Research View - Acyclic movements

In August 2019, Bitcoin struggled to remain above $10,000 as its price fluctuated within a $9400-12,000 range. Monthly altcoin volumes were near all-time lows and the market dominance of Bitcoin approached its 70% tipping point.

The Libra turmoil continues with growing regulation uncertainty, which hindered its public support of pre-announced corporate partners. Meanwhile, China’s CBDC from the People’s Bank of China, now expected to be released before Libra, has been increasingly gaining media interest and raising questions related to financial privacy, as well as whether its two-tier system would entirely rely on blockchain1.

From the product development side, competition in the derivatives section of cryptoassets has intensified, with new exchanges and products getting created, such as options and futures. On the other hand, three Bitcoin ETF proposals in America were once again delayed by the SEC in the first half of August.

In other news, DAG-based cryptoassets received increasing awareness as “scalable alternatives to blockchains”, with Perlin, Binance’s latest IEO, now neighboring other cryptoassets like Fantom and Nano, in this small sub-segment of the digital asset industry.

Crypto spot markets

Table 1 - Main assets by market cap

Table 2 - September 2019’s monthly top 3 gainers on Binance.com

Table 3 - September 2019's monthly top 3 losers on Binance.com

Table 4 - New CEX listings in August 2019

Only four new assets were listed on Binance.com in August: Contentos (COS), TrueUSD on the Binance Chain (TUSDB), Cocos-BCX (COCOS), and Tomochain (TOMO).

On-chain markets on Binance DEX

Table 5 - New DEX listings against stablecoins and BTCB in August 2019

21 new listings were approved in August and only one single listing was against a stablecoin: BNB, which got listed against TUSDB on August 8th.

Chart 1 - Daily volumes on Binance DEX (in USD million)

Sources: Binance Research, Binance Chain

While experiencing a steady decrease in volume (in line with the decrease in BNB price), Binance DEX maintained high volumes with an aggregated median daily volume of $3.7 million. Despite the addition of new stablecoins such as TUSD-Binance (TUSDB), the volume on stablecoin pairs only accounted for less than 1.5% of the total exchange volume, possibly owing to a restricted number of assets available i.e., 6 pairs with 5 base assets traded2.

Borrowing and lending markets

In August 2019, 8 new assets were included for margin trading on Binance.com: USD Coin (USDC), Litecoin (LTC), Ethereum Classic (ETC), Bitcoin Cash (BCHABC), Stellar Lumens (XLM), NEO, and Monero (XMR).

Table 6 - New pairs added for margin trading in August 2019

Lending was introduced for Binance users, with a new subscription service where users had to lock funds for 14 days against attractive returns. This service aims to foster the borrowing capacities for all users interested in engaging in (leveraged) margin trading.

Specifically, the initial subscriptions were offered for three assets: Binance Coin (at an annual lending rate of 15%), USD Tether (at an annual lending rate of 10%), and Ethereum Classic (at an annual lending rate of 7%).

From the perspective of users interested in margin trading, borrowing rates have also been updated based on their VIP levels, with higher traded volumes leading to lower effective borrowing rates. For most of the assets allowed for margin trading, the maximum borrowing rates are 0.02% per day. On the other hand, BNB and USDT have maximum respective daily borrowing rates of 0.03% and 0.0275%. Furthermore, discounts on these rates range between -5% to -20% based on the VIP level of each user3.

Comparing to DeFi rates offered on Compound, it is more expensive, for traders, to enter into a leveraged position on Ethereum, on DeFi, than on Binance.com. Conversely, borrowing rates on Binance being the same for USDC and ETH (i.e., 0.02% daily - 7.57% annualized), it has become less expensive to short Ethereum (ETH) within the DeFi Space than on Binance.com, with ETH’s annualized borrowing rate below 3%. However, Binance offers greater leverage and has far more liquidity than all DeFi combined to sell Ethereum to stablecoins, as of today.

Views from Binance Trading

This section is prepared by Binance Trading, one of the world’s most liquid OTC desks for cryptocurrencies and digital assets4. The following content reflects solely the views of Binance Trading.

Will the Alt Season Come Back?

From a peripheral glance, the month of August seemed like a calm month for the crypto markets. Bitcoin saw an uptick in price, briefly to over $12,000 at the beginning of the month, before hovering around the $10,000 mark. At the end of the month, the price fell back down to $9,500, which is the end of July levels. From just looking at the BTC price, everything seemed business as usual. Beneath the surface though, BTC’s dominance jumped by a whopping +5% to reach slighty above 69%. Again, this did not bode well for the altcoin market, as total market capitalization excluding Bitcoin dropped by more than $20 billion.

A study by Arcane Research5 showed that BTC dominance could actually be above 90% when adjusted for liquidity (calculating the volume-weighted market capitalization). August was another tough month for altcoins, and it feels as though the sentiment has shifted from "WHEN will alts recover" to "WILL alts recover?". Our view is that Bitcoin does not necessarily need the support of altcoins to become digital storage of value, and can continue to succeed acting as a "digital gold". However, BTC price increases help overall crypto adoption, and altcoin performances remain mostly dependent on projects themselves. For the whole crypto industry to develop, though, we feel that altcoins must be an integral part of the maturation process.

In line with general market flows, our OTC desk saw more altcoin sell flows compared to buy flows. Surprisingly, the buy/sell ratio was not as loopsided as one might expect with the current market conditions. Numerous retail investors stepped in, at convenient times, to buy blocks of altcoins (mostly within the top 30 by market cap) at low prices. We even saw some appetite for relatively illiquid altcoins from investors. During times when BTC was hovering just below $10,000, we saw quite several stablecoin to BTC trades, likely with the belief that $10,000 was a strong barrier. However, the $10,000 barrier was utterly broken near the end of August, and traders seemed to be concerned about how much further BTC could drop, as BTC buy flows dropped off dramatically.

It will be interesting to see if BTC dominance can break the 70% mark in September, and if so, by how much. Indeed, the Bitcoin dominance mark has not hit 70% since March of 2017, months before Binance's creation. In our July edition, we stated that we eventually believe BTC dominance will go back down to the 50-60% range. We still believe in this, partly because BTC dominance was below 60% for an extended period, from May 2017 until June 2019. It has only been in the past three months or so that BTC dominance has shot up so dramatically, and the crypto-world has found its way of making everyone feel like a prisoner of the moment. Short-term wise though, BTC dominance may be sticking around. Regardless of personal beliefs about the markets, our trading desk will always be here to help execute decisions made by day-traders, long-term investors, and everyone in between.

1. Check our recent report about China’s CBDC. https://research.binance.com/analysis/china-cbdc↩

2. BNB (against both USDSB and TUSDB), BTCB, UND, COS and ONE.↩

3. Detailed breakdown for each asset is available there: https://www.binance.com/en/margin-fee#indexprice↩

4. If you wish to trade large volumes with an efficient settlement procedure and competitive quotes, join Binance Trading on Telegram or send an email to tradedesk1@binance.com. Please reach out to one of the official traders on the channel, confirm your account and get ready to exchange the world.↩

5. https://kryptografen.com/news/bitcoins-reported-market-dominance-is-approaching-70-but-in-reality-it-is-above-90/↩