OSL Trader View | Weekend Digest

Friday, November 13, 2020

$BTC. Hail to the king.

It has been a good week. The World let out a (largely) collective sigh of relief with the confirmations that the POTUS’s days are now numbered, and everyone can get on with healing - not just from COVID, but from the diplomatic and economic ailments we’ve endured for four years. The change was certainly welcomed in the crypto community, with sentiment getting a boost ($5.2M of it in fact), in the form of Joe Biden contributions from FTX.US; the company behind the FTX exchange coming in as the 17th largest donor for the man in blue. In addition, President-elect Biden is allegedly looking to tap Gary Gensler as his financial advisor. Gensler’s past is dotted with pro-Bitcoin stints in the form of lectures, articles and constructive comments. 

This subsequently led to an 11.4% outperformance of $BTV against gold WoW as the relief rally lifted the tide for riskier assets. $BTC continued to power on. 

 Zoom out YTD,

A bit of a sore thumb?  The best part yet however...

… is that there are more legs to it, 19% to be exact, until we likely face the next resistance before jumping into uncharted territory. With the “Wall of Resistance” at $16K scaled, the path is clear. 

Paypal has launched support for cryptocurrencies and mainstream media are losing their minds. There were over 26M bitcoin addresses before this: 

Counting its 26M vendors the entry instantly doubles the number of open wallets out there, assuming one wallet per person (definitely not the case), that is only 0.66% of the 7.8B global population. 

In the background, Square punched in yet another set of nosebleed numbers for Bitcoin. In their words: 

Vis-a-vis headline,

 

In just three years since its debut, $BTC revenues account for 54% gross profit or 6% of total. In fact, the company liked it so much, that they decided to throw in a kicker by converting $50M in cash reserves into $BTC. While it may not have moved the dial when looking at its total $3.8B in available current assets - as any sell side trader will attest, the best thing you could possibly hear from your client is: “there’s more behind.” 

Social Network Ranking in terms of users (millions) 

 Among the bigger social platforms, a decent cohort falls under the Facebook umbrella which has become public enemy #1 for regulators worldwide with their brazen attempt to usurp the petrodollar. The majority of the other big platforms are Chinese, and well, it’s safe to assume they will be toeing the line as the Chinese government charges ahead with their DC/EP expansion with the next pilot test set for the capital, Beijing. Speaking of China, while the PBOC’s banking law drafted Oct 23rd was largely hailed as yet another step closer to mass adoption, few, it seems, read through the fine print which framed an aggressive stance against CNY backed stablecoins. According to @Dechert

“The draft Banking Law also includes a ban on the issuance of any digital tokens that circulate in the market as substitutes to RMB. Violators face financial and criminal penalties and the issuers of the illegal digital tokens for RMB would be required to destroy them.”

I suppose the writing was on the wall as what the stablecoins are essentially doing is taking the prerogative of seigniorage away from central banks into the hands of private “minters.” In a similar vein, the Americans are going after the biggest private substitute out there: USDT. 

And “the establishment” seems to have found their poster boy in Ray Dalio. The US government will most certainly not stand idly by, and Dalio forecasts an extreme outcome when and where they outlaw USDT. Well they may try, but that would entail convincing at least half of the nodes out there which in itself would be a herculean feat (5219 nodes), compounded by the fact that just 18% of all nodes lay in the “Land of the Free”.

 

And with all those sanctions and anti-trade sentiment served on a platter of 30% inflation, it really does encourage the rest of the world to seek for an alternative and shy away from giving a hand. 

 

That's not to say they won’t stop trying. Senior Deputy Comptroller and Chief Counsel of the OCC,  Jonathan Gould’s breath-of-fresh-air of a letter (TLDR; banks can custody stablecoin reserves and all crypto biz related fiat if they play by the rules) is getting some serious flack from congresswoman Rashida Tlaib and her cohort. All the while, the SEC has been cashing in on this rip of a market too by collecting over $4.68B, including eight ICO enforcements plus the seizure of $1B in crypto related to “individual X”, while the IRS looks to take their cut from your crypto assets. 

Meanwhile the rate of new wallet openings has not slowed:

 

 400~550K daily

 

As have crypto ATM installations:

 

And it's not just your Mom and Pops. JP Morgan, yet again, is in the background drumming the beat with projections of wide adoption of “bitcoin as an alternative to gold”; Fidelity issues a hiring initiative to top up on their “more than 100 forward-thinking professionals”; Figure Technologies applied for a national bank charter to address blockchain-based consumer lending startups; etc, etc.  As our own @iamdavechapman likes to say “Soon, this will not even be news”.  

The monster of a rally has brought $BTC back to near three year highs on $23B one month ADV and $BTC market cap now 55% of its ATH. The rally is truly all inclusive as can be seen from the yield farming tokens back from their troughs topping out weekly performance:

 With total value locked (TVL) on DeFi back punching through ATH @ $13.75B:

Messari reveals that a substantial portion of this actually comes from professional investors, the likes of Polychain Capital.

Bitcoin dominance is grinding higher in tandem. 

 

This has been compounded with yet more proponents of bitcoin. Stanley Druckenmiller who just two years ago was bearish, now expects the digital gold to outperform its analogue counterpart. His words:
"Frankly, if the gold bet works the bitcoin bet will probably work better because it’s thinner, more illiquid and has a lot more beta to it.” He was joined by Bill Miller “strongly recommending Bitcoin at current Prices.”

Get your popcorn out as we head into the Bitcoin ABC fork this coming Sunday 15th, where aside a new ASERT algorithm, will have network users be subject to an 8% tax to “fund protocol development.” as per Amaury Sechet who goes by the title Benevolent Dictator. Network hashrate subsequently dropped 62%. Stranger than fiction!

 #BuyBitcoin

 

More news that caught our eye for your weekend reading list:

  • SEC of Pakistan publishes a consultation paper on digital asset regulations. 
  • Layer1 co-founders embroiled in lawsuit as fundraise falls short.
  • Danal (064260 KQ) & UnionPay launch cryptocurrency supporting digital card. 
  • Bybit partners with Borussia Dortmund football club 
  • Lebanon looks to debut CBDC in 2021.
  • Atari token crashes 70% post launch. 
  • $GRIN subject to 51% attack.
  • Cred files chapter 11 with 50~100M assets vs. $100~500M liabilities. 

 

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

 


 

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