ALSO: WBTC supply passes $1B and Bitcoin network becomes less dominated by whales
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Sept. 18, 2020
Sponsored by 
By the CoinDesk Markets Team
Edited by Bradley Keoun
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TODAY:
  • Bitcoin (BTC) +0.3% $10,976 | Ether (ETH) 0.8% $386 (@10:55 UTC)
  • Price Point: Bitcoin was higher, pushing against the $11K mark, as analysts warned of the potential for rising volatility on a "triple witching" Friday. 
  • Market Moves: Uniswap's surprise token delivery has given the decentralized exchange a market value of more than $5 billion, instantly making it No. 1 in DeFi.  
  • Bitcoin Watch: Market appears unfazed by big transfers to exchange addresses from miner wallets, often a sign of looming sell pressure. 
  • What's Hot: Ethereum-based bitcoin-equivalent tokens known as wBTC have surpassed $1B outstanding, and the Bitcoin network is becoming less dominated by so-called whales with big balances.    

PRICE POINT

Bitcoin was higher in early trading, just below the $11,000 mark that cryptocurrency analysts are now pegging as a key psychological hurdle.

Traders have turned more bullish, with prices up 6.3% since Sept. 14, heading for the biggest weekly gain since mid-July. "Sentiment appears to be positive," Mark Warner, head of trading for the digital-asset firm BCB Group, said in an email. 

Price action could be volatile Friday due to the "quadruple witching" of major options contracts expiring all at once in traditional markets. "We expect to see increased intra-day volatility as market participants look to reposition," Warner wrote. 

MARKET MOVES

Earlier this week, analysts with the cryptocurrency analysis firm Arcane Research were musing that new developments appeared to have slowed in the fast-growing blockchain arena of decentralized finance, known as DeFi. But they predicted that any lull was likely to be temporary.

"A new boost for DeFi tokens could be right around the corner," Arcane wrote Tuesday in a report. "The sector seems determined to grow further."

As if on cue, the decentralized exchange Uniswap late Wednesday made a surprise delivery of its new governance tokens to anyone who had ever used the project. Traders each got at least 400 of the UNI tokens, worth about $1,200 — prompting some witty commentators to call  it “stimulus for Ethereum users,” since it was the same amount as the coronavirus-aid checks mailed out earlier this year by the U.S. Treasury Department. By mid-day Thursday, more than 50,000 addresses were holding UNI tokens.  

The project also allocated tokens to its team members, investors and advisors, for a total supply of 1 billion of the UNI coins. And just like that, the token issuance gave Uniswap an implied market capitalization of $3.7 billion on a fully diluted basis, making it instantly one of the largest projects in DeFi and even pushing Uniswap into the top 10 of the entire crypto industry. 

By early Friday, the value had grown to $5.4 billion, according to Token Terminal, a digital-asset market data website. 



Top five decentralized-application tokens, ranked by market value. (Token Terminal) 

CoinDesk's Muyao Shen described the early trading action as a "roller-coaster ride," perhaps because nobody really had any idea what the tokens should be worth. But the token issuance represented a quick paper profit for big venture-capital investors like Andreesen Horowitz that had joined an $11 million funding round for the project just last month. 

The capital event also cemented a comeback for Uniswap, which last week had many of its users lured away to a two-week-old copycat project called SushiSwap, via an apparently legal maneuver known as a "vampire mining" attack. SushiSwap managed to migrate more than $800 million in crypto assets from Uniswap.

The new token's debut touched off a flurry of announcements by major centralized exchanges like Binance and Coinbase Pro looking to cash in on the hot demand for DeFi-related anything; they listed the UNI tokens within just a few hours  of the release. The OKEx exchange even offered a full set of trading tools for hedging UNI, including for spot trading, margin, swap trading and coin-margined perpetual swaps. Coinbase is among the project’s investors.

According to CoinDesk Senior Reporter Brady Dale, the UNI launch could touch off a "fresh new boom" in the phenomenon of liquidity mining, where users of projects are rewarded for their patronage with extra tokens, similar to credit-card rewards programs. Liquidity mining on Uniswap was set to start Sept. 18 at midnight, coordinated universal time. 

“With their new token and broad distribution model, I believe it will significantly help them grow and retain their liquidity while building trust,” Paul Veradittakit, partner at Pantera Capital, told Dale.

Ethereum Congestion

The Uniswap rollout may have contributed to congestion on the Ethereum blockchain, pushing up already-inflated transaction fee rates, CoinDesk's Daniel Cawrey reported

The average transaction fee on the Ethereum network rose to about 0.03 ether, a 10-fold increase from June levels, with the fee rates themselves set based on market conditions, according to data aggregator Blockchair.

Jean-Marc Bonnefous, managing partner of Tellurian Capital, which invests in DeFi, told Cawrey that Uniswap’s surprise token launch could only make the situation worse. 

“There has been a fair amount of congestion for some time already and we now have the very popular one-off airdrop of the much awaited Uniswap token UNI that is the talk of the town,” said Bonnefous. “DeFi definitely sets the agenda in the digital assets markets this month.” 


Average Ethereum network fees the past three months. (Blockchair)

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BITCOIN WATCH


Bitcoin miner outflows to exchanges (Source: Glassnode, Cole Garner)

Bitcoin is up 6% this week despite the recent spike in flow of coins from miner wallets to exchanges. 

According to data source Glassnode, 1.1 million BTC were transferred to exchange wallets from miner wallets on Sept. 13. That was the biggest single-day outflow from miners to exchanges since December. 

An increase in inflows into exchanges implies increased selling pressure. That's because miners and investors usually move coins to exchanges when they want to liquidate their holdings. 

So far, however, bitcoin has remained resilient. 

"The rotation of money out of alternative cryptocurrencies and into bitcoin seems to be pushing bitcoin higher," senior cryptocurrency trader at Zurich-based Crypto Broker AG, told CoinDesk in a Twitter chat. 

- Omkar Godbole

Read More: Bitcoin Rises Back to $11K Despite Signs of Indecision in the Market

TOKEN WATCH

SushiSwap (SUSHI): On-chain data analysis by IntoTheBlock appears to show yield farmers "dumping their SUSHI on retail investors." 

Wrapped Bitcoin (WBTC): Tokenized-for-Ethereum-blockchain version of bitcoin surpasses $1B supply as cryptocurrency traders seek yield opportunities in DeFi



Total supply of bitcoins tokenized on Ethereum since Jan. 2020. (Dune Analytics, CoinDesk Research) 
 

How to Value Bitcoin: Addresses

In the second episode of CoinDesk Research's webinar series on Bitcoin fundamentals, we unpack a novel accounting method used in Bitcoin and explore how entities are represented and transact on the network.

Philip Gradwell, chief economist at Chainalysis, and CoinDesk Research will walk through the structure of Bitcoin addresses and wallets, how exchanges operate and how ownership data and transaction data can be interpreted by investors.

Register to join our 30-minute webinar Sept. 22 at 10:30 a.m. ET on How to Value Bitcoin: On-Chain Transactions.

WHAT'S HOT

Prompted by surge in Ethereum blockchain fees, prediction-market technology firm Gnosis is copying all its smart contracts over to sidechain xDai, where fast and stable transactions can be had for fractions of a penny each (CoinDesk)

Cryptocurrency brokerage firms and prime brokers "have become the equivalent of supernodes" in digital asset-markets (Binance) 

Bitcoin network becomes less dominated by whales, with "smaller accounts comprising an increasing proportion of the aggregate supply" (Coin Metrics)

The tech arm of Societe Generale has confirmed plans to use up to five different blockchains to test digital securities and a central bank digital currency​​​​​​​ (CoinDesk)

In just eight weeks, Yearn.Finance has exploded in value, from its humble beginnings as a yield aggregator to a complex DeFi ecosystem managing more than $1 billion in assets (Messari)

Increasing transfer volume on Bitcoin blockchain might represent rising over-the-counter trading deals (Arcane Research):



Total transfer volume on Bitcoin blockchain, in number of bitcoin. (Arcane Research/Glassnode)
​​​​​​​

ANALOGS
The latest on the economy and traditional finance

Key U.S. markets pricing in risk of delayed or inconclusive result from upcoming presidential election, JPMorgan says (Bloomberg)

Trump says he "agrees with a lot" of $1.5T bipartisan House stimulus plan (Bloomberg)

Asian stocks on Friday mustered limited gains as investors continued to worry about a faltering recovery in the economy (Reuters)

Indonesia's rupiah clocked a two week high Friday, a day after the country's central bank decided not to change interest rates, saying it wouldn't be influenced by politics on monetary policy (Reuters)

TWEET OF THE DAY

CoinDesk 20 Update: OXT In, BAT Out

The CoinDesk 20 has made its first change since launching in July: Orchid (OXT), issued by Orchid Labs Inc., developer of virtual private network (VPN) software designed to be decentralized and open source, has replaced the basic attention token (BAT) issued by Brave Software Inc., developer of the Brave browser. 

First rolled out two months ago, the CoinDesk 20 is a list of the digital assets that matter most to the market. We filter by consistent, verifiable volume, listing the 20 assets that have the most volume on trusted exchanges for two consecutive quarters. Explore the CoinDesk 20 and our methodology here.


 
Disclaimer: The information presented in this message is intended as a news item that provides a brief summary of various events and developments that affect, or that might in the future affect, the value of one or more of the cryptocurrencies described above. The information contained in this message, and any information liked through the items contained herein, is not intended to provide sufficient information to form the basis for an investment decision. The information presented herein is accurate only as of its date, and it was not prepared by a research analyst or other investment professional. You should seek additional information regarding the merits and risks of investing in any cryptocurrency before deciding to purchase or sell any such instruments.
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