Bull or Bear

Satori Research
3 min readSep 28, 2020

Market Recap

Bitcoin dipped down to $10,200 first part of the week after facing rejection at $11,000. Price held steady circa $10,700 the rest of the week. Outlook in the near term remains foggy. Bitcoin options expired on Friday, with contracts at a record high in notional value. [Figure 1] Elsewhere, KuCoin platform was hacked with limited impact to the market.

Amid current undecisive market trend, altcoins clocked mixed performances. ETH, XRP, and DOT dropped by single-digit while LINK, BSV and ADA recorded gains of more than 10%. In the DeFi space, most tokens crashed despite the total value locked (“TVL”) surpassing $10 billion. [Figure 2] UNI, the newly released governance token of Uniswap, dropped by 15% even though Uniswap reclaimed the title of the “largest DeFi protocol by TVL”. CRV, token of the fourth largest DeFi platform, nosedived 30%.

[Figure 1: Total BTC Options Open Interest]
[Figure 2: Total Value Locked in DeFi]

U.S. equities closed lower for the fourth consecutive week. Concerns over (1) accelerated COVID-19 infection rates, (2) intensified US-China tensions and (2) election uncertainty continue to brew. Chinese stocks eased in tandem with the global correction. The Shanghai Composite Index dropped 3.6%, its biggest weekly loss since July. There was also positive news from China: a major global bond index, World Government Bond Index (WGBI), would include Chinese bonds starting from October 2021. This inclusion would be an incentive for Beijing to provide better market access to foreign investors. Analysts affirmed this move could attract up to $150 billion of foreign capital inflow into the Chinese treasury bond market providing support to the Yuan in the medium term.

(Sep 28, 2020 Top 5 Crypto KPI)

What is Happening?

The Office of the Comptroller of the Currency (“OCC”), under the U.S. Department of the Treasury, issued another interpretive letter on crypto assets. It announced that national banks and federal savings associations (“FSA”) could hold reserve funds for stablecoin issuers. Over the past year, dollar-backed stablecoin nearly quadrupled by market cap, from ~$5 billion to ~$20 billion. The growth was driven by international demand for dollars and more sophisticated financial tools associated with stablecoins, including CeFi (“Centralized Finance”) and DeFi. In fact, stablecoin issuers have been customers of U.S. banks for years but in an unclear regulatory environment. The guidance would not change much in terms of how they operate but will pave the way for further growth of stablecoin market by adding legitimacy to this asset class. Earlier this year, OCC published another letter allowing national banks and FSAs to provide custody services for crypto businesses that have conducted KYC and due diligence.

In China, Ant Group, the country’s largest digital payment provider, has launched a cross-border trading platform powered by blockchain-backed smart contract, “Trusple”. Trusple has partnered with top international banks, including Citibank, DBS, and Standard Chartered. It aims to help banks and SMEs speed up secure processing and order settlement. China has always been taking the stance in supporting the development of blockchain technology but cracking down on crypto-related activities. However, CCTV and Xinhua News recently reported that cryptocurrency is a top-performing investment in 2020. They also discussed the DeFi hype and how it has contributed to the surge in cryptocurrency prices. The reports have drawn wide attention and sparked speculations of the intentions behind as Chinese state-owned media usually have political agendas.

Conclusion

September has always been a difficult month for cryptocurrencies. Around this time last year, Bitcoin dropped over 20% after the launch of Bakkt. Déjà vu, fast forward to this year, the crypto market also experienced a ~20% retracement but has since rebounded. The jury is still out whether the market will turn bullish or bearish from here. Historically, macro markets tend to be steady until after the announcement of the US Presidential election results. Then followed by massive volatility.

Good Luck!

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