14 Oct, 20

Weekly Crypto Market Wrap #41, 2020

weekly market wrap
Zerocap

Zerocap

Week in Review

  • Bank of Thailand issued $1.6 billion in government bonds through IBM blockchain (5 Oct. 2020)
  • China’s Central Bank revealed results of its first DCEP pilot, with 1.1 billion digital RMB ($162 million) across 3.1 million transactions in a 5-month test. (5 Oct. 2020)
  • UK’s financial regulator banned sales of crypto derivatives to retail investors, which will come into effect on 6 Jan. 2021 (6 Oct. 2020)
  • The cryptocurrency exchange BitMEX shuffled its top leadership, after criminal charge by US authorities for failing to prevent money laundering and illegal transactions (8 Oct. 2020)
  • BNP Paribas Securities Services is trailing digital assets transfer through the public Ethereum blockchain (8 Oct. 2020)
  • U.S. government imposed new sanctions on another 18 Iranian banks (8 Oct. 2020)

Winners & Losers

 

weekly crypto market wrap

 

weekly crypto market wrap
  • Bitcoin and Ethereum are both correlating fairly closely with gold at the moment. Performance across all assets ended positive on the week.
  • US and global equities ended the week close to their highs, with the VIX volatility index closing close to its lows. No surprises here – the market being flooded with liquidity, encouraging short-vol exposure. Lonely negative returns for the VIX compared to most asset classes this week. We could be winding up for a short volatility squeeze if this continues into the US election.
  • Notably amongst this backdrop, gold is holding its ground, indicating some concerns on monetary devaluation and inflation concerns.

Technicals and Order Flow

 

  • Bitcoin has broken out of its recent range, making a soft push to the upside – shrugging off Bitmex’s legal concerns. This is coinciding with bitcoin’s one-month realized volatility being at 36% – near a one-year low. Given impending the US election event risk, we expect this to ramp up.
  • Key short term level is at $11,150, chopping into the prior range from August . If we can hold above this level, we are expecting a fairly quick run to $12,000. 
  • The last move above $12,000 was a false-breakout – Covid uncertainty and dialogue into the US election could be the determining factor on whether we see a clean break above this level. 

What to Watch

  • Will the decentralized finance (DeFi) bubble keep deflating, presented by the crashing of market capitalization of DeFi assets?
  • The follow-up of BitMEX criminal charge: 
    • Will open interest on BitMEX keep dropping, and investors on BitMEX keep withdrawing their digital assets?
    • What is BitMEX’s next step?
    • Will BitMEX former executives defend themselves and fight back?
    • What are U.S. authorities’ next steps?
    • What are the responses of other exchanges, e.g. Ripple will move their HQ from the U.S.?
  • The follow-up of America’s sanction to Iran: 
    • Will the sanction cause violent fluctuation in US dollars?
    • Will Iran return any sanctions or fight back through cryptocurrencies to America?
  • Zerocap published an article on the emergent Asian wealth this century, covering the rise of the continent and how digital assets fit into the portfolio of contemporary Asian investors.
  • Last week one of Zerocap’s principals Jon de Wet was featured on Forkast.News discussing how Bitcoin offers a hedge as markets reach peak dislocation.

 

* Index used:

BitcoinEthereumGoldEquitiesHigh Yield Corporate BondsCommodities
BTCETHPAXGS&P 500, ASX 200, VTIHYGCRBQX

About Us

  • Zerocap helps private clients, high net worth individuals and institutions purchase and custody digital assets.
  • If you would like to know more, hit up the team at [email protected] 

Disclaimer

This document has been prepared by Zerocap Pty Ltd, its directors, employees and agents for information purposes only and by no means constitutes a solicitation to investment or disinvestment.

The views expressed in this update reflect the analysts’ personal views about the cryptocurrencies. These views may change without notice and are subject to market conditions. All data used in the update are between 4 Oct. 2020 0:00 UTC to 10 Oct. 2020 23:59 UTC from TradingView. Contents presented may be subject to errors. The updates are for personal use only and should not be republished or redistributed. Zerocap Pty Ltd reserves the right of final interpretation for the content hereinabove.

FAQs

1. What Were the Major Developments in the Cryptocurrency Market for the Week of October 14th, 2020?

Answer: Key developments included the Bank of Thailand issuing $1.6 billion in government bonds through IBM blockchain, China’s Central Bank revealing results of its first DCEP pilot, the UK’s financial regulator banning sales of crypto derivatives to retail investors, BitMEX shuffling its top leadership after criminal charges, BNP Paribas Securities Services trialing digital assets transfer on the Ethereum blockchain, and the U.S. government imposing new sanctions on 18 Iranian banks.

2. How Did Bitcoin and Ethereum Perform, and What Were the Technical Insights During the Week?

Answer: Bitcoin broke out of its recent range, making a soft push to the upside, with key short-term levels at $11,150 and expectations for a quick run to $12,000. The last move above $12,000 was a false breakout, with factors like the U.S. election and COVID uncertainty playing a role. Bitcoin and Ethereum correlated closely with gold, and U.S. and global equities ended the week close to their highs, indicating concerns about monetary devaluation and inflation.

3. What Were the Implications of BitMEX’s Criminal Charge and the Follow-up Actions?

Answer: BitMEX’s criminal charge led to questions about the exchange’s future, including whether open interest on BitMEX would keep dropping, how investors would react, BitMEX’s next steps, the defense strategies of former executives, U.S. authorities’ next actions, and responses from other exchanges like Ripple’s potential move of their HQ from the U.S. The situation created turbulence in the crypto market and raised concerns about regulatory actions.

4. What Are the Key Watch Items and Questions in the Cryptocurrency Space for the Week?

Answer: Key watch items include the follow-up of BitMEX’s criminal charge, America’s sanction to Iran, and Zerocap’s insights on Asian wealth and Bitcoin as a hedge. Questions to consider include the future of the decentralized finance (DeFi) bubble, the impact of sanctions on the U.S. dollar and Iran’s potential response, and the implications of the U.S. election and monetary policies on the cryptocurrency market.

5. How Did Macro Events and Market Performance Influence the Cryptocurrency Market?

Answer: Macro events like the U.S. election and the BitMEX legal concerns influenced the market, with Bitcoin breaking out of its range and gold holding its ground. The market was flooded with liquidity, encouraging short-vol exposure, and the VIX volatility index closed close to its lows. The backdrop indicated concerns about monetary devaluation and inflation, shaping the market dynamics and correlations between cryptocurrencies and traditional assets.

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