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Daily: Ethereum PoS, Bitcoin SV News, Compound Investment
November 15  |  4 min read

Daily: Tolerance for Leverage

BeQuant Analytics, a daily cryptocurrency market analysis contributor

The market has continued to grind lower but interestingly, over the last 7 trading sessions, the lacklustre performance by large caps was matched by the equally lacklustre performance by small caps. Specifically, at the time of writing, large caps are down 4.1% over the course of the last 7 sessions and small caps are down 4.6%. Despite the bearish sentiment, the futures curve remains steep and open interest (OI) is rising, in other words, leveraged names are long.
This suggests very choppy price action, with a significant risk in volatility picking up from its suppressed levels.

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. However, something that may have been overlooked by the market are comments from the chairman of the US Commodity Futures Trading Commission (CFTC) Heath Tarbert, who at a recent Coindesk Invest conference expressed the opinion that the upcoming update for the Ethereum network may lead to the classification as securities. The agency is said to be carefully considering the potential change of ETH to the Proof of Stake (PoS) consensus mechanism. While the agency previously said that, in its current state, Ethereum is likely not a security and should be classified as a commodity, things are less clear when it comes to the 2.0 version.

The team behind Bitcoin SV put out a press release where they celebrate November 15 as the one year mark since Bitcoin SV (BSV) emerged in the world’s first Bitcoin hash war, to declare “independence for original Bitcoin.” The article goes on to say that after years of BTC and BCH protocol developers deviating from the design of Bitcoin creator Satoshi Nakamoto and artificially restricting Bitcoin’s capabilities, BSV is restoring the “Satoshi Vision.” Furthermore, in just one year, BSV has been engaged in solving the biggest problem facing Bitcoin to date: scaling. BSV currently handles up to 20,000,000 transactions per day and is working towards being able to handle thousands of transactions per second. This level of capacity can compete with the VISA payment network’s capacity, and supports enterprise usage for tokens, smart contracts, big data and other applications. The BSV network now surpasses BTC in its number of daily transactions on-chain and has bigger average block sizes as well.

Elsewhere, Bitcoin Cash (BCH) is due to execute an upgrade to its network’s consensus rules.

Two changes are expected to take place for Bitcoin Cash:

  1. A ‘minimal data rule’ will be applied which means that transactions on Bitcoin Cash will now be ‘non-malleable.’
    Now, the majority of transactions on the network won’t be malleable by third parties and transactions can’t be tampered with.
  2. There will be support for Schnorr signatures on Bitcoin Cash. This will allow for more complex multi-signature transactions.

As of now, around 70% of all BCH nodes are prepared and have voted in favor of the upgrade. All the major players in the Bitcoin Cash world—Bitcoin AMB, Bitcoin Unlimited, BCHD, and so on—have agreed to conduct the upgrade. Looking at the recent price action over the last 30 days, BCH is up 25%, as is Tron, while BSV is up 45%. As such, it seems that, at least at this stage, the market is not assigning much significance to the network, nor it is deemed to be a risk factor going forward.

Elsewhere, Compound, the decentralized finance (DeFi) lending protocol, just held a
staggering $25 million Series A led by Andreessen Horowitz, alongside the likes of Bain Capital Ventures, Polychain Capital, Paradigm, and others. Compound is hoping to partner with exchanges, brokers and custodians to help expand their business lines into lending. Instead of developing a lending unit from scratch, these firms can use and improve on Compound's protocol to suit their own needs.

Thank you for reading,

The BeQuant’s Analytics team