The first Crypto Long & Short of 2021 has a different format: instead of the usual article, I asked some industry analysts – from Kaiko, IntoTheBlock, skew.com and Arcane Crypto – to share their favorite graphics with you. The depth and quality of the metrics available to market watchers has grown by leaps and bounds this year, and the work of these analysts and others goes a long way in helping investors not only better understand the cryptographic ecosystem, but also to appreciate how different and fascinating the assets and their markets are. Click on the links below to learn more about the work of these analysts and the data they offer.
Clara Medalie, Kaiko Business Development and Strategy
The March market crash will go down in history as one of the sharpest and fastest sales that have ever swept the cryptocurrency markets. Over the course of an hour, the price of bitcoin plummeted thousands of dollars and the liquidity of the order book practically evaporated. This chart shows the sum of all bids and orders placed in Coinbase’s BTC-USD order book before, during and after the first price crash. We can see that when the crash started around 10:30 am, the number of orders around midprice plummeted, forcing a liquidity crisis that perpetuated the sharp drop in price.
This chart is one of my favorites because it demonstrates the important role that market makers play in creating and maintaining liquidity in the cryptocurrency markets. Ultimately, the March crash proved that the price of an asset is often less a reflection of “true value at a point in time assigned by the market-based price discovery process” and more of a feedback loop product relentlessly triggered by automatic settlements and the depth of the order book decimated. As the cryptocurrency markets mature and the liquidity of the order book improves, we can expect the magnitude and frequency of these price drops to decrease.
Lucas Outumuro, senior analyst at IntoTheBlock
IntoTheBlock categorizes chain transfers of more than $ 100,000 as “major transactions”. The aggregate volume in large transactions serves as a proxy for the transaction activities of institutional investors and individuals with high net worth.
The large volume of transactions for Bitcoin grew considerably in 2020, along with institutional interest. Comparing the average volume of large transactions on the Bitcoin blockchain for December 2020 compared to December 2019, we note that it has more than quadrupled from an average of $ 7 billion per day to more than $ 30 billion.
Emmanuel Goh, CEO of skew.com
In 2020, institutions finally adopted bitcoin, but not always in the way one would expect. For example, sophisticated investors, such as hedge funds, have sought to capture spreads by observing the inefficiencies of this nascent market. This translated, in particular, into a leveraged fund positioning of CME bitcoin futures, making record new sales almost weekly in the last quarter of 2020.
Bendik Norheim Schei, head of research at Arcane Crypto
The DeFi sector saw moderate adoption during the first half of the year, with loan protocols dominating the space. At the time, the total amount blocked at DeFi was relatively stable, mostly ranging between $ 700 million and $ 1 billion. Then, on June 16, Compound launched its governance token. Interest in the sector has exploded (literally), as productive agriculture has attracted many new entrants to space.
- The total value blocked at DeFi increased from $ 670 million to $ 14.5 billion in 2020, an increase of 2100%.
- In December, 1 million unique addresses were affiliated with DeFi, a 10-fold increase over January. Both the lending platforms and the decentralized exchanges (DEXes) had a particularly strong growth this year, while the derivatives platforms had a more moderate (although strong) growth.
2021 forecast: DeFi derivative platforms will experience more substantial growth, with stricter regulations in the centralized derivatives market leading traders to alternative markets.
Does anyone know what’s going on yet?
Instead of trying to recap the annual or even weekly performance in the macro markets (because many will have done it with much more depth and perspective than I do), I will leave you with an incredible summary that you heard from a particularly observant boy when asked on how he would sum up 2020:
“It’s like when you have to cross the road, and look carefully to the right and then to the left, and then you’re hit by a submarine.”
I will, however, share with you our usual graph of relative performances, because, well …
For an insightful summary of Bitcoin market developments in 2020, take a look at my colleague Bradley Keoun’s article.
CHAIN LINKS
Anthony Scaramucci’s SkyBridge Capital has already invested $ 182 million in bitcoin. LIGHT AWAY: The bitcoin fund’s brochure lists increased adoption, lower risk, low interest rates and “unprecedented cash printing” as some of the main reasons for bitcoin’s growing respectability. A quote from the brochure: “Bitcoin is digital gold. It is better to be gold than gold. “
Black stone is looking to hire a vice president to help increase demand for offers related to the company’s cryptography. LIGHT AWAY: The problem here is that BlackRock is planning cryptographic products! This would definitely signal a dominant institutional acceptance – BlackRock is unlikely to take that step unless it has already seen some demand.
Fund Manager VanEck filed an application with the U.S. Securities and Exchange Commission (SEC) for a bitcoin-traded fund. LIGHT AWAY: VanEck previously and unsuccessfully proposed ETFs, withdrawing its most recent application in September 2019. This latest attempt signals that the company believes the environment is more favorable now than in the recent past, and we are likely to see other ETF managers coming up with new ones. proposed in the coming months.
Earlier this week, the Chicago Mercantile Exchange (CME) it was briefly the largest bitcoin futures exchange in open interest, which reached $ 1.66 billion. LIGHT AWAY: This is, in my opinion, the clearest sign that institutional interest in bitcoin is growing. In early 2020, CME bitcoin futures open contracts were in fifth place, well behind BitMEX, OKEx and Huobi. Daily volumes on CME bitcoin futures, however, are well below Asian exchange pairs, which implies less trading and more strategic positioning than on crypto derivative exchanges outside the U.S.
Gazpromneft, the oil subsidiary of Russian natural gas giant Gazprom, has opened a cryptocurrency mining site at one of its Siberian oil drilling sites. LIGHT AWAY: Many threads to pull here: 1) oil and gas producers seeing cryptocurrency mining as a source of diversification; 2) the geographical expansion of crypto-mining activity; 3) Gazprom is a state-owned company, getting involved (albeit indirectly) in cryptocurrency mining.
Canadian augmented reality (AR) company NexTech AR (NTAR) plans to use its treasury funds to buy $ 2 million in bitcoin for “capital diversification”. LIGHT AWAY: This is not as big a bet as MicroStrategy (MSTR) did this year, since this amount is only about 15% of the cash available at the end of the third quarter. The company’s CEO said he sees bitcoin as having more potential for long-term appreciation than simply holding money. We will probably see more ads like this in the coming months.
National Football League player Russell Okung will receive half of its $ 13 million annual salary in bitcoin, through the crypto startup Zap, whose Strike product allows traditional salaries to be converted to bitcoin. LIGHT AWAY: In addition to the high-level advertising this gives bitcoin (and we are likely to see more athletes making crypto-related ads in the coming months), it is also a sign of expanding the product range to a market beyond institutions. According to the CEO of Zap, Strike can now be used as a checking account through partnerships with two banks that have not yet been identified. What’s more, Okung’s advocacy for bitcoin is nothing new – he launched the bitcoinis project that writes and hosts meetings on cryptocurrency – so we can expect to see more public buzz-generating comments next year.
For those of us working in the industry, it has been fun, presumptuously, to observe the number of bitcoin’s statements of failure and imminent death. 99bitcoins.com tracked “obituary” bitcoin, and now it shows that the cynics are weakening. LIGHT AWAY: This is understandable, since bitcoin has withstood some winters and falls in the market. It is also a pity, since a forgotten benefit of criticism is that it forces us to improve our explanations. There is still a lot of education to do; but it seems that there is now more career risk in defaming bitcoin than suggesting that customers invest.
The Ripple Costume: The list of cryptographic platforms discarding XRP due to the SEC lawsuit continues to grow, with Coinbase, Binance US, Genesis, OKCoin, Crypto.com and eToro USA joining them. This week brought a twist to the story when a Coinbase client filed a lawsuit against the exchange for selling XRP as an unregistered security and pocketing the commission.