OSL Trader View | Weekend Digest

Friday, September 18, 2020

Here we go again?

After repeated attempts to punch through $12K resistance, $BTC has pulled a Bart Simpson and retraced back to $10K, reaffirming the once resistance is now the support as it gears up for yet another knock at $12K. Zooming further out, it’s hard not to be reminded of the good old ICO days: if you had a dream and it mentioned “crypto” or “blockchain” in any shape or form, you could, and did, receive eight digit commitments from all corners of the world -  no fiduciary duty, no strings attached. In the end, 90% is the figure that is most often thrown around when asked how many ICOs were scams. A tainted history of scammers taking over? Perhaps, but what it did do was show the world that you too could raise the Benjamins for your shiny new idea and it didn’t come with the punishing covenants of a VC. And some indeed went on to build their dreams into unicorns, while the bad actors did their thing.

Fast forward to today where we’ve seen $BTC dominance slide 13.3ppts gradually over the course of the year,

as the DeFi platforms command more market share. Why? Nine billion reasons…

So are we heading for Tulip 2.0? Sure the price action has many resemblances to 2017, but compared to the “I have a dream projects”, these DeFi applications are all serving a real life use case: earnings. 

Put your money in a bank, good luck getting 1%. Get your head out of the ground and have a look at the DeFi protocols. Case in point above, you can earn 100% APY and this isn’t even the high-end of the range. These yielding DeFi platforms will earn you some serious coin - until they don’t. 

Scammy exits? Ghosting founders? Sketch code forked? Yes to all of the above and bugs will continue to be discovered but bear in mind all these platforms are still in open beta considering the duration they’ve been around.  Well, that's just how it is - high risk, high return. Can’t stomach the volatility? Go camp out in treasuries but be prepared to face rates way below the rate of inflation. That said, DYOR.  But one thing for sure, these farmers are draining the liquidity across all trading platforms.

So does this all end in tears? Perhaps. But the phenomenon unfolding before us is just yet another #RealLifeUseCase that should have major banking brass looking at the next generation of investors (savers and borrowers) and beyond next quarter’s results - because their traditional profit lines may soon be fading. Banks pay you pennies on the dollar that they make farming out your deposits. DeFi brings most of these returns and the governing rights of the platforms to the users. Decentralization 101. 

The other thing to take into account is how in the world will the nine billion dollars be KYC’d? Metamask and other software wallets have the gates open. It’s like trying to fix the barn after the cow’s ran away. There will have to be a reckoning at some point. While the VASPs of the world strive to be regulated and try to steer clear of this wild wild west of a niche market, there is no way from them preventing the outflows of wealth to the promised lands. Dare it be said, DeFi, like Bitcoin, has simply become too big to go away.

So what do you tell the non-coiners who come at you with “it’s too risky, too volatile”? 

“Get with the times!”

And you can always add, “What’s better?”.

What’s better than a stable trajectory with almost 100% surety that your cash will be (if it’s not already) inflated away than a few bumps on the way to 100x? Michael Saylor, CEO of MicroStrategy for one is prepared to take the risk on in size, and has just doubled down, taking the percentage of cash and cash equivalents converted to $BTC to 75%. The response?  

Investors are on board. Saylor couldn’t have used a better analogy in explaining his actions - it’s just a melting ice cube that’ll wipe out 30% of your wealth? That should be an automatic hard pass, but still the stampede hasn’t kicked up too much dust. 

We can bet that it’s the first of many to come - in fact OSL has staked its business on this and the future is looking promising. The proxy for traditional asset management participation has been the CME open interest. They have been handing it to Bakkt, the other venture recognized in similar light with the only difference in that the latter being its physically settled contracts. Hitherto perceived barriers of entry, the perennial gap in OI has finally started to narrow as mainstream gets comfortable with the not-your-keys-not-your-coins mantra and Bakkt ups their game with a record day of clearing: $172mn

 

And if there were any doubts to the intentions of the Fed, the FOMC statement released earlier the week literally cements their stance of continuing to throw more money as their solution - retaining the moving goalposts of a target. Amidst a backdrop where reputable law firms not having a problem in regulating privacy coins; SEC Commissioner Hester Peirce issuing a public dissent against a whale of a 

fine on an unregulated ICO,  Europeans allocating some serious mindshare on DeFi… also lets not forget that the Americans are also forcing their scapegoats to find an alternative payment network. The man that runs the show is literally steering the would-be-participants away from the antiquated, inferior SWIFT. The latest being the Treasury blacklisting some accounts they believe are linked with sanctioned Russians. That’s like trying to save your boat as it sinks by trying to get the water out with a tablespoon. Digital assets couldn’t have asked for a better marketing campaign. And if this isn’t enough, the Chinese DE/EP is pretty much near operational.

The message is indeed trickling down. 

Wallets with non-zero $BTC balances punched through 2017 highs and are showing no signs of slowing. #BuyBitcoin

Also, earlier this week, CV VC published its latest report in partnership with PWC on the global blockchain industry.  We’re thrilled that OSL was listed as one of the top organizations in the Brokers and Crypto Banks sector.  Our own Dave Chapman was highlighted in the report as well. You can grab the full report and sign-up to join Dave, other sector leaders and Cointelegraph as they deep-dive into the report in an online panel next week.


Some more of the news that caught our eye:

  • CFTC clears red tape for crypto swaps 
  • Jewel Bank breaks the wall down as first Bermuda bank to offer crypto custody & loans
  • Codefi becomes first successful project to launch on Consensys’s Activate platform 
  • Binance extends crypto VISA card offerings to the European Economic Area
  • Bithumb subject to third prosecutor raid. 
  • Nigerian SEC recognizes all crypto as securities. 
  • Oleg Kenzov the first artist to transfer copyrights with the Russian blockchain based platform. 
  • Ten heavyweights join the Global Defi Alliance
  • Aviatrade puts a $40mn Gulfstream 650ER on the market and accepts $BTC as tender 
  • Iran looks to purchase cars with crypto
  • GPU mining equipment demand spikes 49% in Russia as $ETH mining profitability explodes
  • Binance, Huobi & OKex all make their forrays into DeFi
  • Apple continues to attempt to put the breaks on DeFi
  • Paxful pulls out of Venezuela due to “Concerns regarding the regulatory landscape around Venezuela and Paxful's own risk tolerance”



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

 


 

OSL is Asia’s most comprehensive digital asset platform providing brokerage, exchange, software-as-a-service and insured custody solutions to professional investors.

Home to one of the world's largest and most experienced digital asset trading desks, OSL has its finger on the pulse of the market. The Trader View newsletter is a short, easily digested summary of market activity and eye-catching news of the day.

Feedback is important to us, and we’re keen to learn more about the types of insights and intelligence that matter to you most. Please share your thoughts with us.

And be sure not to miss future OSL news and insights by following us on TwitterLinkedinFacebook, and Telegram.

 

 

Please refer to OSL's relevant disclaimers and disclosures associated with this note, including restrictions on redistribution.

SHARE: