OSL Trader View | Weekend Digest

Friday May 22, 2020

When I say jump you say how high 

The EU has been written-off for dead by countless prognosticators but now the lack of consensus- or rather, the reluctant support from the biggest benefactor (Germanoy) has started to ruffle a few feathers. However, it appears Angela Merkel has pulled off a hail mary with her joint announcement with France’s Emmanuel Macron of a €500B recovery fund - addressing the noise stemming from the German constitutional court fighting the legitimacy of ECB bond purchases, because no thrifty German said I want to bail out the EU - ever. Compounding the problem, Bank of England governor Andrew Bailey has announced that the BoE is reviewing negative interest rates for the first time. The Europeans are definitely in sync with the Fed and are joining the printing party. 

So how does this all end? It was less than a month ago that we shared with you the appetite Argentinians are showing for $BTC - with temp workers opting to be paid in digital assets over cash due to the high inflationary environment and threat of sovereign default.  This sentiment has now reached the shores of Lebanon… 

There has been a significant amount of new Tether issuances; $2.4B per CoinMarketCap, and the detractors are going to town on how the original promise of a 1:1 backed trust is not quite that.

 

Even still, compared with the banks, they are significantly better capitalized. Top capitalized countries below.

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And lets not forget the Fed cleared the road for the new frontier of zero reserve fractional banking less than two months ago. So which is safer?!

Visa for one, has decided to adopt blockchain technology to enhance their capabilities. Can’t beat ‘em, join ‘em... right? 

China’s Digital Currency Electronic Payment (DCEP) pilot is underway, and heralded as the precursor to a full-fledged CBDC.  For now, the DCEP is exactly as it is named -a “digital currency” - functioning just like cash or reserve in monetary economic terms.  Despite being powered by blockchain and cryptography technology, it doesn’t come with the fanfare of decentralization that is often the hallmark of digital assets. The centralized database, unsurprisingly, maintains the government’s absolute control. Despite this, the implications to China’s domestic market can be significant.

On the mining front, the first difficulty adjustment post halving (prev May 5 12:02 pm) ended with a 6% drop and we’re looking at another -15% to this epoch. Bitcoin difficulty estimator. 

 

 

The instant -50% impact to the top line for miners has led to a ballooning of the mempool to c.80mb (i.e. ½ a day wait) as they become more selective in choosing the txid’s to settle, prioritizing the highest fees. 

Scalability solutions will definitely be under the limelight for the coming weeks… 

Rather than face the same fate as Kik, the Telegram foundation has decided to throw in the towel and return investor money with a 28% haircut. Additionally, the same obscure company that went after Ripple & FTX are now looking to take down Bitmex for wire fraud, money laundering, unlicensed money transmissions, and plenty more.

The silver lining is the fact that the trading venues that have been approved by the US are continuing to eke market share away from the venues lacking fiat rails. Open interest for CME BTC futures stands at $512M while Grayscale reported a 80%+ surge in total AUM to $3.8B. 

 

The transfer of 50 $BTC from a wallet allegedly tied to a miner back to 2009 has been the talk of the town - whether this was “the Satoshi” emerging from the shadows. Consensus has settled that it isn't. A relief for everyone, except #Faketoshi. Cover blown, tampered evidence, conflicting testimonies and just blatant lies you would think the guy just drops the charade.  But yet he persists. It’ll be very interesting to see what kind of excuse he pulls out of his sleeve for this one given the address in question is one of the 16,000 that he alleges belong to him. 

Some additional news that caught our eye this week:

  • Aggrieved investors accuse Nvidia of trying to pass off its sales of as much as $1B in accelerator chips for cryptocurrency mining as gaming hardware.

  • Former FinCEN official, Robert Werner bolsters Libra’s bench bringing  "a wealth of regulatory, financial crime compliance and enforcement experience". Werner has been Office of Foreign Assets Control (OFAC) director, senior counsel for the Under Secretary of the Treasury, Terrorism and Financial Intelligence, and assistant general counsel for Enforcement and Intelligence in the Office of the General Counsel. The new addition marks Libra's second hire of a former FinCEN official after Stuart Levey was brought on board as its first chief executive early in May

 

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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