Whenever someone comes up with an outlandish price prediction of where Bitcoin will trade in the next few years, a scene from “The Wolf of Wall Street” comes to mind with Matthew McConaughey and Leonardo DiCaprio. Matthew McConaughey, who plays Mark Hanna, says to DiCaprio’s budding broker – “Number one rule of Wall Street. Nobody... and I don't care if you're Warren Buffet or if you're Jimmy Buffet. Nobody knows if a stock is going to go up, down, sideways or in circles.”
We can look at everything – from the CME Commitment of Traders (COT) report to the underlying blockchain metrics – and speculate that Bitcoin is a safe haven asset while in the same breath argue that it is uncorrelated and that we still do not have a clue where the cryptocurrency market is going. It is this unexplainable price volatility and the parabolic runs which accompany it that are in fact preventing a number of institutions from entering the space. Still, if you have to play the game, long gamma and short vega play comes to mind as contango remains rampant, where you expect lots of movement in the near term and then expect implied volatility to decrease thereafter. Instead of proselytizing freedom from the draconian central bankers, crypto fundamentalists need to appreciate the complexities of legacy systems and realize that for the market to grow and develop, a gradual evolution is required, as opposed to an overnight crypto revolution.
In terms of crypto market developments, Bitcoin has recovered to the $12k level, while Ethereum has temporarily reclaimed the $300 level. The DeFi market is alive and well, while the MakerDAO may have slowed in growth compared to earlier in the year amid DAI instability, and other parts of the decentralized finance market are booming. For this to continue growing, the digital assets market ought to take a look at how the traditional finance community approaches risk and compliance. At the end of the day, one needs to learn to walk before they run. The market will evolve and purge itself of the crypto lenders and exchanges that fail to innovate and take a measured approach to risk.
To conclude, some key dates to be aware of related to Bitfinex (iFinex), Tether and the NYAG saga (The NYAG has until July 8 to file a response and the judge scheduled a hearing on the motion to dismiss for July 29):
On May 21, 2019 — Bitfinex filed a motion to dismiss the proceeding brought by the NYAG on the grounds that Bitfinex/Tether does not do business in NY, the Martin Act does not apply to its business and the Martin Act cannot be used to compel a foreign corporation to produce documents stored overseas. Bitfinex and Tether also sought an immediate stay of the NYAG’s document demands.
On May 22, 2019 — Judge Joel M. Cohen of the New York Supreme Court granted Bitfinex’s motion for an immediate stay of the document demands. He issued an order requiring the companies to produce only the documents relevant to the limited issue of whether there is personal jurisdiction over the companies in New York while staying the document order in all other respects. The NYAG has until July 8 to file a response. And the judge scheduled a hearing on the motion to dismiss for July 29.
Thank you for reading,
The BeQuant’s Analytics team