The large caps continued to trade weaker which supported flows into small caps where, despite lower liquidity, there is a better opportunity to capture alpha on the back of relative value plays or event-driven strategies. So much so that over the last 30 days, the small cap MVIS index is up 14%, while the large cap index is only up 5%.
The hashrate for Bitcoin continues to oscillate around 100 quintillion hashes per second and general consensus is that the hashrate will resume its uptrend as miners make the last dash ahead of next year’s block reward halving. As such, even though the sentiment is showing no signs up recovering just yet, the current low volatility environment is unlikely to last.
On the global macro front, Hong-Kong liquidity conditions in the FX market are the tightest since the late 1990s, or the aftermath of the Asian financial crisis. Cracks are starting to emerge in HKD and money markets, as traders speculate the local dollar’s resilience to increasingly violent protests won’t last. However, the safe haven trade hasn’t been as straight forward, given that over in the US all major US stock indexes closed at record highs on Friday. What’s more is that the S&P 500 posted its sixth straight weekly gain, the longest such streak since late 2017. The fresh highs came amid a boost in optimism for a trade deal after White House Economic Adviser Larry Kudlow said late Thursday that the US and China were getting closer to reaching a resolution.
On the subject of low volatility. Some will point to the introduction of institutional grade platforms such as Bakkt as the underlying reason for the low volatility environment, while others will argue that speculative interest has burst. Interestingly, Ethereum volatility levels are lower than its larger competitor Bitcoin and as it stands, shorter-dated 10-day volatility is near its all-time low. Ethereum is entering a critical stage of its planned transition from Proof of Work (PoW) to Proof of Stake (PoS) and the network upgrade, dubbed Istanbul, is scheduled for December 4. Ahead of that, according to block reward data, the Ethereum network has issued the least amount of ETH in its history. This will play well into the hands of Ethereum Classic as it seeks to attract miners that feel Ethereum’s PoS model will hurt their business model.
Elsewhere, Fundstrat Global Advisors LLC’s Tom Lee said that the $200 billion cryptocurrency market is far too small for an exchange-traded fund to work. He added that Bitcoin needs to be around $150,000 to cope with daily demand on an ETF.
In other news, BRICS, a group of five major emerging nations - Brazil, Russia, India, China and South Africa, has proposed creating a cryptocurrency for settling payment transactions between the countries. According to Kirill Dmitriev, CEO of the Russian Direct Investment Fund (RDIF), a $10 billion sovereign wealth fund by the Russian government, the member nations plan to create a single payment system and then settle transactions with a single cryptocurrency, adding that the BRICS Business Council has supported the idea.
Elsewhere, cryptocurrency platform Celsius Network announced that it reached $4.25 billion in total crypto loan origination as of Nov. 12. The company also claims $450 million in customer deposits and collateral from loans under management. Furthermore, the group notes it has over 50,000 users from over 150 countries and counts over 150 institutions amongst its customers.
Thank you for reading,
The BeQuant’s Analytics team