes (sans change transactions) on the rise 3 months in a row following significant price rallies in March and April.
On-chain value of both Bitcoins and US Dollar value continue to follow price trends indicating the king of cryptocurrencies has yet to find any footing outside of speculative trading almost two years on from entering the financial challenger hall of fame (see charts).
Bitcoins moved on-chain outpaced dollar value hitting a 14-month high in April. With a value of over $130Bn, the transaction volume closes in on June 2018 levels when the price of Bitcoin averaged $7000 – 35% higher than today.
|| FLUKE OR BUCKING THE TREND?
Quarterly totals tell a different story – one of decline. Whilst 1Q19 remains almost a whopping double the volume than that for the same period in 2017 in USD terms, quarter-on-quarter on-chain activity for Bitcoin has been in decline since the end of 4Q17.
And the first quarter of 2019 has already recorded a 35% decline versus 4Q18, despite the little volatility that has shown to spark off on-chain volume as traders look for an exchange.
2Q19 has kicked off on a higher note compared to previous years.
Bitcoin USD Volume Moved On-Chain
Bitcoin Volume Moved On-Chain
Quarterly Bitcoin USD Volume Moved On-Chain
Quarterly Bitcoin Volume Moved On-Chain
Bitfinex, Tether Tie-Up Sparks Systemic Risk Concerns
While Tether woes have become an industry norm, the latest news that Bitfinex is sitting on a potential loss of $850Mn has sparked on systemic risk fears as the stablecoin sponsor grants the exchange a loan for the cash. There is now, by official statement from Tether representatives, a 26% shortfall in cash-reserves against the outstanding tokens.
Stuart Hoegner, general counsel to both Tether and Bitfinex, has confirmed that the stablecoin outfit is effectively running a fractional reserve against its outstanding tokens following a court order by the New York General Attorney looking into a loan agreement between the two major cryptocurrency organizations.
Bitfinex has had a whopping $850Mn of its funds “seized” by its payment processor Crypto Capital leaving one of the oldest exchanges high and dry and having to skim Tether reserves to cover its own operating expenses.
Lest Mr Hoegner wishes to see inside a jail cell, Tether did indeed have the reserves of the outstanding stablecoins up until its recent change in their terms of service indicating that the company would also hold cash-equivalent assets (Diar, 18 March). Mr Hoegner confirmed that the Tether still holds $2.1Bn in cash in an affidavit.
On the flipside, of course, is that the 8th largest cryptocurrency now doesn’t have the $2.8Bn cash for the outstanding tokens. But despite these clear as day facts, cryptocurrency trading remains pegged to the contentious stablecoin despite many sound alternative options who offer a higher degree of transparency and comply with US regulations.
The confirmed and official stance that the organization is ready to bail out its failing partners at the expense of creditors abandons in clear sight, although suspected character, the 1 to 1 US Dollar equivalent backing.
Tether Coming Back, But Not Quite There Yet
Exchange: Kraken USDT/USD
The stablecoin, now representative of shares as part of the loan agreement between the two entities, has now shifted into securities territory in its essence as a large portion of its reserves will be on the back of an exchange not defaulting.
However, markets have remained much more tolerant than last October when Tether lost its peg to as low as $0.95, and remained off the Dollar mark for over 6 weeks following a crisis in their banking partnerships (Diar, 22 October 2018).
Tether remains below its intended peg on Kraken who offers a USD off-ramp for the stablecoin (see chart).
Third Time a Charm as Dai Raises Stability Fee, Again
The crypto industry can find solidity in the most likely scenario that every week as of late the stability fee to attempt to get Dai back onto its peg will increase.
Now standing at 16.5%, the stability has increased for the third time this month, more than doubling the 7.5% that was being settled at the start of April. The result has been a mere 4.9% reduction in the circulating supply.
At press time, Dai had finally managed, a few days after the fee increase, and a massive Tether debacle (see story), to bob over to the other side of $1, floating a cent above.
Stablecoin Projects Eye Wider Use Case Opportunities
A16z backed tokenized securities platform Harbor has partnered up with Gemini in order to onboard clients through the exchange issued stablecoin. It might be a ways ahead of itself, however, as Harbor's only publically known token was a real estate deal that was canceled last month.
Meanwhile, TrustToken has been moving fast to add more fiat currency stablecoins to its portfolio following the British Pound that was added earlier this month. It now boasts the Australian Dollar and said to be eyeing Canadian and Hong Kong Dollars, as well as the Euro. This would place TrustToken in a prime position to address forex markets, should one develop within the space.
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