Zug July 30th 2019

The S&P 500 trades firmly above 3,000 and the stock market experienced another version of crypto-style hype in the form of Beyond Meat (BYND), a meat substitute producer whose stock price has risen to almost 10 times the IPO price in just under three months – reminiscent of the 2017 crypto altcoin market. In the meantime, Bitcoin has given back some of the recent gains and was range-trading between $9k and $11k.

The Bitcoin price has seen some sharp moves since our last report on July 15, [1] most notably a 9.6% rise within one hour on July 18 after a second test of support in the low $9k area – just above the CME Bitcoin Futures gap lurking between $8.5k and $9k. The bullish impulsion ultimately failed around $11k, from where the price continued to head lower. After a brief consolidation around $9.7k to $10.2k, price rapidly fell from $10k to $9.5k (-5.7% in one hour) and then inched towards $9.6k, where Bitcoin currently trades.

The total market capitalization of all cryptocurrencies currently sits at $266 billion, with Bitcoin responsible for $171 billion of it. The most valuable altcoins (by market cap) are Ethereum ($23 billion), Ripple ($13 billion), and Litecoin as well as Bitcoin Cash ($5.5 billion each). Altcoins have recently been able to slightly increase their market share, with Bitcoin dominance dropping from 68.6% to 67.2%.

Bakkt Tests Physically Settled Bitcoin Futures
Intercontinental Exchange’s Bakkt has recently announced [2] that the company would conduct initial user acceptance tests on their physically settled Bitcoin futures starting July 22. Both daily and monthly margined futures will be supported, and Bakkt has taken steps to include regulated custody as part of the package. Competitors in the space include LedgerX, ErisX and Seed CX – LedgerX has received its own designated contract market license from the CFTC in June 2019.

The sentiment on the launch of physically settled Bitcoin futures is positive in the cryptocurrency community, even though the launch of cash settled futures in late 2017 marked the top of Bitcoin’s last parabola. The physically settled futures will not only simplify operations for businesses such as mining companies or retail stores accepting Bitcoin, but will also effectively allow the purchase of actual Bitcoin through regulated financial infrastructure. The lack of properly regulated means to buy Bitcoin is often seen as a hurdle for institutional investors – as such, Bakkt’s procedures to ensure the comfort and safety of traditional exchanges (e.g. a $35M risk waterfall by ICE Clear US to minimize counterparty risk) are a welcome addition to the crypto markets.

[1] [22/07/2019]

[2] [15/07/2019]