RESEARCH
BEQUANT Crypto&Coffee
A key difference to remember is that tantrums usually have a purpose. However it is not just kids and adults that get emotional, but even financial markets often stop a tantrum once they get what they want, or when they're rewarded for using a more appropriate behaviour. One such example is the infamous Taper Tantrum which refers to the 2013 collective reactionary panic that triggered a spike in U.S. Treasury yields, after investors learned that the Federal Reserve was slowly putting the breaks on its quantitative easing (QE) program. Back to the future and much for much of September, markets were dreading the apparent rise in volatility, which also threatened to spill over into digital assets space and Bitcoin traded in the low $10,000 level. Fast forward to the second half of October and with only weeks to go before the elections in the US, the apparent appetite for risk which resulted in stocks (and Bitcoin) to recover looks to be fizzling out. More worryingly is that market participants are ignoring the divergence between digital assets and S&P 500, even as the short-term (1-month) realized correlation retreated from the mid-50%, into the low-30%. Also, as alluded to in the recent commentary, the $11,500 level remains key for the market given the large gamma at play (if spot remained above this level market makers would have had to close hedges pushing the spot even higher). Only time will tell whether the market will endure a meltdown if the $12,000 is not breached with enough conviction or tantrum grapples the broader market sentiment, as market participants look for policy makers to find a way to prop it up again. Given the retraction by small and mid-caps since early September, one could even argue that large-caps (namely Bitcoin) has become too correlated to traditional markets. Specifically, even though some view Bitcoin as an alternative store of value to gold, the underlying institutionalisation of Bitcoin resulted in it being subjected to biases and market effects that impact the more traditional and well-established assets. This has been especially evident in the times of market distress and subsequent avalanche of margin calls/liquidations. Elsewhere, deposits at crypto-friendly Signature Bank grew by $4.11bln in the third quarter, an 8% increase from the previous quarter. Over the past year, deposits have grown by $15.28bln or nearly a 40% increase, according to the bank's earnings release. Signature reports $54.34bln in total deposits. Finally, as per Cointelegraph, Non-fungible tokens and digital collectibles have been selling like hotcakes over the past couple of months as volumes on peer-to-peer marketplaces surge. From NFTs representing NBA finals moments to crypto industry character cards, the total lifetime NFT volume on the Ethereum blockchain alone has exceeded $120mln, according to crypto research firm Messari. Messari’s research tracked the demand for NFTs, which includes digital art, collectibles and in-game items, over the third quarter. It found the cumulative number of users who interacted with peer-to-peer NFT marketplace OpenSea surpassed 25,000, and that the platform saw a record $2mln in total volume in September.
In terms of news flow, CoinDesk reported that Mode Global Holdings PLC, a London Stock Exchange-listed company, has announced plans to make a “significant purchase” of bitcoin as part of its treasury investment strategy. In a press release on Wednesday, the firm said it will convert 10% of its cash reserves into the cryptocurrency as part of a long-term strategy to "protect investors' assets from currency debasement.
