RESEARCH
BEQUANT Crypto&Coffee
Markets are very fickle creatures, Bitcoin stops rallying like there is no tomorrow and suddenly there is panic on the street that the bull run is over and that everyone should be wary of a major pull back. However, if one is to look at the futures open interest (OI) profile, which stands just shy of its all time high, gives little evidence of market turning tide. Also, Ethereum OI actually advanced to a new all-time high, that's as the spot rate continues to edge ever so closer to its multi-year high level. Bitcoin maximalists may not agree but the imminent launch of Ethereum futures on the CME will lead to competition for flow vs Bitcoin. This flow may at first centre around secondary market trading inefficiencies but eventually, the very same institutional investors that bought into the idea of Bitcoin may also contemplate an allocation to Ethereum. But before that, market flow was dominated by put buying, 29JAN-20000-P particularly active. Month end OI remains heavily biased towards 52k calls, but 20k puts strike is also gaining traction. Gamma squeeze will require spot to advance higher, otherwise impact appears to be limited. The vol has come down from the recent elevated levels and the skew has reversed the extreme positioning. Looking at Ethereum, one would have expected positioning to be even more aggressive given the imminent test on previously mentioned multi-year high levels but the skew profile is actually less bullish, that's even as the spot is up 82% vs Bitcoin up 25% year-to-date. In the world of DeFi, the total value locked look set to top $25 billion mark any day now, with Aave and Sushi making another wave of steady progress. In relevant news, Github repo launched to add xSushi on AAVE. Looking elsewhere, JP Morgan strategist noted that the cryptocurrency is at risk of further losses and an outflow of trend-following investors unless it can “break out” over the $40k level. The team added that the pattern of demand for BTC futures and the $22.9 billion Grayscale Bitcoin Trust might help determine the perspective. Specifically, trend-following traders “could propagate the past week's correction” and “momentum signals will naturally decay from here up till the end of March” if BTC price doesn't break the $40k. Crypto asset manager CoinShares is launching a new physically-backed bitcoin exchange-traded product (ETP). The product, dubbed CoinShares Physical Bitcoin (BITC), will list on Switzerland's principal stock exchange SIX today. Each unit of BITC will be backed with 0.001 bitcoin. Also of note, Ruffer Investment Management has committed to investing in Bitcoin as a long-term uncorrelated portfolio hedge, despite a recent Financial Conduct Authority (FCA) warning that investors in the cryptocurrency stand to lose all their money. In November last year, the group invested 2% in bitcoin, worth about £550 million. In a trading update for the Ruffer Investment Company, published on Monday, it said exposure was gained via the Ruffer Multi Strategies fund and two proxy equities, Microstrategy and Galaxy Digital. Furthermore, in the trading update, Ruffer said it has “a history of using unconventional protections in our portfolio”, citing bitcoin as an example of “a small allocation to an idiosyncratic asset class which we think brings something significantly different to the portfolio”. “Due to zero interest rates the investment world is desperate for new safe-havens and uncorrelated assets. We think we are relatively early to this, at the foothills of a long trend of institutional adoption and financialisation of bitcoin,” it said. Elsewhere, an offline mobile map for travelers has raised $50 million in a funding round led by Alameda Research. Announced Monday, the fresh capital will go toward the launch of a multi-currency wallet on Maps.me and enable a decentralized finance (DeFi) ecosystem on the platform. Cryptocurrency lender Genesis Capital and institutional cryptocurrency firm CMS Holdings also participated in the round.
