Trader View 22 January 2020
Happy new year. May the year of the rat bring nothing but nosebleed bitcoin prices, rockbottom network hash rates and more commas in your bank account. Having said, expect to see more KYC/AML/CTF directives implemented, specifically in the EU as their 5th Anti-Money Laundering Directive (5AMLD) came into effect 10 January 2020.
Plenty of wins to start the year: Christine Lagarde has continued to hold a benign view of crypto, specifically CBDCs; The People’s Bank of China announced completion of private key management regulations and meaningful progress on the bank’s CBDC; UKs FCA takes the mantel in policing AML/CTF requirements for crypto outfits; Binance continued the breakneck pace of adding fiat on-ramps with added AUD & GBP and the much anticipated CME bitcoin options saw 55 contracts (275 BTC) print on debut and construed a success. I find it difficult to see how anyone other than investors from traditional finance will opt to trade CMEs crypto products given the wide tracking error, inefficient deployment of capital (overcollateralized positions) and most importantly, a non-existent market over the weekends. Yeah you read it right. They are not open for business Saturday & Sunday. CME Futures open interest of $225mn may be tiddlywinks compared to the likes of Bitmex, Huobi or OkEx but all things considered, it indeed strikes me as a significant number and if anything, the pace of uptick in open interest should definitely be taken into consideration.
It has been repeatedly shown that geopolitical uncertainty alone is enough to stoke significant demand for Bitcoin and the Americans seem to have no interest in deviating from continuing to wreck havoc in the homes of others. Assassination of other sovereign #2’s has been hailed as a “victory” the killing of innocents “inevitable in safeguarding her oil interests” all the while as they continue to make friends deterring potential participants from visiting any crypto conferences held by North Korea. Plenty of soap operas to spring out from them which will inevitably Spurr more demand for digital gold.
The hash rate of Bitcoin has broken through the 111 EH peak network hash rate coming into the year as it continues to test and breach 115 EH. Estimates range between 30~40% of the total hash power being derived from S9s which are less than half as efficient as the newest and greatest. The latest uptick coincides with their releases and does imply more players are willing to stay in the game — and grow their presence.
Zaibatsu’s SBI Holdings and GMO Internet Inc. are the latest heavyweights to try their luck in the mining business through Northen Data (NB2 GR) subsidiary Whinstone which announced aspirations to build a 1 GW farm ramped up by the end of the year. Uzbekistan is also joining the gravy train as they announce a National Mining Pool for Bitcoin in which miners will enjoy preferential electricity tariff rates.
Separately, interesting to see both volumes and hash rate have been sustained at elevated levels that came about as Faketoshi came up empty handed despite his mystery package arriving. All addresses, no private keys… inline with expectations.
Taking a page straight out of Ben Lawsky’s playbook, former CFTC Chairman Chris Giancarlo has tied up with his lieutenant/former director of LabCFTC Daniel Gorfine in launching the Digital Dollar Initiative. The offering itself joins the myriad of USD backed stable coins but the significance lies in the actors. Former Chairman has been a proponent advocating the regulation of crypto and has shared his opinion that Ethereum is a commodity and futures trading of $ETH would materialize. Some turf wars for sure between the SEC and the CFTC as to which organization’s purview crypto falls under but surely crypto dad wouldn’t be doing this if he figured we were facing a brick wall? Whether former Bakkt CEO Kelly Loeffler’s appointment as a Georgian Senator and more importantly, as a member of the Senate Agriculture Committee (which overseas the CFTC) will help the crypto cause remains to be seen. His successor Heath Tarbert has, for now, reiterated the regulators view that both BTC & ETH are commodities and therefore fall under his purview.
Separately, Rep. Suzan DelBene convinced 3 other lawmakers to co-sign a bitpartisan House Bill aimed to remove sub-$200 crypto transactions accumulating under the gross income count essentially removing tax obligations for transactions falling under the de minimus threshold.
The W80.3bn ($68.9mn) tax bill Korea’s National Tax Service invoiced to Bithumb end-2019 was nothing short of WTF. According to majority shareholder Vidente (121800 KQ), the NTS bill also had them on the hook to fork up income tax payments for foreigners on their platform, not to mention that they hadn’t even figured out how to classify the nascent assets. They’ve made some progress on the latter with by requesting crypto-gains be classified as “other income” ruling out the likelihood of crypto being designated as an asset in any shape or form and if your “other income” exceeds W3mn annually, it’ll join the tally in your income and be subject to a maximum tax rate of 42%. I’ll gladly pay my exorbitant taxes said no thrifty investor ever. Expect Koreans to seek offshore trading platforms to avoid the tight noose the FSC has on the domestic trading platforms a’la Japanese HNWs. If anything, the three-day delay that all the Korean exchanges are imposing on crypto withdrawals has essentially killed the Kimchi premium which had stooped as low as -6%. No chance the 4th Industrial Revolution Commission’s plea to permit crypto derivatives gets any love.
Earlier this week India’s Supreme Court surprised by explicitly saying that they had not prohibited Virtual Currencies. The statement works nicely for clickbait but clearly not true as at least two exchanges have shuttered due to the inability to access fiat payment rails. Whether Binance’s acquisition of WariZ changes that remains to be seen. Elsewhere Capital Markets Board of Turkey is reportedly developing a guideline to observe, audit and regulate crypto; Qatar Financial Centre Regulatory Authority has banned from providing or facilitating crypto exchanges until further notice; Malaysia’s Securities Commission has put into effect Capital Markets and Services Prescription of Securities, Digitsal Currency & Digital Token Order 2019
The SEC is still after Telegram as they continue their overreach into the space. A win for the Durov brothers as the District court for Southern District of New York has ruled they do not need to reveal how the $1.8bn raise was spent.
Gangbuster earnings from Argo Blockchain (ARB LN) reporting a top-line figure for 2019 reflecting YoY growth in excess of an eleven-fold increase on 52% mining margins which were actually narrower vs. 2018 because of “softening Bitcoin price”;
Travala reported a 33.5% MoM growth in December revenue by partnering with Booking.com of which more than 60% of payment has made with crypto.
- Grayscale becomes the first company to file quarterly reports to the SEC.
- Illinois legalizes smart contracts enacting the Blockchain Technology Act.
- Kraken acquires BitTrade, Australia’s oldest crypto-exchange.
- Silvergate Bank launches SEN Leverage; a leveraged Bitcoin trading platform with BitStamp.
- Kadena. JP Morgan’s public shared PoW layer1 blockchain launched 15th Jan.
- Gemini launches Nakamoto Insurance providing their custody solution a $200mn insurance coverage.
- Deribit to utilize Trading Technologies trading tools. Separately the co & KyberSwap leave the EU as 5AMLD comes into effect.
- Ripple ($XRP) +0.1% Bitpay adds support for XRP
- 5% of US-Mexico remittances go through crypto as per Bitso
- CabbageTech CEO Patrick McDonnell sentenced to 33 months + $225,000 fine for victims
- Blockchain Terminal con artist Boaz Manor faces criminal charges.
May the trend be your friend… Happy Trading!