The crypto market is known for its non-correlated and asymmetric performance. Fundamentals and factors related to price discovery are often misaligned and it is therefore notoriously difficult to value the asset. Still, even though the SEC has rejected the proposal by Bitwise to introduce bitcoin ETF, the chairman of the United States Commodity Futures Trading Commission (CFTC) noted that he believes Ether (ETH) is a commodity. Heath Tarbert, who overtook J. Christopher Giancarlo in July, revealed his stance toward cryptocurrencies and forked coins at the All Markets Summit. While the CFTC has been very clear about Bitcoin being a commodity, this is reportedly the first time that the authority has provided a vision for Ether, the second-biggest cryptocurrency by market cap. According to the report, Tarbert acknowledges the existing uncertainty about the status of altcoins. However, he claimed that similar digital assets should be treated similarly. Tarbert suggested that forked cryptocurrencies such as Bitcoin Cash (BCH) or Ethereum Classic (ETC) — those that derive from the original underlying blockchain — should be treated the same as the original asset. At the same time, the chairman noted that the status of a forked coin may vary if the “fork itself raises some securities law issues under that classic Howey Test.”
As pointed out yesterday, the Bitcoin curve continues to trade in contango, albeit the delta is off the levels observed earlier this year and the spread has narrowed further this week. Interestingly, the latest Commitment of Traders report (COT) shows that a lot of positions might have been left to expire in September, as opposed to rolled forward. As pointed out in the past, factually speaking, there are several reasons that will cause the contango to collapse. For one, interest rates would have to decrease a large amount (indirectly applicable in crypto but worth keeping an eye on lending market and there, the reference rates for USDC continue to languish near 3-month low). Another reason for such a move is the so-called “delivery concern”. When a producer, dealer, or speculator is short the front month, come expiration, it has a choice whether to make delivery or not. If not, the holder essentially needs to cover shorts, lease/borrow the asset from someone else and/or roll their shorts to a back month.
Finally, crypto liquidity and OTC provider B2C2 has launched a gold derivatives product that synthetically trades against bitcoin in what the firm says is an important evolution in the safe-haven asset trading space. With the firm’s new product, clients can physically settle synthetic trades with bitcoin, which correspond to physical gold stored in vaults. Synthetic positions combine various underlying assets to mimic the returns of another product without actually holding the product.
Thank you for reading,
The BeQuant’s Analytics team