Upside risks to volatility that were highlighted over the recent weeks materialized in grand style over the weekend, as Bitcoin rallied over 30% and briefly traded above the $10,000 level, only then to gradually pare the move and trade in the low $9,000 area. The short-term vol more than doubled as a result and reached its highest level since July, just above the 50% level.
Just over $20bln was traded across the major crypto derivative exchanges, while Friday’s options volume on Deribit also topped the $100mln mark for the 3rd time this year. This year saw explosive growth in derivatives offerings but it is important not to underestimate the importance of spot exchanges as the backbone of the growing market.
Getting back to the market price action and social media, a number of crypto commentators were quick to announce the beginning of a “bull run”, due to Bitcoin halving trade, while others attributed the move upwards to recent comments by the President of the People's Republic of China who said the country needs to “seize the opportunity” afforded by blockchain technology. However, while China may be bullish on crypto and blockchain tech, it is unlikely that China will allow the adoption of something it cannot directly control and guide the development of. On that note, according to Chinese media reports - “clear guidelines and regulations are needed to evaluate commercial cryptography technologies used in the major fields related to the national interest as the current ‘loose’ system is not suitable for the industry anymore.”
It is also not the first time that China has indicated its desire to explore blockchain technology and there is even an official ranking of various blockchain projects, which is produced by the Chinese CCID Research Institute. The CCID Research Institute is an initiative of China’s Ministry of Industry and Information Technology that provides a monthly assessment of cryptocurrency projects. The assessment takes into account 35 cryptocurrencies and considers their properties such as basic technology, applicability and innovation, which, put together, form a total value index. Most recently, cryptocurrency project EOS (EOS) leads the list, having gained the highest number of points at 153.8, followed by Tron (TRX) with 141 points, while Ethereum (ETH) is third. Interestingly, Bitcoin is in eleventh place on the list of 35 digital currencies in terms of technology, application and innovation.
Something else that should be highlighted is that last week, the president of CryptoCapital, the alleged "shadow bank" at the center of a fraud investigation against crypto exchange Bitfinex and stablecoin issuer Tether, was arrested by Polish authorities. This is important because Ifinex (the parent company of stablecoin issuer Tether and cryptocurrency exchange Bitfinex) has until November 4 to present a case for the lawsuit by the NYAG to be dismissed or else the company may be required to continue to comply with the investigation. If the case by NYAG is allowed to proceed, actual arguments won’t likely begin until 2020.
Who remembers the price action by Bitcoin following the initial announcement of an investigation by NYAG into the entities involved...
Thank you for reading,
The BeQuant’s Analytics team