President Xi is Pro Blockchain; Bakkt to launch Bitcoin Options; tZERO Set to Tokenize $600 Million in Real Estate
Weekly Market Update 10/31 — Market rips
Weekly Market Recap
Oct 31- Crypto assets ripped ~20% this week, bringing the total crypto market cap to $248bn. The Crescent Crypto Market Index (CCMIX) was up 22%, while BTC increased by 24% over the same period. Every index this week underperformed Bitcoin. With that said, every index is up more than 10%. The CDARK index underperformed all other indices up 11% over the last seven days. The strong move upward follows a period selling down to the mid 7000s in BTC. The bulk of the rally, which occurred last Friday and over the weekend, was one Bitcoin’s best single day performances in its history.
Bitcoin vs. CCMIX vs. CCALT vs. CCDARK vs. CCSMART
Oct 25th — Oct 31st, 2019
Market Index Constituent Performance
Oct 25th — Oct 31st, 2019
- BTC performed at the top of the pack this week, with every constituent ending in the green. Bitcoin was up 24%.
- The CCMIX ended the week slightly below with BTC supported by BCH increasing by 33%. The index was dragged down by ETH, LTC, and XRP.
- CCSMART, CCALT and CCDARK underperformed Bitcoin, generating returns of 13%, 14 %, and 12% respectively.
- XRP faltered lat week down 7.4% but rebounded decently with 8% gains. That said, it was the second-worst performing constituent.
- ETH was the worst performer last week and ended this week in the middle of the pack up around 13%.
- XLM was the worst performer this week with a 5% increase.
- Bitcoin dominance increased to 67.6%, up from around 65% last week.
President Xi Jinping of the People’s Republic of China stated that China needs to “seize the opportunity” afforded by blockchain technology. Xi spoke to committee members on the possible integration of blockchain technology raging from financing business to mass transit and poverty alleviation. Xi explained how “We must take the blockchain as an important breakthrough for independent innovation of core technologies.” No surprise to anyone, Xi said there must be a top-down approach to this adoption, expressing the importance of guidance and regulation. This development is only part of the flurry of information that cam from China this week. Other stories include China wanting party members to pledge loyalty on blockchain, the high likelihood of China issuing a digital currency before Libra, and the Chinese Central Bank calling for commercial bank blockchain adoption.
Why Does This Matter?
Whether or not the 40% Bitcoin price surge was caused by Xi Jinping’s announcement on blockchain is up for debate, but the bottom line is that digital asset sentiment is high and on China’s radar. While in the short-term this had positive price implications for Bitcoin, in the long-run it still remains to be seen. Xi Jinping’s goals are still the same — attain tighter control and surveillance on the Chinese populous. A national digital currency does just that, whereas Bitcoin does not. With all the news flowing from China, it does seem that the U.S is falling behind on innovation and acceptance of cryptocurrency. With that said, it is hard to discern China’s exact motives and future plans for public blockchains. Cryptocurrency is still banned in China, and China’s future policy may only allow for the approved subset of digital assets (which have a high probability of centralized control).
The statements regarding blockchain by China’s president were grandiose, but reiterated the government stance and intention. Two important things to note, in our opinion:
1. The message carried greater weight following closely after Zuckerberg’s appearance in Washington. Our lawmakers showed little understanding and instead of debating the merits of future forms of money, most of the transcript was related to different government officials competing to levy insults at Zuckerberg.
2. China’s endorsement of blockchain is not an endorsement of Bitcoin. A Chinese digital currency would be an excellent surevellance tool and afford the government additional and unprecedented controls, as well as a means to spread their currency internationally.
The rise of social credit scores in China highlights the government’s intention to know everything about their constituents, including how they spend their money, who their friends are, where they travel, etc. Bitcoin is the antithesis of a Chinese digital currency, and the rally as a response affirms the market’s perception.
Here is a link to a longer piece which we liked for some details about Libra, China, and the Bitcoin vs. Blockchain debate
Bakkt announced last Thursday that it plans to launch the first regulated options contracts for bitcoin futures. CEO Kelly Loeffler stated that the contracts were created in response to customer feedback. “We’re committed to bringing trust and utility to digital assets and the options contract is an example of the many products we’re developing for regulated markets,” she wrote. “The Bakkt Bitcoin Options contract will be based on the benchmark Bakkt Monthly Bitcoin Futures contract and represents another important step in developing this asset class for institutional investors, their customers, and investors.” Customers will have the option for either bitcoin or cash-settled options.
Why Does This Matter?
Bakkt joins CME with the plans to launch a regulated bitcoin options contract. Bakkt’s launch was met with tepid volume, however, it has begun to pick up steam during the 40% price surge this weekend. To address this Bakkt is launching a market maker program to boost trading of its contract. Kelly Loeffler stated, “The Exchange believes the new Program will incentivize additional liquidity and volume in the new Bakkt Bitcoin (USD) Monthly Futures Contract.” As stated before, volume on regulated exchanges takes time to develop as there are many existing unregulated exchanges offering similar contracts. The pipeline necessary to utilize these contracts are still being built, and in the meantime, it is bullish to see continued growth and contract diversity in the digital asset regulated sphere. The larger crypto ecosystem is excited for the launch a regulated option market available to US investors. Today, there exists lightly traded offshore options markets as well as some parties engaging in bilateral agreements, i.e. OTC and directly negotiated options. These are clearly inferior products — limited portfolio margin, limited liquid secondary market, counter party risk, obscure pricing, etc. The inception of a regulated option market for onshore institutions will allow for more effective miner hedging, creation of new strategies, and potentially more liquidity in the underlier.
Overstock’s security token platform tZERO and the Tezos Foundation partnered on a project that will tokenize $643 million in planned real estate development. They plan to tokenize portions of properties financed by U.K based Alliance Investments. Rani Zahr, CIO of Alliance Investments, stated “Raising funds through an STO is more efficient, cost-effective, autonomous and democratic than traditional financing. We believe that we are at the forefront of a technological change that can disrupt the current funding paradigm.” The first offering will represent £20 million in equity of a Manchester waterfront development and will take place sometime in Q1 2020. The Tezos protocol will be used to “deploy, transfer and store the digital assets and smart contracts,” which will then be offered for secondary trading on the PRO Securities alternative trading system, an SEC-registered subsidiary of tZERO.
Why Does This Matter?
Tokenization of securities are one of the few areas of digital assets that are not severely hindered by blockchain scaling challenges. The settlement assurances, interoperability, and cost savings are the primary value drivers of STOs. As this space grows, much of the growth hinges on incumbents like Alliance Investments’ progression towards digital assets. This progression is not easy, nor it fit for every company. With that said, this is a highly bullish story for both Tezos and the larger STO ecosystem. It is interesting to note that tZERO and Alliance investment decided ultimately to build on Tezos rather than Ethereum, the more decentralized and battle-tested chain.
Investor Relations Teaminfo@crescentcrypto.com
Crescent Crypto Asset Management
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