OSL Trader View | Weekend Digest
Friday, October 16, 2020
Put 'em in a corner and they will retaliate
The technology sector remains the proxy battleground in the latest cold war between the US and China. The latest salvo comes in the rhetoric that China will pass their own laws barring “sensitive exports vital to national security.” As always, the devil remains in the details, and what exactly constitutes ‘vital’ may go with the winds depending on the circumstances. And the volley back by Washington, in this ongoing tit-for-tat diplomacy, looks to be Ant Financial- which generates just five percent of their revenues overseas. Most level headed folk will recognize that the punishment on earnings of the 5% will not make a material impact. Oh, but it is “sending a message”... yes it is, that as we head towards the circus of circuses with the POTUS election - priorities do not seem well in hand.
The comedy continued with Trump himself spurring a mini-contagion within the Administration (and his family). One by one the list of associates and advisors took a knee on COVID, but the man-in-charge on a heavy dose of God knows what bounced back in remarkable time and literally wanted to rip his shirt off upon being discharged from the hospital to reveal a Superman shirt underneath his suit. And so the mass contagion ensues as he hits the campaign trail and his disciples come out en masse and sans mask. The man clearly has HIS priorities straight… just not the country’s. Oh, dear.
It’s hardly a surprise, according to the PEW Research Center confidence in the POTUS is now at all time lows, across the world. It’s rabbit out of the hat time.
To the extent where most countries now trust Xi Jinping or Vladimir Putin more than they do the leader of the land of the free says a lot.
Nevermind the domestic disruptions stemming from pent up rage of social and racial inequalities as the top 1% continue to get bailed out, the rest of the world is busy recovering themselves. What they do care about is the treasury diluting their foreign reserves away, and it’s safe to say, the last thing on Trump’s mind is the best interest of foreign central banks wealth preservation.
So how much exactly are we talking here?
Nearly seven trillion dollars. And as affable as the chief commander in charge can be, it would be a stretch to call him “Mr. Congeniality of the Year”. The relevance? It has cost the greenback 327bps, $384bn or put it differently, more than the size of Denmark’s GDP as the reserve currency of choice by central banks the world over slips from its peak in 2015. Amidst a backdrop of another potential two trillion in free money looking to reign down from the Treasury well, what can you say? Thank you very much for the generous marketing budget Mr Mnuchin. #BuyBitcoin.
NYDIG, trailing Micro Strategy and Square, played a bit of catch up with their foray into digital assets - deploying $50mn. The parent company, Stone Ridge Holdings Group (SRHG US), manages more than $10B. This lifted $BTC back into $11K territory as it tries again for the second time in two months to consolidate.
The inter-departmental discord within the US has started to grow. Although the view is still unknown, it is the first time that the Federal Reserve Chairman Jerome Powell has publicly guided a discourse Re: “digital currencies and their policy implications”. He was joined by Hester Peirce and CFTC Chairman, Heath Tarbert, in stressing the need to revamp the regulatory framework to nurture, not stamp out, innovation on separate occasions. Amidst the backdrop of the rapid turn of events where ex-Bitmex CTO Samuel Reed was arrested on criminal charges brought on by the Department of Justice -subsequently released on $5M bail- does not dampen the message. If you don’t play by the rules, we don’t care where you are, we will shut you down. Shortly thereafter, the three co-founders abruptly stepped away from their positions leaving Vivien Khoo to call the shots at the (still) biggest virtual asset perpetuals market in the space 加油!
Multinational organizations are also looking to contribute, the latest being the OECD as they prepare for their virtual asset tax framework pitch to nations while the FSB published a 69-pager penning their stab on how to govern global stablecoins. Academia also has their sleeves up with the most downloaded dissertation at Cornell University in the past eight years being “On Scalability of Blockchain Technologies”
Not to be outdone, the private sector also helped out with the lift. The Travel Rule Protocol working group Chaired by OSL and including Standard Chartered, ING Life and Fidelity Digital Assets amongst others, released an API to facilitate “Travel Rule” compliance while KPMG pumped out a report guiding $1.7T in contributions from blockchain technology to the global economy over the next decade
The UK FCAs ban on ETNs was an unexpectedly harsh call triggering many unhappy campers to voice their discontent. They did fall short of banning purchasing crypto outright because it is clear that the vast majority of Brits are doing their trading offshore.
A more progressive stance and much further down the learning curve were the Japanese with BoJ Governor Haruhiko Kuroda guides for CBDC tests to commence next spring - but the yellow jersey again, went to the Chinese leaving the West in the dust as citizens received millions in distributions through the DC/EP to spend across nearly four thousand retail vendors so they can test out the pipes. The contrast could not be more striking with Americans arguing over counting votes through snail mail.
CME has allegedly been tapping the market to gauge interest in an Ethereum backed product and both Schnorr & Taproot Upgrade proposals were merged into the Bitcoin Core as the money continues to pour into DeFi with Binance making the latest splash. It is clear why one of the biggest exchanges has earmarked $100M into the space when you look at the rate of adoption of DeFi. Zilliqa ($ZIL) the latest to benefit with over a billion tokens- c.10% of total outstanding- staked on mainnet within hours of launch. Connectivity into traditional finances was facilitated by Gemini, as they extended offerings through BCB Group to the sterling.
It is truly amazing what can be achieved with blockchain technology, which is probably why the US Department of Homeland Security bankrolled five blockchain startups to tackle anti-forgery and counterfeit prevention - admittedly what socios.com achieved is pretty damn cool.
No one is falling for the thin veil of a message that OKeX attempted to mask a failure in their wallet team. They stopped all withdrawals from their platform because of this mishap and has instantly stirred up some jitters - but honeybadger just does not care.
Have a safe and enjoyable weekend folks!
OSL Trader View and Weekend Digest are contributed by Stefan Chu and Santiago Nazaretti
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