Daily Bit #177: A Bootstrap State of Mind

Daily Bit

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The Daily Bit

5 min readSep 13, 2018

Industry Updates

12-yo (obligatory “I am 12”) Pocketful of Quarters CEO George Weiksner raised $400k for an intended ICO.
Brave advertisements are in a public trial for MacOS users.
CarbonUSD is the latest stablecoin that holds its peg using an algorithmic model.
India’s Export-Import bank is researching digital ledger tech with BRIC economic bloc banks.
Bain Capital Ventures led a $15M funding round in Seed CX, a crypto exchange for both spot and derivative products.
The American Nightlife Association partnered with Paytomat to integrate digital currencies with US bars & clubs… pump that beat and that Bitcoin, DJ.

Top Story

A Bootstrap State of Mind

It’s been less than three months since OkCoin landed on U.S. soil, though the exchange has already broadened their bandwidth to an additional 20 states beyond their California HQ.

Prior home: China. OkCoin was booted from the country alongside Huobi in October ’17 after the PBoC draped an iron curtain over domestic crypto exchanges. Huobi broke into the US through their SF-based partner, HBUS, and OkCoin tailed shortly after.

A U.S. expansion is a big deal. It signifies that platforms are willing to tack-on regulatory baggage in exchange for breaking into new markets. And new markets = faster growth = more cash to OkCoin’s war chest for future maneuvers.

Eyes on the prize(s): volume & fees
Thanks to their expansion, OkCoin’s trade volume is ready for launch. Current volume per Coinmarketcap is roughly $700k per day, but that’s only for Cali. All five currencies are paired to USD; new states must use Tether or TrueUSD until OkCoin gets a nod for fiat-to-crypto trading.

Now, remember… one does not simply onboard new users. OkCoin is barreling into a dragon den occupied by Coinbase and Gemini, whose respective ~$165M and ~$31M in daily trade volume isn’t about to get packaged into a welcome basket.

The answer? Slash fees — heavy. And OkCoin’s promotion gives them a heady edge over maker and taker rates offered on both platforms for certain price levels. Fees are based upon 30-days of trading volume.

Taker fees (market-orders):
- Coinbase, under $10m (0.30% flat vs 0.15% max)
- Gemini, under $5m (0.25% [min] vs. 0.15% max)

Maker fees (limit-orders):
- Coinbase, above $1m (both charge 0.0%)
- Gemini, under $15m (0.10% [min] vs. 0.05% max)

The bottom line: There’s no guarantee that OkCoin will keep retail & institutional investors around for a long time, but they can offer them a good one while their cheaper fees stick around… as long as their lower liquidity levels aren’t a dealbreaker.

Other News

Kim Chi, Do You Love Me?

If there was an award for crypto speculation, it would, without question, go to South Korea. Historically, digital currencies were quoted on local exchanges with massive premiums. South Korea’s price gap relative to other platforms was prescribed as the Kimchi Premium.

Unsurprisingly, regulators do not dig the phenomenon
The Bank of Korea introduced new measures to prevent gamblers from betting the farm:
- Stricter KYC/AML
- Internal management systems
- Tighter security measures

It’s a commendable start, but squelching speculation — or more specifically “technically and institutional factors that negatively affect smooth capital flows” — is a process.

There is a saying that curiosity killed the cat
Granted, that doesn’t exactly apply here, though curiosity did prompt us to sift through South Korean exchange data in search of Kimchi Premiums.

Comparing several of Ubit’s KRW and USD pairings did not disappoint:
- Bitcoin: 1.76% (6,512.38 vs. 6,399.67)
- Ethereum: 2.07% (193.42 vs. 189.49)
- Ethereum Classic: 4.24% (11.07 vs. 10.62)
- Zcash: 10.76% (116.85 vs. 105.50)
- Monero: 0.24% (107.08 vs. 106.82)

The verdict? KP is NOT back — or at least not as pronounced as in July when Bithumb froze trading activity, which indirectly triggered premiums as steep as 600%.

Arguably comparable to witnessing your dog roll around in a pile of mud fresh out of a haircut… not an easy (or desired) cleanup for regulators.

Hot Seat — Bitmex. Cool Throne… Also Bitmex

If things don’t go well, people complain. It’s what they do. So when Ethereum broke below $170 yesterday, folks flexed their fingers and took to Twitter in search of a scapegoat.

Remember that Meme, “Trainers Hate Him”?
Well, people (read: Ethereum investors) hate BitMEX — specifically CEO Arthur Hayes — for launching Ethereum perpetual swaps. Ignoring the latest rally, $ETH suffered a debilitating unwind following the launch of BitMEX’s swap product.

There’s no denying that BitMEX triggered, or more appropriately, exacerbated — ETH’s selloff. Though two different tales are told that depend upon where you look for updates.

Red Corner: BitMEX is manipulating prices
When commenting on ETH swaps in a BitMEX chat forum, Hayes wrote “If you are a Bitcoin based speculator this is the perfect way to punt [bet] on the ETH/USD price”.

Trustnodes published an article covering the dialogue. On Hayes’ comment, the author wrote “In other words, Bitmex hates ethereum” before pivoting the assault to questionable regulations.

Our take: It’s a misguided spin on ulterior motives. BitMEX doesn’t hate $ETH — they love money. During a gold rush, sell the shovels…

Blue Corner: BitMEX swaps are a dank hedge
Originating from the desk of Alex Krüger (@Crypto_Macro), imagine stepping into the shoes of a portfolio manager who is diversified into several altcoins.

Additionally, note/consider the following:
- You think alts will fall more.
- You don’t want to sell yet (expecting a healthy bounce).
- Moving illiquid positions is expensive.

Krüger explains that of the products BitMEX offers, Bitcoin and Ethereum perpetual swaps are the most liquid (read: cheap). And because (1) folks generally prefer shorting ETH instead of BTC, and (2) ETH tracks altcoin prices closer than BTC, (3) ETH perpetual swaps are a better product to short.

By the Numbers

(a) Bitcoin all-time-highs (ATHs):

Oct’17 — Dec’17: New ATH once every 3 days, on average.
Longest streak without ATH: 1,176 (Dec ’13 — Feb ‘17).
Days since last ATH: 272 (~4.32x lower than above).

Source — @charliebilello

(b) Return correlation between top crypto assets:

BTC, ETH, XRP, BCH, EOS, LTC.
Increase to ~0.50 from ~0.20 in Aug ‘17.
Context — FAANG’s correlation ~0.54 in past year.

Significance: “could be a sign that people are looking for a bit of diversification within the top cryptocurrencies, allocating assets around instead of buying just one or two coins” — David Martin, Blockforce Capital

Source — bitrazzi

Brain Fuel

Around the Web

Fortune: How crypto will grow into an institutional asset class (Salil Deshpande)
TechCrunch: Spearhead is transforming founders into angel investors (Danny Crichton)

Medium