Mid-term inventory in 2019 (first): What happened to the encryption industry in the past six months?

"Maybe, we are coming out of the encrypted winter, and the encryption warm spring has arrived."

This is the judgement of the current cryptocurrency market by Barry Silbert, CEO of Digital Block Group (DCG), a US blockchain venture capital firm, in an interview with Bloomberg in early June.

In the past six months, cryptocurrency has achieved amazing results in terms of return on investment as a new asset class, surpassing almost all traditional assets such as the Standard & Poor's index, oil, and gold.

Take the largest currency cryptocurrency bitcoin as an example. According to the data, in just half a year, its price soared from around $3,700 to around $12,000, an increase of more than 200%. When Bitcoin broke through the $10,000 mark in 2017, it took only two weeks to reach an all-time high near $20,000, but then the “encryption bubble” burst and the market fell by nearly 90%.

Compared with the bull market in 2017, the external environment, technology base, application situation, participation of large companies and organizations in the encryption market and the blockchain industry are very different, and the regulatory and security issues are still shrouded in Two clouds above the rising market enthusiasm. So what happened to the encryption market and the blockchain industry in the past six months? Compared with pushing Bitpush, it brings you a mid-year inventory.

Bitcoin continues to rise in the second quarter to open the bull market

Fundstrat co-founder Tom Lee said on Twitter that historically, it is only 10 days to decide on a bitcoin rise in a year. After missing these 10 days, the average income is minus 25%.

In the past six months, we have also seen several such decisive moments. In the first quarter, Bitcoin continued to oscillate between $3,300 and $4,000. The three-month sideways formed the bottom of the bear market. On April 2, Bitcoin rose 18% in a single day, breaking through the $5,000 mark in one fell swoop; on May 11 and May 13, respectively, 13% and 12% respectively broke through the $7,000 and $8,000 mark; May 26 The daily increase of 8% is close to 9,000 US dollars; from June 19 to June 26, the consecutive 8 days of rising from 9000 US dollars to 14,000 US dollars near the high point of the year.

At this point, the general trend of this bull market has been formed. Analysts believe that the current cryptocurrency market is more mature than it was two years ago, although a certain degree of correction may occur, but there is not much doubt about creating new historical highs.

From the basics of Bitcoin's network, the hash rate is over 65,000,000 TH / s, a record high. This means that Bitcoin is safer than ever and requires a lot of computing power to influence the Bitcoin network. The daily chain volume, block size and other indicators also confirm that there are more people using Bitcoin than ever before. Compared to 2017, online transaction costs are still relatively low, and optimizations such as Segweit are helping to alleviate network congestion.

In the first half of 2019, the "Lightning Torch" payment experiment, which lasted for more than two months on Twitter, made more people pay attention to and participate in the use of Bitcoin "Lightning Network". Hundreds of people around the world, including Twitter CEO Jack Dorsey, have participated in the “Lightning Torch” in at least 54 countries around the world, demonstrating their strong capabilities across borders and technological potential.

The altcoin has its own merits but it is difficult to shake the leading position of Bitcoin

At the beginning of 2019, with the highest value of the cryptocurrency bitcoin price falling to around $3,400, its dominant position in the cryptocurrency market also fell below 50%. However, with the increase in bitcoin prices after April, its market dominance has gradually increased to over 60%. Obviously, many cryptocurrencies have not kept pace with the rise of Bitcoin, which is the entry point for many investors to enter the encryption field.

Despite this, some other major cryptocurrencies other than Bitcoin have also developed well in 2019.

According to the latest ranking released by financial and investment research firm Weiss Ratings, Ethereum, the second-largest cryptocurrency market, ranks first in the field of cryptocurrency technology. Ethereum is also the only cryptocurrency in the technology field to receive an “A” rating. It brings smart contracts and DApps into the world of cryptocurrencies and will transition to Ethereum 2.0, using Sharding technology to solve the scalability problems that plague Ethereum. According to DApp.com's report, Ethereum is the first and most popular DApp (decentralized application) development platform, with 72,422 people using DApps based on Ethereum.

The third-largest cryptocurrency, XRP from Ripple Labs, became one of the three "A"-rated cryptocurrencies in the field of application, like Bitcoin and Ethereum. MoneyGram will use XRP to transfer funds globally at a very low cost in seconds using xRapid products. In addition, Ripple works with 200 other banks, startups and payment companies, including companies such as Santander, Barclays and HSBC.

In terms of investment, the fourth-largest cryptocurrency Litecoin has soared 330% from a low of $30 in 2019, making it the main cryptocurrency with the highest return on investment. In addition, the platform currency of the cryptocurrency exchange currency has also increased significantly in 2019, and the investment risk is smaller than that of Litecoin.

In addition, EOS, Stellar (XLM), Cardano (ADA), NEO, ONTlogy (ONT), etc. are also in the application and technology.

International situation chaos makes investing in bitcoin a safe haven

In the first half of 2019, the global macroeconomic situation became chaotic, which also made cryptocurrency as “unrelated assets” and “digital gold” capable of storing value to attract funds from more investors.

The international political crisis such as the Brexit process, the internal turmoil in Venezuela and other countries, the Sino-US trade war, and the tension between the United States and Iran continue to have an impact on the global stock market and related countries.

Although the British Parliament is unclear about the Brexit issue, when the UK finally leaves the EU, this may be good news for cryptocurrencies. Encryption analysis predicts that a survey of multiple analysts by the company's Cindicator shows that 62% of respondents said Brexit may promote the cryptocurrency market. If the Brexit situation is serious, financial analysts believe that investors will use cryptocurrency as a substitute for the pound. And the cost of cross-border trade will increase, and investors will look for opportunities in markets with growth potential.

In countries where Venezuelan, Argentina and other legal currencies have depreciated for various reasons, cryptocurrencies such as Bitcoin have become an important means of storing value for the people of these countries. The Sino-US trade war and the tension between the United States and Iran have caused traditional investment markets such as the stock market to be hit. At the same time, some safe-haven capitals have entered the encryption field and pushed up the price of cryptocurrencies.

In addition, European Central Bank President Mario Draghi hinted in June that if the economy did not improve, monetary stimulus would be introduced. The Fed also issued a signal to cut interest rates. Morgan Creek co-founder Anthony Pompliano said that as interest rates fall and legal currency liquidity increases, it will appear that bitcoin is even scarcer. This has also become the direct driving force for Bitcoin to break the price at the end of June.

Traditional financial giants are involved in triggering institutional investment interest

One of the important differences between this bitcoin bull market and 2017 is that it was mainly retail investors who pushed it to a historic $20,000. Nowadays, the entry of traditional financial giants and institutional investors is likely to lead the cryptocurrency market to create new historical highs.

On the last day of last year, Bakkt, an encrypted trading platform operated by the New York Stock Exchange, completed a first round of financing of $182.5 million. In June of this year, it announced that it will begin testing its first physical delivery of bitcoin futures products on July 22. Its chief operating officer Adam White said, "Bakkt will begin user acceptance testing of its bitcoin futures traded on ICE and cleared at ICE Clear US. This is not a small step. This release will bring access to the cryptocurrency market. New standard."

And fund giant Fidelity Investments launched Bitcoin hosting services in March, and the company's encryption project, Fidelity Digital Assets, will attract Wall Street's interest in cryptocurrency trading and hosting. In addition, it will also provide bitcoin trading services to institutional clients.

TP ICAP, the world's largest trading broker, will launch a cash-settled bitcoin futures contract at the Chicago Mercantile Exchange, becoming another traditional financial giant in the encryption field after Fidelity Investments and ICE. TP ICAP's new joint venture will be operated by Simon Forster and Duncan Trenholme in London and is expected to increase bitcoin-related non-deliverable forward contracts.

At the beginning of the year, the JPM Coin program of financial giant JP Morgan Chase also triggered a wide range of Lenovo in the industry. JPM Coin is currently in the trial phase. Recently, Goldman Sachs CEO David Solomon also said in an interview that Goldman Sachs "absolutely" can launch its own cryptocurrency like JPMorgan Chase, which is "widely researching" on asset tokenization and stable currency.

The boom in the bitcoin futures market in the second quarter also showed an increase in institutional demand for bitcoin. As of June 17, the Chicago Mercantile Exchange (CME) had a total of 5,311 open contracts, totaling 26,555 bitcoins, or about $246 million. CME subsequently issued a tweet on Twitter saying that “the Bitcoin futures of the Chicago Mercantile Exchange indicate that more and more signs point to the institutional investment interest.” For example, the GBTC premium, bitcoin derivatives exchange BitMEX data is the same. Both indicate that “professional investor funds” are flooding.

[To be continued, please continue to pay attention tomorrow: mid-term inventory in 2019 (middle)]

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By Liang CHE

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