Around The Block 8/23

Weakened positive momentum, inconsistency, and mixed signals have enveloped the digital asset realm as we march through the 3rd quarter of 2019, evident by yet another sub $10,000 dip for bitcoin (BTC) and stagnating prices across the board. After last week’s plunge to a low point of $9,631 on August 14th, the crypto giant seemed to show indications of rebounding above the $11,000 mark, before dropping back to $9,865 on the 20th. Meanwhile, ethereum (ETH) and ripple (XRP) have shown signs of life, gaining 3%, while ethereum classic (ETC) has jolted up a staggering 31%. Altcoins seem to have found slight success amidst the downward trend of bitcoin, with monero (XMR), cardano (ADA), and TRON (TRX) all appreciating this week. Moving into general blockchain related news, an ever increasing list of leading institutions and companies continue to exhibit strong investment to blockchain technology, suggesting this emerging technology is creeping toward mainstream adoption. This week, MasterCard announced development of an internal cryptocurrency team, IBM has filed a patent for a blockchain powered web browser, and Binance disclosed plans to announce its own rival to Facebook’s Libra. We get into it all, the good and the bad, in this week’s edition of Around the Block.

U.S. Treasury Blacklists Cryptocurrency Addresses

The U.S. Treasury has “blacklisted” the bitcoin and litecoin addresses they say are owned by three Chinese nationals who are key figures in a multi-national drug-trafficking network. The sanctions against these individuals include seizures of U.S. based assets, but the U.S. Treasury is defacto powerless when it comes to the cryptocurrency assets. This marks the second time that the Treasury has published cryptocurrency addresses — the first since late 2018.

Overstock CEO Resigns

Patrick Byrne, cryptocurrency activist, has resigned as CEO of Overstock as of August 22nd due to his relationship with Russian agent Maria Butina. Byrne was the driving force behind many of the company’s crypto friendly policies such as accepting bitcoin for payment, and the development of an inhouse crypto token platform. It is unknown how Overstock will continue to utilize blockchain and cryptocurrency technology following Byrne’s departure. Overstock’s price rallied about 6% following Byrne cutting ties with the company.

IBM Developing Blockchain-Powered Web Browser

The United States Patent and Trademark Office has published a patent outlining IBM’s vision for a blockchain browser system. IBM believes the technology “affords a system for storing browsing information such that privacy is preserved and places privacy in the ‘hands of a user’ rather than a third party.” In other words, IBM aims to return control of data back to users by shifting control away from centralized entities like Google. Potential use cases could include encryption of cookies, browsing history bookmarks, search terms, and more . IBM has been the largest mover in adoption of blockchain technology in the United States in terms of patents filed, rivaled globally only by Chinese giant Alibaba.

MasterCard Developing Internal Cryptocurrency Team

Payments giant MasterCard has begun recruiting for an internal crypto team, yet another indicator that financial institutions are warming to cryptocurrency as a viable option moving forward. Analysts suggest that MasterCard is attempting to transition into a technology company, rather than a card company, and this move is a part of that effort.

Derivative Block Trading Coming to Bitcoin

In an effort to bring the cryptocurrency market closer to traditional finance, Bitcoin Futures and Options Exchange, Derebit, is partnering with messaging service Paradigm to introduce block trading for crypto currency derivatives . Block trades are used to guarantee a singular price for a large volume trade of derivatives. Trades are currently set a minimum of 40 bitcoin or 800 ether.

This Week In Bitcoin

The elevated risk-reward ratio of bitcoin has been a talking point in many of our recent publications, and we continue to stress that bitcoin offers a substantially increased return offering, even when adjusted for the 8x risk the asset has versus the S&P 500. The chart below further highlights this point, as it shows the Sharpe Ratio of bitcoin versus the S&P500.

The traditional calculation for Sharpe can be found here, and usually takes an asset’s return over a period minus the risk-free rate (usually T-bills) to calculate the asset’s excess return divided by the standard deviation of the period return. In the chart below, we have substituted the risk-free-rate for the return of the S&P 500. The excess return of bitcoin versus the S&P 500 is on full display, as this modified Sharpe ratio has been above 1 for all but a handful of months in late 2018 and early 2019.

Can’t wait ’til next week?

Feel free to reach out to us anytime. We are always here to help you learn about, and navigate, the exciting cryptocurrency landscape. If you haven’t already, check out our most recent Crypto Market Commentary.

Blockforce Capital does not recommend that the information presented herein serve as the basis of any investment decision. The information is given in summary form and does not purport to be complete. The sole purpose of this material is to inform, and in no way is intended to be an offer or solicitation to purchase or sell any security, other investment or services, or to attract any funds or deposits.

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Blockforce Capital

Blockforce Capital

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Financial innovation at the intersection of capital markets, technology, and digital assets.