Institutional Digital Asset Newsletter - May 2020

Newsletters May 24, 2020

Once a month, we summarize the best crypto news for Institutional Investors

In this monthly newsletter we plan to answer questions institutional investors may have about Digital Assets. We won’t offer investment advice, but we hope to make it easier for you to develop your own strategy, and to keep abreast of the fast-paced evolution of an emerging asset class.
In each newsletter you’ll get a smattering of links from Trakx and from other reputable sources that reveal trends and developments for our sector. We’ll also fill you in on movements of people and companies (we might even mention you!).
We hope that you find this useful. Constructive criticism is welcome, feedback is valued, and praise will just make our day. Please send comments to [email protected]

INVESTING

Bitcoin Halving: Mission Accomplished

Bitcoin’s halving, a once-every-four-year event that cuts the reward miners receive for each new coin they create in half, was executed without a hitch last week, on May 12th. If the trend that followed its first two halvings continues, its price could soar to all-time highs in the next year.

On the supply side, the halving magnifies the importance of cost efficiency for miners. With the return for mining each bitcoin becoming suddenly less enticing, the average breakeven price for miners could be at least $10,000, not far from where the price of bitcoin is now. If inefficient miners need to liquidate their rewards to stay afloat, it could flood the market with supply and threaten even more miners with a price decline.

$8.8 Trillion Traded in Cryptocurrency Spot and Futures Markets in Q1

The combined total trading volume in the cryptocurrency spot and futures markets amounted to approximately $8.8 trillion in Q1 2020, according to two TokenInsight reports. The amounts represent a massive 314% quarterly increase for futures trading and 104% for spot trading.

The total spot trading volume of the entire market in this quarter was 6.6 trillion US dollars, an increase of 104% quarterly.

Bitcoin spot trading volume
Bitcoin spot trading volume

In Q1 2020, the total futures trading volume in the industry reached $2.1048 trillion, an increase of 314% from 2019 four quarters’ average.

Crypto futures trading volume
Cryptocurrency futures trading volume

“Except for a slight decline in 2019 Q4, the trading volume of cryptocurrency futures has grown steadily in 2019; the total market turnover in 2020 Q1 is roughly 8x than 2019 Q1” the report emphasizes. Three major cryptocurrency futures contracts — BTC, ETH, and EOS — accounted for more than 90% of the total crypto derivatives market turnover in Q1 2020. BTC alone accounted for 78%.

The report also highlights that there are six exchanges with a total futures turnover exceeding $100 billion in Q1 2020: Huobi DM, Okex, Bitmex, Binance Futures, Bitget, and Bybit. Only Huobi DM and Okex had volumes above $400 billion. Meanwhile, “Fully regulated exchanges have not developed significantly, with CME and Bakkt trading volumes of US$6.83 billion and US$1.51 billion, respectively,” the report concludes.

Spike in open interest on BTC options

Bitcoin interest seems to be on the rise in some ways, and today, analysts are looking at volume of Bitcoin options as an indicator.

Jack Martin at Cointelegraph reports on how open interest on options from CME group may be a sign of Bitcoin health.

“Open interest on Chicago Mercantile Exchange Bitcoin options has skyrocketed over the past few days, to hit $142 million as of May 15,” Martin writes. “According to data from market analytics company, Skew, this represents a gain of over 1000% from just $12 million of open interest at the end of April.”

NEW ASSET OVERVIEW

Paxos Gold (PAXG)

PAX Gold is an asset-backed digital token, each representing one fine troy ounce of London Good Delivery gold stored in professional vault facilities in London. PAX Gold customers own the underlying physical gold, while also benefiting from the speed and mobility of a digital asset. Because PAX Gold represents physical gold, its value is tied directly to the real-time market value of gold. PAX Gold is built as an Ethereum token, following the ERC-20 protocol, so that it is easy to integrate with exchanges, wallets, lending platforms and other crypto products. Rather than the usual storage fees that come with gold bars, Paxos charges negligible fees for on-chain transactions and at the point of token creation or destruction on Paxos.com.

PLATFORM

REGULATION

Telegram shuts down its cryptocurrency operation

After years of drama with the SEC, Telegram is calling it quits on its crypto-focused subsidiary, Telegram Open Network (TON).

Last October, the SEC ordered Telegram to halt sales of its cryptocurrency (called Gram) after it failed to register an early sale of $1.7 billion in tokens prior to launching the network. The funds were raised in a series of what Telegram billed as pre-ICO offerings back in 2018, though the company ended up canceling the much-hyped ICO due (in part) to increased SEC scrutiny.

PEOPLE MOVE

Gary Rebibo

CMO @Trakx