CRYPTO STORY OF THE DAY

Crypto Staged A Major Rally Over The Weekend Which Saw BTC Push Beyond The USD 10,000 Level For The First Time Since November 2017 - While Some Market Fundamentals Urge Caution, Retail Attention Is Nowhere Near Where It Was The Last Time We Touched These Levels ~18-Months Ago

• The weekend rally was lead by BTC with the coin breaking beyond 10,000 Friday evening and touching as high as ~11,400 on Saturday. BTC is now up over 18% in the last 7-days with ETH (+14%) and Binance Coin (+10%) the next best performing. On the move, BTC touched its highest level since November 27, 2017. BTC would peak only 2-weeks later just under USD 20,000.

Takeaway: Beyond the extension of the natural reversal we've seen over the last several months one has to credit some of this move to the added attention brought on by Libra. That said, there are some fundamental developments receiving less attention which urge caution. First, the US, and what is starting to look like other associated nations, are losing access to major sources of liquidity in the space. The most recent relevant announcement on that topic, which probably got less attention than it deserved, was Binance moving to restrict US-user access. In addition, the Financial Action Task Force (FATF) formally released guidelines for crypto venues last week which at the very least imply a great cost increase for the space and most likely incentivize further fragmentation in the ecosystem if followed (more on that below). Additionally, the positive attention around Libra itself risks losing steam as Capitol Hill hearings approach in mid-July with the political response so far being almost exclusively negative.

On the bullish side of things, however, the level of media and retail attention at this point of the move is nowhere near late 2017 on both objective and anecdotal metrics.  Google trends show levels of interest in the space only marginally above those seen earlier in the year (chart). Furthermore, posts on social media on the topic and hobbyists drifting into crypto is nowhere near the frenzied levels seen in the last run-up. Ultimately, while in the near-term the space has some fundamental issues to work through, the degree of 'dry powder' on the sidelines implies the potential for higher-highs then were seen in late 2017.