In this week’s edition, we examine the magnificent impact SegWit and the Lightning Network has had on bitcoin, explain why BTC losing dominance of crypto market cap space is a good thing, and review the ways in which blockchain technology is striving to unify peoples around the world.

The price of bitcoin ended largely unchanged for the week, tumbling up and down between the $8000 and $9000 range. The results of positive G20 summit talks and a new price target of $30,000 by the end of 2018 helped bitcoin from falling, but regulatory uncertainty and unresolved issues in Japan (home of the majority of the world’s bitcoin trading) are the likely culprit behind prices refusing to move much higher.

On a positive note, bitcoin transaction fees are now at two-year lows, thanks to the recent adoption of the Lightning Network and SegWit. The latter has proven tremendously popular since its implementation, with the number of transactions using SegWit now outnumbering the total number of Bitcoin Cash (BCH) transactions. For the first time since its release, the total number of transactions utilizing SegWit steadily exceeds 30%. As a side effect of SegWit, the total daily average transaction volume is also down to a 2-year low in terms of daily average.

BTC Dominance on the Decline, Alts on the Rise

Last Sunday, March 18th, something interesting happened: bitcoin reached a maximum in its dominance of the total coin market cap, at 45.7% — a level it had not reached since last year. In the last week, this number dropped by 2% as the total market cap of “Others” increased by 3%, from 17% to 20%. What does this mean? Normally, a rising BTC percentage of total market cap can mean a few things:

  • an increasing price of BTC
  • a decreasing price of altcoins
  • the price of bitcoin is rising faster or dropping slower than most altcoins

Basically, a decreasing dominance of BTC in the crypto market cap is usually good for cryptocurrency, as it means money is more rapidly being put in altcoins, which are by and large seen as riskier than bitcoin, meaning investors have an appetite for risk and are bullish on altcoins. Conversely, a rising BTC % dominance infers that money is flowing out of altcoins and into bitcoin, meaning investors are driven by fear and are bearish on altcoins.

For the first time since late January, bitcoin and other altcoins are converging to a middle % share of dominance, instead of diverging with bitcoin going up and other alts going down (as depicted in the chart above). If not a short-lived event, this shift could potentially spell a reversal in market sentiment towards alternate cryptocurrencies, which has been mostly bearish in 2018. An increased investor appetite for altcoins is what ultimately drives the size of the total coin market cap. Currently, the total coin market cap is about $328 billion, or a paltry 40% of its record of $828 billion, set on January 7th.

Market Cap Not Always What It Seems

While coin market cap is generally one of the best ways to measure the success or popularity of a cryptocurrency, it is worth noting that this metric can be misleading. As a reminder, the formula for coin market capitalization looks like this:

Price of Coin X Number of Coins Currently in Existence = Coin Market Cap

For example, let’s say exactly 17 million bitcoins have been mined, and the current price is $8,500 per coin; that would put bitcoin’s market cap at exactly $144.5 billion:

$8,500 x 17,000,000 = $144,500,000,000

Coins with huge, uncirculated stashes have an artificially-raised market cap, meaning that the coin appears to be “bigger” than it is. Sometimes developers hold onto these stashes and slowly release them into circulation, but sometimes not. Sometimes the true supply of a coin is unknown, and coins with a hidden premine can have much larger numbers than what is released to the public.

In short, while a cryptocurrency with a market cap in the millions most likely has something going for it to get that high of a valuation, this is not always the case, and investors should remember that this measurement is frequently manipulated to make a coin seem more attractive than it actually is.

Nation-Backed Cryptos on the Rise

Perhaps inspired by Venezuelan president Nicolas Maduro’s claims of raising $5 billion since the sale of his administration-backed petro coin began on February 20th, the list of countries considering launching their own “national” cryptocurrencies is growing. In 2018, China, Russia and Iran are all considering the development of state-backed cryptocurrencies in order to raise funds for various government programs. The idea also appeals to countries with no national currency (such as Ecuador and the Marshall Islands, which both rely on the US dollar as the primary currency of acceptance).

The legality of bitcoin varies tremendously worldwide, and with the exception of Venezuela, most countries with their own “national” coin tend to have cryptocurrency-friendly governments. Coins backed by the governments of their nation, such as the petro, should be distinguished from “country coins,” which are coins developed to appeal to citizens of specific nations. The first and perhaps most famous of these is Auroracoin (AUR), released in February 2014. The coin was launched in response to restrictive money transfer measures put into place after the small country was hit particularly hard by the collapse of the financial sector in 2008.

Other country coins are less politically motivated and simply designed to help unify a community or region where residents share the commonality of language, culture and/or borders. These include the following:

Coins have also been made to support independence movements within individual countries. Examples of these are:

There are also coins that hope to represent entire continents, although this has proved to be somewhat of an exceedingly lofty goal for the time being:

  • AsiaCoin (AC)
  • Eurocoin (EUC)

Where is bitcoin presently legal vs. not legal? It turns out that bitcoin is only actively prohibited in 10 countries, and implicitly endorsed by many more. The map below depicts countries that are bitcoin friendly as green and coins that are bitcoin unfriendly as red or yellow.

Also in the News

  • While bitcoin has been around in Las Vegas for quite some time, crypto startup companies are eyeing it as a potential hotspot for blockchain-related businesses. Vegas is already home to strip clubs which accept bitcoin and over two dozen bitcoin ATMs intermittently dispersed among the city’s casinos and highly-traveled tourist areas. The casino business has been the subject of ICOs in the past, but with legitimate products and big-time investors on board, the blockchain might finally find its root in Sin City.

  • Perhaps fearing increased regulatory from pressure in China, Hong Kong-based mega-exchange Binance announced recently that it had acquired investments in Malta, perhaps signaling that it was preparing to withdraw its operations from Asia. Binance has climbed to first place in terms of volume of all cryptocurrency exchanges, including both bitcoin and altcoin exchanges, since opening last year.
  • It seems like celebrity endorsements of ICOs and cryptocurrencies are no longer beneath the radar in terms of government intervention, as Steven Seagal’s Bitcoiin2gen is already under the scrutiny of the regulators. New Jersey’s Bureau of Securities issued a “cease and desist” letter against the celebrity-backed crypto, with warnings also administered by the state of Tennessee. This latest crackdown on crypto just goes to show that even action heroes aren’t invincible against a wary government.