Disclaimer: Felt compelled to publish this because I am certain that this series of market assessments will provide a much less opaque view of what's going on. Additionally, unlike many other alleged 'firms' and 'traders' out there, this isn't guess work. The metrics chosen as part of this analysis were not presupposed ahead of time as a routine, run-of-the-mill packaged pdf designed to make people feel fancy, important, or lofty - but rather out of a desperation to ensure that there is quality information being given somewhere. This is free because learning and educating fulfill me in a way that exceeds the value in money I need to accept the whoring of basic efforts for money.
So we've spent a ton of time in this chat talking about Litecoin and many projects in the top 10 - but now is where we elevate our discourse a bit.
Over the last few days / weeks, I've taken some time to evaluate the markets.
- We're in a really weird time. It doesn't feel anything like 2017. Coronavirus is out and there was a major U.S. election this year (along with a ton of other groundbreaking events). We saw markets globally capitulate back in March, with crypto drowning >50%. Now we're seeing Bitcoin on the precipice of an all-time high (and it appears ready to breach).
- At one point this year, DeFi was the most lucrative investment4 of all time. Despite the clear shenanigans going on behind the scenes (i.e., with it being a ponzi wrapped inside of a pyramid), when in Rome you must... So we reaped the benefits of the dirty market behavior of others (hey, do you want to invest or be Mother Theresa? Because you definitely can't do both). However, like all schemes and frauds, we must understand that the ultimate winners will either be the fraudsters themselves or the related local government that finally jams up the operation.
From the beginning of this year (2020) until around the beginning of October, the volume of trade in the markets (in addition to other external indicators), made it clear that there was no actual surplus in the total investment in the crypto markets.
At the time, this was a concerning observation - because it told us the gains we were seeing in Decentralized Finance were not due to an expansion of the crypto economy, but rather a 'redistribution of wealth' (i.e., winners vs. the unfortunate losers that decided to interact directly with these highly volatile, absurdly risky speculative financial instruments derived from non-existent virtual assets residing atop of yet another highly speculative asset [Ethereum]).
Market Trends Are Changing
At the beginning of this year, we observed that the 'small cap' coins were experiencing most of the gains in the blockchain market (among the top 100 cryptocurrencies).
Since that point, however, there has been a tremendous shift in that trend. This report will briefly point out those transition points before eventually isolating and identifying the one we are in currently.
This is written in a straightforward manner without a lot of posturing / pretend-Wall-St-tradre pseudo-intellectualism that you'll find elsewhere.
Blockchain Markets at the Beginning of 2020
The first period that we're going to cover spans from January 2020 to roughly July (with the transition to the second market phase this year occurring in August).
Utilizing the MVIS Indices
'MVIS Indices' will be used throughout this section and all others. Those looking for a valuable resource should consider remember MVIS Indices for future reference.
All of the data and information afforded by the MVIS on their site can be accessed for free.
First Frame of Reference
As mentioned above, we're going to start off by examining the first half of this year in isolation (January to July).
The two lines in the picture above represent the MVIS Indices for the large and small caps of the top 100 cryptocurrencies.
Both indices are weighted, so the more market capitalization that given asset has relative to the others in its index, the greater "weight" it will receive for the derivation of these values that we see on the chart above.
There will be subsequent guides and information that cover the methodology behind indices (and why they're particularly tricky for crypto), but MVIS is very concrete in their methodology of calculating these indices (all information & math on them is published publicly online).
Peering Closer at the Data
From just a casual glance, it appears as though there's nothing particularly remarkable about this chart.
However, this is not the case.
There was a significant gap between low cap assets and large cap ones that began around May and expanded from that point moving forward.
Take a look at the (interactive) gif below:
As we can see from the chart above, the blockchain space was mostly 'in sync' in terms of the gains that assets were receiving (across the board).
These Results Were Actually Somewhat Unexpected
Why? Well this trend held until around the beginning of September.
But if you were in the crypto space earlier in the year, then you most likely will remember that Decentralized Finance projects were going absolutely nuts at that point.
Possibility That This Performance is Encapsulated by the Mid Caps
If you don't know what those are yet - don't worry, the exact list of assets that are included within each category (large cap / mid cap / low cap) as well as the individual weightings for the assets in their respective index will be given a bit further along in this market analysis.
For now though, let's go ahead and replace the 'small cap' index with the 'mid caps' for the T100 blockchain projects and see how their performance matches up against the large caps (basically the T10 assets) during the first 6 months of the year.
Evaluating Mid-Cap Assets
Let's check out the first shot of the mid-cap assets performance against the large caps here:
As we can see above, the mid-caps were the ones that "held their ground" against the large caps during the summer.
In fact, for most of the year up to that point, it appears that mid-caps (gray line by the way) were kicking ass.
Let's see when the peak divergence between the two:
Unsurprisingly, that peak occurred on July 19th - right in the heart of DeFi's best month (and perhaps the best month that any crypto asset class has ever had, 2017 included).
Both large caps and small-caps were entirely blown away by the performance of the mid-caps.
Why Are We Analyzing This?
There is no way to gain a proper context on what is going on now unless we have a good idea of how things have been leading up to this point.
Specifically, we need to start looking into what it is about the markets that led to the dramatic shift in balance between the asset classes that you see above.
Market Volume Was a Major Concern For Quite Some Time
Despite the gains that the biggest crypto asset classes (T100) had made through to August 1st, the market data reflected another story entirely (one that makes it obvious that there may have been some other forces at play driving the markets).
Using CoinMarketCap, we can see that the market capitalization on May 8th, 2020 was at $270 million:
At its peak (from Jan - July), this total market valuation had jumped to $327 million:
That represents a total appreciation of +20% for the entire market. Which isn't bad at all.
Price Gains Didn't Match the Total Market Volume
Using the same two dates that were referenced above, let's see how the total market volume changed during that same time frame.
Unfortunately, we're forced to jump from resource to resource at this point since there are so few openly available crypto market resources that are available for users (that are also free, reliable to any extent or accurate; and that's a failing on the part of Librehash to not ensure otherwise).
For this portion of the report, we're going to look at 'Coin Codex'.
Specifically, we'll start with the total market volume on May 8th, 2020 (same start day as before):
As we can see from the photo above, the total market volume on that date was roughly $164B (according to aggregated exchange data).
Above is a chart for July 24th. As we can see there, the volume had only increased marginally to $176B.
Obviously, only comparing two separate days of market volume (tracked over a 24-hour period), is a woefully insufficient way to draw any inferences. But from the charts that we can see above (as well as raw CSV data extracted from various market resources), it became quite apparent while conducting the research necessary to complete this piece that the total market volume had remained relatively flat from May to July, while the price of many cryptoassets broke through the roof.
Nefarious Underpinning / Meaning For This
There will be a few reading this that won't like what they're about to see, but the honest truth is that the only logical explanation for why such a contradiction exists between the two metrics analyzed above is to assume (with more evidence in a subsequent publication), that the astronomical increase in USDT disbursements this year are why have primarily resulted in the appreciation during a time period when there was no apparent growth in the markets.
Number One Sign That This Growth Was Inorganic
Our number one sign here lies in the fact that there were no losing sectors in the blockchain space.
In other words, while DeFi may have been a stand out asset class in the crypto markets over the first part of the year - this was not to the detriment of the other asset classes.
Given the fact that there was no apparent increase in investment in the blockchain space (which would have invariably affected the net total difference for market data positively), there should have been an observable decline in one of the asset classes (i.e., money tricking from one asset and to another to explain for that particular sector's appreciation in light of their being no additional investment).
The only that asset classes could increase in the way that we've seen in the blockchain sphere without any additional external capital being injected into the market (in some capacity) is if someone were simply generating their own money to inflate the price of the assets. Of course, this is something that is made pretty overtly clear by the Tether market data, which is becoming increasingly difficult to find through any legitimate sources, but we will have a look at it very soon.