The market continues to trade in a sideways pattern, with the disappointing developments surrounding Telegram offset by the uncertain macro outlook. Spot gold continues to trade around the $1500 level and the recent comments by the Dutch Central Bank are worth highlighting. Specifically, a statement from the bank’s website describes gold as “the trust anchor for the financial system. If the entire system collapses, the gold stock provides a collateral to start over. Gold gives confidence in the power of the central bank's balance sheet.”
However, those looking for a meaningful and actionable correlation to the yellow metal will be disappointed to find out that the 90-day correlation metric stands at a mere 0.1 against Bitcoin and Ethereum. Similarly, 90-day correlation vs VIX, the fear index, is around 0.1. The non-correlated and asymmetric performance that the asset class is known for continues to hold true even as the market undergoes “institutionalization” by traditional financial firms.
The latest quarterly update by CME on the state of Bitcoin futures trading shows that the market continues to mature, with notable daily open interest (OI) of 4,629 contracts (+61% vs Q3 2018). Greater market adoption led to a robust volume of 5,534 contracts traded per day in Q3, +10% vs. that of Q3 2018, a higher contract volume than those recorded for all previous quarters except Q2 2019. Average daily volume (ADV) was equivalent to 27,670 bitcoin or ~$289M notional value (the all-time high for OI of 6,128 contracts—or 30,640 bitcoin—was achieved on July 1). Interestingly, ~50% of BTC volume was traded outside the US, with ~26% coming from APAC and ~21% from EMEA.
The Telegram saga continues, as Telegram has tried to communicate with regulators and solicit feedback over the past 18 months regarding its TON blockchain project. In its suit, the SEC said it asked Telegram to respond to an administrative subpoena and it refused to do so. In part because of this refusal, the SEC said that it had no choice but to file suit.
Elsewhere, in an interview with CNBC, Steven Mnuchin, the US Department of the Treasury Secretary, expressed his thoughts on the recent exodus of companies from Facebook's blockchain project, Libra. Mnuchin told CNBC that he has met with "representatives of Libra multiple times." During those meetings, he has been clear with them that the U.S. government "would take enforcement actions against them," if Libra and its participants "don't meet...our money laundering standards and the standards that we have at FinCEN."
Thank you for reading,
The BeQuant’s Analytics team