The first Crypto Long & Short of 2021 has a different format: instead of the usual article, I asked some leading industry analysts – from Kaiko, IntoTheBlock, skew.com and Arcane Crypto – to share their favorite charts with you. The depth and quality of the metrics available to market watchers has increased by leaps and bounds this year, and the work of these and other analysts goes a long way towards helping investors not only better understand the crypto ecosystem, but also how different and how different it is different it is fascinating are the assets and their markets. Click the links below to learn more about what these analysts do and the data they offer.
Clara Medalie, Business Development and Strategy at Kaiko
The March market crash will go down as one of the steepest and fastest sell-offs in history to ever hit the cryptocurrency markets. Bitcoin price dropped thousands of dollars in the course of an hour and the liquidity of the order book all but disappeared. This graphic shows the sum of all bids and requests that were placed in Coinbase’s BTC-USD order book before, during and after the first price crash. We can observe that at the beginning of the crash around 10:30 am, the number of orders around the mid-price decreased, forcing a liquidity crisis that continued the sharp price decline.
This chart is one of my favorites as it shows the important role market makers play in creating and maintaining liquidity in cryptocurrency markets. Ultimately, the March crash proved that the price of an asset often reflects less “its true value at a point in time determined by the process of market-based pricing” and more a product of relentless feedback loops triggered and decimated by automatic liquidations Order book depth. As cryptocurrency markets mature and the liquidity of the order book improves, we can assume that the magnitude and frequency of such price crashes will decrease.
Source: Kaiko
Lucas Outumuro, Senior Analyst at IntoTheBlock
IntoTheBlock categorizes on-chain transfers of over $ 100,000 as “large transactions”. The total volume in large transactions serves as a proxy for the transaction activity of institutional investors and high net worth individuals.
The large transaction volume for Bitcoin grew significantly in 2020 along with institutional interest. If we compare the average large transaction volume on the Bitcoin blockchain for December 2020 compared to December 2019, we find that it has more than quadrupled from an average of USD 7 billion per day to over USD 30 billion.
Source: IntoTheBlock
Emmanuel Goh, CEO of skew.com
In 2020, institutions finally decided to go with Bitcoin, but not always in the way you’d expect. For example, sophisticated investors like hedge funds have attempted to capture spreads by studying the inefficiencies of this emerging market. This was particularly reflected in the positioning of CME Bitcoin futures by leveraged funds, which resulted in new record shorts being achieved almost weekly in the last quarter of 2020.
Source: skew.com
Bendik Norheim Schei, Head of Research at Arcane Crypto
The DeFi sector saw moderate adoption in the first half, with lending protocols dominating the room. At that point, the total value set in DeFi was relatively stable, mostly between $ 700 million and $ 1 billion. Then on June 16, Compound launched its governance token. Interest in the sector then exploded (in the truest sense of the word) as high yield farming attracted many new participants to the room.
- The total value set in DeFi has increased from $ 670 million to $ 14.5 billion in 2020, a growth of 2100%.
- By December there were 1 million unique addresses associated with DeFi, a 10-fold increase from January. Both credit platforms and decentralized exchanges (DEXes) saw particularly strong growth this year, while derivatives platforms saw more moderate (albeit strong) growth.
Forecast 2021: DeFi derivatives platforms will see stronger growth with tighter regulations for the centralized derivatives market leading traders to alternative markets.
Source: Arcane Crypto
Does anyone know what’s still going on?
Rather than trying to summarize the annual or even weekly performance in the macro markets (because many will have done this in much greater detail and with more perspective than I could), I am going to leave you with a compelling summary that has been heard from the mouth of one particularly alert child when asked how they would summarize 2020:
“It’s like when you have to cross the street and look right and then left and then get run over by a submarine.”
However, I will share our usual table of relative performances with you because …
For an insightful overview of Development of the Bitcoin market in 2020Check out my colleague Bradley Keoun’s play.
CHAIN LINKS
Anthony Scaramucci SkyBridge Capital has already invested $ 182 million in Bitcoin. BRING AWAY: The Bitcoin Fund brochure lists the increasing adoption, lower risk, low interest rates and “unprecedented money pressures” as some of the main reasons for Bitcoin’s growing reputation. A quote from the brochure: “Bitcoin is digital gold. It is better to be gold than gold. “
BlackRock seeks a vice president to drive demand for the company’s crypto offerings. BRING AWAY: The problem with this is that BlackRock is planning crypto products! This would definitely signal acceptance from mainstream institutions – BlackRock is unlikely to take this step if it hasn’t already seen some demand.
Fund manager VanEck has filed an application with the US Securities and Exchange Commission for an exchange-traded Bitcoin fund. BRING AWAY: VanEck had previously and unsuccessfully proposed ETFs and withdrew its most recent application in September 2019. This latest attempt signals that the company believes the environment is more favorable now than it has been in the recent past, and we are likely to see other ETF managers come forward with more proposals in the months ahead.
Earlier this week the Chicago Mercantile Exchange (CME) was briefly the largest Bitcoin futures exchange by open positions, reaching $ 1.66 billion. BRING AWAY: In my opinion, this is the clearest signal that institutional interest in Bitcoin is growing. At the beginning of 2020, the open interest of the CME Bitcoin futures took fifth place, far behind BitMEX, OKEx and Huobi. However, the daily volume in the CME’s Bitcoin futures is well below its Asian counterpart, implying less trading and more strategic positioning than in crypto derivative exchanges outside of the US
Source: skew.com
Gazpromneft, the oil subsidiary of the Russian gas giant Gazprom, has opened a cryptocurrency mining site at one of its oil drilling sites in Siberia. BRING AWAY: There are so many topics here: 1) Oil and gas producers view cryptocurrency mining as a source of diversification; 2) the geographic spread of crypto mining activities; 3) Gazprom is a state-owned company that participates (albeit indirectly) in cryptocurrency mining.
Canadian Augmented Reality (AR) company NexTech AR (NTAR) plans to use its own funds to buy Bitcoin worth USD 2 million for “capital diversification”. BRING AWAY: This isn’t as big a bet as MicroStrategy (MSTR) this year, as that amount is only about 15% of available cash at the end of the third quarter. The company’s CEO said that Bitcoin had more long-term upside potential than just holding cash. We’ll most likely see more announcements like this in the months ahead.
National Football League players Russell Okung will receive half of his annual salary of $ 13 million in Bitcoin through the crypto startup Zap, whose Strike product enables traditional paychecks to be converted into Bitcoin. BRING AWAY: Aside from the high profile advertising Bitcoin is offering (and we’ll likely see more athletes making crypto-related announcements in the coming months), this is also a sign of the growing breadth of products for a non-institutional market. According to the CEO of Zap, Strike can now be used as a checking account through partnerships with two yet to be named banks. Additionally, Oken’s endorsement of Bitcoin isn’t news – he started the Bitcoinis project, which writes and hosts cryptocurrency meetups – so we can expect more public comment in the next year.
For those of us who work in the industry, watching the number of declarations of Bitcoin’s failure and impending death have been smugly fun. The website 99bitcoins.com has been tracking Bitcoin “obituaries” and now shows that cynics are slacking off. BRING AWAY: This is understandable given that Bitcoin has weathered several winters and market slumps. It’s a shame too, because an overlooked benefit of criticism is that it forces us to improve our explanations. Its a lot to do; But it seems that there are now more career risks from dissing Bitcoin than suggesting customers are investing.
Source: 99Bitcoins, CoinDesk Research
The ripple suit: The list of crypto platforms dropping XRP in the face of the SEC lawsuit continues to grow. Coinbase, Binance US, Genesis, OKCoin, Crypto.com and eToro USA are joining the ranks. This week turned history when a Coinbase customer filed a lawsuit against the exchange for knowingly selling XRP as an unregistered security and pocketing the commission.
