In this week’s edition, we go over the latest major developments in the crypto markets. Bitcoin had another dull week as analysts made their cases for both bull and bear scenarios, and Litecoin led the pack with some substantial gains. We review what a low price of BTC means for miners worldwide and review a couple of coins which managed to veer strongly into green territory while most other coins remained relatively unmoved.

BTC Flat as Bulls and Bears Battle It Out

It was another uneventful week in the world of crypto as the price of BTC struggled to remain about the psychologically important $3,400 level, ending nearly flat for the week. The first 35 days of the year have so far been pretty lackluster in terms of volume or price movement, a signal that the bears and the bulls remain torn over which direction things would move next. Interestingly, the next four of the remaining five top coins by market cap all ended the week on a positive note, with Litecoin (LTC) shooting up some 9.6%. Litecoin has been on a tear as of late, ending each of the last five weeks in positive territory. Performing the worst out of the top ten was Stellar (XLM) which plunged 8.3% in the other direction, its third week in a row of posting losses.

Making the bull case for bitcoin last week were two prominent CEOs: Jack Dorsey of Twitter and Mike Novogratz of Galaxy Digital. Dorsey took to the Joe Rogan Experience to tackle several issues before delving into bitcoin, commenting that he saw a future where one single digital coin became “the currency of the internet.” While not specifically stating that it had to be bitcoin, he did have several kind words to say about the mother of all cryptocurrencies, remarking that “it was something that was born on the internet, was developed on the internet, was tested on the internet, (and) it is of the internet.”

Billionaire bitcoin bull Novogratz took to Twitter to remind everybody he was still bullish on bitcoin, despite his prediction of it reaching $10,000 by the end of 2018 failing to materialize.

Novogratz is CEO of the biggest merchant bank dedicated digital assets and blockchain technology, Galaxy Digital, which has the goal of institutionalizing the cryptocurrency space. In October of last year, his company teamed up with Goldman Sachs to joint fund crypto wallet developers BitGo, which provide institutional-size investors with the security, compliance, and custodial solutions necessary for multi-billion dollar cryptocurrency wallets. In a press release, Novogratz had the following to say about Wall Street’s entry into crypto and the wallet developers:

“Institutional investors are gradually realizing that digital assets are going to be a game changer, and they want to participate… We have been impressed with BitGo’s world class team, their deep technical understanding of digital assets as well as their ability to deliver institutional-quality products to investors. Our team is excited to support BitGo as it enters into this next phase of growth.” – Michael Novogratz, Founder of Galaxy Digital Ventures LLC

Of course, not everybody remained bullish about the future of bitcoin. Some analysts at CNBC are making the contention that, despite a year-long bear market, things will continue to get worse for bitcoin and crypto in the near future. All in all, it was a week of mixed signals that pointed to an unclear future for the direction of the markets. Though things may seem to be in the doldrums now, this particular infographic comparing the ROI of different assets over the last 10 years serves as a reminder of just how awesome bitcoin’s progress has been, and how its rise is nothing short of truly amazing:

Bitcoin Mining Profitability Reaches New Low

According to an analysis spearheaded by JPMorgan, the price of BTC is now significantly below the world-weighted average cost of mining one bitcoin, which is estimated to be $4,060. This means that paying the average rate for electricity (and other considerations) would yield a loss of around $600 per bitcoin mined. Clearly, some mining operations pay less for electricity than others, such as those in China which have direct agreements with aluminum manufacturers to purchase their unused electricity allocations at a discount. This renders their average cost of bitcoin production around $2,400, making the endeavor still clearly profitable in the country.

Source: bitinfocharts.com

 

High altitude, cold weather locations where cooling costs are kept to a minimum, combined with cheap electricity costs, are becoming more attractive as places to launch new mining centers, with China’s northern neighbor Mongolia set to run as many as 1,000 new miners in the near future, thanks to an abundance of low-cost power and construction materials. As of late January, up to 75% of all bitcoins mined were by mining pools located in China:

“The drop in Bitcoin prices from around $6,500 throughout much of October to below $4,000 now has increasingly pushed margins further and further negative for just about every region except low-cost Chinese miners,” read the JPMorgan analyst report, suggesting that high cost mining operations would continue closing their doors if the prices didn’t resume their history-long upward trend. By December 2018, over a million miners had already been taken off the grid, with the vast majority of those being located in the United States.

Most non-profitable mining operations that continue to remain in business even after incurring losses do so because they are in it for the long term. They have already invested huge sums of capital into purchasing mining equipment, setting up their rigs, buying or leasing real estate and purchasing electricity contracts to lock in the price of their power supply. They count on the probability that either one of two scenarios will unfold: 1) the price of BTC will increase, thereby making business profitable once again, or 2) bitcoin’s mining difficulty will continue to decrease, thus lessening the cost of electricity spent while mining while simultaneously increasing their chances of finding a block.

Bitcoin mining profitability. Source: blockchain.com

Coins Bucking the Trend

Since last week was for the most part uneventful in terms of price action across the board, it is worth identifying the handful of coins that managed to buck BTC’s sideways trend by either lurching upward or downward. Using our signature Goodness Index (GI) score, determined by a coin’s relative performance against bitcoin in terms of price movement and volume, we identified two coins whose score was significantly different from the week’s average score by more than four standard deviations, which is quite a bit compared to previous weeks in which these scores have been calculated.

For the top 100 coins by market cap (excluding all stablecoins and BTC, as BTC’s score is always zero), the average GI score was 0.51, meaning that broadly speaking, most coins fared better than BTC, if only slightly. We present to you these two coins to help get a better understanding of what makes a coin tick upward in otherwise flat market conditions.

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Litecoin (LTC) (GI = 41.1)

As we mentioned at the top of the article, Litecoin has been on a tear recently. Released by famed developer Charlie Lee in October 2011, Litecoin is the second “altcoin” to ever be launched, the first being Namecoin (NMC). Unlike Namecoin, however, it uses the scrypt hashing algorithm and is considered to be “lite” because it requires significantly less hash power to mine. What’s been driving Litecoin up close to 10% over the last 7 days? For one, the coin is scheduled to undergo a reward halving in approximately half a year, which means that only half as many coins will be rewarded to miners per block found after this point.

While this may seem like a long time still to go, it should be noted that Litecoin reached a bottom exactly 200 days before its last halving in 2015, and there are currently 184 days before the next halving. By all accounts, this is a bullish sign for investors and it could go as high as $50 in the next few weeks. Another couple of things to consider is the fact that Coinbase is currently rolling out institutional support for Litecoin purchases (along with BTC and ETH), and that mega exchange Huobi is implementing futures contract trading for Litecoin in the near future. All this positive news has helped LTC obtain over four times as much trading volume (relative to its market cap) as BTC, a testament to the level of investor excitement surrounding the coin.

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Metaverse ETP (ETP) (GI  = 34.4)

Another coin that surged upward last week was blockchain-as-a-service coin Metaverse ETP. The coin is currently ranked #100 by market cap size, thanks to a healthy 26% gain over the course of the last week. Metaverse ETP, founded in 2016 by Eric Gu and programmed by a diverse team of software specialists, aims to “revolutionize the way financial services and transactions are processed,” while simultaneously offering improvements on identity verification services. The coin opened for trading in June 2017 and has gone on a wild ride, roller coastering between $0.40 and $6.00 per coin among a chaotic series of peaks and troughs.

So why did Metaverse ETP take off during an otherwise sideways week? As a frame of reference, at its current $0.51 a coin its still only 16% of its price 3 months ago, so needless to say it’s been beaten up pretty bad, and perhaps even oversold. Helping things are the launch of a new wallet aimed to make the PoS staking process easier for holders and an announcement that the dev team is implementing a PoW/PoS “double consensus” algorithm, followed by a “triple consensus PoW/PoS/dPoS” in their next release phase. A sophisticated and possible first-of-its-kind maneuver, this will assuredly help add additional layers of security to the coin’s protocol, however it may not be enough to help it reclaim enough ground to bring it back anywhere near its former glory.

Also in the News

  • Two weeks ago, we announced the launch of an entirely new form of cryptocurrency based on the intriguing (and potentially revolutionary) MimbleWimble protocol, Grin. Over this short period of time, when most markets have been moving relatively sideways, the price of Grin has exploded 110%, making it one of the fastest growing coins on the market. Exchanges have been in a rush to add the coin which, thanks to its data slimming design and advance anonymity features, has quickly become all the rage among seasoned crypto veterans.
  • On a more somber note, an Oakland, California man was arrested for attempting to buy poison from a dark market in order to murder his wife. The man, knowing the custody of his child would go to his wife after their impending divorce was finalize, is charged with placing an order to buy the poison from an undercover agent posing as a vendor on the marketplace. Initially, the man wanted to use a darknet service to hire a contract killer, but figuring it would be too expensive, simply settled on buying $95 worth of bitcoin to purchase the non-existent poison. The container holding the liquid was equipped with a tracking device, which led authorities to the man’s location, where they discovered he had also purchased specialized equipment in order to handle to poison.
  • It’s official: Ethereum has been determined to be the #1 coin platform for scammers. Unlike 2017, which was mostly dominated by phishing scams and malware infections, 2018 saw a dramatic amount of Ponzi schemes and ICO exit scams, all using tokens based on the highly popular platform. The amount of people scammed increased three fold year over year, and the amount of revenue collected by scammers more than doubled, which goes to show that even in a bear market, scammers are increasingly invading the crypto space.
  • The Palestinian fundamentalist organization Hamas has recently turned to bitcoin as a way to raise funds for its struggle against Israel. Hamas, dubbed a terrorist organization by several world governments, is hoping that bitcoin’s pseudonymous nature will help it attract funds that may otherwise be cut off via traditional banking methods. In an accidentally humorous element added to what is otherwise a very serious matter, a version of the news printed by the Times of Israel decided to add the words, “There was no immediate reply from Bitcoin” at the end of their story…