The contango (Bitcoin futures curve) has been nothing short of a god send for miners and a curse for specs. However, just like in Dec’17, it remains to be seen how long the overstretched levels will last. The current dynamic is such that not only are miners able to capitalize on the parabolic advance in prices but they can also lock in prices for the next 3-6 months at a premium over the spot market. This premium ranged from $400-900 at the end of last week before coming down to a mere $300 over the weekend. Given that the CME futures are not traded over the weekend, that is traditionally when more sensitive price action takes place. Nonetheless, the dramatic nature of the collapse in contango delta over the weekend ought to serve as a reminder of the fragile nature of the recent rally.
Looking elsewhere, apart from Litecoin’s impending block reward halving event, where the reward will decrease from 25 to 12.5 coins, another event worth keeping an eye on is Ethereum Classic’s hard fork. The fact that the broader market has softened so fast during a key time for Litecoin is somewhat unfortunate and, looking at month-to-date performance, LTC is down 27%, which isn’t too far behind the likes of Bitcoin Cash and EOS that are down 29.06%, 26.56%. As such, there appears to be plenty of room for more downside especially heading into the final days before the event.
In terms of Ethereum Classic, the Atlantis hard fork is scheduled for September, 17 or at block 8,772,000 on the blockchain. Atlantis, paired with a later upgrade called Agharta, is intended to boost chain interoperability between the Ethereum Classic and Ethereum networks. Starting with a bundle of EIPs activated on the Ethereum blockchain back in 2017, Atlantis is the first step towards ensuring that the migration of decentralized applications (dapps) from either chain is smooth and seamless. Year-to-date, ETC is only up 9.99%, which makes it a good prospect for relative value (RV) plays, even vs Ethereum, given the focus of the planned upgrades on chain interoperability. This is especially the case given Ethereum’s plans to transition away from Proof of Work (PoW) towards Proof of Stake (PoS). Also, the recent dominance of MakerDAO continues to soften, the amount of ETH locked in the credit ecosystem has now fallen below 1.4% and the overall system collateralization ratio is also close to 3-month lows. The risk scenario is that if Ethereum’s price continues to slide, the rising amount of liquidations would put additional pressure on ETH, as the ETH collateral is sold to pay off loans, which would prompt even more liquidations.
In other related news, the Ethereum (ETH) smart contract of 0x (ZRX) decentralized exchange (DEX) protocol has been suspended after a vulnerability has been uncovered in its code, the project’s team announced in a Medium post published on July 13. Per the announcement, third-party security researcher samczsun warned the 0x team about the vulnerability in the exchange smart contract and, after evaluating it, the team suspended the exchange’s contract and the AssetProxy contracts. The vulnerability would have allowed an attacker to fill certain orders with invalid signatures.
Looking elsewhere, as reported by Cointelegraph, Whale Alert — a Twitter account dedicated to reporting large cryptocurrency transactions — noted that 50 million USDT tokens had been transferred from cryptocurrency exchange Poloniex to the Tether Treasury via the Omni protocol on the Bitcoin (BTC) blockchain. The account subsequently reported that the Tether Treasury minted 5 billion USDT tokens on the Tron blockchain, after which it burned them. Then, Tether minted another 50 million USDT on the same chain, burned another 4.5 billion USDT, and finally transferred 50 million Tron-based USDT tokens to a wallet presumably belonging to Poloniex. In a tweet, Tether CTO Paolo Ardoino explained that Tether meant to perform a swap of 50 million Omni-based USDT tokens to the Tron blockchain, but a mistake had been made with the decimals.
Finally, the President of the United States of America, Donald Trump, is no stranger to controversy and his public pressure on the chairman of the Federal Reserve (Fed) is well publicized. Most recently Trump tweeted – “I am not a fan of Bitcoin and other Cryptocurrencies, which are not money, and whose value is highly volatile and based on thin air. Unregulated Crypto Assets can facilitate unlawful behaviour, including drug trade and other illegal activity. Similarly, Facebook Libra’s “virtual currency” will have little standing or dependability. If Facebook and other companies want to become a bank, they must seek a new Banking Charter and become subject to all Banking Regulations, just like other Banks, both National and International. We have only one real currency in the USA, and it is stronger than ever, both dependable and reliable. It is by far the most dominant currency anywhere in the World, and it will always stay that way. It is called the United States Dollar!”
Thank you for reading,
The BeQuant’s Analytics team