The Hard Fork – Weekly Market Commentary

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This Week’s Topics:
1) Fidelity Digital Assets’ platform goes live
2) BlockFi introduces 6% interest on digital currencies
3) Bitmex bitcoin futures volume outpaces Cboe, trails CME

 

Indices Round-Up

TradeBlock Index Asset1 Price ($) 7d∆2
LTX Litecoin 47.89 9.78%
XLMX Stellar Lumens 0.09 7.90%
EOSX EOS 3.67 4.95%
XBX Bitcoin 3,890.21 2.63%
ETX Ethereum 134.66 2.61%
XMRX Monero 49.01 2.21%
XRX XRP 0.31 0.94%
BCX Bitcoin Cash 130.52 0.62%
ECX Ethereum Classix 4.22 0.36%
ZCX Zcash 49.85 -1.12%
1. Underlying asset sorted in descending order by 7 day price movers.
2. 7 day price movers monitored from 03/03/2019 17:00 UTC thru 03/10/2019 16:00 UTC.

7 day price movers

Digital currencies traded modestly higher on the week. Among our indexed assets, the largest price risers were LTX and XLMX, while ZCX was the only index which traded down, shedding 1.12% on the week. Bitcoin, the largest digital currency by market cap, rose a modest 2.63% despite positive comments from Twitter CEO Jack Dorsey this past week. On the podcast, Tales from the Crypt, Dorsey said he has been buying $10,000 in bitcoin each week, maxing out the weekly limit on Square’s Cash app.

Square Inc. is a payment platform developer co-founded by Jack Dorsey that allows for the purchase of bitcoin. In Square’s Q4 2018 shareholder letter, the firm noted that more than $50 million in revenue came from bitcoin purchases on its Cash app (21% gain QoQ).

 

Fidelity Digital Assets platform goes live

Fidelity Digital Assets’ long-anticipated platform is now live, servicing institutional client needs on a select basis. In a media interview this past week, Head of Digital Assets at Fidelity, Tom Jessop, unveiled how the firm has been servicing hedge funds, endowments, pensions, and other institutional investors with trading and custody needs. While the platform is now live, Jessop noted that Fidelity is still working through various aspects of the platform.

Despite the bear market in digital currency prices, Tom Jessop noted that institutional investment firms have not lost interest in the still nascent space. To the contrary, Jessop noted that: “If anything, the (funds) are as encouraged now as they were when prices were higher.”

Digital currency investors and enthusiasts have long anticipated the flow of institutional capital into the space. This expectation comes one step closer to fruition with a suite of product offerings from Fidelity. One of the largest firms to launch a platform within the digital currency ecosystem, Fidelity consistently ranks within the top five largest asset managers in the world.

 

BlockFi introduces 6% interest on digital currencies

On March 4th, 2019 BlockFi announced the launch of the BlockFi Interest Account (BIA). BlockFi is one of few firms in the digital currency space that has launched a product which offers an interest rate on digital currencies. At product launch, the BIA offers a 6% annualized percentage rate on bitcoin and ether. While those are the only two currencies the BIA currently supports, the firm may increase the number of supported digital currencies over time.

The launch of an interest bearing account gives digital currency market participants access to financial products that are common in the traditional financial ecosystem. At time of writing, 12 month certificates of deposit (CDs) offer savings interest rates ranging from 0.65%-1.40%. While the BIA offers an attractive yield relative to current traditional interest bearing assets, the BIA does not come without risks, which include: custody, lending, and other market risks associated with BlockFi and its lending businesses.

 

Bitmex bitcoin futures volume outpaces Cboe, trails CME

Bitcoin futures trading volumes at Bitmex and the Chicago Mercantile Exchange (CME), on average, experienced increased demand as the new year has progressed. While the Chicago Board Options Exchange (Cboe) has seen reduced bitcoin futures trading volume year-to-date (YTD), Bitmex and the CME have recorded significantly higher volume than their peer.

We tracked notional bitcoin futures trading volume across Bitmex, the CME, and Cboe YTD. Over this time period, the CME recorded the highest volume, followed by Bitmex. In the below figure, the Bitmex volumes only include notional volume for the exchange’s XBT futures products and does not include volume for perpetual swaps, or Bitmex’ upside/downside profit contracts.

In a previous report, we diagrammed how notional bitcoin trading volumes have changed at the CME and Cboe since inception of their respective bitcoin futures offering.

Figure 1: Bitcoin Notional Futures Trading Volume YTD

Bitcoin Notional Future Trading Volume

Data for chart sourced from Bitmex, thew CME and Cboe

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