In this week’s edition we give you some insight as to what may have set the markets into a panic (this time), explain why Ethereum’s Vitalik Buterin no longer has confidence in the expansion of crypto into the mainstream, and on a brighter note, go over a couple of coins that managed to do just fine and post significant gains for the week.

Goldman Sachs Behind Last Week’s Crash?

After a week of reckoning in the crypto markets, bitcoin has plummeted some 13% as of early Monday morning, once again dampening the hopes of investors that things had finally begun to turn around in what has been a dismal year for cryptocurrency. Hardest hit out of the top 20 biggest coins was Ethereum (ETH), falling below $200 for the first time in almost a year, and to prices not experienced since July of 2017. All-in-all, about $40 billion was erased from the total coin market cap, which sank beneath $200 billion to a 10-month low over the course of the week.

To blame for the sell-off this time was Goldman Sachs, who announced on Wednesday that they were shelving plans to open a cryptocurrency trading desk. The move would have been a first for Wall Street and for bitcoin and would have likely lent cryptocurrency some much-needed legitimacy in the eyes of heavyweight traders and investors. Conditional to the launch of the trading desk were that proper regulations be put in place to guide its legal operation, and that the risks of running it could be thoroughly assessed. Because the issuance of such regulations had not developed in a timely fashion, and perhaps because of the SEC’s continued unwillingness to approve the formation of a Bitcoin ETF, the move was cancelled, sending the price of bitcoin down 6% by the end of the day.

By Thursday, the Chief Financial Officer of Goldman publicly addressed the decision, saying “I never thought I would hear myself use this term but I really have to describe that news as fake news,” at the TechCrunch Disrupt Conference in San Francisco. CFO Martin Chavez went on to talk about how Goldman still had plans to launch a bitcoin derivative on behalf of clients who wanted access to such an option. A bitcoin derivative would still allow clients to indirectly trade or invest in bitcoin without ever actually owning bitcoin in their investment portfolios. As far as actual bitcoin was concerned, Chavez remarked that they had yet to find a safe custodial solution that would allow them to buy, hold and sell bitcoin the behalf of their clients.

Despite the recent sell-off, crypto prices seemed to be back on the mend as of Monday morning:

“Crypto Tree Map” depicting volume and prices of biggest coins over the last 24 hours. Source: coingecko.com

Bitcoin Popularity Continues to Wane

Ethereum co-founder Vitalik Buterin was in the news again, this time expressing his doubt that there was much room left for growth in the cryptocurrency and blockchain industry. In an interview with Bloomberg at the Ethereum Industry Summit conference in Hong Kong on Saturday, he said that the strategy of waiting for greater levels of adoption was “hitting a dead end,” noting that it would take users to go from just being interested in cryptocurrency to real applications of real economic activity” in order for coin prices to appreciate significantly in the future.

“The blockchain space is getting to the point where there’s a ceiling in sight… If you talk to the average educated person at this point, they probably have heard of blockchain at least once. There isn’t an opportunity for yet another 1,000-times growth in anything in the space anymore.” – Vitalik Buterin

Perhaps running contrary to Buterin’s words is an explosion in the growth of blockchain-oriented startups which are actively finding solutions to business problems, with some notable success already occurring in the healthcare, identity management and supply chain logistics fields. Bitcoin as its own subject, however, continues to decrease in popularity as a subject of general interest, with Google searches for the term “bitcoin” falling to about 11% of what it was during its peak, in December 2017. This statistic would certainly back Buterin’s assertion that everybody who wanted to find out more about bitcoin has already done so.

Interest in “bitcoin” as a Google search term has decreased significantly since December 2017. Source: trends.google.com

 

The places where “bitcoin” continues to be a popular search term may seem surprising to most. South Africa ranked as the #1 country in terms of most Google searches, a country that is relatively lax on cryptocurrency restrictions and has a booming crypto-to-fiat trading industry. Both private and public sector organizations there are also employing the use of cryptocurrency as a cost-cutting mechanism to improve day-to-day financial operations, helping to reduce the cost of providing basic services and saving their citizens money in the process. The top 5 nations in terms of Google searches for “bitcoin” are rounded out with Slovenia, Netherlands, Australia and Singapore, in descending order of popularity.

The world by popularity of “bitcoin” as a search term, with darker colors representing higher levels of popularity. Source: trends.google.com

Coins Bucking the Trend

Despite enduring one of the most brutal weeks seen in recent history for the crypto markets, a sliver of coins actually managed to do well, climbing significantly not only against bitcoin but against the dollar as well. Unsurprisingly, the average score of our patented Goodness Index (GI) formula (described in previous editions) for the top 100 coins by market cap was negative (-6.33), meaning that most coins fared even worse than bitcoin last week. However, two coins stood out far up above it all, with scores over 3 standard deviations away from the rest. We’ll perform a closer examination of them for you now.

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Bitcoin Diamond

Bitcoin Diamond (+53%) (GI = 142)

Bitcoin Diamond (BCD) brands itself under the auspices of being “the better bitcoin,” and is the result of a BTC fork which took place in November 2017. Unlike most other bitcoin forks, the Bitcoin Diamond fork will amplify the number of BCDs by a factor of ten, meaning there will ultimately be a total of 210 million BCDs created, as opposed to bitcoin’s 21 million. It is different from BTC in that its blocks are 8 MBs in size compared to BTC’s 1 MB (or BCH’s 32 MB), and it uses a different hashing algorithm from BTC, known as “Optimized X13.”

BCD hasn’t had much success since the time of its fork and has flown largely under the radar of most investors, so why is it suddenly skyrocketing in value as most other coins are collapsing? On September 5th, BCD has a huge surge in price, lifting it over 300% on huge volume in less than a few hours time. These types of moves in hundred million dollar plus-size cryptocurrencies aren’t experienced very often, which is what makes the “diamond of bitcoins” so particularly fascinating this week. Outside of a well-execute pump scheme, another reason why the coin suddenly sparked interest is the launching of BCD Bazaar, a website where people could buy and sell things using BCD as currency.

However, it is looking likely that the new website is just an excuse for the pump, and not the other way around. Another possible motivating factor for the increase in price is BCD’s recent listing on a new cryptocurrency exchange, however this too may be part of a clever ploy by a manipulators seeking to either profit from an unsuspecting dump on others, or those looking to use the coin as a means to launder money. In short, BCD’s recent rise seems non-organic and unmotivated by any legitimate developments.

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Dogecoin

Dogecoin (+20%) (GI = 62)

Most crypto enthusiasts know Dogecoin (DOGE) from either being one of the longest-standing cryptos that still maintains a great degree of popularity or from the meme fixture of a Shiba Inu cartoon image that graces its logo. DOGE has brought the cryptosphere many great things over the years, including tipping bots (first used on Reddit), unforgettable expressions (such as “to the moon!”), and even one of the first crypto-based charities (Doge4Water). For a few years, it was in the top 10 (if not the top 5) of most successful cryptocurrencies, and in January 2018 it briefly enjoyed a billion dollar-plus market capitalization value.

DOGE has since returned from the moon and come back down to earth, but seems to be destined to take off again, thanks to some very real (and massive) developments within its community. For months there had been talk of projects underway to create a “bridge” between the Dogecoin and Ethereum blockchains, aptly referred to as “Dogethereum.” This bridge would enable interoperability and direct swaps between the two coins, frequently referred to as “atomic swap operations.” The price of DOGE started rising steadily at the end of August, and finally, a beta test for Dogethereum was announced on September 5th, the results of which have propelled DOGE up in price to a tremendous degree when most every other crypto had been decidedly down.

In addition to the whole Dogethereum affair, Yahoo! Finance recently announced its support for Dogecoin through its partnership with TradeIt, an IOS app that allows the trading of BTC, ETH, LTC, and DOGE, on mobile devices. For a coin that started out as a joke, DOGE has become an incredibly powerful force in the cryptocurrency space, assuredly far greater than its creator, Jackson Palmer, ever envisioned. In the face of this outcome, Palmer could probably only respond, “Wow.”

Also in the News

  • The long-standing instant coin exchange service, ShapeShift, turned some heads in the crypto space with their announcement that they would be implementing Know Your Customer (KYC) standards for their members, limiting daily withdrawal amounts for those who failed to comply by submitting the necessary identifying documentation. The move was seen as controversial for the popular service because one of their executive board members and senior bitcoin developer, Erik Vorhees, is regarded as a staunch advocate of freedom for digital finances. Vorhees quickly became the target of criticism by another senior member and recognized name within the industry, Andreas Antonopoulos, who took to Twitter to express his dismay with Voorhees’s apparent change in attitude on the matter.

  • Two exchanges now comprise half of the volume of all bitcoin currently being traded on a daily basis: BitForex and BitMEX, each accounting for about 25% of the total trading volume. BitForex is a rather new exchange that has gained massive popularity in a very short period of time thanks to its ease of registration of advanced trading options, such as 20-to-1 leveraging and short selling options. It also hosts a wide array of trading pairs without involving fiat currency, as it employs Tether (USDT) in its place. Similarly, BitMEX has achieved a tremendous level of popularity in the short time of its existence thanks to similar leveraging options, with two main differences being users can withdrawal and deposit actual dollars (USD), and its BTC trading is classified as “derivatives” trading rather than the customary “spot” trading.
  • A recent survey concluded that almost half of all millennials within the United States believe that cryptocurrency will be “somewhat” or “very widely” accepted within the next 10 years. This number is significantly higher than “generation X” respondents, of which only a third positively responded to the idea of an increasing general acceptance of cryptocurrency in the future, and far higher than “baby boomer” responders, at 29%. Nick Cowan, CEO of Gibraltar Blockchain Exchange, stated why the outcome of the poll signaled a win for cryptocurrency, even in spite of 2018’s downturn in prices and popularity:

“The fact that 48% of millennials would be interested in using a digital currency is a sign of things to come. This is important because, ultimately, the future of the global economy lies with the millennials, not the baby boomers… The fact that over three-quarters of Americans would be interested in using cryptocurrency as a primary means of exchange is a positive for the industry. It speaks to the future prospect of cryptocurrency going mainstream. What is required is private sector actors offering real-world services to unlock institutional investment opportunities so that the market can become truly viable.” – Nick Cowan