2019 May 21 - Volume.3 Issue.15

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2019 May 21 - Volume.3 Issue.15

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Outstanding Stablecoins, Spot Trading Volumes Hit Record

Stablecoins have hit an all-time high with over $4Bn tokens representing the Greenback now on the blockchain. While Tether dominance remains, new stablecoins that came to market recently have made leapfrogs of progress. And trading volumes have already in less than 5 months beat that of last year's record with 2019 set to dwarf the now infamous bear market in comparison.


This year to date has seen trading volumes with Tether pairs already exceeding a whopping $1.3 Trillion - $200Mn more than all of last year (see chart 3). Despite the transparency concerns of a now diversified reserve, the dominating market stablecoin has not budged traders from using it as it remains to have the most liquidity and options across cryptocurrency exchanges (Diar, 30 April).

While there is a leering concern of wash trading on unregulated and under-regulated exchanges, current volumes at this magnitude could also indicate a growing difficulty in market manipulation, should it be the case.

|| SLOW AND STEADY WINS A BULL MARKET RACE

Last year's stablecoin newcomers have not been slouches either. Circle/Coinbase backed USDC has seen its outstanding tokenized version of the US Dollar grow by 41% since the start of the year - north of $100Mn. And trading volumes have finally managed to pick up some speed clocking in a whopping 435% increase (see table, chart 1).

|| GROWING IN TANDEM

TrustToken's USD, one of the few stablecoin options on the market at the start of last year has seen growth, albeit, smaller than USDC. Still, TUSD has recorded $3.8Bn in trading volume for May, a little over $200Mn than their closest rival. Notably, though, is that TUSD has a higher velocity marking it a favorite by traders as the stablecoin has 30% less in outstanding reserves than Centre's USDC.

|| BLOCKCHAIN BILLIONS

Major stablecoins now stand north of $4Bn, with more fiat options coming to market, primarily offerings from TrustToken. The company has announced a plethora of new fiat-pegged tokens, but have so far garnered little interest as trading pairs and a forex market does not exist as of yet.

|| BLOCKCHAIN UNUTILIZED

Though numbers impressive, the use case of stablecoins have found little appeal outside of sitting on centralized exchanges. USDC has indeed seen an impressive 540% increase in active addresses on-chain versus the start of the year. And TrustUSD is not very far behind on this metric either. But the absolute maximum addresses using the blockchain have been a mere 5500 at peak on a single day for the two majors outside of Tether.

|| NEW AVENUE PUSH

Last week saw Coinbase make its largest market push yet opening up crypto-to-crypto trading, including USDC, to another 50 countries bringing up the tally to an impressive 103 from 32 just a year ago (Diar, 11 February).

The popular exchange has now invested and built out its own vision of an 'Open Financial System' through various avenues from a non-custodial wallet, to supporting major Decentralized Finance (DeFi) companies that have garnered much attention as of late.

And while the experiment still continues as to the long-term stability of these various decentralized applications, the infrastructure is slowly coming together. However, with a focus remaining on distressed economies, the growth and use-case is likely to remain small without developed nations also adopting into the concept.

USDC Trading Volume Jumps 130% May* vs April with Time to Spare


TrueUSD Finds Higher Volumes than USDC at $3.8Bn for May*


But Still a miniscule 1% of Tether Trading Volumes


Outstanding Stablecoins Break Past $4Bn

wdt_ID Stablecoin USD
2 USDT (Omni) 2,865,716,915
3 USDT (ETH) 400,057,493
4 USDT (Tron) 37,902,010
5 USDC 359,073,390
6 TUSD 243,230,996
7 PAX 185,393,508
8 DAI 81,355,756
9 EURT 55,828,306
10 EURS 35,706,863
11 GUSD 22,903,779


Sources: CoinMetrics, Etherscan - Notes: Upto and including May 20 2019


Institutional Traders Mark Record Volumes on Derivative Exchanges

Bitcoin derivatives are working out to become crypto's "new thing" for 2019 as trading on CME, the now only regulated futures venue, has hit all-time-high two months running. BitMEX is also enjoying much of the same due to recent volatility, while Deribit options may have found a more institution-based audience.


While spot market exchanges are hitting new record levels (see story above), derivative exchanges have found enough interest with a now ever-shifting landscape tilting towards a much larger and synthetic Bitcoin market.

|| PAYMENTS TURNING TO AN OPTION

The "New Gold" is ironically following the footsteps of its non-tech predecessor with cash-settled derivatives set to take volumes far past actual and maximum supply. Bitcoin's most bullish attribute of having a maximum supply is now turning into a moot point as advocates aggressively position the cryptocurrency as a store-of-value far removed from the tenant of being used as a preferred payment and settlement currency, and more as an added benefit.

But various products on the market are addressing physically-settled Bitcoin futures. CoinFlex, that has found the backing from mega investors Digital Currency Group and Polychain, have already launched two futures contracts.
Timothee Noat, COO of Skew, a derivative focused data-analytics firm tells Diar that the recent development of physically-settled futures adds to the "development of the financial infrastructure that helps reduce market manipulation."

|| CLOCKING OUT

Deribit, who have primarily focused on options, has also been hitting record volumes month-on-month (see chart). The Dutch-based trading venue has emulated traditional financial infrastructure setting up chat-rooms allowing for negotiations off the exchange that would secure traders better pricing before executing on the platform.

Notably, the market makers that require to be present for options to make any financial sense appear to be trading during weekdays indicating an audience of firm caliber rather than round-the-clock spot markets that retail markets see.

CME Hits Record Volumes Two Months Straight


Source: Investing.com


BitMEX Leverage Facilities Allowing For Shattering Reported Numbers


Source: Skew

Deribit Bitcoin Options Trading Volume


Source: Skew


CryptoFacilities Also Nearing $1Bn


Source: Skew


Kraken Set to Raise $10Mn From Non-Accredited Investors*

* Update:  Kraken has informed us that investors have to, in fact, be accredited investors should they reside in the USA or Canada.

Kraken has opened up a minuscule round in an effort to raise approximately $10Mn at a $4Bn valuation, similar to what it sought in 2018. This time around, the exchange is parting ways with a mere 0.255% equity on a third-party platform in its effort to also onboard smaller investors with a ticket size of only $1000.

|| CRAKING CHANCE?

As with anything, the opportunity lies in the eye of the beholder. Besides some goodwill exposure, it seems the exchange is looking to inject some liquidity into its war chest after splurging a purported $80Mn for futures and derivatives exchange Crypto Facilities as it sets itself apart from the competition. The futures arm of Kraken has grown by a whopping 1700% since it was purchased (see chart above).

And while Kraken's global share of spot market volumes stands at under 10% that of major global exchanges, it does secure a third of total US-based trading venue appetite (Diar, 5 November 2018).

Kraken BTCUSD Trading Volume Q-on-Q


Source: CoinAPI


Little Hopes for Bitcoin ETF
The US Securities and Exchange Commission (SEC) has once against delayed its decision in approving a proposed ETF, with this latest setback sitting on VanEck's shoulders. The repeated postponement of a final decision is indicative of the lack of faith by the regulator for price discovery and manipulation fears as questions of liquidity take a back seat (see stories above). It's unlikely a Bitcoin ETF to be approved by the SEC until the ecosystem is able to address fair trade across a global network of unregulated exchanges, or, new regulated options gain prominence.
Governance Woes
A proposed stability fee decrease on MakerDAO from 19.5% to 17.5% has failed to reach enough votes to pass. This marks the first time that the platform hasn't managed to garner enough approval following an onslaught of stability fee hikes this year in its effort to bring it back to the intended US Dollar peg. Amid increased trading volume, demand for Dai has helped the Ether-backed stablecoin trade above parity. The fair governance of such setups is likely to face further complications with interest in participation questionable and accounting for possible groups having more voting power.
Delisting Kickstart?
Circle-owned Poloniex is set to address markets differently as it plans to delist 9 cryptocurrencies for US-based customers following guidance by the US Securities and Exchange Commission (SEC). The exchange has said it will continue to pursue favorable regulatory outlook on assets that are now likely to be deemed as securities. Notably, Augur's REP token is to be delisted which remains to be traded on other US-based exchanges Coinbase and Kraken. The prediction market platform is one of the few live blockchain applications that have gone live with no kill-switch for the network.
Going Clearmatics
London-based Clearmatics who has been at the helm of the Utility Settlement Coin (USC) is set to exit the R&D phase according to Reuters. The company focused on distributed Financial Market Infrastructure (dFMI) is one of the few blockchain projects that have gained the confidence of 'Big Banks' in their own efforts to address idle capital, settlement time and reduce costs. There is a lingering question on how Central Banks will take to accepting USC. But tech adoption is a route the IMF advocates leaving monetary policy, not consensus, in the hands of Central Banks.

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