OSL Trader View | Weekend Digest
Friday June 19, 2020
We are hardly out of the hole. We’re not even close. Yet the amount of commentary over the recent macro prints coming through (more than 2x expectations) has surely added fuel to the printing press fire as the price dislocation in these tables continue to trend into the stratosphere:
Have you heard of this concept called low base? That’s what this is - a recovery from the fastest meltdown in recorded capital market history. Chairman of the Fed, Jerome Powell, is guiding zero (not negative) rates for the foreseeable future. He has, however, addressed the concerns of it being only a matter of time before the Fed flips to negative rates.
But, apart from the Fed, one of the biggest bids in this knee-jerk V-shaped recovery has come from retail (or “herd”) investors egged on by Barstool Sports founder Dave Portnoy. A self-professed sports betting extraordinaire, boasting over 1.5M followers on Twitter (many millennial types), he’s had to turn to day-trading stocks in the absence of major league sports events to fuel his impulsions. But in fairness, he appears to have been hitting the ball out the park - allegedly getting into airline stocks just as Warren Buffet disclosed divesting from them - and making other plays that he’s been all too happy to share as the latest Pied Piper of equity markets.
You would think that with S&P500 bouncing off its 50DMA that POTUS would be wallowing in Wall Street’s success, despite the economic hardships that Main Street endure. But it’s an election year so he’s needing to excite his base, but running afoul of ever tightening social media policies in the process. Maybe it’s all part of his genius plan… more talk about banned ads, are promotions in and of itself. Not to mention, FREE!
In the spirit of election years past there’s always scandal and vengeance stirring under the woodwork to coincide with polling results and as we head towards the debates (a few months away). The first wave of detail to hit the light seems to have come from former national security advisor John Bolton with the release of his book “The Room Where It Happened: A White House Memoir”. The memoirs have clearly irked POTUS as some excerpts shared with the press ahead of the official launch reveal some pretty scathing accounts.
Missing money! Wirecard’s auditor is unable to find evidence for 1.9 billion Euros (over $2 billion) worth of cash balances on the German firm’s trust accounts. Wirecard said “spurious” balances may have been provided by a third party “in order to deceive the auditor”. Whatever the reason, it led to the biggest drop posted by a DAX30 constituent in history.
The company allegedly does business with Crypto.com ($CRO) UNCH & TenX ($PAY) but their silence in the matter is deafening.
It turns out a little known Korean exchange (a.k.a. Good Cycle) which many are calling a ponzi on Twitter were behind the three mysterious transactions tagged with nose-bleed gas fees. Peckshield reckons this was a ransomware attack. Vitalik weighs in by explaining that the attackers likely gained access to a shard of the private key which is not enough to send $ETH at the wallet out but can write immaterial value transactions with any gas price. So essentially until the ransom is paid, we can expect to see more of these going through. Three transactions were written with c.21K $ETH, Ethermine & Sparkpool chose to distribute the transaction fees to their pool users while F2Pool has taken the high road and have chosen to return the gas to the sending address. Ransomware or fat finger, it is clear that this was not an intended figure. Hats off to you F2Pool.
Compound Labs debuts in flying colors. Its decentralized protocol on EVM (managing borrowing and lending via algorithms) has catapulted to the second biggest DeFi platform in terms of value locked at $347M upon completing distribution of tokens...
...with Tether taking over ⅓ of total supply.
Cash USDT is king! And this is just another point that underlines the dominance of Tether so much in fact, that USDT related transactions now account for 19.4% of all fee distributions on the EVM.
The competition is heating up in Brazil. Annual remittance flow of $2.93B doesn’t stack up against the behemoths in this market i.e. India ($78B) or China ($67B), but being the sixth most populous country and having been singled out as one of the future growth drivers of the global economy (remember BRIC?), they are getting some love. Ripple has guided On-Demand Liquidity expansion in LatAm, to be available “soon” and will face off with WhatsApp. With the entire American congress against Facebook’s Libra, they have pushed this puppy out rather surreptitiously on Facebook Pay in an attempt to “bring payments to WhatsApp for People and Small Businesses in Brazil” - in fiat only though, for now.
Following ETC Group’s buzzkill of an ETF (BTCE launch turned out to be an ETP i.e. debt rather than an ETF- an equity, as rumored), Wilshire Phoenix submitted an S-1 for a Bitcoin Trust. We’re starting to see a lot more of these ‘GBTC killers’ popping up, but why wouldn’t we… the prize is $3.5B with 23 reasons to give it a go given Grayscale’s ETP has a 52 week average premium of over twenty-three percent.
It’s absolute madness. Short-lived dislocations indeed occur, but a perennial discount of this magnitude? Now this is a story worth investigating and there are quite a few theories.
- Traditional money managers with no knowledge (or will) of how to purchase and own coins directly have no other “legitimate venue to get exposure”;
- It's being used as a conduit to acquire bitcoins in a tax efficient way, typical of grantor trusts; and
- Most commitments are in-kind i.e. in $BTC (borrowed $BTC that is) by professional investors that are gaming the spread and by extension, the premium is caused by a short squeeze.
One thing for sure is Three Arrows Capital - who recently filed a 13G disclosing a 6.2% stake is not long bitcoin through this inefficient structure. The question is, how many more players are in the mix?
Grayscale ETH Trust may be somewhat linked to the bizarre price action in $ETH because if you thought the GBTC premium was hard to stomach well, take a seat first.
ETHE’s 52-week average premium stands at 265%! Time to get that box on.
A majority of bitcoins haven’t moved in at least a year, according to on-chain data, signaling investor confidence in $BTC amid macroeconomic uncertainty. It’s the highest levels of inactivity (or lowest levels of activity) in four years!
If the halvening didn’t have the unit price effect many observers had hoped, the impact may be starting to take shape. With the expansion of the pool slowed, it’s getting a lot more crowded in the deep end. The number of Bitcoin whales with the ability to affect the $BTC price is approaching 2017 levels, when the token was ascending to $20K.
Decisions, decisions. Better a fraud or a thief? Faketoshi will need to choose one soon after claiming one of the wallets related to the 80K BTC Mt Gox hack was under his control.
A snapshot of the global digital asset landscape:
- Bitcoin network difficulty posts biggest upward adjustment (+14.95) in two years.
- Google Trends data, compiled by BlockchainCenter, shows search interest in Bitcoin is highest in Kenya and Brazil.
- In South Korea, the central bank has tapped six experts to assess possible legal issues surrounding the launch of a central bank digital currency, meanwhile shroud in little detail the Finance Minister has confirmed that taxes will be imposed on digital assets in the country, and will reveal more on the plan in July. We’ll be watching this space closely, as the Minister suggests he’s been in contact with other jurisdictions - which may be a precursor to more of the same taxation regimes around the world.
- On the subject of taxes, rarely a laggard when finding taxable inclusions, the Internal Revenue Service (IRS) will be looking forward to all of your digital asset claims next month (with the extended deadline for tax filing coming soon… July 15th). So for all our American readers (or Green Card holders) if you’re not ready to file your “crypto taxes” in less than a month, you had best seek an extension. Uncle Sam has some bills to pay and will need your payments made promptly, please.
- Turkey continues to be a bastion of digital asset progression with growing demand and usage. Adding to the list of major corporations fueling this trend, the Turkish real estate firm, Antalya Homes, announced that its customers can now pay for properties listed on its platform with Bitcoin.
- The central Asian republic, Kazakhstan, is road mapping its future in the digital asset mining sector and aims to attract $740 million to boost this infrastructure and “technological output” over the next three years. It already boasts a positive track record, and hopes to solidify its position with favorable policies around mining and mining related activities.
Have a great weekend, stay safe, and 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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