RESEARCH
BEQUANT Crypto&Coffee
Staying with the macro narrative and risk was back on the table, with stocks and digital assets well bid, while the belly of the bond curve compressed following comments from the European Central Bank (ECB). The comments were seen as a precursor to the potential comments that could come out of the central bank across the pond – the Fed. Specifically, as reported by Bloomberg, the European Central Bank “can and must react against” any unwarranted rise in bond yields that threaten to undermine the euro-area economy, policy maker Francois Villeroy de Galhau said. The comments by the Bank of France governor, among the strongest yet by ECB officials, encouraged investors to bet that the central bank is already stepping up its own emergency bond-buying program. While fresh data on Monday showed net purchases slowing last week, it said the figures were distorted by redemptions. As a result, equities surged, with small caps and Nasdaq enjoying their best day since the election/vaccine day in early Nov and as pointed out earlier, the risk on mode was just as prevalent in digital assets. Bitcoin surged back towards $49,000 level, while Ethereum also rallied close to 10% into the $1,500 zone. The open interest recovered somewhat following the retreat last week, but only marginally. The recent pull back in assets, in particular DeFi based assets also cooled off the “over heating” Ethereum network and in turn, resulted in some degree of stabilisation of gas fees. This, when combined with another wave of risk on flow, saw DeFi based assets trade sharply higher. Sushiswap rallied 7%, Uniswap advanced over 15%, with Aave also gaining 14%. The aforementioned risk on sentiment was also supported by the reports that Goldman Sachs has restarted its cryptocurrency trading desk and will begin dealing bitcoin futures and non-deliverable forwards for clients from next week, a person familiar with the matter said. As per Reuters reports, the desk is part of Goldman's activities within the fast-growing digital assets sector, which also includes projects involving blockchain technology and central bank digital currencies, the person said. Separately, Citi released a research report where it stated that Bitcoin is at the “tipping point of its existence” thanks to large institutional investment and growing regulatory groundwork. While the perception of the cryptocurrency varies greatly, it is undoubtedly the inspiration for a blockchain-based economy and has created a new decentralized cryptocurrency market, according to the paper by Citi Global Perspectives and Solutions (GPS), the bank’s “thought leadership” arm. Also of note, CoinDesk reported that Bitcoin miners broke a more-than-three-year-old record in February, generating $1.36 billion in revenue, up 21% from January, according to on-chain data from Coin Metrics. The previous revenue record of $1.25 billion was set in December 2017 during the peak of the cryptocurrency’s previous bull market. Last month’s surge in revenue came as bitcoin’s price climbed during the month from $33,000 to a new all-time high of just above $58,000 before dropping sharply to $43,000 in the last week. Revenue estimates assume miners sell their BTC immediately.
