It seems speculation is the best anyone can offer whether looking at either crypto or traditional markets these days. As per the heads up we mentioned in last week’s roundup, Fidelity made headlines early in the week, releasing their institutional market outlook. One of their key indicators for a bullish market was a significant drop in concern over volatility as a barrier to entry. Admittedly, this sentiment was recorded before all the madness in March kicked off.
Here’s our weekly roundup of the industry news and big reads.
JPMorgan Says Bitcoin Passed its ‘First Real Stress Test’ during March’s Global Economic Turmoil
Bitcoin successfully passed its “first real stress test” during March’s global economic turmoil caused by the coronavirus (COVID-19) pandemic, according to JPMorgan strategists.
In the report published last week, strategists at the bank led by Joshua Younger and Nikolaos Panigirtzoglou, said that bitcoin rarely deviated from its intrinsic value or mining cost in the past few months, and outperformed other traditional asset classes, proving its resilience.
There was also little sign of a flight to liquidity within the cryptocurrency market, and the market structure was “more resilient” than forex, equities, treasuries, and gold, according to the strategists.
Bitcoin saw one of the “most severe” drops in liquidity around the peak of the crisis in March, “but that disruption was cured much faster than other asset classes. At this point, bitcoin market depth is above its 1-year trailing average, while liquidity in more traditional asset classes has yet to recover,” they added.
Custody Battle Pits Institutional Boomers against Crypto Upstarts
This interesting review last week of recent developments in the crypto custody space looks at the rampant building and acquisition moves seen in recent times shows a scramble to define the business model for crypto market infrastructure going forward.
While some players are trying to adapt traditional structures for crypto markets, on the grounds that investors expect a certain level of service and reassurance, others are working to break the centralised mould and create systems that in theory are more robust.
Ether More Like ‘Digital Tungsten’
Two crypto fund managers say Ether (ETH) is neither a worthy asset for investors nor a great store of value. According to a report last week by Steven McClurg and Leah Wald of Exponential Investments, Ether is a “risk-on asset” and not a reliable investment as many in the crypto community believe.
Ethereum Options Open Interest Soars 315% — Are Institutions Bullish?
A good indicator of institutional participation in the space could be the open interest reported on ETH options, which have soared 300+%. Deribit owns almost all of this market, and their June contract expires on the 26th, which could have some interesting repercussions. On the subject of Derbit, in a series of tweets, Michael Arrington unpicks the Deribit investments happening behind the scenes.
Driven by Financial Institutions, Stablecoin Acceptance Turns a Corner
This year is proving to be an exciting time for stablecoins as interest among financial institutions picks up speed. Wisdomtree, a regulated money manager, has made plans to launch a stablecoin as an extension of its business in exchange-traded funds and IBM, State Street, JPMorgan Chase and Wells Fargo have all been exploring the opportunities provided by stablecoins. It’s these institutions that will drive mass adoption.
Stablecoins also got a mention in last week’s JPMorgan report. The strategists said stablecoins such as Tether (USDT) and USD Coin (USDC), emerged largely “unscathed” from March’s global economic turmoil.
“These tokens were relatively well behaved—though daily volatility is much higher than one would want from a truly managed exchange rate, it did not rise appreciably either in March. In that sense, their backing held through the most acute phases of the crisis.”
Paulo Ardoino: Managing the Growth of Tether
Paolo Ardoino, CTO of Tether and Bitfinex, joins On the Brink’s Nic Carter to unpack how they run the system and gives an update on the growth of capitalisation of Tether, now the third largest cryptocurrency.
Asset Manager Whilshire Phoenix Files to Launch New Bitcoin Investment Trust
Wilshire Phoenix, an investment firm that provides multiple services including advisor and asset management, has filed an S-1 registration statement with the US Securities and Exchange Commission for a publicly traded Bitcoin Fund. Wilshire Phoenix will be working with Fidelity Digital Assets as its custodian. Broadridge Financial Solutions and UMB Funds are also reportedly involved in the initiative, according to the filing.
Coinscrum Markets Podcast
Last week we joined Coinscrum Markets alongside Bitstamp’s Miha Grcar to share insights on Bitstamp’s recent GBP listing and how banking relationships have changed in the crypto ecosystem.