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The Hard Fork – Weekly Market Commentary

This Week’s Topics:

1) Institutions rush into BTC; now own 5% of supply
2) Coinbase set to IPO, selects Goldman
3) US announces long awaited wallet regulations


Indices Round-up


TradeBlock Index Asset1 Price ($) 7d∆2
LTX Litecoin 105.27 31.80%
XBX Bitcoin 22,637.36 18.52%
BCX Bitcoin Cash 314.83 17.01%
EOSX EOS 2.99 6.23%
XRX XRP 0.53 5.98%
ETX Ethereum 606.35 4.64%
ECX Ethereum Classic 6.21 3.71%
ZCX Zcash 68.98 3.69%
XLMX Stellar Lumens 0.17 -2.30%
XMRX Monero 144.54 -6.24%
1. Underlying asset sorted in descending order by 7 day price movers.
2. 7 day price movers monitored from 12/14/2020 06:00 ET thru 12/21/2020 06:00 ET.


7 day price movers
Digital currencies posted broad gains on the week during a wild rally. Among our indexed currencies, litecoin traded up the most gaining over 30%. Conversely, monero traded down the most, losing 6%. Bitcoin, the largest by market cap, gained just over 18% on the week to hit a new all-time high. Bitcoin’s price rise came as much anticipated wallet regulations came out as less feared than initially expected. Additionally, three large institutional buyers announced positions in the asset this past week, adding follow-on buying. In early trading this morning, bitcoin pared some gains to trade around $22,700.

Figure 1: Bitcoin price hit new all-time high over $24,000

In traditional markets, US equities ended the week up with the S&P 500 rising nearly 1%. In the bond markets, US treasury yields were flat with the 10-year yielding 0.95%.

Institutions rush into BTC; now own 5% of supply
This past week saw a surge of new institutional buyers into bitcoin. One River and Ruffer Investments were revealed to have accumulated a large stake in bitcoin. One River holds approximately $600 million in bitcoin, executed through Coinbase’s OTC desk, and plans to increase its stake in bitcoin and ether to $1bn in Q1 2021.

Ruffer, after a series of media inquiries, was revealed to hold more than $750 million in bitcoin–2% of the fund’s AUM. Additionally, Michael Saylor’s MicroStrategy completed its $550 million notes offering last week, with the fund being used to buy bitcoin for the company’s treasury reserve. This is the most continuous large block buying by institutional investors ever. Institutions now hold approximately 5% of the current bitcoin supply. In the figure below we diagram the largest institutional bitcoin holders by current market value of their positions.

Figure 2: Largest institutional bitcoin holders


Coinbase set to IPO, selects Goldman
This past week, Coinbase announced that it confidentially submitted a draft registration statement Form S-1 with the US SEC for an Initial Public Offering (IPO). The form is expected to go into effect after the SEC completes its review process. While it was floated that Coinbase would undergo a direct listing, it is now reported by BusinessInsider that Coinbase will select Goldman Sachs to lead the offering.

Goldman Sachs and Morgan Stanley consistently rank near the top of league tables for tech IPOs. DoorDash, which IPO’d last week, selected Goldman Sachs as its lead underwriter while AirBnb, which also IPO’d last week, selected Morgan Stanley and Goldman as its lead underwriters.

The tech IPO market has been red hot with both DoorDash and AirBnb seeing their stock prices soar after initial trading debuts. On the back of this, Coinbase’s IPO could be one of the most sought after offerings of the past few years. At its last valuation, Coinbase was valued at $8 billion, making it one of the most valuable cryptocurrency companies in the world.

US announces long awaited wallet regulations
The cryptocurrency market appears to have digested newly announced regulations quite well, with bitcoin rallying past $24,000 soon after regulations were revealed. Upcoming regs had weighed heavily on the space in the past weeks with the price of bitcoin declining to around $16,000 on Thanksgiving after Coinbase CEO Brian Armstrong raised a multitude of concerns around wallet regulations on Twitter.

The new rules, which are put forth by finCEN and the US treasury would require, “banks and money service businesses (“MSBs”) to submit reports, keep records, and verify the identity of customers in relation to transactions involving convertible virtual currency or digital assets with legal tender status held in unhosted wallets”. While it was feared that new rules would require individuals to KYC any private wallets with which they interact with, a task that would be nearly impossible to do, the new rules seem mostly geared at centralized institutions themselves.

The proposed regulations appear smaller in scope than initially expected as they would just require centralized exchanges and lending businesses to KYC individual wallets that interact with each platform. While this would be quite burdensome and limit many direct transfers, such as those from a centralized exchange to a decentralized exchange, it would not limit these transfers from happening entirely.

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