The month in crypto: July 2018
Jul 30 2018 · by Rabbi Ahmed
Category: Market Analysis
What’s been happening this July in the crypto space? Here’s a round-up of the most significant news, updates, and events.
In the technology realm of bitcoin, keep an eye out for the submission of Bitcoin Improvement Proposals (BIPs). The open source community driving the evolution of bitcoin software has uses BIPs as a method of implementing new features. In early July, we saw Peter Wuille submit a BIP on Schnorr signatures.
This feature would facilitate a whole host of improvements: a reduction in the storage burden on the network and new privacy possibilities to multisig transactions, to name a few.
More news on the technology front: we’ve seen a ramping-up of the use of the Lightning Network, a two-layer technology that enables payments by creating a routing network comprised of bidirectional payment channels called open channels. This structure allows for many off-chain transactions to be handled before they are settled on-chain. It’s one of the technologies that will facilitate micropayments, and ideally usher in more widespread adoption of bitcoin as a means of exchange.
Over the past six months, the open channels in the Lightning Network have grown to over 7,000, demonstrating a sharp increase from a few dozen at the beginning of the year. Evidently, more individuals and businesses are testing this technology.
In European news, July saw the launch of a Euro backed stable coin, EURS. This is essentially a fiat-collateralised crypto-token with each unit backed 1:1 with Euros. The Malta-based company, STASIS, anticipates that this move will support more European institutional money coming into the market. Like the USD backed Tether, it will also facilitate live exchanges offering trading pairs in EURS.
Here at Bit Trade, we are closely monitoring the movements of institutional money and sophisticated investors as they enter the crypto space.
Over the past month, there have been several notable events that we’ve followed that indicate a further maturing of the overall market. These are a clear indication of building momentum from institutional money. For them, the opportunities are too good to miss. And, as the regulatory environment becomes more established, they will no doubt be ready to capitalise.
One of the worlds largest asset managers, BlackRock, which has an estimated $6.3 trillion USD under management, is investigating how it can enter the cryptocurrency market. It has set up a working group to explore the use of cryptocurrencies like bitcoin in its offerings.
Goldman Sach’s incoming CEO, David Solomon, is considered to be a crypto-friendly banker, which is a pleasant change from the negative stance we have become accustomed to from most investment banks. The market is hopeful that this will buck the curve and be a starting point.
Coinbase, the largest exchange in the US, has established infrastructure and custodial accounts that are to be directed towards institutional investors. What’s more, they are said to be introducing new security tokens onto their exchange. This move was anticipated to take place after more regulatory certainty on ICOs came from the SEC in early June.
Although the recent appeal on the Winklevoss’s ETF was denied by the SEC last Friday, the situation may edge closer to the likelihood of approval from another, more formal fund. An exchange-traded fund will allow institutional investors to invest into the price movements of BTC while having insurance on the loss of coins through the ETF. This may come from the likes of Cboe or CME, both of which have had active futures trading on bitcoin operating since December 2017. Another prominent institution that is in the running for an ETF is money management firm VanEck, which filed for a bitcoin ETF in August 2017 despite claiming that the digital currency was a ‘fad.’ On July 20th they published a letter addressed to Dalia Blass, director of the SEC’s division of investment management. In this they covered the five areas that had previously been raised as concerns being: valuation, liquidity, custody, arbitrage, and potential manipulation. Furthering the arguments in support of these type of products that institutions use.
The ruling last week was not without controversy.
One of the commissioners, Hester Pierce, had issued a public statement of dissent to the ruling which is worthwhile noting as it again indicates supporters amidst the old guard.
“Contrary to the Commission’s determination, I believe that the proposed rule change satisfies the statutory standard and that we should permit BZX to list and trade this bitcoin-based exchange-traded product”
Furthermore, following the SEC decision on Gemini’s ETF, the Nasdaq, which has partnered with the Winklevoss’s U.S. based digital-asset exchange, hosted a closed-door meeting bringing together representatives from several companies, including traditional exchanges.
This all highlights the push from established institutions for Exchange Traded Products which will come sooner rather than later.
CME Group’s bitcoin futures average daily volume in Q2 grew 93% over the previous quarter, while open interest surpassed 2,400 contracts, a 58% increase. This points to continued interest and confidence from institutional money.
This wraps up our new segment as part of Bit Trader’s monthly, where we aim to give our customers and readers an overview of the important news and events for the month.
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Trading in bitcoin and other cryptocurrencies is speculative in nature, and comes with inherent risks. The analysis provided by Bit Trade is for informational purposes only, and should not be construed as investment advice.
Category: Market Analysis
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