You really can’t make this stuff up. One minute there are press reports out claiming that Tron founder and CEO Justin Sun is not allowed to leave Chinese territory, citing allegations over money laundering, pornography-related transactions on his Peiwo social media, illegal fundraising and gambling. Then in response, Justin Sun denies the allegations and posts a video of himself in what seems to be San Francisco. What's more, is that initial reports go as far as to suggest that this is the real reason why Sun decided earlier to postpone the Warren Buffett Lunch and press conferences to an unspecified date. Nonetheless, Tron was still trading down 20% although in spite of all the calamity, Tron’s Twitter page continues to point out unheard of dapp volumes, and, according to a dapp review platform, Tron Dapp volume on July 21 reached $67,944,673.82, a figure well beyond that of ETH ($5,583,074.11) and EOS ($11,030,606.39).
Looking at the broader market, Bitcoin is trading below the $10,000 level and Ethereum is desperately trying to hold onto the $200 level, the contango is slowly getting crushed and there is a risk of panic selling, not just by retail but also mining entities that failed to make the most of the overextended contango curve and hedge their exposure. Elsewhere, EOS is the standout performer, albeit marginally, which comes ahead of the official launch of eosfinex on July 25th. Bitcoin SV is trading down 5%, in line with the market, in spite of the planned network upgrade which is focused on scaling - the only change scheduled is a lifting of the default BSV block size hard cap from its current 128MB to 2GB. Although the default block size hard cap will be 2GB, initially, a significant portion of miner hash rate will manually set their hard cap to a lower level of 512MB – far higher than any other competing Bitcoin project.
The lending arm of Genesis Global Trading continues to grow, adding $746 million worth of crypto loan originations in Q2, bringing its total originations to $2.3 billion since its launch in March 2018. Citing the reasons for higher demand for cash borrowing, Genesis said the increasing contango in the Bitcoin and other crypto futures market was one of the factors. The opportunity to capture a basis spread between futures and spot also contributed to the demand. The report credited the growth in Q2 to a strong uptick in the borrowing of $USD and stablecoins, as well as an increase in the price of Bitcoin. The firm’s USD and stablecoin lending (Paxos Standard or PAX and Circle’s USD Coin or USDC) now constitute nearly a quarter of the active book, increasing over 100% from last quarter, per the report.
Aside from Genesis Global Trading, there are a number of new entrants to the crypto market, promising huge returns on their lending/borrowing offerings. While the likes of Genesis may have the expertise to deal with various risks and unexpected market events that come with lending practices, very few retail outlets will be anywhere near in terms of risk protection. Specifically, contango is actually a very dangerous phenomenon for retail platforms because most of the deposits are in cryptocurrency and cannot be sterilized to USD or BTC, which creates a problem for the lender. One of the ways to keep a customer from leaving is to subsidize the interest rate from their ICO or VC raise, all in the hope that the market structure will flip. Another factor to keep in mind is LEO, since that can also be used as margin collateral to buy Bitcoin on leverage and short expensive longs.
Thank you for reading,
The BeQuant’s Analytics team