OSL Trader View | Weekend Digest

Friday May 29, 2020

Goldman Sacks... $BTC 

In addition to making crypto part of the legal inheritance, the China digital asset space got some positive shine as the CPPCC National Committee gathered this week. Notable member Neil Shen (Sequoia) sponsored a proposal for a Libra-esque version of the DCEP whereby a mix of CNY, JPY, KRW & HKD would back a stablecoin to facilitate cross-border trade. It is all too conspicuous how the Chinese government is competing with Facebook with the latter having depleted all paths of least resistance and left to tweak its Libra plans - including a complete rebranding of the wallet previously known as Calibra, to NOVI

And while the World focuses on China’s progress with their DCEP,  India has had its boat rocked following a right to information request revealed that there was actually no legal grounds for the banks to deny Virtual Asset Trading Platforms fiat rails - the storm rages on in Twitter. 

It’s been one of those perfect storms that has seemingly brought in some real dollars as a string of Indian exchanges have attracted offshore capital, a clear sign the second most populous nation is getting ready to play the game - and be a contender. CoinCDX just announced an additional $3M raise and with these fresh new banking rails it’s looking very promising. Local exchanges are already reporting significant uptick in volumes with demand primarily stemming from $BTC and USDT. 

While we are continually reminded about the helicopter money sprayed to the masses, equities have powered on literally brushing off the quickest meltdown in recorded history.  One point many fail to realize is that capital markets have been buoyed by the trillions of stimulus, whilst the only thing supporting digital asset markets were the market participants themselves. And through it all... bitcoin has been dominant. 

A currency is only as strong as the belief users have that the entity owning the seigniorage. I have yet to see any currency - including the greenback- where the users have unconditional support especially given how actions of the central bankers are increasingly noticeable to the RoW. One result was for the US corporate bond market to hit the $1T milestone of issuance year-to-date, six-months earlier vis-a-vis 2019. 

There have certainly been a few that have taken the crisis and spun it into an opportunity. Bitwage is one that has even taken things to the next level from the observers tracking the value of what the gift voucher from the government would be worth had they thrown it all into bitcoin. They’ve actually made it easier for the businesses to comply with the requirements to be eligible for the Small Business Paycheck Protection Program in the form of 401(k)s!  You gotta love the innovation.

Having said, definitely the first loan term sheet I’ve seen stating full forgiveness before the loans are even issued… you go boy!

There was certainly a great deal of anticipation from the digital asset community ahead of the Goldman Sachs’ investor call earlier this week.  With the callout to $BTC being on the agenda, speculation mounted that the Wall Street titan would throw its weight behind digital assets, like Paul Tudor Jones did weeks earlier.  However, it was all for not, with Goldman beyond bearish on $BTC…. 

It was not smelling roses for the digital asset community, only tulips and a bouquet of pretty disconnected facts, for those on the call… but the markets responded positively as $BTC continued to climb.

There’s also an emerging trend happening with governments getting their hand in the cookie jar before the regulations are even in place. Canada, for example, has ample low-cost renewable energy sources which are plenty attractive vs. prices to the rest of the world yet they fail to attract the motherloads as they try to call dibs (through both income tax and capital gains taxes) on mining proceeds. The same thing unfortunately, is taking place in Korea as the Ministry of Economy and Finance proposed to tax income derived from virtual asset while the Iranians have also called for a national Crypto Mining Strategy 

The gold rush has not been kind to all however. Canaan released their 1Q20 earning 6-K filing and on top of a 76% YoY growth of the short-term debt balance, they’ve rewarded their shareholders with a sea of red. The writing was on the wall in their F-1 filing which has been dissected before. Seriously, why buy equity of the service providers when you can get direct exposure to the underlying? #BuyBitcoin


May the trend be your friend!


OSL Trader View and Weekend Digest are contributed by Stefan Chu, SJ Oh, and Santiago Nazaretti



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