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
- 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:
|Bitcoin||Ethereum||Gold||Equities||High Yield Corporate Bonds||Commodities|
|BTC||ETH||PAXG||S&P 500, ASX 200, VTI||HYG||CRBQX|
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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.