RESEARCH
BEQUANT Crypto&Coffee
A strong wave of risk-on flow emerged yesterday following reports that Pfizer’s COVID vaccine candidate prevented 90% of infections in the latest study. As a result, equities surged higher, with the German DAX index trading up over 5% and US markets moving nearly as high at the open, while gold fell dramatically from $1960 to just shy of $1900 level. As the session progressed, gold continued to head south before stabilising in the mid-$1800 zone, while the tech heavy NASDAQ100 index underperformed its peers. Interestingly, given the recent correlation with equities, Bitcoin’s immediate price action has been much more-choppy and the spot rate eventually fell below $15,000 before rebounding. This is likely an indication of hot money movement rather than fundamental rotation out of digital assets and into equities. As such, while the long-term Bitcoin bull market is unlikely to be derailed, short-term upside may temporarily slow as some capital is put to work in equities. In addition, the strong bounce by Bitcoin also reinforced the notion of strong institutional demand as per the recent uptick in the AUM by the likes of Greyscale, 21Shares EPT and others. Also of note, after the initial bout of volatility, ETHBTC stabilised and despite the recent focus on BTC, the pair did not show bias towards BTC outperformance which suggests that ETHBTC may look for higher levels. Bitcoin aggregate open interest (OI) held near the recent highs, with the CME jut shy of $1bln mark. OKEx has managed to retain its strong position and the OI rose to its highest level since early September. Despite the choppy price action, the futures term structure remained steep, offering plenty of yield for basis traders. Bitcoin options OI also rose back to pre-weekend levels and while some market participants may be missing the levels of volatility for which Bitcoin and other crypto assets are known for, the current stability will likely encourage further institutional flow. As alluded to yesterday, small caps are again attempting to decouple from large caps, over the last week the MVIS small cap index is up 17% vs large cap up 12%. Liquidity on Uniswap rose to a new record high of $3.26bln, as has the total amount locked on DeFi platforms which stands at $12.75bln. The magnitude of the recent selling pressure on some DeFi and DEX related assets has been such that it has since enticed plenty of bargain hunting related flow. To wit, SushiSwap price/sales ratio (market cap/revenue) is at 2.2x, Uniswap at 8.5x and Compound at 18x, while Curve is trading at almost 70x. In term of news flow, CoinDesk writes that Billionaire U.S. investor Stanley Druckenmiller, who just weeks ago was said to be shorting the dollar, is long on bitcoin. Druckenmiller said on CNBC Monday he owns Bitcoin, becoming the latest high-profile, ultra high-net-worth investor to get in on the benchmark digital currency. Though he said his gold position is "many, many more times" larger than his bitcoin allocation, Druckenmiller predicted his bitcoin would outperform. Elsewhere, The Block writes that Ripple for the first time bought $46 million worth of XRP in the third quarter of 2020, despite already owning nearly half of the digital asset's supply. Ripple said the purchase was made to support "healthy markets," possibly referring to creating interest around XRP and thereby raising its price.
