Regardless of whether you find yourself in the bull or bear camp of the crypto market, it is always worth reminding yourself that this is a very speculative market. Fundamental metrics do not always correlate to the underlying cryptocurrency prices and, more often than not, proposed valuation models are biased and subject to data overfitting. At the same time, the OTC market resembles a very archaic way of doing business and is full of dream chasers. Crypto maximalists may disagree but for Wall Street to roll up their sleeves and commit to crypto, they do not necessarily need to believe in the technology. If there is a secondary market for the asset class and there are inefficiencies to be exploited, then there is no reason to expect them refrain from trading cryptocurrencies, just like they trade pork bellies and the longevity market. With that being said...the crypto market remains in a bullish bias, a positive outlook echoed in the derivatives market. ETH contango is being pushed wider, which is also driving other assets higher (given the correlation and hedging strategies). However, the Bitcoin curve remains subject to regular shifts from contango to backwardation, which indicates increased interest from spread traders.
Coinbase announced yesterday that EOS coin would be one of three new assets added to the exchange’s Pro platform. In addition to new cryptocurrency trading pairs for Augur (REP) and Maker (MKR), EOS will have order books in USD, EUR, & BTC. As a result, EOS outperformed its peers, albeit modestly. It is also worth pointing out that in an effort to expand support for its developer community, EOS has introduced EOSIO Labs and the initiative will share open-source code repositories with developers building on top of EOS, allowing them to leverage EOS code innovations for use in their proprietary decentralized applications. Back in 2018 Coinbase was unable to secure the necessary amount of liquidity to establish a proper order-book for the coin after it started accepting inbound transfers at the end of 2018.
In other news, Bitstamp exchange announced on Tuesday it has secured a much-sought after BitLicense, which allows firms to conduct crypto business in the US. Bitstamp was the 19th firm to clinch a BitLicence, after crypto brokerage Tagomi Holdings became the 18th earlier this year. Elsewhere, China's National Development and Reform Commission (NDRC), a state planning agency charged with spearheading macroeconomic policies, is considering eliminating crypto mining in the country. The measure would be part of the NDRC’s wider Catalogue for Guiding Industry Restructuring, which has been issued since 2005 and determines which industries are to be fostered, restricted or eliminated.
Finally, Japanese bank holding and financial services company Mitsubishi UFJ Financial Group (MUFG), the fifth largest bank in the world, is set to put its digital currency MUFG Coin into practical use later this year. The Japanese bank plans to issue a virtual currency, specifically a blockchain-based stablecoin pegged 1:1 to the Japanese yen. The asset is designed with a focus on functionality; customers will download an app that will automatically convert their bank deposits into the stablecoin.
Thank you for reading,
The BeQuant’s Analytics team