Bitcoin managed to remain above the $10k level over the weekend but it is facing growing institutional pressure, as evidenced by the latest CME Commitment of Traders Report (COT) which shows that, as of 25/06/2019, the leverage funds category has increased its short positions to a record high of 3,246 vs longs at 3,093. The other reportable category is also overwhelmingly bearish, with shorts at 1,967 vs longs at 490. As pointed out in the past few months, this trend has been in place for some time and comes in spite of the rising market capitalization of digital assets, as well as the expected introduction of physically settled futures and other various institutionally ready products. It is, of course, worth pointing out that other platforms that provide futures trading do not offer a similar breakdown of market positioning and, as such, this is not a representation of the entire market structure. Still, given the unresolved state of affairs between Bitfinex and Tether vs NYAG, the cautious stance is not exactly unexpected. As a reminder, the NYAG has until July 8 to file a response after Bitfinex filed a motion to dismiss the proceeding and the judge scheduled a hearing on the motion to dismiss for July 29.
Looking elsewhere, Ethereum transactions are at their highest in over a year, surpassing the 1mln transactions per day threshold late last week (as a reminder the metric peaked at around 1.3 million in January 2018). It is worth pointing out that Diar reported earlier this year that Ethereum volumes on decentralized applications (DApps) registered a new high in April with 776,000 ETH transacted. In spite of this, the amount of ETH locked in the DeFi superstar that is MakerDAO remains steady at 1.42% and the collateralization ratio has also fallen to below 500% level. As such, it is worth keeping an eye on whether there is an acceleration of outflows and how that impacts other DeFi platforms.
As a reminder, the first stage of the Ethereum network’s transition to Ethereum 2.0 is expected to take place on January 3, 2020. Phase zero is the name of the first transition stage of the Ethereum network from a proof-of-work (PoW) to a proof-of-stake (PoS) consensus algorithm, which would transfer the block validation function from miners to special network validators. Reportedly, one Ethereum community member is about to begin what one might call a “friendly fork” of the Ethereum blockchain. Called “Alternateth,” James Hancock, project team lead at Ethereum start-up ETHSignals, will act as “a sister chain” to Ethereum validating ideas and proof-of-concepts before adoption on the main chain. The goal is to initiate the split in two months’ time.
Finally, speaking to the Financial Times, chief of the Bank for International Settlements (BIS), Agustin Carstens said that BIS – which acts like a central bank for central banks – is supporting global central banks’ efforts to research and develop digital currencies based on national fiat currencies. Specifically, he pointed out that a number of central banks are engaged in such work and “we are working on it, supporting them.” Furthermore, the arrival of such products might be just around the corner if there is clear evidence of demand from the public.
Thank you for reading,
The BeQuant’s Analytics team