21Shares Research Newsletter - Issue 50

Market Outlook

Over the last week, Bitcoin Cash — a fork of Bitcoin and one of the most popular crypto assets — had its latest scheduled Halving event where its block reward, the amount of BCH tokens inflated into its monetary supply every block, halved from 12.5 BCH to 6.25 BCH. This event is especially important as it can give an indication of what could possibly happen during Bitcoin’s upcoming halving, estimated to occur on May 13th of this year — as we discussed in our first webinar.

The chart below shows the amount of BCH inflated into Bitcoin Cash’s monetary supply each day which halved as well on April 9th. An average of 143 blocks has been mined daily over the last four months.

What is most noticeable is the large drop-off in the total amount of BCH mined from 1243.75 BCH to 343.75 BCH on April 8th and April 9th respectively. There was also a large drop-off in the number of blocks mined on the Bitcoin Cash network as the chart below shows — from 149 blocks on April 8 to 55 blocks on April 9. Understanding why this happened is key to getting a grip on the likely immediate effects of the Halving on Bitcoin in May.

The fall in block rewards for BCH has made mining Bitcoin Cash less profitable in the absence of a doubling of Bitcoin Cash’s price. This move may have incentivized miners to switch away from mining on Bitcoin Cash to mining on Bitcoin (or other crypto assets that utilize the same ‘SHA-256’ algorithm which miners use). Evidence of this can be seen by comparing the average time a miner found a block (block time) during the halving for Bitcoin and Bitcoin Cash.

As we can see above on April 9, Bitcoin Cash’s block time increased from 11.9 minutes to 26.2 minutes, whilst Bitcoin’s block time fell from 10 minutes to 9.4 minutes. While inconclusive, this does suggest that the halving may have driven miners to shift over to mining on Bitcoin which may have provided better margins — however this advantage was short-lived as the block times have since converged in subsequent days.

Following a brief upsurge during the start of the week due to relatively positive upwards estimations of the economic fallout of the COVID-19 virus and the associated economic shutdowns, the large-cap crypto assets were largely down this week with Bitcoin Cash (BCH) faring the worst — BTC (-4.51%), ETH (-4.27%), XRP (-2.19%), BCH (-10.81%), and LTC (-7.42%).

On-chain transaction volumes were slightly up last week moving from $2B to $2.13B. This was driven primarily by general market reactions to the Bitcoin Cash halving; average daily transaction volume figures were as follows — BTC ($1.59B), ETH ($299M), XRP ($110M), BCH ($110M), and LTC ($24.9M).

Research - Portfolio Optimization With BNB (w/ Binance Research)

Last week 21Shares announced the exciting news that we had collaborated with Binance, the world’s most popular crypto asset exchange, to produce a research paper analyzing their BNB crypto asset. We have previously collaborated with Binance to launch the 21Shares Binance BNB ETP (ABNB) — a product that seeks to track the performance of BNB.

This collaborative report between 21Shares and Binance Research analyzed the performance of traditional US equity, and fixed-income portfolios, without crypto, with BNB, and with BNB & BTC. In addition, different rebalancing techniques were also used in this study. We show how, like Bitcoin, BNB has displayed a low correlation with all traditional financial assets over the long-term. Moreover, this research shows the importance of considering skewness in regard to the large negative tail risk involved across asset classes.

Read the report here.

Webinar - State of Crypto Webinar | April 9, 2020

Last Thursday, April 9th, we hosted our second webinar session - breaking down the factors driving the market over the past week and explained the basics of Bitcoin mining.

In the first part, our senior associates - Hansen Wang and Davide Vicini respectively gave an overview of the crypto asset markets and delved into Binance's acquisition of CoinMarketCap. Watch the presentation here.

While, in the second part, our new researcher, Eliezer Ndinga, dived into the nuts and bolts of Bitcoin mining and its three main functions. Watch the presentation here.

Join us next Thursday, April 16th at 3 PM CET when our team will hold its third webinar. This time, we’ll first showcase the performance of our various ETPs and provide insights into the current state of the market. The second part of the webinar will be a short primer on the proof-of-stake-enabled crypto asset, Tezos.

Sign-up here.

News - Square's Users Can Route Stimulus Payments to BTC-Friendly Cash App | CoinTelegraph

What Happened?

Last Saturday, on April 11th, the IRS announced the first Economic Impact Payments were deposited into US taxpayers' bank accounts. In response to the ongoing COVID19 pandemic, the US Congress passed the Coronavirus Aid, Relief, and Economic Security (CARES) Act to support many US citizens and permanent residents with a one-time payment of $1,200 from the US Treasury Department.

To accelerate the payment process, the Bitcoin-friendly payment application, CashApp lets users submit their Cash App Routing and Account numbers to the IRS.

What Does It Matters?

This is a great initiative by CashApp to support many Americans in need of such payment to meet their financial obligations promptly. As a matter of fact, the company recently changed its tagline to "CashApp, Get Your Stimulus Check In Less Time" in response to the initiative. Importantly, as a Bitcoin-friendly mobile payment application, this endeavour will also raise the awareness of the whole crypto asset ecosystem, starting with CashApp’s educational section on Bitcoin.

It is safe to say that this marketing move could boost CashApp user traction and lead the application to continue to be one of the major on-ramps to the crypto asset market going forward.

Learn more here.

News - FBI Warns COVID-19 Scammers Are Targeting Crypto Holders | CoinDesk

What Happened?

In the midst of the pandemic we are currently living in, we have witnessed heroic initiatives all around the world — but the Federal Bureau of Investigation (FBI) has also warned of the rise of crypto asset-related scams and fraud schemes. The FBI investigated and found out scammers luring people into buying COVID-19-related non-existent treatments or safety equipment or face masks. Scams also come in traditional methods such as blackmail or death threats of infecting people with SARS-CoV-2 unless they receive a Bitcoin payment.

Why Does It Matter?

Illegal activities within the crypto asset market are fairly minimal. For example, the on-chain analytics firm, Chainalysis, has noted that scams' earnings have dramatically lowered recently. Nonetheless, in times of uncertainty and despair, it is important to remain composed and rely on common sense to avoid such scams by conducting extensive research on the vendor's legitimacy, double-checking the email address or an account handle on social media.

Learn more here.