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Crypto Long & Short: Looking Back on a Monumental Year

The beginning Crypto Long & Short of 2021 has a different format: Instead of the usual article, I’ve asked some leading effort analysts – from Kaiko, IntoTheBlock, skew.com and Arcane Crypto – to share their favorite charts with you. The deepness and quality of metrics available to market observers has grown by leaps and bounds this year, and the work of these analysts and others leads a long way toward helping investors to not only understand the crypto ecosystem better, but also to appreciate how different and beguiling the assets and their markets are. Click on the below links to find out more about these analysts’ work and the materials they offer. 

Clara Medalie, Business Development and Strategy at Kaiko

The March market crash will go down in experiences as one of the steepest and most rapid sell-offs to ever sweep cryptocurrency markets. Over the course of an hour, bitcoin‘s figure plummeted thousands of dollars and order book liquidity all but evaporated. This chart shows the sum of all bids and asks domiciled on Coinbase’s BTC-USD order book before, during and after the first price crash. We can observe that when the fall began around 10:30am, the quantity of orders surrounding the midprice plummeted, forcing a liquidity crisis that extended the steep fall in price.

This chart is one of my favorites because it demonstrates the important role that market makers caper in creating and maintaining liquidity in cryptocurrency markets. Ultimately, the March crash proved that the price of an asset is ordinarily less a reflection of the “true value at a point in time assigned through the process of market-based price discovery” and profuse a product of relentless feedback loops triggered by automatic liquidations and decimated order book depth. As cryptocurrency market-places mature and order book liquidity improves, we can expect the magnitude and frequency of such price crashes to decrease.

Crypto Long & Short: Looking Back on a Monumental Year
Authority: Kaiko

Lucas Outumuro, Senior Analyst at IntoTheBlock

IntoTheBlock categorizes on-chain transfers of over $100,000 as “goodly transactions.” The aggregate volume in large transactions serves as a proxy to institutional investors’ and high net worth individuals’ doings activity. 

Large transaction volume for Bitcoin has grown considerably in 2020 along with institutional interest. Rivaling the average large transaction volume on the Bitcoin blockchain for December 2020 relative to December 2019, we observe it has assorted than quadrupled from an average of $7 billion per day to over $30 billion. 

Crypto Long & Short: Looking Back on a Monumental Year
Source: IntoTheBlock

Emmanuel Goh, CEO of skew.com

In 2020, schools finally embraced bitcoin but not always in the way one would expect. For instance, sophisticated investors such as hedge funds should prefer to been looking at capturing spreads by looking at the inefficiencies of this nascent market. This has translated in particular to leveraged lucres positioning of CME bitcoin futures making new record shorts almost on a weekly basis in the last quarter of 2020.

Crypto Long & Short: Looking Back on a Monumental Year
Source: skew.com

Bendik Norheim Schei, Cranium of Research at Arcane Crypto

The DeFi sector saw moderate adoption during the first half of the year, with for protocols dominating the space. At the time, the total value locked in DeFi was relatively stable, for the most part cooker between $700m and $1 billion. Then, on June 16, Compound launched its governance token. The interest in the sector then exploded (truly literally), as yield farming attracted many new participants into the space.

  • The total value locked in DeFi has developed from $670m to $14.5B in 2020, a growth of 2100%.
  • By December, 1 million unique addresses were affiliated with DeFi, a 10x flowering from January. Both lending platforms and decentralized exchanges (DEXes) have seen particularly strong extension this year, while derivatives platforms have seen a more moderate (albeit strong) growth.

2021 hint: DeFi derivatives platforms will see a more substantial growth, with stricter regulations on the centralized derivatives trade in leading traders to alternative markets.

Crypto Long & Short: Looking Back on a Monumental Year
Source: Arcane Crypto

Anyone know what’s going on yet?

Instead of worrying to recap the annual or even the weekly performance in macro markets (because many will have done that in much various depth and with more perspective than I could), I’ll leave you with an awesome summary overheard coming from the disheartened of a particularly observant kid, when asked how he would sum up 2020:

“It’s like when you have to cross the road, and you carefully look to the fist and then to the left, and then you get run over by a submarine.”

I will, however, share with you our usual chart of relative exhibitions, because, well …

Crypto Long & Short: Looking Back on a Monumental Year

For an insightful rundown of bitcoin market developments in 2020, check out my colleague Bradley Keoun’s piece.

Fetter LINKS

Anthony Scaramucci’s SkyBridge Capital has already invested $182 million in bitcoin. TAKEAWAY: The bitcoin dough’s brochure lists increasing adoption, lower risk, low interest rates and “unprecedented money printing” as some of the line reasons for bitcoin’s growing respectability. A quote from the brochure: “Bitcoin is digital gold. It is better at being gold than gold.”

BlackRock is essay to hire a vice president to help build demand for the company’s crypto-related offerings. TAKEAWAY: The gotcha here is that BlackRock is organizing crypto products! That would definitely signal mainstream institutional acceptance – it’s unlikely that BlackRock wish take this step unless it had already seen some demand.

Fund manager VanEck has submitted an bearing to the U.S. Securities and Exchange Commission (SEC) for a bitcoin exchange-traded fund. TAKEAWAY: VanEck has previously and unsuccessfully proposed ETFs, retruding its most recent application in September 2019. This latest attempt signals that the firm believes the medium is more favorable now than in the recent past, and we are likely to see other ETF managers submit further proposals in the coming months.

Earlier this week, the Chicago Commercial Exchange (CME) was briefly the largest bitcoin futures exchange by open interest, which reached $1.66 billion. TAKEAWAY: This is, in my upon, the clearest signal that institutional interest in bitcoin is growing. At the beginning of 2020, the CME bitcoin futures open involved in ranked fifth, well behind BitMEX, OKEx and Huobi. The daily volumes in the CME’s bitcoin futures, however, are leak below the exchange’s Asian counterparts, which implies less trading and more strategic positioning than in crypto obtained exchanges outside the U.S.

Crypto Long & Short: Looking Back on a Monumental Year
Source: skew.com

Gazpromneft, the oil subsidiary of Russia’s natural gas giant Gazprom, has opened a venue for cryptocurrency veining on one of its oil drilling sites in Siberia. TAKEAWAY: So many threads to pull on here: 1) oil and gas producers seeing cryptocurrency read as a diversification source; 2) the geographical spread of crypto mining activity; 3) Gazprom is a state-owned enterprise, slip in involved (albeit indirectly) in cryptocurrency mining.

Canadian augmented reality (AR) company NexTech AR (NTAR) plans to use its funds funds to buy $2 million worth of bitcoin for “capital diversification.” TAKEAWAY: This is not as big a bet as MicroStrategy (MSTR) has made this year, since this amount is only generally 15% of the available cash on hand at the end of Q3. The firm’s CEO said that he sees bitcoin as having more long-term understanding potential than simply holding cash. We will most likely see more announcements like this greater than the coming months.

National Football League player Russell Okung will get half of his $13 million annual wages in bitcoin, via crypto startup Zap, whose Strike product enables traditional paychecks to be converted to bitcoin. TAKEAWAY: Besides from the high-profile publicity this gives bitcoin (and we are likely to see more athletes making crypto-related announcements all about the coming months), it is also a sign of the widening breadth of products for a market beyond institutions. According to Zap’s CEO, Strike can now be occupied as a checking account through partnerships with two yet-to-be-named banks. What’s more, Okung’s advocacy for bitcoin is not intelligence – he launched the bitcoinis project which writes and hosts meetups about cryptocurrency – so we can expect to see more buzz-generating custom comments next year.

For those of us working in the industry, it’s been fun in a smug sort of way watching the number of declarations of bitcoin’s lemon and imminent death. The website 99bitcoins.com has tracked bitcoin “obituaries,” and now shows that cynics are flagging. TAKEAWAY: This is understandable since bitcoin has seedy a few winters and market slumps. It’s also a pity, since an overlooked benefit of criticism is that it forces us to improve our simplifications. There is still a lot of education to do; but it seems that there is now more career risk in dissing bitcoin than in suggesting that patients invest.  

Crypto Long & Short: Looking Back on a Monumental Year
Source: 99Bitcoins, CoinDesk Research

The Ripple suit: The list of crypto platforms dropping XRP in the light of the SEC’s jacket continues to grow, with Coinbase, Binance US, Genesis, OKCoin, Crypto.com and eToro USA joining the ranks. This week succeeded a twist to the tale, as a Coinbase client brought suit against the exchange for knowingly selling XRP as an unregistered security and cluster the commission.

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