Daily Market Update - October 30, 2020

The Cusp of a Breakout

Bitcoin enjoyed a 10% pop heading into the week on the coattails of JP Morgan calling a 10x move to the upside for BTC on the simple premise that it was the adjustment required to match investments into the boomer substitute: gold. This was followed by an announcement stating JPM Coin is already in service commercially this week under Onyx- a business unit created to manage the blockchain and digital currency efforts staffed with 100+ employees.

This pushed $BTC back up to throwing distance away from the $14K hardstop that we have yet to breach since the 2017 pop to ATHs.

While Bitcoin dominance has gained 6.6 points from the mid-September trough, no meaningful uptick in new wallets imply that those that have diversified out into higher beta altcoins are bringing capital back into the OG as balances on exchanges continue to head south; hitherto a good indicator of upside price action to come.

Compounded by the unfortunate mishaps in DeFi detracting additional capital inflows (latest being Harvest Finance losing $34 million) and the crescendo of converts banging the table to trade at the cusp of a breakout, many have joined the party. Grayscale certainly benefited from the shift as CEO Barry SIlbert popped his collar after witnessing a $300 million inflow into GBTC the same day Paypal announced their foray into the space. While the professional trader cohorts hedge the downside on this breakout.

Whales are piling in.

Whales are piling in

and with participant expectations back with the bull,

With CME with open interest now eyeballing $1bn, 

It sure looks like a cocked gun locked, loaded, and ready to rip.

The CFTC chiming in on best practices for FCMs to hold and report physical-delivery virtual asset products has been drowned out by the pushback from established vested interests couching for the endorsement of the petrodollar camp. The greenback losing the privileged position as the most favored global reserve currency is pushing detractors out of the woodwork. Rep. Brad Sherman is a leading candidate to become the posterboy of this misinformation cohort with a comically wrong interview where he says 46% of all bitcoin trading is done by criminals. Where in the world he got that stat is beyond me.

Needless to say, the regulatory inconsistency is clearly doing more harm than good as Ripple becomes the latest in guiding to relocate away as the US looks to designate the contentious $XRP as a security.

There were however, a few lucky ones to have received the blessing of American regulator’s history making history. Kraken is moving in stride after being the first crypto exchange to win a bank charter in the US as they power back up in Japan, expanding their distribution network after having been denied a license the first time round as the Japanese FCA went into brace mode after Coincheck.

Avanti followed soon after with a unanimous decision to approve banking from the same Wyoming Division of Banking with SoFi on their coat tails after winning over the OCC. Fiat on/off ramps are definitely a bottleneck to wider adoption so whoever controls the reigns at this part of the value chain in a way holds the key to the city. But who’s to say that direct conversion mechanisms won’t become the medium of choice - just take a look at fees for SWIFT for USD payments between banks domiciled in the same jurisdiction. It’s not too far-fetched of a scenario to anticipate crypto-linked debit/credit cards and other direct conversion mechanisms becoming preferred over working through an intermediary like a bank. Coinbase, Huobi & Paxos are the latest to provide their users with these off ramps.

With US Treasuries slowly losing sheen, Iran has replaced the USD with CNY as the country’s main foreign exchange currency. Given current US policies, they may not be the last. Iran does not seem short of substitutes, as the country’s Cabinet pushes Bitcoin adoption by its central bank and also for its use as a medium of trade.

The CCP continues to charge on with the PBOC publishing a draft law governing the digital Yuan, reiterated intentions to have this rolled out fully in-time for the 2022 Beijing Winter Olympics supplemented with stronger language of their plants to combat “dollarization.” Given the printing press of a Treasury who’s answer to everything seemingly is to print it away and pass the buck down, it does not sound out of place at all. Plenty of central banks appear to concur as evident by a flurry of renewed interest in national virtual currencies: Cambodia just launched a blockchain payment system, Mongolia has tied up with Delio to pursue one, Central Bank of Kenya has started discussions over the topic, Peru guides national Crypto policies to be a priority, Societe Generale & Consensus will be helping France, and even the BIS is willing to try their luck with the Swiss National Bank.

And what about that fine on Goldman Sachs? $5 billion+ globally ($2.9 billion alone from US DoJ) in fines slapped on the company. They agreed to pay thereby avoiding a guilty plea in the US. This is just from American law enforcement. The subsequent fines of $350 million from the Hong Kong SFC, $96 million from the UK FCA & PRA with others expected to follow suit has not even been mentioned.

The bank ignored red flags raised by internal compliance and helped Jho Low take $6.5 billion from the Malaysian government. Fines amounting to 5.5% of the company’s net assets hardly makes a dent.

Buyers stepped in after a bearish session last night that took BTC back to the $12,970 demand area, pushing the price of the biggest crypto asset to $13,600, just $230 shy of the high it reached 3 days ago. 

Zooming out, BTC is still forming a range from the 12,640 zone to the highs mentioned above - time will tell if this is re-accumulation and another leg up is around the corner, or if this is distribution and we’ll see BTC down to the $12,000’s. 

For alts, most of the rest of the projects felt BTC strength and could not keep up with today’s bullish momentum. Only 1 out of 4 of the top 100 altcoins are overperforming BTC but none higher than 5%, with DeFi coins such as YFI, OCEAN, RSR, AAVE, and SNX losing the most value against BTC. ETH/BTC is down to 0.0285 levels, a price where some buyers might step in - failure to do so could send the second biggest coin down to 0.0273 or lower. ETH/USD is also fighting to stay above support at $386.

This comes after a string of reports from the ICIJ put the heat on HSBC, Standard Chartered et al. So, an arbitrary number thrown by a politician struggling to remain relevant or crypto. #BuyBitcoin

News that caught our eye:

  • Speculation that Binance may be under investigation by the FBI and the IRS

  • Curv adds Franklin Templeton to the cap-table

  • PTJ says “Bitcoin is an inflation with a kicker and great intellectual capital behind it…”

  • “There are no opponents of blockchain in Russia

  • Malaysia’s Digital Assets Guidelines came into effect this Wed (28th)

  • Grayscale 63% of respondents reported COVID helping in pulling the trigger on crypto

  • Wiliam Hinman who classified ETH as a non-security to leave SEC this year

  • Coinbase outage on breakout, again.

  • Ethereum ($ETH) on runrate to settle one trillion USD this year.

  • Virgil Griffith appeals accusation of conspiring to violate US Sanctions against North Korea

  • Shinhan Bank & Korbit establish JV for Korea’s first bank-backed crypto exchange, pending approval.

  • Fidelity expands distribution to Asia via Stack Funds (Singapore).

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