Crypto Update: Sell-offs and subpoenas

Jacob Pouncey

Cryptocurrency analyst, Saxo Bank

This week the entire crypto market cap fell 18% to $280 billion. The market cap is well within reach of its 2018 low of $250bn. Similarly, Ethereum fell by 20% against the USD. Meanwhile, Bitcoin traded 14% lower, with its market cap sitting at $110bn. Bitcoin's percentage of the total market cap and its performance is indicative of a downturn, as Bitcoin tends to outperform the market due to investors selling alternative coins to buy bitcoin in the downturns. 

Chainanalysis offers insights to the great sell-off of 2018

Cryptocurrency forensics firm Chainanalysis published a blog post detailing a great distribution of wealth at the beginning of this year. The firm purports that from December 2017 to April 2018, the number of bitcoins used for speculation increased by over 50% as long-term investors exited their holdings. They suggest that this change of bitcoin from the hands of investors to the hands of speculators increased the liquid supply of bitcoin while the change in demand was immaterial, therefore aiding the price decline. 

Crypto exchanges subpoenaed

Over the weekend, the US Commodity Futures Trading Commission requested trading data from the exchanges that comprise the Bitcoin futures index as part of its price manipulation investigation in the bitcoin markets. Some exchanges refused at first before being subpoenaed as they claimed the request was invasive because of the amount of data and the fact that they would have to share it to a third-party that also runs a crypto-trading platform. Some cited this increased oversight from the CFTC as the reason for the recent market downturn.

Bitmain eyeing IPO

The largest cryptocurrency miner and chip manufacturer Bitmain raised $400m with a valuation of $12bn in a pre-IPO round of financing led by Sequoia Capital China. Bitmain is looking to go public by September at a valuation of $30-40bn. The bitcoin miner uses and sells complex hardware designed to mine cryptocurrency and made $3-4bn in revenues last year. Bitmain’s IPO highlights the maturation of the space and could encourage other large crypto-focused firms to go public. 

Disclaimer

Saxo Capital Markets Pte. Ltd. (“SCM SG”) may distribute information/research produced within the Saxo Bank Group pursuant to an arrangement under Regulation 32C of the Financial Advisers Regulations. Where the research is distributed in Singapore to a person who is not an Accredited Investor, Expert Investor or an Institutional Investor, SCM SG accepts legal responsibility for the contents of the report to such persons only to the extent required by law. Singapore recipients should contact SCM SG at +65 6303 7800 for matters arising from, or in connection with the information distributed. All legal documentation and disclaimers can be found at https://www.home.saxo/en-sg/legal/.

The Saxo Bank Group entities each provide execution-only service. Access and use of Saxo News & Research and any Saxo Bank Group website are subject to (i) the Terms of Use; (ii) the full Disclaimer; and (iii) the Risk Warning in addition (where relevant) to the terms governing the use of the website of a member of the Saxo Bank Group.

Saxo News & Research is provided for informational purposes, does not contain (and should not be construed as containing) financial, investment, tax or trading advice or advice of any sort offered, recommended or endorsed by Saxo Bank Group and should not be construed as a record of our trading prices, or as an offer, incentive or solicitation for the subscription, sale or purchase in any financial instrument. No representation or warranty is given as to the accuracy or completeness of this information. All trading or investments you make must be pursuant to your own unprompted and informed self-directed decision. No Saxo Bank Group entity shall be liable for any losses that you may sustain as a result of any investment decision made in reliance on information on Saxo News & Research.

To the extent that any content is construed as investment research, such content was not intended to and has not been prepared in accordance with legal requirements designed to promote the independence of investment research and as such, would be considered as a marketing communication. 

Please read our disclaimers:
- Full Disclaimer (https://www.home.saxo/en-sg/legal/disclaimer/saxo-disclaimer
- Notification on Non-Independent Investment Research (https://www.home.saxo/legal/niird/notification)