The market resembles a sea of red, as the breakout below $8,000 which ensued yesterday slowly gathered momentum and subsequently saw Bitcoin fall into the low $7,200 area. The contango delta narrowed further, with Dec’19-perp on Deribit at a mere $25 and against Mar’20 at $150. As it stands, large caps and small caps are down around 13%. Over the course of the last 30 days, large caps have lost close to 8%, while small caps have lost 2%. The bulls will take this as a big positive and use the sell-off to re-establish longs, especially relative value plays.
The flattening of the hashrate and falling mining revenue, as documented by blockchain.com, points to further selling but it is worth remembering that global electricity rates range anywhere from over $0.10 to $0.05. As such, while the smaller mining farms may be finding the current market structure challenging, the better-capitalised projects will be keen to utilise lending and derivatives markets to weather the storm and re-position. The aforementioned scenario is very similar to that which took place early this year when miners struggled with extreme pressure on spot for a number of months before the weak hands were squeezed out. Lending rates, which peaked in mid-summer will likely begin climbing again as demand for USDC and other stablecoins grows. The futures curve will steepen out again and put even more pressure on the centralised lenders (CeFi), which struggle in times of deep contango. As a guide, next week sees the CME Bitcoin futures expire.
In other news, the Intercontinental Exchange (ICE)’s Bakkt platform has officially confirmed its forthcoming launch of a cash-settled Bitcoin (BTC) futures contract. In a news release published Nov. 22, ICE — the operator of 23 leading global exchanges, including the New York Stock Exchange — revealed that the contract will be listed on ICE Futures Singapore starting Dec. 9. According to the exchange, the new Bakkt Bitcoin Cash Settled Monthly Futures will be settled against data from its existing physically delivered Bakkt Bitcoin (USD) Monthly Futures contract.
Elsewhere, authorities in Shenzhen have identified a total of 39 exchanges falling foul of China’s cryptocurrency trading ban, according to local news outlet Sanyan Finance. It remains unknown what consequences the exchanges will face, with Sanyan highlighting a desire to crack down on liquidity. CoinTelegraph writes that cryptocurrency exchange Binance has denied rumors police had raided its office in Shanghai. Shortly afterward, fellow exchange Bithumb similarly refuted the idea it planned to close its Shanghai outpost and Huobi followed suit.
Finally, Franklin Templeton Investments, the global investment firm looking to track shares of a money market fund on the Stellar blockchain, has tapped wallet service provider Curv to help safeguard its shares. Franklin Templeton first revealed in September that it planned to track the shares of its fund using the Stellar blockchain, though there are no plans to actually invest in any cryptocurrencies.
Thank you for reading,
The BeQuant’s Analytics team