RESEARCH
BEQUANT Crypto&Coffee
The semi-surprise rate cut by the Fed of 50bps, which was the first rate cut outside of a regularly scheduled policymaker meeting since 2008 at the height of the financial crisis, resulted in Bitcoin mimicking the price action of other risk on assets. The pump was promptly reversed as equities retraced much of their gains and following Fed’s Powell press conference, the yield on the benchmark 10-year Treasury fell to 0.99%, dipping below 1% for the first time ever. The President of the US, Donald Trump, tweeted – “The Federal Reserve is cutting but must further ease and, most importantly, come into line with other countries/competitors.” The temporary impersonation of traditional market moves underscores the institutionalisation of the asset class and goes to show the importance of liquidity and access to capital in the market. When liquidity dries up, cash is king and even safe haven assets suffer when market participants are forced to meet liquidity constraints across their portfolio. In another positive development, as reported by Bloomberg, cryptocurrency exchanges scored a victory in India after the nation’s Supreme Court endorsed their stand against curbs put in place by the central bank that effectively outlawed virtual currencies in Asia’s third-largest economy. A three-judge bench agreed with petitions by cryptocurrency exchanges, start-ups and industry bodies that had challenged the Reserve Bank of India’s April 2018 decision to ban banks from offering any services to support digital currencies. The court struck down the RBI’s curbs on Wednesday. The charts are yet to corroborate the positive macro developments, with Bitcoin futures curve trading rather flat, even as the options market saw aggressive out of the money (OTM) Bitcoin call buying. In particular, good size flow was noted in Jun32k (post Bitcoin halving) and also Apr28k levels, total 3.5k bought. When it comes to being bullish, this is a special kind of bull. What is interesting is that it comes amid distinct lack of leverage flow, although demand for stable-coin loans remains strong as ever, with both spec and mining related entities looking to capitalise on the upcoming block reward halving play. Please contact the BEQUANT Sales team to discuss lending rates and opportunities. Looking elsewhere, the number of active Bitcoin addresses has increased significantly in the last 24 hours, current value is 48,869.958 (up 14.4% from 42,707.438). In addition to that, the Average Spent Output Lifespan (ASOL) metric also increased significantly in the last 24 hours, with the 2-day moving average up 80.1%. This suggests profit taking and would explain the soft spot market. The ever so rising hashrate may be good for the overall security of the blockchain but it also makes it ever so challenging for smaller farms to compete and as such, some miners will struggle to make it through block reward halving and some may even decide to cash out before the going gets tough again.
