The Bitbuy Brief: Crypto volatility continues!

The Bitbuy Brief

Issue #108

August 6th, 2020

Weekly Market Movement.

Analysis: Crypto volatility continues while BTC remains steady. Ethereum continued to lead the charge with a 22% weekly gain, as DeFi token swaps often requiring ETH have surged in popularity. Spot volumes are at some of their highest levels of 2020.

Big Story Of The Week

It Has Been A Wild Few Weeks In Crypto Trading – Recent  Volatility Gives A Preview Of The New High-Volatility Regime We Seem Likely To Have Entered

  • In a matter of minutes, early Sunday morning, BTC dropped from USD 12,000 to around 10,500, before settling back in the range of 11,000. Prior to the move, BTC had been gradually rising to hit its highest levels since August 2019 which coincided with visible technical resistance. The downswing triggered about USD 1B equivalent of liquidations on crypto-settled derivative platforms. Following these moves, 10-day realized volatility is now +80 and above 1-year realized volatility for the first time since mid-May. While 1-month realized volatility remains at a relatively depressed 50, it is nearly double its level from July 20.

Takeaway: Historical precedent would suggest that this is only the beginning of the volatility spike. One-month and three-month realized volatility are both between 50 and 60 vol, well below 1-year realized volatility at 81. Evidence of leveraged speculation is beginning to show up. USD peer-to-peer borrowing rates on Bitfinex have spiked to consistently above 20% annualized. While this is well above levels seen a few weeks ago, these rates spiked above 50% annualized during the rally in early 2020. That said, the liquidations that occurred on the draw-down over the weekend shows how quickly leverage can be accumulated and wiped out in crypto markets. Caution will continue to be warranted in this emerging high-volatility regime.

Other Weekly Headlines

  • According to a JP Morgan report cited by Bloomberg, investors are looking to alternative assets during the pandemic, with younger investors attracted to BTC and older to gold. The report also notes that millennials are preferring tech stocks while older investors are moving away from equity and into bonds. – link – @Bloomberg
  • Ethereum Classic seems to have suffered a second 51% attack in a few days. The first suspected attack took place over the weekend. Recent analysis from Bitquery, a blockchain data firm, claims that weekend technical issues were in fact a 51% attack. The latest incident has been described as a 51% attack by Binance, which halted ETC withdrawals and deposits. – link – @CoinDesk
  • Barstool Sports president Dave Portnoy has discussed investing in bitcoin as part of his ‘Davey Day Trader Global’ segment on investing and invited the Winklevoss twins to explain the asset to him. Tyler Winklevoss replied, ‘Invitation accepted.’ Portnoy has previously discussed bitcoin, noting last month he is not ‘in on bitcoin.’ Portnoy has 1.7M followers on Twitter and 2.7M on Instagram. His ‘Davey Day Trader Global’ segment has grown in popularity since lockdowns began, with Bloomberg describing him as ‘leading an army of day-traders.’ – link – @Forbes
  • The US’ SEC is looking for a ‘distributed ledger technology (DLT) smart contract analysis tool’ according to a July 30 public solicitation. The tool will become part of the regulator’s ‘efforts to monitor risk, improve compliance and inform Commission policy with regard to digital assets.’ – link – @SAM.Gov
  • Ripple has published second-quarter XRP sales figures. According to the report, Q2 XRP sales totaled $32.55M, compared to  $1.7M in the previous quarter. Ripple noted that it has also been a ‘buyer in the secondary market and may continue to undertake purchases in the future at market prices’ of XRP. – link – @Ripple
  • Huobi Group has announced the launch of Huobi DeFi Labs, an incubator aimed at decentralized finance. According to the announcement Huobi Group, plans to ‘allocate tens of millions of dollars to an initial investment fund, which will be managed by Huobi DeFi Labs’ as part of the effort. – link – @HuobiGroup