Source link

December Market Outlook

Success attracts eyeballs. Sometimes that attention is desirable. Other times…well, it’s complicated.

As bitcoin and the cryptoasset space enjoyed arguably its best month ever in November, with media and Wall Street investors trumpeting bitcoin climbing to another new all-time price high, regulatory storm clouds began forming.

From rumors of new regulations in the final days of the Trump administration aimed at non-custodial wallets to Congressional legislation clamping down on stablecoins, there has been a slew of new regulatory developments.

Notable regulation has been with the cryptoasset space since spring 2013 when the US Financial Crimes Enforcement Network (FinCEN) issued its first guidance around cryptocurrency. In our view, FinCEN set a good regulatory example, striking a reasonable balance between upholding public safety interests and creating space for innovation. Bitcoin’s price even rallied around the FinCEN announcement.

But in the still relatively short history of cryptocurrencies we have also seen the opposite occur. In certain cases, overly heavy-handed and uninformed regulation has threatened to drive innovation and jobs offshore, and ultimately proven counterproductive.

In short, regulation can cut both ways.

As we can expect the coming months to feature renewed regulatory focus we were thrilled to have Peter Van Valkenburgh, director of research at Coin Center, on this month’s webinar and podcast.

Now, we’re pleased to offer you our latest thoughts on what’s driving crypto markets and analysis of bitcoin on-chain activity this month.


  1. November Markets: Bitcoin sets a new all time high while gold plunged
  • For the month Bitcoin (BTC) and Ethereum (ETH) were up 43% and 57%, respectively, with Ethereum bouncing back from underperforming relative to bitcoin in October
  • On November 30th bitcoin set a new all-time high of ~$19,783 and is up 173% YTD; Ethereum is up 373% YTD but still more than 50% below its all-time high
  • Gold was down for a third consecutive month, plunging -5% even though the US dollar resumed its 2020 slide -2% for the month, hitting its lowest level in two and a half years
  • Equities reversed October’s losses to gain 11% for the month and are up 12% YTD, while long-dated US Treasuries gained +2% and are now outperforming gold for 2020 (+18% vs +17%, respectively)

2. On-chain insights: Highlights from the data science team

  • Record setting November bitcoin price action occurred alongside a strong increase in bitcoin on-chain activity.
  • Bitcoin mempool size showed lower activity in November 2020 than during the December 2017 bull run, bolstering evidence that the recent bull run is institutionally and not retail driven
  • How on-chain measurements of bitcoin ownership concentration can be misleading, particularly during periods of significant price spikes

3. How I Learned to Stop Worrying and Love Unhosted Wallets

  • Over the past year, governments around the world have expressed concern about the risks associated with the use of “unhosted” wallets
  • Prohibitions against personal cryptocurrency transactions are not only impractical and ineffective at deterring illicit activity, they actively undermine efforts to combat it
  • Overall, policymakers would be wise to heed King Canute’s warning about the futility of stopping the ocean’s tides from rising

4. What we’re reading, hearing, watching

1. November Markets: bitcoin sets a new all time high while gold plunged

In November crypto continued its strong Q4 with bitcoin setting a new all-time high of ~$19,783 on November 30th (Table 1). For the year bitcoin is now up 173%.

For the third time this year Ethereum (ETH) showed a monthly gain of 57%. The other months when this happened were April and July, with June the best month this year for $ETH at +70%.

Table 1: Price Comparison: Bitcoin, Ethereum, Gold, US Equities, Long-dated US Treasuries, US Dollar (% Change)

November was an extraordinary month for bitcoin and crypto as a whole, with positive developments in particular coming from Wall Street and institutional investor adoption. Fabled hedge fund manager Stan Druckenmiller publicly disclosed for the first time that he now owned bitcoin, while longtime bitcoin skeptic Ray Dalio, founder of the world’s largest hedge fund, acknowledged that he “might be missing something” with his traditionally bearish bitcoin stance.