RESEARCH

RED OCTOBER

BEQUANT Crypto&Coffee

The risk off sentiment came back to the forefront as coronavirus cases soared across both of the pond, while the hotly contested election in the US are just days away. As a result, the US benchmark S&P 500 fell 3.5%, its biggest one-day loss since June, putting the index on course for its worst weekly performance since the market ructions in March. The tech-heavy Nasdaq Composite dropped 3.7%, with a huge sell program at the open (4th biggest of the year). To combat the rising spread, Germany announced further restrictions to slow the second wave of the pandemic, and French president Emmanuel Macron addressed his nation to announce more lockdown measures there. 

Despite the apparent decoupling from equity markets, Bitcoin also came under a barrage of selling pressure, although there is yet to be any evidence of panic. The fact that Bitcoin was able to post such strong gains this month, even as equity markets faltered may encourage profit taking. However, since the upside appears to have been led by retail, together with the fact that as per the recent Grayscale's "Bitcoin Investor Study" which highlighted that the strongest stated driver for bitcoin investments was the coronavirus pandemic, which spurred 63% of respondents into investing, selling pressure may prove contained.

In other developments, as per MakerDAO - on the 26th October, the Smart Contracts Domain Team detected voting behaviour irregularities with respect to: Increase the Surplus Buffer, Oracle Whitelisting - October 23, 2020 proposal 29. It has since been confirmed that a flash loan was used to pass the October 23rd proposal. The Maker Foundation has been in contact with the BProtocol team, and are aware that they were responsible for the flash loan. BProtocol has been fully transparent in communicating their actions once the Foundation became aware of the voting irregularities. Their actions are a practical example for the community that flash loans can and may impact system governance and highlight that MKR market liquidity needs to be actively monitored. The DAO also needs to assess its ability to react in the event a more contentious vote is pushed through. The fact that the proposal in question was directly related to BProtocol being whitelisted on the ETHUSD Medianizer and OSM oracles raises some concerns as to how/if flash loans should be accepted in such circumstances.

In other news, ETC labs and ChainSafe Systems announced the launch of a new bridge between Ethereum (ETH) and Ethereum Classic (ETC), with a focus on bridging the Dai stabelcoin to ETC. The goals of the partnership were to ensure accessibility to Dai for the ETC community, while also increasing access to decentralized finance (DeFi). The founder and Chairman of ETC labs, James Wo noted the core mission of the project being realized through this bridge and creating a level playing field in terms of access to financial tools.