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Bitcoin Ethereum Stablecoin Crypto mining Market Watch Weekly

Stablecoin Market Share Explodes, BCH, BSV Halvings Approach: Market Watch Weekly

2020.04.06 Robbie Liu

Crypto assets have rebounded sharply this week, with Bitcoin (BTC) up 15 percent and trading over the $7,000 mark today, April 6, per OKEx’s BTC Index price. Although the leading cryptocurrency eventually closed 25.4 percent down in March 2020, the price has risen 80 percent from a low of $3,890 on March 12-13 after its steepest decline in 11 years. 

Bitcoin prices are currently trading in the $7,100 range after several failed attempts to break over that psychological price point last week.

OKEx BTC/USD Index Weekly Price. Source: TradingView

Demand for stablecoins surges

While the price of BTC has rebounded strongly, there has not been a significant increase in trading volume. The decline has led to OKEx becoming the largest futures platform in terms of Open Interest per Arcane Research’s data. On the other hand, BTC spot markets aggregated daily volumes have not picked up, according to data provided by research firm Skew. An increase in price that is not supported by an increase in trading volume is considered to be a short-lived rebound in technical analysis. This often leads to large corrections later on. 

Share of Total Open Interest 3/23-3/29. Source: Arcane Research
BTC Spot — Aggregated Daily Volumes. Source: Skew

But at the same time, we’re noting that USD-denominated stablecoins have become an important means for cryptocurrency investors to avoid price fluctuations.

The demand for stablecoins has been extremely strong since the mid-March market crash, just as in traditional finance, demand for dollar cash has increased in times of crisis. Additionally, Bitcoin doesn’t seem to be decoupled from the stock markets yet. 

In particular, the market value of Tether (USDT) is growing fast. Before the March 12 crash, USDT had $4.7 billion in circulation, taking 2.1 percent of total cryptocurrency market capitalization. By April 4, USDT’s total circulation had grown to $6.1 billion, or 3.24 percent of the cryptocurrency market’s value per Longhash and Coincheckup data.

USDT Circulation and Bitcoin’s price. Source: LongHash

Although the market currently has a large number of stablecoins, this is not the only criteria to start a bull market. A large number of stablecoin issuances can only provide the fund basis for a bull market, but the low trading volume and decline in liquidity may hold off the bull market. 

Bitcoin Cash & Bitcoin SV halvings next week

Bitcoin Cash (BCH) and Bitcoin SV (BSV) will go through their respective block reward halvings next week. 

Halving countdown. Source: Blockchair

Historically, BCH mining difficulty and its price maintain a high degree of consistency. Since all three proof-of-work coins are mined using SHA256, the miners choose whether to switch based on price in order to be more profitable.

This also means that after a few days, there will be a large number of miners forced to shut down or switch to BTC to continue mining. That would make BCH’s mining difficulty decline, unless its price can skyrocket. Given the historical correlation, the price of BCH has a good chance of going down with the upcoming halving. 

Bitcoin Cash mining difficulty vs. price in USD historical chart. Source: bitinfocharts.com
Avg mining difficulty per day vs. Avg price per day, USD, 7-day Rate of change. Source: bitinfocharts.com

In the gap between the BCH halving and BTC halving in May, we’ll see many miners migrate to the BTC network to mine more profitably, making the network hashrate go higher and the average cost of mining more expensive. If the price of Bitcoin does not rise by then, more inefficient miners will struggle to make a profit, and eventually they will likely capitulate.

 By mid-May, when Bitcoin halves, miners will face another round of capitulation. The remaining miners will be those strong hands, and their increased willingness to HODL will reduce market selling pressure.

The CEO of the mining operation Btc.top, Zhuoer Jiang, confirmed in an interview this week that the famous Bitmain S9 mining rigs have been turned off after the crash in mid-March. In an interview published April 5, Bin Luo, overseas sales director of mining rig manufacturer Avalon, said good news for the miners is that as the April to May flood season approaches, they can opt for stable, low-cost mining sites. Impacted by the coronavirus, many factories are not actually fully open and the oversupply of electricity is actually a good opportunity to negotiate low electricity prices.


Disclaimer: This material should not be taken as the basis for making investment decisions, nor be construed as a recommendation to engage in investment transactions. Trading digital assets involve significant risk and can result in the loss of your invested capital. You should ensure that you fully understand the risk involved and take into consideration your level of experience, investment objectives and seek independent financial advice if necessary.


Disclaimer: This material should not be taken as the basis for making investment decisions, nor be construed as a recommendation to engage in investment transactions. Trading digital assets involve significant risk and can result in the loss of your invested capital. You should ensure that you fully understand the risk involved and take into consideration your level of experience, investment objectives and seek independent financial advice if necessary.

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