RESEARCH
BEQUANT Crypto&Coffee
Narratives and broader macro trends can push valuations and multiples to extremes (too high or too low), even if the underlying fundamentals tell a different story. On that note, the Dow reached record highs amid what John Hussman of Hussman Funds described as capitulation in the face of overwhelming liquidity. With that in mind, Bitcoin continued to power on higher and the relentless trend will likely see the largest digital asset by market capitalization top the key $20,000 any moment now. At the same time, gold continued to trade softer and the much-prized correlation is now nowhere to be seen. As a reminder, not long-ago analysts at Deutsche Bank pointed out Bitcoin’s increasing demand to use Bitcoin where gold was used to hedge dollar risk, inflation and other things. As Bitcoin continues its steady advance to a new all-time high, something that the crypto community is seemingly overlooking is that if one goes by the narrative that the rally is largely driven by professional asset managers, this means that Bitcoin will play a more active part in portfolio construction, going forward. The implications for Bitcoin and its once cherished non-correlated asset appeal are unclear but it makes sense that if more institutions hold it, the more likely it will become correlated to traditional assets. If Bitcoin loses this non-correlated appeal altogether, is there another segment of the digital asset ecosystem that can replace it? In terms of news flow, CoinDesk reported that Crypto exchange Coinbase plans to end all margin trading effective Nov. 25, 2020, due to recent regulations by the Commodity Futures Trading Commission (CFTC). The exchange pointed to “recent guidance” from the CFTC, referring to the Commission’s March guidance around “actual delivery” of digital assets as the reason for this decision, but didn’t specify which aspect of the guidance led to the move. That guidance, which has its roots in a 2016 enforcement action against Bitfinex, sought to provide rules around when a customer can be said to have legally taken control of a cryptocurrency, including when the customer acquires the crypto through a margin or leveraged product. Assets purchased through leverage or a margin contract cannot be liquidated, according to the guidance. Cointelegraph writes that decentralized finance protocol Yearn has announced a partnership with Pickle Finance to bolster yield farming incentives, and compensate victims of the recent Pickle exploit that resulted in the loss of almost $20 million in Dai. According to an announcement from Yearn founder Andre Cronje, the move is designed to reduce duplicate work, increase specialization, and leverage shared expertise. Pickle Finance vaults, or ‘Pickle Jars’ as they’re known, are cloned versions of Yearn’s v1 yVaults so the code is similar. Pickle Finance incentivizes farmers to sell stablecoins that are trading above their peg and buy ones that are below it, to keep them closely aligned with the dollar upon which they’re based. In other news, cryptocurrency infrastructure providers Anchorage and Tokensoft are teaming up to wrap FIL, the native token of decentralized file storage network FIlecoin, for use on Ethereum. The news came on the same day that Filecoin announced the storage capacity dedicated by its global mining community has exceeded one exbibyte — equal to more than one billion gigabytes. According to an announcement, Filecoin’s capacity could store 4,500 Wikipedias, 290 million movies at 1080p quality, and 19 copies of the entire Internet Archive. 3D graphics image provided by Quince Creative
