Dawn of a New Era for Crypto Exchanges

Market Recap

Bitcoin price virtually unchanged this week, a consolidation of triangle flag is formed and due to provide some direction next week. At the time of writing (HK time, Monday 2 am), BTC last traded at $10,600 down ~3% from last week close. BSV underperformed other major coins, down -6.36% for the week. ETH which has been suffering lately due to pressure exerted by the cooling down of DEFI hype, is showing an annual negative (-9.47%) funding rate for the week. However, TVL in the DEFI space continue to increase, Uniswap became the first platform to exceed 2B of TVL last week while total TVL surpassed 10B [Figure 1].

[Figure 1: Total Value Locked in DeFi]

On Thursday, BitMEX, one of the world’s largest cryptocurrency derivatives exchanges, was charged with illegally operating in the U.S. and evading rules designed to stop money laundering and violating the federal Bank Secrecy Act. While BitMEX isn’t formally located in the U.S., CFTC claims that the company both seeks U.S. customers and performs a significant chunk of its business in the U.S. For years, BitMEX has been fighting off lawsuits, and the CFTC is merely the latest in a series of legal lawsuits aimed at the firm. Though a lot of users believe that the US overreach has happened repeatedly in the past and has not stopped any bull runs, this move unto BitMEX is unprecedented, and there has not been active as aggressive and broad as this. Data from Arcane Research shows that open interest on Bitmex’s bitcoin derivatives market touched a new low of 45,122 BTC on October 1. The figure represents a 16% drop since the CFTC announced charges against Bitmex. Meanwhile, Coinmetrics data shows that during the same period, a total of 37,000 BTC ($387M) was moved out of Bitmex as investors panicking sought to secure their funds. Coinmetrics also adds that Binance and Gemini together captured over 1/3 of the Bitmex withdrawals.

(Oct 05, 2020 Top 5 Crypto KPI)

What is Happening?

On the Macro side, US Stocks brushed off the uncertainties around the economic recovery and finished the week higher on hopes that Congress will reach a deal on another coronavirus-relief bill. Attention turned back to the virus and its effects after news that President Trump and First Lady Melania Trump have both tested positive for COVID-19 and that they will be going into quarantine. On the economic front, the U.S. economy added 661,000 jobs, marking a slowdown in the pace of job gains, but the unemployment rate came in better than expected at 7.9%. We believe that the economic recovery is entering a slower phase, but a gradual improvement in the labor market, along with low interest rates and fiscal stimulus, should provide support.

Chinese stocks rose slightly in a holiday-shortened week, lifted by several economic readings showing that the recovery was on track, but ended September with the biggest monthly loss since May 2019. Technology shares outperformed, and Shanghai’s tech-focused STAR 50 Index rose 4.0% ahead of the initial public offering of Chinese fintech company Ant Group, which could raise up to USD 30 billion in a Hong Kong-Shanghai dual listing set to happen in the coming weeks.

U.S. president Donald Trump tested positive for the novel-coronavirus on Friday morning. Shortly before the news broke, the U.S. Navy’s doomsday planes launched on both American coasts. It could be no accident that E-6s doomsday planes were airborne over both coasts in the minutes before Trump’s announcement that he was infected.

Conclusion

Heading into November US Presidential election month, recent global events and the extreme Democrats/Republican political divide in the US should provide ample opportunities to the trading community.

Those who cannot remember the past are condemned to repeat it. Over the years the cryptocurrency market has endured many negative regulatory actions enacted by governments across the world. However, Bitcoin has always managed to recover strongly from each of these episodes. While the recent charges against BitMEX may have short-term bearish implications, in the long run it may just be another drop of water into the ocean .

Good Luck!