OSL Trader View | Weekend Digest
Friday, November 20, 2020
Ever heard of anyone having gone down that proverbial rabbit hole of Bitcoin to come out and say it’s not for them?
We’ve asked around and have yet to find anyone fitting that profile just yet. It seems once you’re a believer you’re on a one-way path, no turning back. The latest high-profile joiner being senator-elect Cynthia Lummis who “hopes to bring Bitcoin into the national conversation.” She joins the outspoken former Coinbase GC Brian P. Brooks getting the nod from Donald Trump, on his way out the White House, to be the Comptroller of the Currency. Sure there are many skeptics who in fairness are quite knowledgeable about the space, but it sure seems their sideline stance is positioned far closer to the playing field than ever before. It’ll be interesting to see how much longer they can hold out before joining the game. But of course the mudslinging amongst other protocols and forks have given some reason to pause opting to judge the merits of Bitcoin against its somewhat dysfunctional peers.
Fueling that hesitation we need look no further than Nov 15 2020 at block height #661648, the BCH camp split yet again into the Bitcoin Cash Node ($BCH) and Bitcoin Cash ABC ($BCH ABC). Technicals aside, it boils down to do you want to pay a mandatory 8% dividend?
The miners voted with their hashpower as they dropped Amaury Sechet like nobody’s business causing network hashrate to drop to 110PH, 4.2% of $BCHNs 2590PH. Strip out the computing power contributed from the benevolent dictator’s cohorts and, well, you have a cult supporting magical internet money.
Tired by the antics, many have come back to the OG triggering a +12% rally since the hard fork.
Keeping the $BTC dominance sticky at 66% handle and roughing it out at $18,000. The monster rally has stretched the momentum indicators but the resistance here has the bulls loading up with volumes exploding to $30-40B per day.
You can readily pick up the soundbites from all of the newest members to the cheerleading camp from Wall Street to the Valley. The cadence is certainly picking up and it's getting tougher to keep track of all the new announcements (if not tiresome or simply “non events” ) as more traditional players pledge capital or deploy more to their hedge against the calamities of monetary policy.
And that honey comb of a backdrop is just about to get sweeter as the writing is increasingly on the wall. Despite the $3 trillion and change, there better be more in behind. BofA projected some nose-bleed minimums just to keep up with the upcoming increase of supply. They are already falling behind: they’ve printed 2~3x the notional value of paper released during the past two quarters
And they are not alone…
ECB president Christine Lagarde is definitely drinking some stiff Kool Aid with her proposed stimulus set to debut on Dec 10. Word on the street is another €500bn in bond purchases. And while this may not get the total government debt figure to hit 100% of GDP, it’ll get ‘em pretty close...
Post third halvening, Bitcoin inflation rate is now down to 1~2%
Compounded by the hyperinflation we are starting to see stemming from the weaker sovereign fiat currencies, this is translating into ATHs for Bitcoin denominated in their national currency.
Triple digit inflation or a choppy path to capital gains in quite possibly the biggest trade of the decade?
So while these #RealLifeUse cases of people protecting their wealth is gaining traction, the gateways into crypto are coming in a dime a dozen. Grayscale’s trust now holds 500,000 BTC and became the first crypto money manager to hit the $10B mark as premiums ripped, LTCNs in particular reaching 3447%.
The sheer lack of listed alternative investment vehicles, which by no small part is a result of the SEC’s iron fist rulings over the approval of $BTC ETFs, is largely responsible for this rip-off of mom and pops. Grayscale’s ETPs are allegedly the only products available to American retirees through their 401ks. How many Trump voters you reckon checked the premium on GBTC before committing their life’s savings? Well, there are some retirement plans they can turn to.
Paypal’s 300mn users are already on track to making collective purchases exceeding the daily supply increase (900BTC + tx fees).
And rest assured that they will certainly not be the last. Case in point Airbnb. The home sharing unicorn has filed to go public next month. Following a 3Q20 turnaround (outpacing traditional peers like Marriott and Hilton) the darling-disruptor has gone on the record to say adapting to crypto and emerging technologies may be crucial to its own future success. Interesting times to be going public following a contracted year, but maybe it can attract some of the previously pledged ANT Financial money that was left on the table following it’s rug being pulled out from under it earlier this month.
CME’s Bitcoin Futures are often taken as a proxy of institutional investor sentiment. Few have mentioned much of Bakkt which albeit coming from a very low base. They’ve been sending a few rockets to the moon. The crucial difference is that Bakkt instruments are physically delivered (i.e. these players are playing the same game as most of us) - they are stacking sats.
Skybridge Capital managing $3.8bn in private equity will be participating through SkyBridge Capital II. LLC for which Form F24B3 was submitted last Friday while Mexican billionaire Ricardo Salinas Pliego just talked up his portfolio announcing 10% of his liquid wealth in digital gold. The banks were right behind echoing the sentiment: a Director at Citibank published a lone-wolf missive on 21st century gold; Goldman Sachs publishing an 81-pager expecting China’s DC/EP to clear 15% of total consumption payments equivalent to $2.7T total payment value (TPV); while Deutsche Bank, MD, Jim Reid pointed out an uptick in demand for $BTC to serve as a dollar hedge risk.
Institutional grade infrastructure to facilitate the inflow is here. Proven by the myriad of commitments we’ve seen from both Main Street and Wall Street.
What we are dealing with here is not only volatile price action of a nascent technology in its first successful iteration,
...but a Metcalfe curve of adoption. And if your Mom and Pops with their savings have been the foot soldiers for this beachhead assault, we are now seeing the professional money managers in their B52 bombers and T-14 tanks coming in with weighty tickets armed with many more zeroes. Kaboom.
Jay Clayton's announcement to leave his seat as the chairman of the SEC has been rejoiced by the industry. Regardless of who the detractors within the Commission were, it has been widely understood that it was ultimately Clayton giving the Heisman (repeatedly) to crypto ETFs applicants.
With Biden teeing up to be POTUS #46, Clayton will be throwing in the towel at the end of the calendar year causing all sorts of speculation about a crypto friendly man in charge. Biden did choose a former Goldman Sachs banker turned MIT crypto lecturer as his financial advisor. We can at least find solace in knowing that he is not against digital currencies.
The rip has pushed volatility back into the seventies
Widening the premiums
As open interest popped
As the next wall of premium sellers queueing up at $20,100
Chainalysis has been encouraged by the $1B+ bounty the US government seized, enough to launch a tool to find more of these illicit pools of digital wealth.
We were pleased to see our friends at Galaxy Digital hit the ball out the park as they turned to black YoY. Even after stripping out the $10.4M mark-to-market gains,
They should not be complaining.
Buoyed by the rally lifting us all, posting a 263% YoY increase in digital assets growing to account for 42% of all assets; a 20ppt increase.
All-in-all, it’s been a busy week for sure and plenty of dizziness and euphoria as we track to new heights on the $BTC front. These bulls look to have energized legs and we’ll be hoping we can end the week like we did the last with some further trending upward… and minting more ATHs.
Take care, stay safe, and we’ll catch you all next week.
OSL Trader View and Weekend Digest are contributed by Stefan Chu and Santiago Nazaretti
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