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BEQUANT Crypto&Coffee
The market staged a healthy rebound on Wednesday, with both Bitcoin and Ethereum trading up around 1.4% heading into the final hours of trade for the day. The outperformance by small caps bodes well for risk sentiment going forward, with the MVIS 100 small cap index finishing the session up almost 5%, while the large cap equivalent was only able to advance higher by 1.4%. The move higher was led by Ren, up over 15%. At the same time, the DeFi ecosystem continued to enjoy steady capital flow, with the total amount locked now at $7.22bln. The top three assets, which includes the likes of Aave, Maker and Curve have over $1bln locked each. Ren is the tenth largest as per DeFi Pulse and the total amount locked rose almost 20% on Wednesday. Also of note, the total number of Bitcoins locked in the ecosystem has now risen to 46,086, with wbtc accounting for 30,798, followed by renbtc with 8,408. In terms of newsflow, according to the latest post by the CME, the number of unique accounts that have traded bitcoin futures since launch exceeds 5,400. As new participants enter the market, the number of LOIH (Large Open Interest Holders) continued to grow and on that note, a record number of 94 holders was established the week of August 18th.
Furthermore, the number of LOIH has risen sharply since Q4 2019 indicating growing institutional interest (an LOIH is a holder of at least 25 contracts). A record number of 94 holders was established the week of August 18th. In addition to that, along with the rise in LOIH, average daily open interest has been steadily increasing since March and for the last four months has exceeded average daily volume. OI reached a record 15,406 contracts (77,030 equivalent bitcoin) on August 17 and is averaging 13,672 contracts for the month, a +40% increase from July. ADV in August is 9,570 contracts (47,850 equivalent bitcoin) up ~30% from July.
Launched in January, interest in our options on bitcoin futures grew post bitcoin’s halving in May. Pre-halving, average daily volume was less than 30 contracts and has surged almost 9x to 256 contracts post-halving. Open interest is spread out over our wide strike range which ranges from $1,000 to $100,000 per bitcoin and across our listing cycle which extends to December 2021.
On the macro front, rising geopolitical tensions between the US and China are giving gold a boost late Wednesday morning as prices have pushed well off their session lows. December gold futures last traded at $1,947 an ounce, up more than 1% on the day. The rally comes as the U.S. dollar also loses momentum, falling to a session low around 93 points. According to media reports, the Chinese military launched two missiles, including an “aircraft-carrier killer,” into the South China Sea on Wednesday morning. According to sources close to the Chinese military, the missile launched was a clear warning to the United States. The reports said that the Chinese government is retaliating a day after they said that a US U-2 spy plane entered a no-fly zone off the country ’s north coast
As a reminder, market participants are keenly awaiting Fed’s Chairman Jerome Powell speech during a virtual version of the Fed’s annual Jackson Hole, Wyoming, conference. The Chairman of the Fed is expected to outline what could be the central bank’s most active efforts ever to spur inflation back to a healthy level, with CNBC writing citing analysts that it is likely that the phase such as “average inflation” targeting may be used. Said otherwise, the Fed will allow inflation to run higher than normal for a period of time. The reason why the conference matters for crypto markets is likely impact it will have on the widely followed Bitcoin vs gold correlation metric.
Elsewhere, Fidelity president and head of strategy and planning, Peter Jubber, filed paperwork with the US Securities and Exchange Commission (SEC) informing the regulator of a new fund dedicated to bitcoin. The previously unknown Wise Origin Bitcoin Index Fund I, LP was incorporated this year and is being run from the same Boston headquarters where the investing giant manages $8.3 trillion in customer funds. The early documentation provides little in the way of details about the fund, and shows zero investors have currently participated.
Cointelegraph writes that the Securities and Exchange Commission, or SEC, is now amending its definition of an “accredited investor” to relax the purely wealth-based requirements, after announcing such plans in December 2019. Accredited investors in the US enjoy special privileges with the SEC — namely being able to participate in certain types of simplified securities sales like Regulation D. The SEC noted that previous definitions relied on specific income and net worth criteria, which did not take their actual “financial sophistication” into account. In the case of the US, these requirements amounted to either $1 million in net worth or a stable income of at least $200,000 per year.
