Altseason

Altseason Altseason Bitcoin and Altcoin seasons
CRYPTO SEASONS
19.05.2019
BITCOIN BULL SEASON VS. ALTSEASON
CHRISTIAN OTT
AUTHOR
Introduction
There are currently 2186 cryptocurrencies listed on CoinMarketCap but with Bitcoin, just one cryptocurrency is accountable for over 50% of the total crypto market cap. With so much dominance of the whole market cap and Bitcoin also being a trading pair for most coins, the whole Altcoin market is highly depending on the largest cryptocurrency. Therefore, crypto cycles are mostly divided in Bitcoin bull cycles, where most Altcoins lose value against Bitcoin, or Altseasons, in which most Altcoins gain value against Bitcoin. In this article, I want to discuss and analyze both types of seasons.

Identifying Bitcoin and Altcoin seasons
First of all, we have to identify Bitcoin seasons and Altseasons. While there are certainly single days, in which Altcoins gain more than Bitcoin and vice versa, I prefer to identify these cycles in a macro perspective, allocating at least a few weeks to a season. The seasons can be identified best with the Bitcoin dominance chart provided by CoinMarketCap. When there is a period of rising Bitcoin dominance, it is a Bitcoin season, whereas a period with decreasing Bitcoin dominance signals an Altseason. Utilizing this method, I identified 6 Bitcoin seasons and 6 Altseasons since December 2014 – which are depicted in the following graphic. It also shows the BTC and ALTS dominance simplified from highest/lowest point at the start of a season to the lowest/highest point at the end of a season:
BTC DOMINANCEALTS DOMINANCEBITCOIN SEASONALTSEASON201520162017201820%0%40%60%80%100%DOMINANCEBITCOIN VS. ALTCOINS
The graphic displays Bitcoin dominance (colored in red) and Altcoin dominance (colored in blue) of the total crypto market capitalization. The two most obvious observations are: Bitcoin and Altcoin seasons are alternating and Bitcoin’s dominance has decreased over time. While Bitcoin’s dominance was above 80% throughout 2015 and 2016, it went below 60% ever since. Another interesting fact is that Altcoin seasons appear to be much quicker than Bitcoin seasons.

Length and frequency of seasons
Let’s have a closer look at the length and frequency of the seasons. On average, a Bitcoin season lasted 167 days, while an Altcoin season lasted 94 days. During the last four years, Altseasons were much more likely to happen in the first half of a year, with the first quarter having the highest probability of an Altcoin season. The third quarter of a year has almost entirely been dominated by Bitcoin, with a sole exception of a single Altseason in July 2015. The fourth quarter of a year has also been dominated by Bitcoin in 2015, 2016 and 2017. However, from September 12 in 2018 to the end of March in 2019, the Bitcoin dominance decreased, indicating an Altseason.
JANDECFEBNOVMAROCTAPRSEPMAYAUGJUNJULALTSEASONFREQUENCY PER MONTHAVERAGE LENGTH OFALTSEASON94 DAYSJANDECFEBNOVMAROCTAPRSEPMAYAUGJUNJULBITCOIN SEASONFREQUENCY PER MONTHAVERAGE LENGTH OFBITCOIN SEASON167 DAYSSEASONSLENGTH AND FREQUENCY
Market cap during seasons
How did the market cap of Bitcoin and Altcoins change during their respective seasons? The average Bitcoin season made Bitcoin’s market cap increase by 117%, while the average Altcoin season made the overall market cap of all Altcoins increase by 663%. However, these averages are largely inflated by the price movement in 2017, where the Altcoin market cap increased by 3296% in the first half of the year, while the Bitcoin market cap increased by 605% in the second half of the year.

If we erase these two seasons from the average calculation, Bitcoin’s market cap increased by an adjusted average of 20% in a Bitcoin season and by an adjusted average of 136% in an Altcoin season (since December 2014). Therefore, the Altcoin increases are nearly 7x higher percentage-wise in an Altcoin season than Bitcoin increases in a Bitcoin season. However, the performance of Altcoins in Bitcoin seasons is also worse than the performance of Bitcoin in Altcoin seasons. On average, the market cap of Altcoins decreased by 20% during Bitcoin seasons, whereas the Bitcoin market cap increased by 30% on average in Altcoin seasons. The following graphic contains all identified seasons since December 2014 and their respective market cap decreases and increases:
18.12.2014 –18.05.2015-22%-68%18.05.2015 –10.07.201524%136%10.07.2015 –08.01.201667%-36%08.01.2016 –13.03.2016-7%255%13.03.2016 –27.12.2016136%-6%27.12.2016 –19.06.2017183%3296%19.06.2017 –07.12.2017605%129%07.12.2017 –12.01.2018-22%198%12.01.2018 –02.04.2018-49%-70%02.04.2018 –06.05.201837%102%06.05.2018 –12.09.2018-33%-72%12.09.2018 –31.03.2019-34%-13%BITCOINMARKET CAPALTCOINSMARKET CAPMARKET CAPBTC- AND ALTSEASONSBITCOIN SEASONALTSEASON*PERCENTAGES REFER TO USD VALUATION
Critical discussion of the analysis
Criticism concerning this analysis can be targeted towards the rather small sample size. Bitcoin has been around for only 10 years and the Altcoin market as a whole is even younger. At the end of 2013, there weren’t even 100 Altcoins listed on CoinMarketCap, which is why I decided to start with this analysis at the end of 2014, when there were at least 500 Altcoins listed on CoinMarketCap. This provides us with roughly 4.5 years of market data, that resulted in the identification of 12 different seasons, which is a small sample size. It’s not a failure of this analysis though, it is simply a result of the crypto market being relatively new. It will be interesting to see, whether the same patterns will be visible in several overhauls of this analysis during the next few years.

Wrap-up
Bitcoin and Altcoin seasons are alternating market movements in the crypto market. In this analysis, a prolonged increase of Bitcoin dominance in the whole crypto market capitalization was declared as a Bitcoin season, while a prolonged increase of Altcoin dominance was declared as an Altcoin season. This method identified 6 Bitcoin and 6 Altcoin seasons. A comparison of these seasons against each other outlined, that Bitcoin dominance decreased over time, even though Bitcoin seasons are on average 1.8 times longer than Altseasons. During the last 4 years, Altcoin seasons were more likely to happen in the first half of a year than in the second half. The analysis also displays that Altcoins on average increased by a larger percentage in an Altcoin season than Bitcoin increased in a Bitcoin season. However, the Altcoins’ USD market capitalization on average decreased during Bitcoin seasons, whereas Bitcoin’s market cap in fact increased on average during Altcoin seasons.



Articles, that may interest you:

Litecoin ATVWAP

Litecoin ATVWAP
LITECOIN ATVWAP
22.04.2019
ALL-TIME VOLUME WEIGHTED AVERAGE PRICE
CHRISTIAN OTT
AUTHOR
Introduction
Recently, I put a spotlight on using the all-time volume weighted average price (ATVWAP) to evaluate, whether the price of Bitcoin is overbought or oversold (find the detailed article here: Bitcoin ATVWAP). It is basically an average daily price, with every price point being weighted by its daily trading volume. The ATVWAP is not limited to BTC though, it also offers interesting insights for the price of other cryptocurrencies. In this article, it will be applied to Litecoin.

Trading Volume
Litecoin’s trading history has been well-documented since the mid of 2013. In the last 6 years, LTC never traded below a dollar and went up as high as 375 USD in December 2017. Since July 2013, Litecoin traded on 1131 days between 1 and 10 USD, on 448 days between 10 and 50 USD, on 298 days between 50 and 100 USD and on 192 days above 100 USD. Litecoin’s overall trading volume has increased over the years. While it was around 1 million Litecoin traded per day from 2014 – 2016, it increased to 5.5 million LTC per day in 2017 and 2018. In 2019, Litecoin’s volume has reached new highs though, with a daily trading volume across exchanges of 27 million Litecoin per day.

However, Litecoin’s trading history didn’t start in mid-2013, its trading history goes back to October 13, 2011, where it first started trading at 0.01 USD. Litecoin’s historical trading data before mid-2013 is incredibly hard to find though, especially when it comes to trading volume. I could not find a single source for Litecoin’s trading volume before mid-2013, which unfortunately forced me to improvise. Since Bitcoin’s and Litecoin’s trading volume has been highly correlated over the last 5 years (correlation coefficient of 0.88), I derived Litecoin’s trading volume prior to July 2013 from Bitcoin’s daily trading volume in that time span. That may not be very precise but is the best approach available. Nevertheless, it is quite obvious, that Litecoin’s trading volume is way lower in its first two years, than from mid-2013 on. The following graphic underlines this by showing Litecoin’s trading volume per price range:
3.2B2.4B1.6B800M0.01$100$.10$–  .01$1$–  .10$10$1$50$10$><100$50$LITECOINTRADING VOLUME PER PRICE RANGE(IN LTC)
Litecoin ATVWAP (in USD)
As the graphic shows, Litecoin has been trading in many different price ranges since late 2011. It is therefore difficult to determine a “fair” price, that is significant but also not too complicated to calculate. An average price of Litecoin over time (currently at 25 USD) wouldn’t be significant since its trading volume was way higher above a dollar, then it was when Litecoin traded below 10 cents. Instead of the average price, I suggest using the all-time volume weighted average price (ATVWAP), which weights each daily price with the volume it was traded at. The following chart shows both the daily price movement and the corresponding ATVWAP value.

LITECOIN(IN USD)ALL-TIME VWAPATVWAP (USD)VOLUME(LTC)DAILY PRICE(USD)2012201320142015201620172018.001$0.01$0.1$1$10$100$1000$
Litecoin started trading on October 13, 2011. In its first 8 months, the public interest in trading Litecoin was very low, leading to a price decline from 3 cents in November 2011 to 0.3 cents in May 2012. From that point on, the price went up massively in three waves. The first wave sent the price from 0.3 cents in June 2012 to 9 cents in October 2012. The second wave increased the price from 7 cents in March 2013 to 5 USD in April 2013. The third wave led to a price increase from 2 USD in October 2013 to a temporary high of 53 USD on November 28, 2013. Litecoin therefore increased its US Dollar valuation by an absolutely incredible 21,200 times or 2,120,000% (!) in a time span of 1.5 years.

During that run-up, Litecoin’s trading volume increased from around 10,000 Litecoin per day to around 1,000,000 Litecoin per day, so it is fair to say that once interest in Litecoin picked up, the illiquid order books couldn’t meet the demand and the price increased massively. The ATVWAP underlines this as well – while Litecoin’s average price was at 1.1 USD at the day of its temporary all-time high of 53 USD on November 28, 2013, its all-time volume weighted average price was at 3.2 USD, which is 3x higher than the average price.

In the years after that massive bull run a decline and accumulation period followed. Litecoin went down all the way from 53 USD in November 2013 to a low of 1.1 USD in January 2015, trading both way below its ATVWAP value of 9 USD and its average price of 4.5 USD. After that massive retracement of 98% from its high in 2013, Litecoin went up again from 1.5 USD in May 2015 to 6.5 USD in July 2015, followed by an accumulation period, where it traded between 3-5 USD for nearly two years until April 2017. The ATVWAP value acted as a resistance level from April 2014 to April 2017, which was tested three times (12.5 USD in April 2014, 6.4 USD in July 2015, 5.5 USD in June 2016).

After the price finally broke through the ATVWAP resistance in April 2017 though, a hefty price increase followed. Starting from 4 USD at the end of March 2017, the price went up to a high of 375 USD on December 19, 2017, which is an increase of nearly 94x or 9,400% in 9 months. At Litecoin’s all-time high, its ATVWAP value was at 35 USD, so around 90% lower than the daily price. After that run-up, a massive correction followed, sending Litecoin’s price as low as 23 USD in December 2017, which is a 94% retracement from its all-time high.

As we saw from April 2014 – April 2017, the ATVWAP acted as a resistance again in the 2018 price decline. Litecoin’s daily price went below the ATVWAP value of 62 USD on August 10, 2018 and retested it multiple times in September. After it couldn’t manage to climb above the resistance level, Litecoin declined to its 2018 low of 23 USD, a low that was almost perfectly predicted by Litecoin’s average price (at 24 USD at that point in time). In anticipation of the upcoming Litecoin halvening, it bounced from its average price level and also managed to climb above its all-time volume weighted average price again in March 2019 and went up all the way to a high of 97.5 USD. Currently, Litecoin’s daily price is at 77 USD, with an ATVWAP of 56 USD and an average price of 25 USD.

Litecoin ATVWAP (in BTC)
Unfortunately, most cryptocurrencies’ USD valuations highly depend on Bitcoin’s USD valuation. Therefore, a LTC to BTC chart should reveal more of Litecoin’s independent market moves. The following chart displays LTC’s daily price and its ATVWAP, both in BTC:

LITECOIN(IN BTC)ALL-TIME VWAPATVWAP (BTC)VOLUME(LTC)DAILY PRICE(BTC)2012201320142015201620172018.0005.005.05
The chart shows, that Litecoin’s trading patterns have been very volatile against BTC. Overall, Litecoin has been trading between 0.0005 BTC and 0.05 BTC per LTC. Litecoin’s recurring trading pattern seems to be a massive increase in a short time span and a decline in a longer time span after that. The chart shows 8 massive price increases in a short time span, 4 of them until the end of 2013 and the other 4 since 2015.

Let’s focus on the trading data from October 2013 onwards, since the early price movements of Litecoin were based on very low volume. While the first price increase on very high volume sent the LTC price to a high of 0.04 BTC in December 2013, its price increases in the following years went only as high as 0.02 – 0.025 BTC per Litecoin. The chart shows, that Litecoin has mostly traded in a range between 0.005 BTC and 0.025 BTC in the last five years. Buying Litecoin above its ATVWAP valuation in BTC didn’t necessarily turn out profitable in the long term, since it has been returning below its all-time volume weighted average price after every price increase.

From October 2013 on, Litecoin has also struggled to reach new higher highs in its BTC valuation. Its high in December 2013 was at 0.041 BTC, its high in July 2015 was at 0.025 BTC, its high in February 2018 was at 0.023 BTC and its most recent high in April 2019 only went as high as 0.018 BTC. In the last 5.5 years, Litecoin only traded 33% of the time above its all-time volume weighted average price in BTC, but on 67% of the days below its ATVWAP.

Wrap-up
While Litecoin’s USD valuation chart outlines a long-term growth, its BTC valuation chart shows, that Litecoin has been trading in a range for the last 5 years and has also struggled to make higher highs against Bitcoin. Against BTC, it had several pumps, where the price increased very quickly, followed by a longer period where the price declined. In Litecoin’s USD valuation chart, the ATVWAP acted as a long-term resistance from April 2014 – April 2017. Once Litecoin broke through this resistance, its price increased up to 94x. Litecoin’s all-time average price nearly perfectly predicted the 2018 bottom of 23 USD. The ATVWAP has been a useful indicator in Litecoin’s BTC valuation chart in the past, since a daily price of Litecoin above its ATVWAP has been a good selling point and a daily price of Litecoin at least 30% below its ATVWAP has been a good buying point.



Articles, that may interest you:

The Month of Exchange Tokens

Month of Exchange Tokens
MARCH 2019
01.04.2019
THE MONTH OF EXCHANGE TOKENS
CHRISTIAN OTT
AUTHOR
Introduction
March 2019 has undoubtedly been the month of exchange tokens. Driven by the hype of initial exchange offerings and more interest going into investing in the crypto market again after stable prices for months (in contrast to the constant downfall in the second half of 2018), many exchange tokens saw massive gains. In this article, I compiled a ranking of exchange tokens by their price increases against Bitcoin in March, which you can see below:

The percentage values are the increase of the token price against Bitcoin’s price, comparing the opening price on 2019-03-01 to the closing price on 2019-03-31. The market cap is based on the closing price on 2019-03-31. Data is from coinpaprika, CoinGecko and CoinMarketCap.
0.110 MILLION USDMARKETCAP:TIDEXEXCHANGE:TDX-19%0.090 MILLION USDMARKETCAP:TOPBTCEXCHANGE:TOPB-20%1.012 MILLION USDMARKETCAP:BLOCKTRADEEXCHANGE:BTT-17%6.021 MILLION USDMARKETCAP:TRADE.IOEXCHANGE:TIOX-36%0.615 MILLION USDMARKETCAP:IDEXEXCHANGE:IDXM-12%0.386 MILLION USDMARKETCAP:METAMORPHEXCHANGE:METM-10%5.053 MILLION USDMARKETCAP:IDEXEXCHANGE:AURA-8%27.940 MILLION USDMARKETCAP:LATOKENEXCHANGE:LA-6%41.591 MILLION USDMARKETCAP:BANCOREXCHANGE:BNT+16%162.977 MILLION USDMARKETCAP:SEVERALEXCHANGE:BTS+21%2.443 MILLION USDMARKETCAP:SWITCHEOEXCHANGE:SWTH+22%4.283 MILLION USDMARKETCAP:COBINHOODEXCHANGE:COB+23%48.972 MILLION USDMARKETCAP:LIQUIDEXCHANGE:QASH+25%10.511 MILLION USDMARKETCAP:COSSEXCHANGE:COSS+31%2,533.648 MILLION USDMARKETCAP:BINANCEEXCHANGE:BNB+57%0.757 MILLION USDMARKETCAP:OTCBTCEXCHANGE:OTB+59%?MARKETCAP:DIGIFINEXEXCHANGE:DFT+64%6.580 MILLION USDMARKETCAP:BIT-ZEXCHANGE:BZ+66%46.918 MILLION USDMARKETCAP:KYBER.NETWORKEXCHANGE:KNC+71%2.889 MILLION USDMARKETCAP:BITMARTEXCHANGE:BMX+83%0.373 MILLION USDMARKETCAP:BITIBUEXCHANGE:BTB+82%75.694 MILLION USDMARKETCAP:DIGITEXEXCHANGE:DGTX+87%0.345 MILLION USDMARKETCAP:HOTBITEXCHANGE:HTB+94%104.183 MILLION USDMARKETCAP:HUOBIEXCHANGE:HT+101%346.372 MILLION USDMARKETCAP:ZBEXCHANGE:ZB+137%563.323 MILLION USDMARKETCAP:OKEXEXCHANGE:OKB+140%1.375 MILLION USDMARKETCAP:COINEXEXCHANGE:CET+149%?MARKETCAP:FCOINEXCHANGE:FT+190%2.576 MILLION USDMARKETCAP:BGOGOEXCHANGE:BGG+197%54.413 MILLION USDMARKETCAP:BIBOXEXCHANGE:BIX+197%151.691 MILLION USDMARKETCAP:KUCOINEXCHANGE:KCS+247%1.934 MILLION USDMARKETCAP:NEXT.EXCHANGEEXCHANGE:NEXT+315%61.616 MILLION USDMARKETCAP:BITMAXEXCHANGE:BTMX+506%3.212 MILLION USDMARKETCAP:ETERBASEEXCHANGE:XBASE+616%MARCH 2019EXCHANGE TOKEN GAINS
Wrap-up
As we can see, the prices of exchange tokens have been increasing throughout the market. The tokens of Eterbase, BitMax, Next.exchange and Kucoin have been the top performers with price increases way over 200% in March 2019. Adding to that, other tokens have seen massive gains as well: The average price increase against Bitcoin of all 34 listed tokens was 102%, with 20 tokens gaining more than 50% against Bitcoin and just eight of the 34 losing value throughout March. Is that kind of growth sustainable? Are these signs of a returning bull market? Only time will tell…

Volume vs. Order Book Depth

Volume vs. Order Book Depth
VOLUME VS. DEPTH
24.03.2019
EVALUATING BITCOIN TRADING PAIRS BY VOLUME AND LIQUIDITY
CHRISTIAN OTT
AUTHOR
Introduction
Artificially created trading volume by crypto exchanges has become an increasingly concerning issue throughout the industry. With the interest in cryptocurrencies rising and their number one use case being speculation, the amount of crypto exchanges who want to get a share in the high-margin revenue market of trading fees is growing rapidly. However, most of these new exchanges use one of three common user interfaces and have the exact same digital assets integrated than other exchanges, so little to nothing sets them apart from their competitors. Accordingly, most of them have difficulties to attract a large number of customers and therefore decided to boost the position of their exchange in ranking sites like CoinMarketCap. As all of these rankings are currently based on trading volume, an increasing number of exchanges started to integrate bots that trade the same coins back and forth, creating hundreds of millions in trading volume even though some of those exchanges have hardly any users.

Order book depth as an alternative ranking method
So, how can we rank exchanges differently than by trading volume? Fairly recently, I introduced a method called “order book depth” to rank exchanges by their provided liquidity. The metric displays the amount of coins that can be bought/sold in an order book per market order, without moving the price by more than one percent. Fortunately, with Coinpaprika the first exchange ranking site has stepped up and started to implement the feature. However, in this article I want to make another step forward and run a little comparison of order book depth data against trading volume.

Most liquid Bitcoin exchanges
As a case study, I made a snapshot of the order books of 104 exchanges, that had an accessible order book and a 24-hour trading volume of above 200k USD in their most frequently traded BTC/Fiat or BTC/Stablecoin trading pair on 21-03-2019. By the time the snapshot was taken, on 15 of these 104 exchanges, one could have sold 100 BTC (currently around 400,000 USD) per market order and wouldn’t have hit buy orders 1% below the current market price. I ranked these 15 exchanges by order book depth and also added the reported 24-hour volume on these trading pairs (according to exchange ranking site CoinPaprika) to the graphic, showing that trading volume and order book depth are not necessarily correlated:
40.808 MILLION USD727 BTCBTC/TETHERBITFINEX27.903 MILLION USD343 BTCBTC/USDBITSTAMP53.110 MILLION USD486 BTCBTC/TETHERHITBTC20.287 MILLION USD430 BTCBTC/USDKRAKEN34.060 MILLION USD551 BTCBTC/USDCOINBASE PRO10.790 MILLION USD227 BTCBTC/USDGEMINI110.645 MILLION USD219 BTCBTC/TETHERHUOBI105.006 MILLION USD209 BTCBTC/JPYLIQUID13.185 MILLION USD162 BTCBTC/JPYBITFLYER60.933 MILLION USD119 BTCBTC/KRWBITHUMB91.355 MILLION USD121 BTCBTC/TETHERBINANCE184.408 MILLION USD110 BTCBTC/TETHERIDAX1.266 MILLION USD111 BTCBTC/IDRINDODAX55.386 MILLION USD109 BTCBTC/TETHERCOINALL6.592 MILLION USD114 BTCBTC/JPYCOINCHECKPAIR:PAIR:PAIR:PAIR:PAIR:PAIR:PAIR:PAIR:PAIR:PAIR:PAIR:PAIR:PAIR:PAIR:PAIR:24H PAIR VOL:24H PAIR VOL:24H PAIR VOL:24H PAIR VOL:24H PAIR VOL:24H PAIR VOL:24H PAIR VOL:24H PAIR VOL:24H PAIR VOL:24H PAIR VOL:24H PAIR VOL:24H PAIR VOL:24H PAIR VOL:24H PAIR VOL:24H PAIR VOL:EXCHANGESMOST LIQUID BITCOINHOW MANY BTC CAN BE SOLD ONTHESE EXCHANGES PER MARKETORDER IN A SPECIFIC TRADINGPAIR, WITHOUT THE PRICEDECLINING BY MORE THAN 1%:
As displayed in the graphic, the exchanges that have been around for a long time are also the ones, that have the highest liquidity. Bitfinex and HitBTC are positioned on the first and third spot of the list, providing enough depth in their BTC/Tether order books to sell over 700 BTC on Bitfinex and close to 500 BTC on HitBTC without hitting buy orders 1% below the current price. The biggest order book concerning the 1% price range of buy orders on the BTC/USD pair is provided by Coinbase Pro (551 BTC), followed by Kraken (430 BTC), Bitstamp (343 BTC) and Gemini (227 BTC). With Liquid, Bitflyer and Coincheck three exchanges also made it into the list, with a BTC/JPY (Japanese Yen) trading pair.

Majority of exchanges provide far less liquidity
However, in contrast to these 15 very liquid exchanges, 89 of the 104 exchanges failed to provide enough liquidity to sell over 100 BTC per market order without hitting buy orders 1% below the current price. Regarding the 1% price range, one could have sold 50-100 BTC on 12 exchanges, 20-50 BTC on 11 exchanges, 10-20 BTC on 15 exchanges and 1-10 BTC on 23 exchanges. On 28 of these 104 exchanges, which all had a daily trading volume above 200k USD in their most frequently traded BTC/Fiat or BTC/Stablecoin pair, one could not have sold more than 1 Bitcoin without hitting buy orders 1% below the current price.
SELLABLE AMOUNT OF BTCIN 1 PERCENT PRICE RANGENUMBER OF EXCHANGES PROVIDINGTHIS SELLABLE AMOUNT OF BTC010203040506070809010020406080EXCHANGESLESS LIQUID BITCOINNUMBER OF BTC THAT COULDHAVE BEEN SOLD WITHOUT THEPRICE DECLINING BY MORE THAN1% ON 89 LESS LIQUID EXCHANGES:
Correlation between order book depth and trading volume
How does the evaluated order book depth relate to the reported trading volume of the considered trading pairs on these 104 exchanges? The data suggests that there are three types of exchanges: Some don’t artificially inflate their trading volume, some partly inflate it but have significant real trading volume as well and some exchanges have mostly artificial trading volume and almost no real volume.

In the data set, the exchanges with the highest liquidity in their order books mostly generated a double-digit million USD trading volume in this specific trading pair. To name a few: Bitfinex was at 41 million USD, Kraken at 20 million USD, Bitstamp at 28 million USD and Bithumb was at 61 million USD. Remember, these are exchanges with a very high liquidity. Interestingly enough, the average daily trading volume in the evaluated trading pairs across all 104 exchanges was at 43 million USD. So, on average each exchange in the list had more daily trading volume than for example Coinbase Pro or Gemini.

To further analyze the connection between trading volume and order book depth, I ran a correlation test between the two. One should expect a slightly positive correlation between the two factors, since they seem to be intertwined. However, that wasn’t the case. While an outcome of 1 in the correlation test determines a perfect positive correlation and an outcome of -1 determines a perfect negative correlation between two input variables, the correlation coefficient between trading volume and order book depth was rated at 0.02. It shows, that both factors are completely uncorrelated and there is not even a slightly positive relationship between them.
BITSTAMP28MPAIR:BTC/USDUSDKRAKEN20MPAIR:BTC/USDUSDGEMINI11MPAIR:BTC/USDUSDAVERAGE43MPAIR:BTC/FIATSTABLEUSDPOSITIVECORRELATIONUNCORRELATEDNEGATIVECORRELATIONCORRELATIONVOLUME VS. DEPTHTRADING VOLUME OF TRADINGPAIRS ON EXCHANGES WITH AHIGH ORDER BOOK LIQUIDITYVS. AVERAGE TRADING VOLUMEOF PAIRS IN THE DATA SAMPLE:CORRELATION COEFFICIENTBETWEEN TRADING VOLUME ANDORDER BOOK DEPTH:
Discussing the relationship between order book depth and trading volume
Let’s declare the trading volume on Coinbase Pro, Kraken and Gemini as real volume. All of these have packed order books, but don’t have that much volume (compared to other crypto exchanges). For example, the order book depth of Gemini, Huobi and Liquid was in the same range in the analyzed data sample (around 200 BTC could be sold with the price not declining by more than 1%), but the trading volume on both Huobi and Liquid (each around 100 million USD) was 10 times as high as on Gemini (around 10 million USD). Adding to these, the daily trading volume on Binance for example was 2.5 times as high than the volume on Coinbase Pro, even though Binance had only 22% of Coinbase Pro’s liquidity in their order books.

Does that mean that all the volume on Binance, Huobi and Liquid is fake? No, it doesn’t. Does it mean, that the volume on Binance, Huobi and Liquid is partly inflated with artificial volume? Probably, but not necessarily. Probably the exchanges inflate their real trading volume with artificial volume to attract traders. Probably all their volume is real and caused by traders who just like to trade more on these exchanges than on other exchanges due to a better trading experience or lower trading fees. As long as an exchange provides decent liquidity in their order books, it is hard to prove that their volume is partly or entirely fake.

However, fake volume is pretty clearly generated by some exchanges that claim to generate multiple million USD in daily trading volume, but one cannot even sell a few BTC without crashing the price on the exchange. To give you an example: Of the analyzed 104 exchanges, 16 reported a daily trading volume of over a million USD in a BTC/Fiat or BTC/Stablecoin trading pair, but you could not even sell one (!) Bitcoin without making the price decline by more than 1%. These exchanges are clearly trying to trick customers and should be excluded from rankings by trading volume.

Critical discussion of the analysis
The biggest limitation of this analysis is its limited dataset. The reported order book depth is based on a snapshot of a single day and was partly refined with trading data from two other days. Unfortunately, there is not yet a central source available for order book depth, which makes the process of collecting data extremely time-consuming. Adding to that, some order books were not fully accessible and were therefore excluded from the analysis. However, that doesn’t mean the analysis is not significant – if an exchange failed to provide liquidity in the snapshot, it most likely can’t provide liquidity in general.

Additionally, it has to be noted that the amount of BTC used in the analysis originates from the order books provided by the particular exchanges. Some of these order books may be intertwined because an exchange might display order book entries of other exchanges on their own exchange, that are integrated through a trading API. Furthermore, alongside the reported trading volume, the entries in an order book can be faked. It would be possible for an exchange to make orders disappear in the second a user hits the buy/sell button and make these orders appear again, after the trade has been executed. However, it would certainly damage the reputation of these exchanges, so I am not sure, how long they could sustain a faked order book.

I also want to add, that the exchanges mentioned in the list are not necessarily the best crypto exchanges, just because they provide liquidity. A lot of controversy has been surrounding Bitfinex or Tether for the past couple of years and HitBTC has been in the news recently for not allowing their users to withdraw funds. However, this list and the underlying metric of order book depth is thought as an improvement towards ranking exchanges by volume, since trading volume is often understood as liquidity, but in the current state of the cryptocurrency market, reported trading volume and liquidity on an exchange are totally uncorrelated.

Wrap-up
In this article, I used the method of order book depth to evaluate the trading volume on exchanges. In a data set of the most frequently traded Bitcoin/Fiat or Bitcoin/Stablecoin pairs on 104 exchanges with a daily trading volume above 200k USD, I identified the 15 most liquid Bitcoin exchanges, where one could sell over 100 BTC without the price declining by more than 1%. In addition to these, I showed the allocation of sellable Bitcoin on less liquid exchanges. The average daily trading volume in the evaluated data set per trading pair on each exchange was at 43 million USD, which was higher than the trading volume on some of the most liquid exchanges. As a final conclusion, a correlation test showed that trading volume and order book depth were completely uncorrelated.



Articles, that may interest you:

In-Game Coins

In-Game Coins
IN-GAME COINS
14.03.2019
COMPARING FINANCIAL DATA OF NBA 2K AND EA’S ULTIMATE TEAM TO CRYPTOCURRENCIES
CHRISTIAN OTT
AUTHOR
Introduction
Utility tokens are a fairly new and innovative asset class. In difference to stocks, where the value highly depends on the performance of the company invested in, the utility token gains value depending on its usage. Whether it is just used as the fuel of a platform or has several use cases across different platforms and products, the price should highly correlate with its number of users. However, in the past we have mostly seen the downside of the utility token in the cryptocurrency market, with major price declines due to no usage and no adoption. With not many successful utility tokens in the market, it is difficult to estimate the potential market cap of utility tokens with adoption. However, outside of the cryptocurrency market, the gaming industry has successfully integrated virtual currencies into their products in recent years, giving us a glimpse of how successful utility tokens could be. In this article, I will take a look at two successful in-game currencies to see, how their financial data ranks among other cryptocurrencies.

Virtual Currencies in Games
Virtual currencies in games are a relatively new mechanism and have been introduced as part of the “Freemium” model. Freemium is a business model where users can play the basic features of a game for free but advanced features or the purchase of in-game items requires payments. After some Freemium titles revealed the potential revenue generated with virtual currencies, major video game publishers also started to integrate virtual currencies into their products. While in some games purchasable items can just be used to change the appearance of an avatar, in-game currencies have seen tremendous interest in games, where the purchasable items can give a gamer a competitive edge over other gamers. This is especially the case in sports games, where gamers can buy better players for their team with the help of virtual currencies.

NBA 2K
One of these sports games with a purchasable in-game currency is the NBA 2K series. Video game publisher Take-Two has introduced virtual currencies in NBA 2K13 and they have seen tremendous interest ever since. While Take-Two already called the sales of virtual currencies in NBA 2K13 “high-margin revenue”, sales of virtual currencies in the NBA 2K series grew by an incredible rate of 150% in both 2014 and 2015 and by about 70% in both 2016 and 2017. Growth in 2018 has slowed down a bit but is still at a high-flying 34%.

Unfortunately, Take-Two doesn’t disclose the total revenue generated with virtual currency sales in NBA 2K publicly, however, they have named the increases in revenue generated by the NBA 2K series in fiscal year 2017 (265.8 million USD) and 2018 (159.4 million USD). Valuing these numbers against the increases in copies sold and the percentage increase of revenue with virtual currencies enables us to estimate the increase in revenue with virtual currencies in NBA 2K for the fiscal years 2013 to 2018, which can be seen in the following graphic. Don’t take these numbers as an exact value (it is just an estimation) but they should be good enough to give us a hint of how much revenue Take-Two is generating with virtual currency sales in the NBA 2K series.1-11
NBA 2K VC(IN USD – ESTIMATED)T2'S YEARLY NET REVENUE FROM00.1B0.2B0.3B0.4B0.5B201820172015201620142013
EA’s Ultimate Team Mode
Aside from the NBA 2K series, the sports gaming sector is dominated by EA with yearly releases in the FIFA series, Madden NFL series, NHL series and NBA Live series. All of these games have an integrated “Ultimate Team” mode, where gamers can collect players and build a team to compete against each other online. Players can be obtained with coins or points, whereby coins can be gained with in-game success and points can be bought with fiat money. Points enable gamers to buy item packs with different players included in them, which might be better than the players already included in the gamers’ team but might also be a lot worse.

These in-game buys with fiat money are an extremely successful revenue source for Electronic Arts and accounted for 21 percent of EA’s net revenue in fiscal year 2018, which roughly equals 1.1 billion USD. In-game purchases in Ultimate Team are growing at a tremendous rate – in fiscal year 2017 its net revenue was at around 775 million, while it was at around 660 million in fiscal year 2016. Unfortunately, EA doesn’t disclose percentages or totals of their Ultimate Team revenue per game, so we just have to regard it as a total per all Ultimate Team modes.12-15
ULTIMATE TEAM(IN USD)EA'S YEARLY NET REVENUE FROM00.2B0.4B0.6B0.8B1.0B1.2B2018201720162015
Rank among other Cryptos
So, how would these in-game currencies rank among other cryptocurrencies regarding financial data? They are different from most cryptocurrencies, since those mainly have a fixed supply and an increase in demand results in an increase in price. However, an increase in demand for these in-game currencies just leads to an increase in tokens sold, NBA 2K’s VC or EA’s Ultimate Team points don’t have a max supply and therefore stay at the same fixed price (unless they issue a discount). It makes them easier to compare to ICOs than to the market cap of cryptocurrencies, because with ICOs we usually look at amount of money raised (which is the actual amount of money put into this ICO) while the market cap just multiplies the current price of a cryptocurrency with its circulating supply (e.g. 10 million invested in a coin might result in a 100 million increase in market cap).

Rank among other Cryptos – ICOs
Positioning these two in-game currencies in a ranking of money raised by ICOs shows their huge success. EA’s net revenue with the sale of virtual currencies in their Ultimate Team mode from fiscal year 2015 to 2018 is at around 3.1 billion USD and might even surpass 4 billion once fiscal year 2019 is completed on March 31, 2019. The estimated net revenue generated by Take-Two with the sale of virtual currencies in the NBA 2K series from fiscal year 2013 – 2018 is at around 1.2 billion USD. There are only two ICOs that raised comparable numbers with the EOS ICO (4 billion USD raised) and the Telegram ICO (1.7 billion USD raised). Adding to that, these ICOs are huge outliers concerning amount of money raised, no other ICO has raised even close to a billion U.S. Dollars and only a small number out of thousands of ICOs has raised over 100 million USD.16
RANKINGIN-GAME CURRENCIES AND ICOSESTIMATED NET REVENUE FROM FISCAL YEAR 2013 – 20181.2 BILLION USDNBA 2K VCAMOUNT OF MONEY RAISED IN THEIR ICO1.7 BILLION USDTELEGRAMNET REVENUE FROM FISCAL YEAR 2015 – 20183.1 BILLION USDEA'S ULTIMATE TEAMAMOUNT OF MONEY RAISED IN THEIR ICO4.1 BILLION USDEOS
Rank among other Cryptos – Market Cap
This net revenue generated in both sports game series by sales of their respective virtual currencies could be viewed as their market cap in the current form the tokens are sold. Every sold token moves from the infinite total supply to the circulating supply with every token having a fixed price. Ranking these market caps in CoinMarketCap’s top 100 ranking places both in-game currencies among the top cryptocurrencies. With a market cap of 3.1 billion USD, EA’s Ultimate Team is ranked below EOS and above Bitcoin Cash on place 6. NBA 2K’s VC would be placed on position 13 with a market cap of 1.2 billion USD below Cardano and above Bitcoin SV.
RANKINGVC, UT AND COINS – MARKET CAPMARKET CAP ON 12.03.2019 (ACCORDING TO CMC)0.9 BILLION USDMONEROMARKET CAP ON 12.03.2019 (ACCORDING TO CMC)1.2 BILLION USDBITCOIN SVESTIMATED NET REVENUE FROM FISCAL YEAR 2013 – 20181.2 BILLION USDNBA 2K VCMARKET CAP ON 12.03.2019 (ACCORDING TO CMC)1.2 BILLION USDCARDANOMARKET CAP ON 12.03.2019 (ACCORDING TO CMC)1.5 BILLION USDTRONMARKET CAP ON 12.03.2019 (ACCORDING TO CMC)2.0 BILLION USDSTELLARMARKET CAP ON 12.03.2019 (ACCORDING TO CMC)2.0 BILLION USDTETHERMARKET CAP ON 12.03.2019 (ACCORDING TO CMC)2.1 BILLION USDBINANCE COINMARKET CAP ON 12.03.2019 (ACCORDING TO CMC)2.3 BILLION USDBITCOIN CASHNET REVENUE FROM FISCAL YEAR 2015 – 20183.1 BILLION USDEA'S ULTIMATE TEAMMARKET CAP ON 12.03.2019 (ACCORDING TO CMC)3.3 BILLION USDEOSMARKET CAP ON 12.03.2019 (ACCORDING TO CMC)3.5 BILLION USDLITECOINMARKET CAP ON 12.03.2019 (ACCORDING TO CMC)12.9 BILLION USDXRPMARKET CAP ON 12.03.2019 (ACCORDING TO CMC)14.1 BILLION USDETHEREUMMARKET CAP ON 12.03.2019 (ACCORDING TO CMC)68.8 BILLION USDBITCOIN
Market Cap vs. Money invested
Nonetheless, with the market cap just being an indicator of how much an investor would pay for a purchase of the total supply at the current price, it does not represent how much money went into or out of a particular asset. For example, with just a 24-hour volume of 26.4 billion USD, the overall market cap of cryptocurrencies listed on CoinMarketCap fell from 395 billion USD to 330 billion USD on February 6, 2018, which is a market cap decline of 2.64 times the volume the coins were traded at. So, the question is how much does the market cap of a cryptocurrency increase, if it has a fixed circulating supply and a certain amount of money is invested in it?

According to an estimation by Thomas Lee, the overall cryptocurrency market cap increases by 25 billion, every time 1 billion USD goes into the crypto market.17 That estimation might have its origin in the bull market and honestly, I think 25 times as a figure is quite high but I generally agree that a billion invested in the crypto market leads to a multi-billion increase in market cap, due to thin orderbooks and a lack of liquidity for large buy orders as we have seen in 2017. Vice versa, a billion cashed out of the market leads to a multi-billion decrease in market cap, which we witnessed in 2018. Let’s go with a more conservative approach than Thomas Lee and say, that the cryptocurrency market cap increases by 5-10 billion for every billion invested in it. The following graphic shows the hypothetical market cap of the two in-game currencies under the consideration of a multi-billion dollar market cap increase for every billion invested in the asset:
RANKINGHYPOTHETICAL MARKET CAPHYPOTHETICAL MARKET CAP = 25x NET REVENUEHYPOTHETICAL MARKET CAP = 10x NET REVENUEHYPOTHETICAL MARKET CAP = 5x NET REVENUENET REVENUE FROM FISCAL YEAR 2015 – 201877.5 BILLION USD31.0 BILLION USD15.5 BILLION USD3.1 BILLION USDEA'S ULTIMATE TEAMHYPOTHETICAL MARKET CAP = 25x NET REVENUEHYPOTHETICAL MARKET CAP = 10x NET REVENUEHYPOTHETICAL MARKET CAP = 5x NET REVENUEESTIMATED NET REVENUE FROM FISCAL YEAR 2013 – 201830.5 BILLION USD12.2 BILLION USD6.1 BILLION USD1.2 BILLION USDNBA 2K VCMARKET CAP ON 12.03.2019 (ACCORDING TO CMC)12.9 BILLION USDXRPMARKET CAP ON 12.03.2019 (ACCORDING TO CMC)14.1 BILLION USDETHEREUMMARKET CAP ON 12.03.2019 (ACCORDING TO CMC)68.8 BILLION USDBITCOIN
Conclusion
Due to the fixed price of Ultimate Team points or the VC sold in the NBA 2K series, we know how much money was invested in these during the last couple of years. Take-Two had an estimated net revenue from selling virtual currencies in the NBA 2K series of around 1.2 billion USD in the last 6 years, with an estimated 470 million from fiscal year 2018 alone. However, they did all that with just 9 million copies sold of NBA 2K18 in fiscal year 2018. While this is certainly a high number for a sports game, think about the potential we are talking here.

Let’s say an application can create the same demand than the NBA 2K series for their virtual currency but has 90 million users instead of 9 million users. Then we are not talking about 470 million USD put into the token in one year but rather 4.7 billion USD. Connecting that to the fact that one billion USD invested leads to a multi-billion USD increase in market cap, shows us the potential of a very successful utility token. Let’s say it leads to 5 times the market cap, then we are looking at a 23.5 billion USD market cap for that 90 million user application, which is currently around 2x the market cap of Ethereum or XRP. Let’s say it leads to 10 times the market cap (47 billion USD) or Tom Lee’s suggested 25 times increase, then we are looking at a 117.5 billion USD market cap for the application, which is around 50 billion higher than Bitcoin’s current market cap and underlines the huge potential of highly demanded utility tokens.

Wrap-up
While utility tokens are an innovative new financial asset, the cryptocurrency market has seen its majority of utility tokens stay without many use cases or users, resulting in heavy price declines of these tokens. On the contrary, the gaming sector has successfully integrated virtual currencies into video games. Especially the sports gaming sector has created a huge demand for their tokens by providing gamers with better players in exchange for purchasable in-game currencies. The NBA 2K series or EA’s Ultimate Team mode are perfect examples for this success with the generation of multiple billion USD in net revenue by selling their virtual currencies. If a cryptocurrency reaches a comparable or even higher demand than these games, it would certainly be placed among the top cryptocurrencies and could reach a market cap higher than Ethereum’s or XRP’s current market cap, with even a chance to surpass Bitcoin’s current market cap.

Sources
1
A big thank you to “Thinking Gamers”, who made a terrific job of collecting information about the numbers behind virtual currency in NBA2K and gave me a ton of input for the NBA 2K section of this article.
Thinking Gamers; Medium; Financial Slam Dunk: The Numbers Behind Virtual Currency in NBA2K; 18.10.2017
2
“Delivered the top-ranked and top-selling basketball video game for the 11th year in a row with the release of NBA 2K12. The title received the highest Metacritic score in the history of 2K Sports and, for the second consecutive year, sold-in over 5 million units and led 2K Sports to achieve profitability.”
Take-Two Interactive Software, inc.; Official Website; Annual Report 2012; 2012
3
“Delivered the top-ranked and top-selling basketball video game for the 12th year in a row with NBA 2K13. The title won more than 38 editorial honors and quickly became the most profitable sports release in the history of 2K. This was the third consecutive release of our annual basketball series to sell-in over 5 million units.”
Take-Two Interactive Software, inc.; Official Website; Annual Report 2013; 2013
4
“In addition to DLC, we are also now receiving high-margin revenue from in-game purchases of virtual goods, both in front-line titles such as NBA 2K13, and in mobile and online titles, many of which are free-to-play.”
Take-Two Interactive Software, inc.; Official Website; Annual Report 2013; 2013
5
“Delivered the highest-rated and top-selling basketball video game for the 13th consecutive year with NBA 2K14. The title was our first for next-gen and has surpassed NBA 2K13 as our highest-selling sports release, with sell-in of more than 6.5 million units to date. The success of NBA 2K14 was enhanced by strong demand for the game’s virtual currency, sales of which increased 150% versus NBA 2K13.”
Take-Two Interactive Software, inc.; Official Website; Annual Report 2014; 2014
6
“Once again delivered the highest-rated and top-selling basketball video game with NBA 2K15. The title has sold-in over 7 million units to date, and overall revenue is up substantially versus the comparable period for NBA 2K14, driven by both higher sales and growth in recurrent consumer spending. During fiscal 2015, virtual currency sales grew 150% year-over-year, benefitting from increased online gameplay for NBA 2K15 and significant engagement with the MYNBA 2K15 companion app.”
Take-Two Interactive Software, inc.; Official Website; Annual Report 2015; 2015
7
“We released NBA 2K16, which remains the highest-rated and top-selling NBA simulation. The title outperformed our expectations and is poised to become our highest-selling sports game ever, with sell-in to date of nearly 7.5 million units – up double-digits versus the same period for the prior release. NBA 2K has benefited from strong player engagement, and sales of the game’s virtual currency were the largest contributor to recurrent consumer spending after Grand Theft Auto Online. During fiscal 2016, recurrent consumer spending on NBA 2K grew 64% year-over-year, driven both by online play and the MyNBA2K companion app.”
Take-Two Interactive Software, inc.; Official Website; Annual Report 2016; 2016
8
“We released NBA 2K17, which remains the highest-rated sports game of the current console generation, and is poised to become our highest-selling sports title ever with sell-in to date of nearly 8 million units. Engagement with and recurrent consumer spending on our industry-leading basketball series continues to grow, with over 2 billion games of NBA 2K17 played on PlayStation 4 and Xbox One, up 16% over NBA 2K16. More than 1.3 billion of these games were multiplayer – a 40% increase. In addition, the average time that consumers spent playing multiplayer games increased by nearly 30%. This remarkably strong engagement helped to drive record Bookings from recurrent consumer spending on NBA 2K, which grew 71% during fiscal 2017.”
Take-Two Interactive Software, inc.; Official Website; Annual Report 2017; 2017
9
“For the fiscal year ended March 31, 2017, net revenue increased by $366.1 million, as compared to the prior year. This increase was due primarily to (1) an increase of $265.8 million in revenues from our NBA 2K franchise;”
Take-Two Interactive Software, inc.; Official Website; Annual Report 2017; 2017
10
“We released NBA 2K18, which is now our highest-selling sports title ever with sell-in to date of over 9 million units – up 17% over last year’s release. In addition, our NBA 2K series continues to benefit from growing engagement and recurrent consumer spending. During fiscal 2018, average revenue per user, revenue per hour and unique multiplayer users all increased double-digits, and recurrent consumer spending on NBA 2K grew 34% to a new record.”
Take-Two Interactive Software, inc.; Official Website; Annual Report 2018; 2018
11
“For the fiscal year ended March 31, 2018, net revenue increased by $13.1 million, as compared to the prior year. This increase was due primarily to an increase of $159.4 million in revenues from our NBA 2K franchise,”
Take-Two Interactive Software, inc.; Official Website; Annual Report 2018; 2018
12
“Our most popular live service is the Ultimate Team mode associated with our sports franchises. Ultimate Team allows players to collect and trade current and former professional players in order to build, and compete as, a personalized team. Net revenue from Ultimate Team represented approximately 21 percent, 16 percent and 15 percent of our total net revenue during fiscal year 2018, 2017 and 2016, respectively, a substantial portion of which was derived from FIFA Ultimate Team.”
Electronic Arts Inc.; Fiscal Year 2018 – Annual Report; Our Games and Services; 2018
13
“In fiscal year 2015, net revenue from our Ultimate Team services, Battlefield 4 and FIFA 15 represented approximately 13 percent, 11 percent and 11 percent, respectively, of our total net revenue.”
Electronic Arts Inc.; Fiscal Year 2017 – Annual Report; Our Games and Services; 2018
14
“Our largest and most popular game is FIFA, the annualized version of which is consistently one of the best-selling games in the marketplace. Net revenue from FIFA 18, FIFA 17, and FIFA 16 represented approximately 11 percent of our total net revenue in fiscal years 2018, 2017, and 2016, respectively.”
Electronic Arts Inc.; Fiscal Year 2018 – Annual Report; Our Games and Services; 2018
15
“Electronic Arts Inc. and Subsidiaries – Year Ended March 31 – Net revenue: 5.15 billion in Fiscal Year 2018, 4.845 billion in Fiscal Year 2017, 4,396 billion in Fiscal Year 2016, 4,515 billion in Fiscal Year 2015, 3,575 billion in Fiscal Year 2014,”
Electronic Arts Inc.; Fiscal Year 2018 – Annual Report; Selected Five-Year Consolidated Financial Data; 2018
16
“EOS – Funds raised: $4.2b; Telegram – Funds raised: $1.7b; Petro – Funds raised: $735m; TaTaTu – Funds raised: $575m; Dragon – Funds raised: $420m; Hdac – Funds raised: $258m; Filecoin – Funds raised: $257m; Tezos – Funds raised: $232m; Paragon – Funds raised: $183m; Sirin Labs – Funds raised: $158m”
Bloomberg; Official Website; How’s That ICO Working Out?; 14.12.2018
17
“For every billion Dollars, that goes into crypto, it is turning into roughly 25 billion dollars of price appreciation. If Millenials put 10 percent of their savings flow – a 100 billion – into crypto, that’s a 2.5 trillion dollar rise per year and crypto is roughly a 500 trillion dollar market cap.”
Thomas Lee; YouTube; Thomas Lee Presents The Economics of Cryptocurrencies | Upfront Summit 2018; 21.02.2018

Skycoin Distribution

Skycoin Distribution
DISTRIBUTION
07.03.2019
PAST AND FUTURE DISTRIBUTION OF SKYCOIN
CHRISTIAN OTT
AUTHOR
Introduction
The cryptocurrency market is well accustomed to the ICO model. Most projects use the approach of an initial coin offering to finance their idea via crowdfunding, with investors receiving a substantial portion of the coins of the invested project in return. From the start of these projects, most of the coins are held by investors and there will be little to no influx of new coins. Only a few projects use a long-term distribution model, in which just a slight portion of coins is released at a time and the distribution is executed over years. Skycoin belongs to this group of long-term distributed coins and we will take an in-depth look at how its distribution is executed.

Circulation
A total of 100 million Skycoin were generated in the genesis block.1,2 On April 2nd in 2015, these 100 million Skycoin were separated into 100 addresses with each of it having a balance of 1 million Skycoin (transaction).3 These addresses are known as the distribution addresses. Each Skycoin, that is not contained in these addresses, counts as circulating supply.4 Since April 2015, coins are successively taken from the distribution addresses and are put into circulation. I analyzed all transactions of the distribution addresses and displayed them in a chart, that shows how many Skycoin were distributed over time:
SKYCOINCIRCULATING SUPPLY14.0m12.0m10.0m8.0m6.0m4.0m2.0m02015201820172016+77%+127%+92%
Distribution events – General
As the chart shows, the circulating supply increased periodically. It looks like the distribution was either made directly from the wallet (slow growth) or the coins were taken out of a distribution address completely and were then distributed (sudden growth). Nonetheless, there were some distribution events, that we can attach to this chart.

Distribution events – 2015 & 2016
The first initial public offering was announced in early 2014.5,6 It was held one year later in April and May 2015,7,8 where about 450 thousand Skycoin left the original distribution addresses. To be fair, it was not an usual IPO, it was more a private sale to dedicated early followers/contributors,9 who would not shy away from compiling the wallet on Linux.10 Because of the difficulties that came along with this early IPO, the team offered to continue selling Skycoin for the same BTC price of the IPO, until a circulating supply of about 2 million Skycoin would be reached.11 If they actually sold more than 2 million from the first 3 million Skycoin distributed in 2015 and 2016 is hard to determine. What we know so far, is that 1 million Skycoin were sold to a large investor or a consortium of investors, that were held in one address. The coins were sent to this address in September 2015 and have recently been sold.12 Concluding from that, an amount of 1.45 million Skycoin have evidentially been distributed via sales in 2015. Therefore, I would estimate that another 550k were sold to early followers, while the remaining 1 million Skycoin from the first 3 distribution addresses were distributed to team members and project contributors.

Distribution events – 2017
After some testing of a Skycoin distribution on a third-party platform,13,14 the next big distribution event was held on the exchange C2CX in early 2017. About half a million Skycoin were sold in this event.15 Followed by this success, another distribution event was held on C2CX in August 2017, where 1 million Skycoin were eligible to be sold to the public.16 However, since I couldn’t find any source indicating how many Skycoin were sold of these 1 million Skycoin available and the coins were sold for twice the market price Skycoin was traded at back then, the distribution event probably wasn’t very successful. I would guess, that about 10% (100k Skycoin) of the available coins were sold in the event. Overall, the Skycoin distribution was pushed forward in November and December 2017 with over-the-counter sales, with Skycoin being both sold manually and fully automated via the Skycoin website. About 50 thousand Skycoin were distributed in the automated OTC, which can be seen in the Skycoin explorer (automated OTC address).17 Determining the amount of Skycoin sold via manual over-the-counter sales is more difficult. The amount of Skycoin sold in these sales was rather high, as Synth has stated in an interview.18 One address alone has received 1 million Skycoin in December 2017, which I suppose is an OTC sale to a large investor (or a consortium of investors). Given that 4 million Skycoin were put into circulation in 2017, I would estimate, that another 1 million Skycoin were sold via OTC sales in addition to the 1 million Skycoin distributed to the large investor address.

Distribution events – 2018
In 2018 many smaller distributions took place. It started with the distribution of Skycoin to buyers of the official Skyminer, which was sold for one BTC each. The first batch of 300 Skyminers was handed to buyers alongside 450 Skycoin each,19,20 whereas the second batch of 300 Skyminers included a rebate of 650 Skycoin per buyer.21,22 These miner rebates add up to a total of 330 thousand Skycoin. Then in May, Skycoin was listed on Binance. Since Binance is one of the largest cryptocurrency exchanges it presumably required a listing fee (which might have been paid in BTC or in SKY) and a certain amount of Skycoin to ensure liquidity in the orderbook. Finding out how many Skycoin were distributed to Binance for these purposes is difficult, a look at Binance’s Skycoin withdrawal address can provide some hints however. The trading of Skycoin on Binance started on May 24, deposits were enabled one day earlier.23 The Skycoin withdrawal address on Binance was filled for the first time on May 25 with an initial amount of 503 thousand Skycoin. With the help of the Skycoin blockchain, I traced back the largest amounts of SKY deposited to Binance from this initial amount and it included 85 thousand Skycoin, that originated from a distribution address opened 5 months earlier. Therefore, I assume that these 85k Skycoin were given to Binance to provide the orderbook with liquidity. In June, Binance also held a trading competition and a lucky draw in cooperation with Skycoin, in which they gave away 50 thousand SKY.24 From June onwards, the Skywire testnet went live and rewards were handed to participants monthly. 9 months later, these rewards have accumulated to a total of 330k Skycoin.25 In July, around 700k Skycoin were distributed to an OTC seller, which became apparent after the investor sold all his coins on Binance a few months later (see his Binance deposit address for more information).26

Distribution events – 2019
In December 2018, the circulating supply started to increase from 10 million to now 13.7 million Skycoin at the beginning of March 2019. It can be assumed, that most of these coins were distributed via OTC sales,27 so I would estimate around 3 million Skycoin from these 3.7 million introduced to the circulating supply from December 2018 to March 2019 have been sold over the counter. Skycoin also started trading at the crypto exchange LBank, which (according to an analysis of Skycoin’s blockchain) has received around 50k Skycoin for liquidity and airdrops.
330KSkywireTestnetRewardsSince June20183MOTCSale(est.)Dec – Mar2018/1950KBinanceTradingComp.June2018700KOTCSaleJuly201850KLBankAirdrop &LiquidityJanuary201985KLiquidityBinance(est.)May2018330KMiner RebateSkyminerBuyersJan/Jun201850KAutomatedOTCDec/Jan2017/181MDistributionto largeinvestorDecember20171MManualOTC(est.)Nov/Dec2017100K2. Distributionvia C2CX(est.)Aug/Sep2017500K1. Distributionvia C2CXJan – April2017550KSale to earlyfollowers –(est.)April – Dec20161MDistributedto largeinvestorSeptember2015450KFirst PublicOffering ofSkycoinApril/May2015SKYCOINDISTRIBUTION EVENTS
Allocation of the total supply
The numbers shown in the graphic add up to a total of 9.195 million Skycoin, that have been mostly distributed via sales. The circulating supply right now is at 13.7 million, although we have to consider that the Skycoin project didn’t necessarily distribute the coins directly from the distribution addresses, but rather took them out all at once and then placed them in several smaller distribution addresses. It is therefore possible that the real amount of Skycoin in circulation is lower than the amount displayed in the Skycoin explorer. Nevertheless, I can’t tell how many of these have been distributed, so let’s say 13.7 million is the actual circulating supply. Considering that approximately 8.5 million Skycoin were sold, (only) 62% of the circulating amount of Skycoin have been distributed via sales. So, what has happened to the other 38% of coins in circulation, that were not sold in distribution events?

A part of the Skycoin distribution strategy is to not offer all Skycoin to speculators, who might only be interested in short-term profits. Certainly, coins are sold to gather funds and provide liquidity to the market, but a vast amount of coins is distributed to people who contribute to the success of the project. Of the 25 million Skycoin that are immediately available for distribution,28 10-15 million will be offered in ICO and OTC sales.29 Another 10 million Skycoin are reserved to incentivize Skywire by either handing out mining rewards or offering a Coin Hour buyback.30,31 However, we don’t know if these 10 million Skycoin are fully part of the first 25 million distributable Skycoin. We can assume it though, because the Skywire network had to be incentivized anyways, if the team would make a decision against distributing more than 25 million Skycoin in the future. Furthermore, the Skycoin project is willing to fund interesting, dedicated projects within the Skycoin ecosystem, that move the project forward.32 There are also bounties available for individual contributors to the Skycoin project.33 So, going back to the 40% of coins in circulation that were not allocated for sales, it is assumable that they were distributed to contributors of the project.34 Generally speaking, with a minimum of 20 million Skycoin being used for sales and Coin Hour buybacks, I think 5 million Skycoin is the maximum amount available for a fund included in the first 25 million Skycoin. Let’s visualize these numbers:
SKYCOINALLOCATION OF FIRST 25 MILLION10MINCENTIVINGSKYWIRE10MSALEmin5MFUNDmax
Maximum supply
As we have seen, 25 million Skycoin are immediately available for distribution. As soon as this mark of 25 million Skycoin in circulation is reached, another 5 million Skycoin become available per year, until there is a maximum of 100 million Skycoin available for distribution.35 In addition to that mechanism, there is an unknown group of developers involved in the distribution process, who need to agree to unlock 5 million Skycoin. If just one of these developers votes against distribution, it can stop the whole process.36 It is currently under consideration, if the growth should not be slowed down even more.37 Adding to that, each core developer is getting 1 million Skycoin, which are locked for several years.38 There are different mechanisms in place, that prevent the core developers from dumping the coins.39,40

So, how could a concrete distribution plan look like? We saw, that it took 4 years to distribute 13.7 million Skycoin. Let us assume, that 6.25 million Skycoin will be distributed per year in 2019 and 2020, which is already a high amount compared to the distribution in the past. This would mean, that it would take until the end of 2020, until the immediately available 25 million Skycoin are distributed. After that mark would be reached, 5 million Skycoin would be unlocked per year. If, for the following 15 years, each of these Skycoin would be distributed in the same year, the whole amount of 100 million Skycoin would be in circulation at the end of 2035. Let’s visualize it:
SKYCOINESTIMATED DIST. OVER TIME20272015201720192021202320252029203120332035100m80m60m40m20m025m
The reasons behind the long-term distribution
After looking at how the past distributions were executed and depicting, how future distributions might look like, you are probably still wondering, why the Skycoin project made the decision for this long-term approach. It is in fact such a different approach compared to the distribution of the majority of coins and tokens. Most new cryptocurrency projects choose the distribution method of an ICO, where they sell a large portion of their coins, because they require a decent amount of funding to execute their idea. It is basically a crowdfunding approach to finance their project. However, this did not apply to the Skycoin project. The early developers of Skycoin claim, that they were very early into cryptocurrencies. They say, they owned Bitcoin before it reached the mark of one US dollar and are therefore pretty well off.41 Additionally, they stated that a lot of the early development of Skycoin was funded by a bunch of different companies,42 meaning the Skycoin project didn’t need to fundraise money to finance the development. So, unlike the majority of other coins, they could thoroughly plan their distribution. In their opinion, it is the best approach to distribute coins gradually, with the influx of new coins decreasing over time, which is similar to Bitcoin’s distribution rate.43 They aim to sell small amounts of Skycoin at a time, and will reinvest the received funds into the project’s development and infrastructure.44 To not effect the price per Skycoin negatively by increasing the circulating supply, they intend to release coins slower than the growth of their userbase.45

Wrap-up
Unlike most other cryptocurrencies, the Skycoin project prefers to use a long-term approach for the distribution of Skycoin. Of 100 million Skycoin, about 13.7 million were distributed in four years since the first ICO in April/May 2015. From now on, I estimated, that 6.25 million Skycoin could be distributed per year, until 25 million Skycoin would be in circulation at the end of 2020. After that, 5 million Skycoin could be distributed per year, so that there could be 100 million Skycoin in circulation at the end of 2035. Talking about the target audience of these distributions, the project wants to not only distribute Skycoin via ICO and OTC sales, but also use the coins to incentivize bandwidth providers in the Skywire network and to generally reward people who contribute to the project. All in all, I hope this article increases the transparency about the Skycoin distribution and provides answers towards most questions around this subject.



Articles, that may interest you:
Sources – General supply
1
“Skycoin has a total supply of 100 million coins created in the genesis block.”
Skycoin; Skycoin Blog; Understanding the Skycoin Supply & Distribution; 25.01.2018
2
“So there’s one hundred million total and the reason that number was chosen was that one million coins is exactly 1% of Skycoin.”
Synth; Youtube; Coin interview with Skycoin; 30.10.2017
3
“The 100 million coins are being sent, 1 million coins to each of 100 addresses with multiparty lock system to prevent theft. There is also a time capsule lock on the private keys.”
Skycoin; Bitcointalk; [SKY] Skycoin Launch Announcement; 01.04.2015
4
“unlocked means it can be distributed, locked means it cant be distributed, circulated means distributed”
Steve [Sky Dev]; Telegram; Skycoin main channel; 01.11.2017
Sources – Distribution events
5
“How the IPO Will Work: 1 million coins (1%) will be sold for 50k in Bitcoin.”
skycoin; Bitcointalk; [SKY] Skycoin Launch Announcement; 18.04.2014
6
“IPO pre-registration begins in a few hours. Trying to get binaries compiled and making sure this bitmessage library works. Pre-registration will last two weeks. Until the 6th of September. Pre-registration will be required for the IPO.”
skycoin; Bitcointalk; [SKY] Skycoin Launch Announcement; 22.08.2014
7
“2500 Skycoin per Bitcoin. Which is about $0.10 / Skycoin. Bitcoin to USD is too volatile so just set it to that. … I think we started getting bitmessage requests for IPO in about two months ago and are just sending out coins now. … There are about fifty people in the IPO so far. The average amount is $2000. About half the coins in the allotment are already accounted for. Very good so far.”
skycoin; Bitcointalk; [SKY] Skycoin Launch Announcement; 18.04.2015
8
“25% of the IPO receipts have been processed. I am this far down list now. I have not even gotten to processing the orders for the Skycoin devs yet.”
skycoin; Bitcointalk; [SKY] Skycoin Launch Announcement; 02.05.2015
9
“This IPO is for developers, people who have been following for a while and experienced people who know what they are doing. This is more of a private offering and not really an IPO. The purpose is to get Skycoin trading and work on bugs.”
skycoin; Bitcointalk; [SKY] Skycoin Launch Announcement; 07.02.2015
10
“We did a ghetto ICO, by hand on bitmessage a few years ago. To software developers who had to compile the wallet from source, on linux.”
skycoin; Bitcointalk; [SKY] Skycoin Launch Announcement; 25.12.2016
11
“Yes we reserved 2% of the coins for people on the Bitcoin talk thread, at the ICO price. Bitmessage did not work for a lot of people. We tried to do sale over Tox bot and that failed and people had problems. Also, no wallet builds and difficult to buy. We have developers we are reserving coins for, because they have not been able to get compilation working on their platform.”
skycoin; Bitcointalk; [SKY] Skycoin Launch Announcement; 10.10.2016
12
Please refer to my blockchain analysis of Skycoin, where I dedicated one paragraph to this address.
Christian Ott; Refering to my chain analysis of Skycoin; 19.07.2018
13
“We have an invite only ICO on third party platform, that you need QR code to access. 25 people have code right now, and it is open to anyone who posted on the Bitcoin talks thread in the past 4 years. More information later.”
skycoin; Bitcointalk; [SKY] Skycoin Launch Announcement; 23.11.2016
14
“Now we are testing ICO on third party website.”
skycoin; Bitcointalk; [SKY] Skycoin Launch Announcement; 25.12.2016
15
“Last distribution was 500,000 coins. That took 4 months to sell. But then in last month someone wrote one article and skycoin was put on one website and whole ICO sold out in two weeks”
Synth; Telegram; Skycoin main channel; 22.04.2017
16
“On August 8, 2017, 1% (1 million) of Skycoin will be sold at a fixed price of 0.002 BTC / SKY.”
Skycoin; Skycoin official website; Distribution; 13.08.2017
17
“-The OTC price adjusts when we adjust it -The OTC wallet is bxpUG8sCjeT6X1ES5SbD2LZrRudqiTY7wx you can see how many coins are in it. There’s about 20BTC worth at these prices -We add coins to the OTC wallet manually. This reflects the amount available for sale. -The OTC price is kept higher than market price for reasons stated 100 times in chat and also in blog posts”
Steve [Sky Dev]; Telegram; Skycoin main channel; 09.01.2018
18
“I have 300 people messaging me for the OTC. Until we have the automated system in place, which is just being turned on now, I had to do these things by hands, so we were getting 100 messages an hour for OTC sales. It took three weeks I think for me to finish all of the OTC sales … So we have these OTC orders and some are like 5, 10, 200 Bitcoin…”
Synth; Youtube; Coin Interview with Skycoin 02; 11.12.2017
19
“For the cost of 1BTC you receive the miner (value of 0.05 btc +/-) and you receive a rebate in the form of .95BTC worth of Skycoin (450 Sky at the moment)”
MrHodlr | Systems Integrator | Skycoin; Telegram; Skycoin main channel; 30.01.2018
20
“Shipping schedule: – 50 miners are available for shipping immediately- 250 miners should be available by the 2nd week of February.”
Steve [sky dev]; Telegram; Skycoin main channel; 10.01.2018
21
“About 300 I think.” (Responding to the question how many Skyminers will be sent out)
Steve [sky dev]; Telegram; Skycoin main channel; 26.05.2018
22
“Miner rebates were at 650”
therealssj; Telegram; Skycoin main channel; 23.07.2018
23
“Binance will open trading for SKY/BNB, SKY/BTC and SKY/ETH trading pairs at 2018/05/24 09:00 AM (UTC). Users can now start depositing SKY in preparation for trading.”
Binance; Official Website; Binance Will List Skycoin (SKY) on 2018/05/24; 23.05.2018
24
“Skycoin Competition … Trading Competition: a total of 20000 SKY to win! … Lucky Draw: 30000 SKY + 10 Skyminers to win!”
Binance; Official Website; Binance | Skycoin – Lucky Draw; 07.06.2018
25
The following amounts of Skycoin were sent to miners per month: 25k SKY – June 2018; 25k SKY – July 2018; 30k SKY – August 2018; 30k SKY – September 2018; 60k SKY – October 2018; 40k SKY – November 2018; 40k SKY – December 2018; 40k SKY – January 2019; 40k SKY – February 2019
PSA Skywire; Telegram; Channel PSA Skywire; Starting from 28.07.2018
26
“huge OTC investor who was time locked; at $35 dollars a coin, just had coins unlock, so may be dumping”
Synth; Telegram; Skycoin trading channel; 27.10.2018
27
“Some OTC at market and some to investment funds. And some for coin hour buy backs.” (Answering the question on how coins are being distributed)
Synth; Telegram; Skycoin main channel; 01.01.2019
Sources – Allocation of total supply
28
“75 million coins (75%) are timelocked (hardcoded in skycoin.go scroll down to bottom) and 25 million coins are currently unlocked.”
Skycoin; Skycoin Blog; Understanding the Skycoin Supply & Distribution; 25.01.2018
29
“We will set the total cap of the OTC sale to bring Skycoin’s distributed percentage to be between 10% and 15%. Currently, Skycoin is at 6%. The remainder is reserved for the Skywire network subsidy, until we hit the 25% timelock cap and enter a maximum 5% per year distribution.”
Skycoin; Skycoin Blog; Skycoin Distribution Plan; 09.10.2017
30
“We have decided we will distribute a portion of the Skycoin over time to people running Skycoin meshnet nodes. To promote network usage and to get users on to the network and balance out the whales.”
skycoin; Bitcointalk; [SKY] Skycoin Launch Announcement; 09.03.2017
31
“We have 10 million skycoin allocater for coinhour buybacks over a few years to bootstrap the skycoin to coinhours market.”
Synth; Telegram; Skycoin main channel; 25.11.2017
32
“However, if 1% of currency is created each year and invested in activities that increase the value of the coin network, by more than the cost, then doing so maximizes the value for all coin holders. If $1 in investment in meshnet deployment, PR, advertising or lobbying nets $5 in coin market cap then coins which use this mechanism will out-compete coins that are unable to. The market-cap and values of coins pursuing this strategy will grow significantly faster than the alternative.”
Skycoin; Skycoin Blog; Development Update #45; 17.12.2014
33
“If you come in and you do a VPN app or videosharing app or a messaging app on Skycoin, we might give you half a million dollars of Skycoin. We fund our developers. We invested in a lot of different development teams and we distributed the coins to the people that are doing the work and promoting it. If you are doing a meetup, we will give you Skycoin. If you are doing T-Shirt designs, we will give you Skycoin. If you help with translations, we have a bounty program. So, we are busy distributing the coins to people moving the project forward.”
Synth; Youtube; AMA hosted by Crypto Brahma; 11.03.2018
34
“We are going to be distributing coin bonuses to about thirty contributors, on a vesting schedule over the next few years. For example – one project manager who has help fix over a hundred fifty bug tickets is getting 250,000 SKY over the next four years (about 40k USD in SKY at price when he joined project) – website guy/content/marketing/design guy who was critical is getting 60,000 SKY over next two years – some contractors and major contributors are getting 5,000 SKY to 30,000 SKY distributions over the next two years for work on mesh network, bounties, bug fixes, etc”
Skycoin; Skycoin Blog; Ask the developers #8; 25.12.2016
Sources – Maximum supply
35
“The Skycoin distribution is timelocked. This means that, of the undistributed Skycoin, 25% are immediately distributable. The remainder cannot be distributed until the first 25% have been distributed. Once the first 25% have been distributed, an additional 5% is unlocked for distribution. For each subsequent year thereafter, an additional 5% is unlocked for distribution. This gives Skycoin a 14 year distribution timeline, after the first 25% is distributed. We may extend the unlocking process to take up to 25 years, but we will never shorten the timelocking schedule. There is no requirement that the yearly 5% be distributed. The unlock only enables that amount to be distributed. The locked Skycoin are allocated for expansion of the Skywire Network via targeted network subsidies and for bounties for platform development.”
Skycoin; Skycoin Blog; [SKY] Skycoin Distribution Plan; 09.10.2017
36
“The 75 million (75%) undistributable Skycoin cannot be distributed until the first 25 million (25%) have been distributed. After that is done, for each subsequent year thereafter, 5 million coins (5%) are unlocked via an unanimous consent (1 vote against distribution can stop the whole process) of an unknown group of developers. This does not mean that each year 5 million coins have to be distributed, they are just unlocked and it is possible to distribute them.”
Skycoin; Skycoin Blog; [SKY] Understanding the Skycoin Supply & Distribution; 25.01.2018
37
“We are considering slowing down the timelock even further: * 5% each year for 5 years * 4% each year for 5 years * 3% each year for 5 years * 2% each year for 5 years * 1% each year for 5 years This make it last for 25 years instead of 14, and is better suited to our growth forecasts. Note that for technical reasons, locking is handled in 1% chunks, otherwise we would be doing exponential decay.”
skycoin; Bitcointalk; [SKY] Skycoin Launch Announcement; 28.08.2017
38
“Each of the core developers is only getting 1% each and they are locked for several years.”
Skycoin; Skycoin Blog; Ask the developers #7; 07.05.2015
39
“We are putting technical and human measures in place, to ensure that if any of the key contributors starts dumping that it would only be temporary. We want to avoid a situation where someone has 30% of the coins and the community has 2% and that person could dump their coins everyday on the market for a decade before they ran out. That is what happened with NXT and we wanted to avoid that.”
skycoin; Bitcointalk; [SKY] Skycoin Launch Announcement; 04.04.2017
40
“Future Measures: – we are going to time lock the addresses in the future, so the node will reject transactions spending their outputs – we are going to put constraint in the code, so the blocks have to be distributed in sequential tranches”
skycoin; Bitcointalk; [SKY] Skycoin Launch Announcement; 04.04.2017
Sources – Reasons for the long-term approach
41
“All of our lead developers were in Bitcoin before it was at a dollar, so they are pretty well-off. Then we had an ICO and even the developers had to buy in the ICO and that was when Bitcoin was less than a hundred dollars and Bitcoin is over 10,000 dollars now. Actually, we never even had budgeting until very recently, because the Bitcoin price was just going up and up and up and no matter how many people we hired, we couldn’t even spend it.”
Synth; Youtube; AMA hosted by Crypto Brahma; 11.03.2018
42
“Skycoin is more like a consortium. There is a bunch of different companies, that are all using the infrastructure or are contributing to the infrastructure and funding developments. In the beginning we didn’t do a huge ICO to raise money, most of the development was funded by our corporate partners and also the personal contributions of the developers who made a lot of money on Bitcoin and just wanted to see this technology built.”
Synth; Youtube; AMA hosted by Crypto Brahma; 11.03.2018
43
“Our distribution schedule is very similar to Bitcoin. – We are not doing a large sale of 30% of the coins at once like Ethereum. We think this distribution schedule sells to many coins and limits the upside for investors and will destroy the long term price when the speculators/miners dump. – We are not hoarding 98% of the coins like Ripple (the Ripple free float is a lie) – We think a gradual distribution with the number of new coins decreasing over time is the best distribution schedule. – If the distribution negatively impacts the price, we will cut the distribution back and if it continues to fall we will begin buybacks. – We have a professional market maker partner who is invested for the long term and will provide liquidity on both sides of the order book. We think the Bitcoin distribution schedule is the most natural and has been the most successful. We do not have miners and no new coins are created, so it has to be done by hand, but we think that is best way to allow gradual long term appreciation.”
Skycoin; Skycoin Blog; Ask the developers #7; 07.05.2015
44
“The Skycoin distribution schedule and philosophy is identical to Bitcoin’s distribution rate, or how Facebook or Google stock was distributed. Google did not distribute 80% of its shares by doing a massive Ethereum style crowd sale, before any of the work was done. It sold off fixed, small slices of equity at each step at an increasing price. Then they dumped the money into development and increasing the value of the equity for all stakeholders by investing the money raised in infrastructure. This is what makes sense for funding a large, long term project whose value is increasing. We are using this model, because it works.”
Skycoin; Skycoin Blog; Ask the developers #9; 13.04.2017
45
“There are two conflicting things we have to deal with – The community wants us to distribute at a rate so the coin becomes less centralized over time – The community does not want us to distribute so quickly that it drives the price down … We want to distribution coins, slower than the rate of user growth – If we distribute 10% of the current free float (10% inflation in free float) – Then the user base growth for Skycoin should be at least 10 or 20% over the same period … The max any one person holds, is 1% of the total coins. 1 million SKY. These are early developers, who have been working on the project for years. This is to eliminate dumping and prevent NXT/Ripple style situations as people join and leave the project team. We have an extremely tight coin supply. No one person is in a position to do major damage, like what happened with NXT or Ripple. We studied every way, that every previous coin had failed and then explicitly designed our rule set to avoid those methods of failure.”
Skycoin; Skycoin Blog; Ask the developers #8; 25.12.2016

Bitcoin’s Lower Highs

Bitcoin Lower High
BTC’S LOWER HIGHS
20.02.2019
A SERIES OF LOWER HIGHS SINCE ATH
CHRISTIAN OTT
AUTHOR
Introduction
The ongoing bear market for Bitcoin has revealed a very interesting pattern for the biggest cryptocurrency. Ever since its all-time high, Bitcoin has had rallies upwards and downwards, but has continuously failed to produce higher highs. Each US Dollar high that followed after 20k USD was placed lower than the previous one. Since December 2017, Bitcoin has repeated this pattern over and over again. I made a list of Bitcoin’s lower highs, that you can find below:
4,415 USD29.11.20184,239 USD24.12.20184,115 USD08.01.201919,892 USD17.12.201717,178 USD05.01.201812,986 USD20.01.201811,775 USD20.02.20189,948 USD05.05.20188,488 USD24.07.20187,402 USD04.09.20186,823 USD22.09.20186,810 USD15.10.2018
Conclusion
As the numbers show, Bitcoin’s price produced lower high after lower high after lower high. Some of the lower highs came very close to the previous high but couldn’t manage to rise above. Therefore, I would expect the first higher high since Bitcoin’s all-time high to have a significant effect on the market. The question is just – when will we see this higher high? Can we see it tomorrow? Possible. Can it take a couple more months and more lower highs until we see a higher high? Absolutely. However, with the Bitcoin price going lower and the margin between previous lower highs getting smaller, I expect this pattern to come to an end in a not so distant future.

Nano ATVWAP

NANO ATVWAP
NANO ATVWAP
04.02.2019
ALL-TIME VOLUME WEIGHTED AVERAGE PRICE
CHRISTIAN OTT
AUTHOR
Introduction
Recently, I put a spotlight on using the all-time volume weighted average price (ATVWAP) to evaluate, whether the price of Bitcoin is overbought or oversold (find the detailed article here: Bitcoin ATVWAP). It is basically an average daily price, with every price point being weighted by its daily trading volume. The ATVWAP is not limited to BTC though, it also offers interesting insights for the price of other cryptocurrencies. In this article, it will be applied to one of the fastest cryptocurrencies around, which is Nano.

Trading Volume
Nano has been traded publicly for about two years. It started trading below 0.01 USD in March 2017 and then rose all the way up to an all-time high of 37.62 USD on January 2, 2018. After that, it went all the way down to a low of 0.74 USD on December 15, 2018. As these numbers indicate, Nano was traded in many different price ranges. The trading volumes per price range differed largely from each other. For example, not many people were able to pick up Nano below one cent with just 20 million Nano traded below that range. Surprisingly, only a total of 170 million Nano were traded with the Nano price below 10 cents, even though it traded in that range for 170 days, whereas 244 million Nano were traded with a Nano price above 10 USD in just 62 days. By far the most trading volume (810 million Nano) has occurred in the range between 1 and 5 USD. The following visualization shows how many Nano were traded in each price range:
800M600M400M200M0.01$10$.05$–  .01$.10$–  .05$.50$–  .10$1$–  .50$5$1$><10$5$NANOTRADING VOLUME PER PRICE RANGE(IN NANO)
Nano ATVWAP (in USD)
As we can see, Nano was traded in many different price ranges over the past two years. It is therefore difficult to determine a “fair” price, that is significant but also not too complicated to calculate. An average price of Nano over time wouldn’t be significant since its trading volume peaked above a dollar, even though Nano traded below 10 cents for a long time. Instead of the average price, I suggest using the all-time volume weighted average price (ATVWAP), which weights each daily price with the volume it was traded at. The following chart shows both the daily price movement and the corresponding ATVWAP value.

NANO(IN USD)ALL-TIME VWAPATVWAP (USD)VOLUME(NANO)DailyPrice (USD)20172018.005$.05$.5$5$50$
During its nearly 2 years of public trading, Nano mostly went up in 2017 and mostly went down in 2018. Starting in March 2017, Nano’s price increased steadily from 0.008 USD to 0.09 USD in the beginning of November 2017, growing by around one percent a day for half a year. The all-time volume weighted average price (ATVWAP) acted as a reliable support during that period, with Nano’s price approaching the ATVWAP on several occasions, but barely going below.

From November onwards, Nano pumped massively from 9 cents up to 37 USD in a span of two months, growing on average by 10 percent per day (!). That huge growth in price led to an increase of the ATVWAP as well, but it didn’t go nearly as high as the daily price. When Nano hit its all-time high of 37.62 USD on January 2, 2018 the ATVWAP was at 1.37 USD, indicating that Nano was massively overbought. The daily price declined after that, but managed to stay above the ATVWAP until March 27, 2018, with the daily price at 6.66 USD and the ATVWAP at 6.8 USD.

From mid-March to mid-May 2018 Nano’s price hovered around the ATVWAP but declined below it afterwards. On August 14, 2018 Nano reached a temporary low of 0.78 USD, with the ATVWAP at 6 USD. Nano went up afterwards, but only to a temporary high of 3.72 USD 12 days later. After that, Nano continued to go down to a low of 0.74 USD on December 15, 2018 and has therefore now stayed below the ATVWAP for over eight months, leading to the ATVWAP declining to 4.5 USD.

Conclusion
For the last 76 days Nano has stayed below/around the one USD mark. With a price around 80 cents today, Nano is trading way below its current ATVWAP of 4.5 USD. It shows, that many investors are sitting at a loss and might have little to no incentive to sell at these prices. However, the ATVWAP is an adaptive metric and will go lower, the longer Nano’s price stays below the ATVWAP. Adding to that, investors that buy at these prices are in profit, if the price goes back up to two USD or higher. Therefore, it might take some time until Nano’s price hits the ATVWAP again but buying far below the ATVWAP value should be a way better entry point than buying it while the daily price traded 30x above its ATVWAP value.



Articles, that may interest you:

TOP 50 one year after the peak

TOP 50 cryptocurrencies
TOP 50 CRYPTOS
24.01.2019
ONE YEAR AFTER THE TOTAL MARKET CAP PEAKED
CHRISTIAN OTT
AUTHOR
Introduction
It was on January 8, 2018 when the overall crypto market cap reached its peak of 828.5 billion USD. It was the peak of a phase of seemingly never-ending euphoria, and cryptocurrencies were said to be the new financial paradigm. From that point on, the cryptocurrency market moved into a totally different direction, with many coins/tokens losing over 90% of their fiat value in less than a year. In this article, I will take a look the TOP 50 cryptocurrencies at the peak and how they are positioned on the exact same day one year later.

TOP 50
A comparison between different years for cryptocurrencies can be done with different parameters. You can base the calculation on the price, but that doesn’t consider (logical) price declines due to increases in circulating supply. The market cap of a cryptocurrency should therefore be better suited for a comparison, since it both includes price and circulating supply. The market cap itself is often referred to in USD, but due to most altcoins’ fiat value depending on Bitcoin’s fiat value, comparing the market cap in BTC should give better insights on how a coin performed over time, than it’s fiat value. Accordingly, in the following you can find the market cap of the TOP 50 cryptocurrencies on January 8, 2018 compared to their market cap in BTC on January 8, 2019.
55,547 BTC5,438 BTCCHANGEIN MARKET CAP:-90.21%DENT55,912 BTC42,676 BTCCHANGEIN MARKET CAP:-23.67%BAT56,368 BTC8,628 BTCCHANGEIN MARKET CAP:-84.69%VERITASEUM56,440 BTC10,157 BTCCHANGEIN MARKET CAP:-82.00%HYPERCASH59,495 BTC8,566 BTCCHANGEIN MARKET CAP:-85.60%LOOPRING59,856 BTC17,278 BTCCHANGEIN MARKET CAP:-71.13%GOLEM61,003 BTC44,696 BTCCHANGEIN MARKET CAP:-26.73%0X66,343 BTC21,471 BTCCHANGEIN MARKET CAP:-67.64%KOMODO66,628 BTC7,295 BTCCHANGEIN MARKET CAP:-89.05%DRAGONCHAIN71,151 BTC27,422 BTCCHANGEIN MARKET CAP:-61.46%AUGUR73,895 BTC32,378 BTCCHANGEIN MARKET CAP:-56.18%DIGIBYTE77,304 BTC60,288 BTCCHANGEIN MARKET CAP:-22.01%VECHAIN89,843 BTC71,633 BTCCHANGEIN MARKET CAP:-20.27%WAVES97,677 BTC476,703 BTCCHANGEIN MARKET CAP:388.04%TETHER97,724 BTC23,416 BTCCHANGEIN MARKET CAP:-76.04%STEEM103,387 BTC15,208 BTCCHANGEIN MARKET CAP:-85.29%ARDOR106,864 BTC16,704 BTCCHANGEIN MARKET CAP:-84.37%STATUS107,019 BTC13,333 BTCCHANGEIN MARKET CAP:-87.54%KUCOIN SHARES111,762 BTC66,482 BTCCHANGEIN MARKET CAP:-40.51%DOGECOIN118,345 BTC14,999 BTCCHANGEIN MARKET CAP:-87.33%DENTACOIN119,188 BTC215,467 BTCCHANGEIN MARKET CAP:80.78%BINANCE COIN131,332 BTC28,851 BTCCHANGEIN MARKET CAP:-78.03%BITSHARES138,226 BTC85,014 BTCCHANGEIN MARKET CAP:-38.50%ZCASH141,490 BTC28,265 BTCCHANGEIN MARKET CAP:-80.02%STRATIS141,965 BTC20,101 BTCCHANGEIN MARKET CAP:-85.84%POPULOUS147,362 BTC– BTCCHANGEIN MARKET CAP:-100%BITCONNECT158,952 BTC33,373 BTCCHANGEIN MARKET CAP:-79.00%BYTECOIN160,691 BTC52,145 BTCCHANGEIN MARKET CAP:-67.55%OMISEGO162,715 BTC27,168 BTCCHANGEIN MARKET CAP:-83.30%SIACOIN170,695 BTC27,002 BTCCHANGEIN MARKET CAP:-84.18%VERGE223,049 BTC132,872 BTCCHANGEIN MARKET CAP:-40.43%ETH CLASSIC226,616 BTC32,952 BTCCHANGEIN MARKET CAP:-85.46%NANO240,997 BTC39,274 BTCCHANGEIN MARKET CAP:-83.70%LISK259,842 BTC32,313 BTCCHANGEIN MARKET CAP:-87.56%ICON264,548 BTC58,379 BTCCHANGEIN MARKET CAP:-77.93%BITCOIN GOLD272,316 BTC50,410 BTCCHANGEIN MARKET CAP:-81.49%QTUM377,537 BTC628,973 BTCCHANGEIN MARKET CAP:66.60%EOS415,997 BTC220,192 BTCCHANGEIN MARKET CAP:-47.07%MONERO438,659 BTC147,965 BTCCHANGEIN MARKET CAP:-66.27%NEO559,764 BTC173,401 BTCCHANGEIN MARKET CAP:-69.02%DASH658,750 BTC435,423 BTCCHANGEIN MARKET CAP:-33.90%TRON704,654 BTC250,374 BTCCHANGEIN MARKET CAP:-64.47%IOTA741,741 BTC585,328 BTCCHANGEIN MARKET CAP:-21.09%STELLAR921,778 BTC587,008 BTCCHANGEIN MARKET CAP:-36.32%LITECOIN980,967 BTC143,603 BTCCHANGEIN MARKET CAP:-85.36%NEM1,536,478 BTC312,122 BTCCHANGEIN MARKET CAP:-79.69%CARDANO2,697,743 BTC705,189 BTCCHANGEIN MARKET CAP:-73.86%BITCOIN CASH6,272,316 BTC3,697,160 BTCCHANGEIN MARKET CAP:-41.06%XRP7,333,157 BTC3,889,475 BTCCHANGEIN MARKET CAP:-46.96%ETHEREUM16,790,616 BTC17,470,941 BTCCHANGEIN MARKET CAP:4.05%BITCOINCHANGE OF MARKET CAP IN BTCFROM 2018-01-08 TO 2019-01-08:1 YEAR LATERCOINMARKETCAP TOP 50
Insights
As we can see, there are only four coins in last year’s TOP 50, whose market cap was worth more in BTC, than it was one year later. EOS’ market cap gained 66.6% in Bitcoin, Binance’s market cap gained 80.8% and stablecoin Tether’s market cap gained 388% in Bitcoin value. Bitcoin’s market cap was also worth more (in terms of BTC) than it was one year ago, due to an increase in circulating supply. The market cap of all other 46 coins/tokens lost value against BTC, some less (Stellar lost only 21%), some more (DENT lost 90%). 36 coins remained in the TOP 50, while five coins even moved out of the TOP 100. One coin died completely, which is the infamous Bitconnect. On average, the market cap of coins/tokens in the TOP 50 lost 50.4% in Bitcoin value.

Price in fiat value
The peak of the overall crypto market cap also meant a peak for most coin’s prices. With BNB, EOS and USDT, only three coins would have gained value against BTC, if you had invested in them at the peak of the market. But even they couldn’t gain value against USD. Besides stablecoin Tether, the best investment from a perspective of keeping your fiat value would have been Binance coin – it’s price in USD went down “only” 63.4%. If you would have invested an equal amount in each TOP 50 coin at the peak, you would have lost 88.9% of your fiat value compared to exactly one year later.

Wrap-up
The cryptocurrency market peaked at January 8, 2018. A comparison between the valuation of coins/tokens on this day and one year later is best done by comparing their market cap in Bitcoin value. At the peak, only an investment in Binance Coin, EOS and USDT would have gained value against BTC, while the average market cap of TOP 50 cryptocurrencies lost 50.4% of its value in Bitcoin. Talking about the TOP 50’s price valuations in USD is even more devastating: Binance coin lost the least with only 63.4% of its USD value, while the TOP 50 cryptocurrencies on average lost 88.9% of their USD value.


Let’s hope for a better 2019.

Ethereum ATVWAP

Ethereum ATVWAP
ETHEREUM ATVWAP
07.01.2019
ALL-TIME VOLUME WEIGHTED AVERAGE PRICE
CHRISTIAN OTT
AUTHOR
Introduction
Recently, I put a spotlight on using the all-time volume weighted average price (ATVWAP) to evaluate, whether the price of Bitcoin is overbought or oversold (find the detailed article here: Bitcoin ATVWAP). It is basically an average daily price, with every price point being weighted by its daily trading volume. The ATVWAP is not limited to BTC though, it also offers interesting insights for the price of other cryptocurrencies. In this article, it will be applied to the second highest ranked cryptocurrency on CoinMarketCap, which is Ethereum.

Trading Volume
Ethereum has been traded publicly for the last 3.5 years. Similar to Bitcoin, Ether’s trading volumes have gone up significantly over time. While just 835k ETH were traded on a daily basis in 2015, this number increased to 6.7 million ETH in 2018. Lately, the market showed tremendous interest in trading Ether, with a daily trading volume of 21.2 million ETH in December 2018. Consequently, the ATVWAP should better indicate a fair price of Ether than the average price does, because way more investors agree to buy and sell Ether in 2018, than they did in 2015. The rising volume can be seen in the following chart:
ETHEREUM(IN ETH)AVG. DAILY TRADING VOLUME OF01M2M3M4M5M6M7M2018201720162015
Ethereum ATVWAP (in USD)
During these 3.5 years of public trading activity, ETH went from lows around 0.5 USD all the way up to 1400 USD. During the course of 2018 however, Ether has seen its biggest decline. When it hit 82.83 USD on 2018-12-15, it was down 94.2% from its previous all-time high. At that point, many people were screaming for Ether to go even lower, but it has recovered a little instead and went up to the 150 USD range again. Ether’s price movements should provide interesting data to apply it to the ATVWAP.

Although before calculating the ATVWAP, we have to consider Ethereum’s initial distribution method. Ethereum held an ICO in 2014, where it raised 31,538 BTC.1 It can be assumed, that purchases of ETH were made for 2000 ETH per 1 BTC,2 indicating that 63 million ETH were sold in the crowdsale for approximately 0.3 USD per ETH. Why is that important for calculating the ATVWAP? Alongside the public trading data, it also makes sense to integrate data from a crowdsale into the ATVWAP, to add the price difference between token issuance and first exchange listing into the equation. The result is displayed in the following chart:
ETHER(IN USD)ALL-TIME VWAPATVWAP (USD)VOLUME(ETH)DailyPrice (USD)2016201720180.15$1.5$15$150$1.5K$
As the chart shows, ETH’ price action was very bullish from its ICO onwards to the end of 2017. After listing 10x above its ICO price on public exchanges, it dropped down to 0.5 USD, but stayed above its ICO price of 0.3 USD. Later on, it went up from 1 USD to 15 USD in the first 75 days of 2016 and stayed in the range of 7-15 USD for almost a year. Then, from the beginning of 2017 on, ETH had its biggest run up from under 10 USD all the way up to 1400 USD, followed by a massive price decline in 2018. Now, which role does the ATVWAP play?

There are some interesting similarities between how Bitcoin’s and Ether’s price behaved towards its ATVWAP. We had seen, that Bitcoin had a massive run up two times and after that hovered around the ATVWAP for months (in 2012 and 2015). Similar to that, ETH hovered around its ATVWAP after two run ups. The first occasion where this happened, was during the last months of 2015. After being issued for 0.3 USD in its ICO, ETH reached 3 USD on exchanges and later consolidated in the 0.8 – 1 USD range, while its ATVWAP was at 0.75 USD. The second occasion, in which the ETH price hovered around its ATVWAP, was at the end of 2016. After having failed to pass 15 USD on multiple attempts in 2016, ETH went down to the range of the ATVWAP again in December 2016, which was at that time at 7.8 USD.

After its major run up in 2017 however, ETH declined below its ATVWAP value and has stayed below since August 2018. Its ATVWAP had been as high as 304 USD in August, but due to ETH having stayed below for several months with way higher volume than before, its ATVWAP has already declined down to 250 USD. Accordingly, we have yet to see a longer consolidation period around the ATVWAP value, which would only be the case, if ETH behaves similar to both previous occasions.

Ethereum ATVWAP (in BTC)
To be honest, I am not totally satisfied with calculating the ATVWAP of Ether in USD. The whole crypto market somehow rises and falls with BTC and an USD chart therefore contains unwanted correlations with Bitcoin’s USD value. I think measuring the ATVWAP of Ether in Bitcoin shows more interesting patterns than the USD chart, but is also less intuitive to understand, since most people might rather measure value in FIAT than in BTC. Let’s have a look at the chart:
ETHER(IN BTC)ALL-TIME VWAPATVWAP (BTC)VOLUME(ETH)DailyPrice (BTC)201620172018.00025.0025.0250.25
Ethereum’s price movement against BTC over the past 3.5 years is very interesting. It had three major pumps and massive declines after that, but it could establish a higher support level after every pump. It can also be noticed, that each time ETH had a major decline, it went below its ATVWAP value, only to snap back above it after a while again. Moreover, every time it climbed back up above the ATVWAP level, ETH had a parabolic move upwards. Following the massive decline in 2018, ETH seems to surge to its ATVWAP level again, but if we see a parabolic move upwards after it managed to get above its current ATVWAP level of 0.044 BTC remains to be seen.

Wrap-up
In this article, I discussed the all-time volume weighted average price (ATVWAP) as a method to analyze Ethereum’s price. While it is both possible to analyze ETH’s price in relation to its ATVWAP in USD and BTC, analyzing the price in BTC appears to be more promising, because it includes less correlation with Bitcoin’s price in USD. The chart shows, that ETH had three declines below its ATVWAP value (in BTC) in the past, but always managed to climb back up again, followed by a parabolic move upwards. Currently, it trades below the ATVWAP for the fourth time, but seems to be on its way to recovery again and might touch its current ATVWAP value in the near future.



Articles, that may interest you:
Sources
1
Ethereum received 31,538 BTC in their crowdsale in 2014.
Bitcoin Blockchain; 36PrZ1KHYMpqSyAQXSG8VwbUiq2EogxLo2; 06.01.2019
2
“Data was taken yesterday, when we had 24000 BTC, and assumes that all purchases were for 2000 ETH / BTC (an assumption that is not strictly true, but the error term is sufficiently tiny that it can safely be discounted).”
Vitalik Buterin; Ethereum Blog; Ether Sale: A Statistical Overview; 08.08.2014