Global macroeconomic uncertainty remains heightened, with the never-ending China-US trade talks turning sour yet again, Brexit and all the political drama in Italy. Despite the recent tariff announcement by US President Donald Trump, the latest press reports by the Chinese media have largely shrugged off Trump’s latest escalation of the tariff war, with state media signaling the government is ready to weather the economic turbulence as no breakthrough to resolve the standoff is in sight. Editorials and commentaries since the Trump administration slapped tariffs on roughly $110 billion in Chinese imports on Sunday have focused on the impact that the latest hikes on goods produced in China will have on US consumers. Late Sunday, the State Council released a statement pledging to increase economic support if needed. Over in Italy, the prime minister designate, Giuseppe Conte, said on Sunday he was confident that squabbling political parties would set aside their bitter differences over migration and security to form a workable coalition this week. The prime minister said that the centre-left Democratic Party and the populist Five Star movement, until now political rivals, had created a “good working environment”. Mr. Conte said he expected to tell President Sergio Mattarella he was ready to form a government by Tuesday or Wednesday.
Despite the political drama, crypto markets remain soft and the flight to safety towards “digital gold” has yet to materialize. Crypto markets are no strangers to hype and built-up expectations and the month of September is promising to be one to remember, largely due to the launch of Bakkt physically settled futures. With this in mind, market participants will be keenly watching the shape of the futures curve and how that behaves with month-rolls and more importantly expirations. Lending for USD is expected to remain elevated, to maximize the basis trade and the contango delta may undergo much more dramatic widening and subsequent narrowing depending on the flow perceived by the market. In turn, even though ETH continues to soften, the demand for DeFi and CeFi products remains strong. This has been especially true for dYdX, which is geared toward experienced traders and lets users lend, borrow, or margin trade any supported asset (as of May 2019: ETH, Dai, and USDC, with more planned). Traders can take leveraged long positions of up to 4x the value of their collateral (3x for shorts). Loans and margin trades can remain open for a max of 28 days, after which they’re automatically closed out. In ETH related news, which might help the sentiment towards the crypto asset, software startup TON Labs, managed by Telegram’s token offering investors, is building a Solidity compiler for its blockchain. This programming language is primarily used to develop smart contracts in the Ethereum network.
In other news, high net-worth individuals in India are more likely to invest in Bitcoin than other cryptocurrencies, according to a new Huru India survey, FinancialExpress. Digital currencies were the fourth most preferred asset overall, although almost half of the respondents didn’t know what cryptocurrencies were.
Thank you for reading,
The BeQuant’s Analytics team