30 August 2021
Nothing much has changed in the last week — broader crypto market continues to hover above $2tn market cap, while BTC and ETH are trading sideways. Market continues to be idiosyncratic, with the moon ($LUNA, +25%) and the sun ($SOL, +34%) outperforming, with reflexive relationship between TVL and token value. Satori was more interested in $RAY (leading DEX on the Solana blockchain), as large price differences were observed across platforms on Friday (20% higher on Binance vs. FTX); we turned bullish upon the observation. Move higher in $RAY (+40% since Friday) led $SOL (+15%) and other DEXs higher ($SRM +15%; $MNGO +35%). Despite the move higher, we remain med- to long-term bullish on Solana, given increasing number of developers (and thus the number of upcoming projects); we are also constructive in the short-term price action of $SOL (vs. rest of the crypto) given major launches this week (Aurory NFT; Mango v3). Avalanche, on the other hand, appears to be slowing down in terms of deposits into the Avalance Bridge (Chart 1), but the smooth bridge experience and increasing number of protocols and liquidity mining programme hint that AVAX winter has room to go. Bubble indicators, such as Kimchi premium (Chart 2), Grayscale premium (Chart 3), and funding rate (Chart 4) remain stable.
On the industry front, it was the same old — MicroStrategy bought 3,907 more bitcoin for US$ 177mio, bringing their total holdings to 108,992 BTC (@ average price of $26,769); FTX snagged up another sports venue, acquiring naming rights for California Memorial Stadium (football stadium for UC Berkeley), on top of baseball (MLB partnership), basketball (Miami Heat arena), and e-Sports (TSM Leage of Legends team). One rather concerning development was Canadian regulator’s decision to bar registered crypto platforms from trading Tether; USDT was the sole digital asset named in an appendix marked “Prohibted Crypto Assets”. Although affected exchanges are small/structurally insignificant, this could set an unfortunate precedent in an environment where regulatory scrutiny is heightened.
On the macro side, main risk event for last week was Powell’s speech in Jackson Hole, where the Fed Chair acknowledged ‘further progress’, but continued to emphasize optionality. With less-hawkish-than-expected Powell, risk assets traded favourably. Dovish remarks set as greenlight for another set of ATH in equities, USD underperformed, and Treasuries were bought across all tenors. Although a Q4 taper announcement is likely, timing of the announcement remains conditional on ‘data and further progress’, and with perceived increasing data-dependence, market will closely be watching this week’s NFP, (9/3, Est. 728k) in addition to ISMs (9/2, Est. 58.5 for ISM Mfg PMI Aug).
What is Happening?
eToro’s 2Q results show crypto income soared by 23x YoY. Crypto trades were responsible for 73% of the commissions charged by the platform in the period (vs. just 7% in Q2’20), amounting to ~US$ 264mio. Other noteworthy points were: 1. BTC accounted for just 7% of crypto commissions, 2. eToro would be continuing to expand their crypto offerings, including increasing the number of tradeable tokens and staking services (for ETH, ADA, TRX). This is largely in line with Robinhood’s Q2 results we covered last week, in which crypto trading revenue increased by 4,282% YoY (US$ 5mio to US$ 233mio).
In comparison to eToro, Robinhood, and Square, that have decided to embrace crypto, banking sector continues to be slow to the game; Citigroup is waiting on regulatory approval to begin trading CME Bitcoin Futures. Big banks and organisations have been encumbered by internal and regulatory hurdles in offering crypto-related services, enabling crypto-native/friendly funds and institutions to rapidly grow.
Narrative surrounding macro backdrop (Fed to taper slowly, risk assets performing), institutions (Visa aping into CryptoPunks, growing acceptance of crypto as an asset class, and potentially future of finance/metaverse), developments in the crypto space (new dApps and solutions at breakneck pace) and price action all appear supportive of crypto. So far, this round of crypto move higher has rewarded cultural aficionados (JPEG-season) the most, followed by Layer 1s that have been building quality products ($SOL, $LUNA) and/or strong retail following ($ADA). With new projects popping up everyday, we are tirelessly monitoring the market for pockets of opportunity.