Coin Metrics' State of the Network: Issue 55
Tuesday, June 16th, 2020
Assessing Crypto’s Recovery Three Months After The March 12th Crash
Bitcoin (BTC) and Ether (ETH) have recovered most of their losses after the March 12th crash, while assets like Bitcoin Cash (BCH) and Litecoin (LTC) have lagged behind.
Other assets that have outperformed include Cardano (ADA), Crypto.com Coin (CRO), and OmiseGO (OMG).
Stablecoin trading volume has exploded since March 12th, with Tether (USDT) leading the way. BTC-USDT spot market volume on Binance, Bitfinex, Bittrex, HitBTC, Huobi, and LBank shot up to new highs on March 13th, and has remained relatively elevated since.
Volume continued to spike in April and May on all six exchanges, although to a lesser extent than on March 13th.
Another trend that has emerged following March 12th is the growth of addresses holding relatively small amounts of crypto. Since March 12th, BTC and ETH have both had noticeable increases in addresses holding at least 1 billionth of total supply.
On March 12th crypto experienced one of its largest crashes ever with many assets falling over 50% in less than 24 hours. Now, a little more than three months later, the market has turned around and shown signs of recovery. However, not all assets have reacted equally, and the market continues to change at a fast pace as global uncertainty remains high.
In today’s Weekly Feature we look at network data (i.e. on-chain data) and market data to assess how different assets recovered, and analyze some of the ongoing changes after the crash.
Price Recovery Differs Across Assets
Assets like Bitcoin (BTC) and Ether (ETH) have recovered most of their losses after the crash, while other assets like Bitcoin Cash (BCH) and Litecoin (LTC) have lagged behind.
The below chart shows market capitalization for nine major cryptoassets over the last year. All nine assets experienced market cap spikes in February, immediately prior to the crash. BTC’s market cap reached $188.76B on February 14th, its highest point in 2020. ETH’s 2020 market cap peaked at $31.25B, also on February 14th.
After the crash, BTC’s market cap recovered to $187.58B by June 1st 2020, just shy of its February high. Similarly, ETH’s market cap reached $27.69B on June 1st.
But other assets have not recovered as much of their pre-crash highs. BCH’s post-crash market cap peaked at $4.92B on April 8th, down from $9.01B on February 14th. LTC market cap reached $5.37B on February 14th and has not passed $3.2B since. Ripple (XRP) and Bitcoin SV (BSV) are also down compared to other assets.
Price recovery paints a similar picture. The below chart shows price recovery (i.e. percent regained of initial price) from February 14th, which was the high point for many cryptoassets in 2020, to June 14th.
In addition to BTC and ETH, several mid-cap assets like Cardano (ADA) and Crypto.com Coin (CRO) have recovered relatively well. OmiseGO (OMG), which launched on Coinbase Pro on May 19th, has also outperformed.
Stablecoin Trading Volume Has Surged
Stablecoin trading volume has exploded since March 12th, with Tether (USDT) leading the way. BTC-USDT spot market volume on Binance, Bitfinex, Bittrex, HitBTC, Huobi, and LBank shot up to new highs on March 13th, and has remained relatively elevated since. Volume continued to spike in April and May on all six exchanges, although to a lesser extent than on March 13th.
The following chart shows BTC-USDT trading volume smoothed using a 7-day rolling average.
This increase in volume corresponds with the huge growth in Tether supply seen since February 2020. Tether is currently issued on many different platforms, including Ethereum (USDT_ETH) and Tron (USDT_TRX). USDT_ETH supply more than doubled from February to May 2020, and USDT_TRX supply has more than tripled over the last two months.
Addresses Holding Small Amounts of BTC and ETH are Growing
Another trend that has emerged following March 12th is the growth of addresses holding relatively small amounts of crypto.
The following chart shows the number of addresses holding at least 1 billionth of total supply (.000000001%). BTC and ETH both had noticeable increases in growth following March 12th. Ripple (XRP) and Tezos (XTZ) have also shown steady growth over the last year. This suggests that the amount of individuals holding these assets is growing, and that the amount of retail investors (i.e. non-institutional) may be increasing.
However, it’s important to note that a single entity can own many addresses at once, so an increase in addresses does not necessarily mean an increase in usage. Alternatively, the rise could be caused by a small number of entities spreading their coins across many addresses.
In three short months after the March 12th crash BTC and ETH have recovered most of their losses. Additionally, stablecoin trading volume has exploded, and the amount of addresses holding small amounts of BTC and ETH have grown. However, not all assets have recovered as well as BTC and ETH. BCH and LTC market caps remain well below 2020 highs, and many other assets are lagging as well.
As global uncertainty is still high, it remains to be seen whether crypto will continue to trend upwards. But at least up to this point, a lot of the post-crash data has pointed towards a relatively strong recovery.
Check out our free community charting tool to access some of the data used in this piece as well as more of our on-chain network data.
Network Data Insights
Bitcoin (BTC) and Ethereum (ETH) both had slightly down yet relatively stable weeks. BTC’s market capitalization dropped 1.8% week-over-week, while ETH’s dropped 1.3%. Realized capitalization (which values each coin at the last time it moved on-chain), however, increased for both.
Notably, ETH daily fees grew by over 178.5% week-over-week, a seemingly huge surge. However, this was due to two specific transactions which each inexplicably spent $2.6M on transaction fees.
Bitcoin Cash (BCH) and Litecoin (LTC) continued their downward trends as highlighted in today’s Weekly Feature. LTC active addresses dropped 15.8% week-over-week. Although BCH addresses increased 11.3% week-over-week, most other BCH on-chain metrics were down, including a 46.8% drop in transactions.
There were 1.05M Bitcoin daily active addresses on June 11th, the highest single day total of 2020. Bitcoin daily active addresses have not topped 1.05M since June 2019.
Bitcoin active addresses also surged in May. Current levels of active addresses have only been seen twice before in Bitcoin’s history: December 2017, when Bitcoin price was approaching $20K, and July 2019, when Bitcoin’s price climbed from around $5K to over $13K. The following chart shows Bitcoin daily active addresses since May 2015, smoothed using a 7-day rolling average.
Ethereum daily active addresses have also surged in the past few weeks. Ethereum active addresses are now approaching levels not seen since January 2018. The following shows daily active addresses smoothed using a 7-day rolling average.
Market Data Insights
This past week in Bitcoin was relatively quiet, with daily volatility reaching the lowest levels in three months. This level of volatility was last seen the week of March 7th, 2020, just days prior to the roughly 50% drop in price on March 12th. Historically, Bitcoin has not been able to maintain volatility below the 50% threshold for periods of time. Is this time different or will volatility be returning soon?
Bitcoin’s rolling 30 day average volatility has only fallen below the 50% threshold 35 times during the modern Bitcoin market (if we consider the modern market for Bitcoin as starting when Bitcoin initially hit $1,000 on November 29, 2013).
Below is a histogram of the number of days that Bitcoin’s 30 Day volatility has remained below 50% for those 35 points mentioned above. 80% of those periods lasted less than 20 days, with 55% lasting less than 10 days. These percentages skew higher when looking only at data since 2017. To keep the following analysis more concise and relevant for the current trading regime we will continue to focus on just the period since 2017.
This leads us to consider what happens following these periods of low volatility. Below is a look at the 10 days preceding and 50 days following periods where the volatility has fallen below 50%. You can see the median and mean trends in red, showing that pattern of rising volatility following the tenth day.
Is this a bullish or bearish signal? It is difficult to say with certainty using solely historical price data. However, we thought it would be interesting to repeat the analysis above looking at change in price instead of volatility. The results are mixed - sometimes price rises and sometimes it falls. The median and mean therefore both hover around 0% up to 40 days out.
CM Bletchley Indexes (CMBI) Insights
All of the CMBI and Bletchley Indexes experienced losses this week with the exception of the Bletchley 40 (market cap weighted and even weighted) which was up 1.1%. The CMBI Bitcoin Index and CMBI Ethereum Index were down 2.7% and 2% respectfully.
Interestingly, the Bletchley 10 index, which is composed 82% of Bitcoin and Ethereum, was down 5.1% for the week, implying underperformance in the other constituent assets of the Bletchey 10 (XRP, XTZ, BCH, LINK, BSV, LTC, XLM, EOS).
Coin Metrics Updates
This week’s updates from the Coin Metrics team:
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Coin Metrics’ State of the Network, is an unbiased, weekly view of the crypto market informed by our own network (on-chain) and market data.
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