Category Archives: Binance Research

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Bitcoin Correlation with Altcoin Wanes in 2019

Bitcoin Correlation with Altcoin Wanes in 2019

A new study from Binance Research shows growing evidence that Bitcoin’s correlation with other crypto has become less and less apparent, at least in Q2 2019.

Bitcoin price is generally found to be in close correlation with altcoin prices. When Bitcoin is on a bull run, such as in 2017, altcoins also tend to move in parabolic patterns, and when Bitcoin does the inverse, altcoins usually do too. The only difference is in the magnitude, where altcoins tend to rise and fall in far stronger patterns than Bitcoin.

The research arm of crypto exchange giant Binance published its 2019 Q2 Crypto-Correlations Review, which highlights how this is now the third best quarter that the industry has ever seen since 2014. It is also the quarter with the highest growth seen since the period of the bull run in 2017.

Bitcoin’s rise in US dollar valuation took the world by surprise in this period, increasing by over 300% and pushing its market dominance (by share of market capitalization) to above 60%, while creating new repeated and consecutive milestones in highs for 2019. These strong indicators of Bitcoin strength all played their part in significantly decreasing Bitcoin’s correlation with other digital assets.

The report noted:

“Correlations declined between Bitcoin and altcoins, with a decrease in average correlation of -0.11. The overall market capitalization rose by 139%, whereas altcoin aggregated market capitalization (including stablecoins) increased by ‘just’ 71% over the same period.”

The report also observed a decreasing correlation with some Proof-Of-Work crypto assets such as Bitcoin Cash, Dogecoin, Ethereum Classic, Bitcoin Gold, and more, which provided average correlations that were lower than before, whereas privacy coins like Monero displayed higher than average correlations with each other.

 

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Stablecoins Used by Nearly All Market Participants

Stablecoins Are Used by Nearly All Market Participant

Even though cryptocurrency is touted to be more efficient than legacy currency systems, it appears most cryptocurrency traders can’t help but peg their trust to fiat or its digital look-alike. This assumption holds true as a report by Binance Research indicated nearly all market participants use stablecoins.

Stablecoins are best known for their hedge against volatility in the cryptocurrency markets and though in a few cases are used as a medium of exchange, their most widely adopted use case is in a crypto-to-stablecoin trade environment. The level of adoption, however, especially the most used types – stablecoins backed by fiat – do reveal the strong industry ties to fiat systems.

According to Binance Research, while sampling its institutional and VIP clients, it observed that “90% of the clients use USD as the benchmark currency”, which further supports their initial theory on the adoption potential of stablecoins backed by USD. The report further suggested “USD stablecoins and USD-denominated platforms are the leading forces of the cryptocurrency and digital asset industry”.

As a correlation between the level of adoption of stablecoins and fiat-dependence, a subtle observation pointed out in the research indicated a large number of the respondents had prior experience in the financial industry exclusive of the digital asset industry. At the time of the study, more than half of the market participants sampled, either had one foot in the equity market or the foreign exchange market, which evidently supports the gravitation towards fiat-dependency.

Comparatively, the traditional financial market has well-established hedging strategies in the form of offsetting stock positions, options, futures, and bonds, to reduce exposure to market risks. On the other hand, while the cryptocurrency industry may have mirrored a few of these market derivatives – which for the most part are largely accessible by large investors and those rather conversant with the financial market principles, adoption of fiat-backed stablecoins by all class of investors has been somewhat sporadic with USDT taking the lead.

Circulating Supply of stablecoins since June 8th:

GUSD: -16 million
PAX: -36 million
TUSD: -42 million
USDC: +20 million
Tether: +280 million

🤔

— Giancarlo The Tether Whisperer (@CasPiancey) June 27, 2019

With respect to the recent bull-run which dazed many in the industry, as flagship cryptocurrency Bitcoin touched new highs in over 16 months, some have opined that the mysterious uptrend may not have been without the help and from an uptick in the recent interest stablecoins.

The renewed interest in the bull-market of crypto may seem a mystery to some, but perhaps it had to do with the catalyst brought by Libra, Paxos, and other stablecoins in the market!

— Paxos (@PaxosGlobal) July 2, 2019

Adoption of other types of stablecoins – those backed by commodities and by other forms of cryptocurrencies, don’t seem like the go-to-choice for investors in times of strong market movements. As a matter of fact, a recent report indicated only 30% of all stablecoins are currently operational, with the demise of a majority resembling cryptocurrency pegged to physical commodities such as gold and other precious metals.

 

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Binance: Bitcoin Dominance to Reach 80% in 2020

Binance_ Bitcoin Dominance to Reach 80% in 2020

Binance Research, the research arm of global crypto exchange Binance, has collated a series of predictions that Bitcoin market dominance will reach a figure of around 80% by the year 2020.

In this Q2 survey, it said that more than half of all the VIP and institutional clients it surveyed believed that Bitcoin dominance would be in the 40-60% range by the end of this year alone. This signals that most believe it will peak and that altcoins will also have their turn in rising price, just as they did during the last crypto bull run.

But a further 30% predict that this figure will not only maintain this year but rise up in the next year to as high as 80%. According to Binance Research this “illustrates the special status of Bitcoin as the bellwether of the cryptocurrency and digital asset industry”.

As reported by BitcoinNews.com yesterday, Bitcoin market dominance has already risen above 60% in the midst of this current bull run for the world’s most used crypto, a figure not seen since almost two years ago in 2017.

According to figures from CoinMarketCap, dominance, measured by a digital asset’s share of the total crypo market capitalization, is counted only for Bitcoin, and it has been on a slow but steady uptrend since August last year, when it first broke 50% on the way to its current levels.

The same survey found that over 56% of significant Bitcoin investors hold positions for an average position of over a week, although many would disagree that this defines them as holders. A fifth (22%) of all respondents were high-frequency traders, who held positions for an average less than an hour.

 

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Study: Crypto Wealthy Still Prefer Exchanges to Wallets

Study: Crypto Wealthy Still Prefer Exchanges to Wallets

Bitcoin is now cresting in the midst of a huge rally that seems to have no letdown in sight yet, and the attention must surely turn to the Bitcoin whales at some point, especially with regards to security and the safety of their funds.

But strangely enough, current data from Binance Research seems to suggest that even with more secure options available to institutional investors and wealthy Bitcoin owners, accounts with large Assets Under Management (AUM) or those with more than USD 25 million in digital assets are still preferring the services of exchanges, instead of custodial services or even their own wallets, either hot or cold.

This data from Binance looks at Q2 2019 and finds that the top four methods were exchanges, followed by cold wallets, hot wallets and then custodial services such as BitGo.

Binance itself, although one of the world’s most popular exchanges, self-described as having some of the best security features in the industry, has been a victim of cyber attacks, losing funds in the process. Binance was fortunate enough to cover the losses after the hack this year with funds set aside for exactly such emergencies. But other exchanges like Cryptopia and QuadrigaCX have not been so lucky, with hacks — alleged or otherwise — spelling their end as they both now are embroiled in expensive litigation battles with former clients now turned creditors.

The Binance Research report shows that clients still end up storing funds on exchanges, although “partially” stored in cold wallets via “third party custody services”.

The biggest reason for this is that they trade “high turnover” digital assets and simply choose to avoid deposit and withdrawal fees, as well as commissions for transactions:

“One of the potential explanations is that market participants with high turnover buy/sell frequently digital assets and need to keep funds on exchange as the exchange platforms typically charge some additional fees to withdraw along with better liquidity of centralized exchanges.”

Custodial borrowing and lending platforms were only used by a third of clients surveyed, but these tend to have a longer-term view than traders.

 

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Binance Research, Stablecoins Show Potential to Grow Crypto Industry

https://pixabay.com/photos/digitization-currency-bitcoin-3614384/

Binance cryptocurrency exchange recently released a report carried out by its marketing research and analysis wing Binance Research, noting an increase in the activities of stablecoins as well as the potential for less risk-averse mainstream companies such as Facebook and Samsung to further the course of cryptocurrency adoption.

According to the report, USD-backed stablecoins continue to see growth in adoption especially during the first four months of the year 2019; which in turn implies a rapid increase in their use as a wild card against volatility. Although the mid-cap stablecoins such as PAX, TUSD, and USDC show mild trading variations, overall 24-hour Quote Asset volume for stablecoins on Binance show significant growth “eating into the market share of both BTC-denominated and ETH-denominated pairs”.

Further, the existence of non-USD backed stablecoins have also proven that the intrinsic values of stablecoins are not exclusively tied to the US dollar alone. Rather, relative expansion to other currencies as well are increasingly becoming popular: “The expansion of non-USD stablecoins, illustrated by Trust Token’s new offerings (HKD, AUD, CAD, GBP, EUR), may lead to several key developments.”

More so, the analysis of the report considered the current involvement of companies such as Facebook and Samsung as a viable gateway through which cryptocurrency mass adoption could be achieved leveraging on their large existing user base:

“Stablecoin initiatives from various non-financial companies, i.e. Facebook and Samsung, may further the growth of the digital asset industry by introducing cryptocurrencies and blockchain technology to their large existing user bases.”

Commenting on the current “Facebook Coin”, as well as “Samsung Coin” under development, Binance Research noted that these tech corps have the advantages of being established brands. Moreover, in contrast to traditional financial companies, the incentive to disrupt the payment industry is far greater as they have the required resources to swiftly execute their plans. This could mean that these companies’ future roles in the digital asset industry could be pivotal, being potential “key growth drivers for both the global payment and the digital asset industry”.

Numerous reports about stablecoins indicate a global interest aimed at either providing a digital equivalent of a store of value, a medium of exchange or simply offering “a variety of alternative financial services“. These emerging class of digital assets continues to address the volatility concerns in the industry.

 

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Binance Report Shows Only 7% Institutional Bitcoin

Binance Report Shows Only 7% Institutional Bitcoin

A study released by global cryptocurrency exchange Binance indicates that only about 7% of Bitcoin in circulation is owned by institutional investors, suggesting that the much anticipated deluge of institutional investment in Bitcoin is yet to come.

The report, published by the exchange’s research arm, Binance Research, shows that there is far more space for growth in institutional investment than most people would assume, given that the amount of institutional money in the crypto market is barely a third of that invested in traditional stock markets. The report shares:

“[the] crypto market’s frequent periods of extreme correlation are inseparable from the market’s highly retail-driven participation… Data shows that whenever correlations between [Bitcoin and altcoins] reach a specific positive upper bound of [0.8 to 1.0], the trend of Bitcoin against USD tends to reverse, or at least halts the previous price action.”

Institutional investment is widely believed to be the much-needed catalyst for a strong and sustained growth in Bitcoin price, and, by extension the cryptocurrency market. This is one of the reasons that regulated derivatives such as the Bitcoin exchange-traded funds (ETF) applications awaiting US Securities and Exchange Commission (SEC) approval are keenly watched by investors.

At the moment, institutional investors would not be able to enter Bitcoin easily, since it can only be bought individually at exchanges at limited amounts. Huge orders expected by institutional money would also destabilize markets, since orderbooks at exchanges are thin in volume. Bitcoin’s recent surge by 10% in a day was an example of how big orders could cause sudden movements in price.

 

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