October 2018


 

Cryptalgo Development Status

 

TRADING AND LIQUIDITY PLATFORM: Following the presentation at Chicago’s P&L conference of our joint Cryptalgo and Elysium demo of the OEMS trading and risk management system, we are seeing considerable interest from potential institutional clients who want to invest or trade cryptocurrencies and security tokens on a fast, efficient and reliable platform. OEMS is scheduled to launch in Q1 2019 and addresses precisely these complex requirements. We are currently working on a Front-End/ Trading client, adding risk management, compliance and advanced security features to make the solution uniquely adapted to the needs of financial institutions looking to trade blockchain assets. Please stay tuned over the coming months for screen shots and a demo of the system.

LOOKING FORWARD: our goal is to become a global trading and liquidity platform for financial institutions by aggregating liquidity from Cryptocurrency and Security Token exchanges via our Galaxy connectivity backbone. Our services will be similar to those of institutional trading venues on traditional equity and futures markets, providing a reliable, highly secure and regulated environment backed with state of the art technology. These will include (1) institutional-quality order execution, (2) aggregated liquidity across multiple exchanges, (3) algorithmic trading, (4) an institutional-designed trading client (front end) and (5) internal matching engine.

 

Cryptocurrencies Market Update

 

Cryptocurrency prices declined moderately in October, down -11% on average across the top ten coins. Total market capitalisation stood at USD 204 billion on October 28th, -6% lower than last month (USD 218 billion). Bitcoin’s dominance rose to 55% (from 52% at the end of September). Among the ten largest cryptocurrencies, the most significant drop was seen in Ripple (-22%). This was a natural correction following the +80% surge in the currency during September following the announcement of XRapid. Ethereum and Ripple are now firmly established as the second and third cryptocurrencies by market capitalisation (at USD 21 and USD 18 billion respectively).

Data source: www.coinmarketcap.com

A major news item in October was Tether. The USD pegged cryptocurrency briefly “untethered” from USD on October 15th, dropping as low as USD 0.85 due to concerns around solvency. The price collapse was triggered following an announcement by Bitfinex that it was suspending all fiat deposits. This came shortly after Bitfinex reportedly changed banking partner (see the news section below). Since then, Tether has recovered and is now trading at close to USD 1.00. Interestingly, while Tether’s price has recovered, its market capitalisation has dropped -30% to below USD 2 billion and has remained at that level, indicating that Tether has retired from circulation around USD 600 million worth of its own coins in October. Some market participants have speculated that it was the company itself buying back its coins at a discount, following the drop in price.

Tether’s price and market capitalisation during October

Data source: www.coinmarketcap.com

During October, the price of Bitcoin saw its one-month volatility drop to lows of 23%, a level not seen since the end of 2016. The currency’s daily closing price published by Bloomberg remained within a narrow range of USD 6,200 to USD 6,600 (or 6% of its price).

Bitcoin’s price (versus USD) has remained range bound and its volatility has dropped below 23% during October 

Data source: Bloomberg

24-hour trading volumes for the top 200 coins declined in October to USD 8.8 billon (down -36%), affected by news surrounding Tether (its 24-hour volume was down -45%) and the correction in Ripple (its 24-hour volume was down -81%).

Data source: www.coinmarketcap.com

New funding for ICOs declined substantially, reaching only a total of USD 159 million in September across 13 successful token offerings (compared to USD 502 million in August for 17 offerings). The trend is now resolutely downward. One effect at play is that investors seem to have devalued the idea of buying a utility token, and instead want to buy equity in the same companies. We note that merger and acquisition activity by cryptocurrency companies among themselves and by companies hunting for bitcoin’s underlying technology is hitting record levels, which appears to support a similar view.

Data source: Token Data

Cryptocurrency Market News

 

As noted above, the major news story this month was the collapse in the value of Tether following the change of banking partners by Tether and Bitfinex. It started by news that Bitfinex and Tether had allegedly terminated their relationship with Noble Bank, a Puerto Rico based company. Shortly thereafter, Bitfinex announced it was suspending all fiat deposits (the service subsequently resumed). This caused USDT to collapse to USD 0.85 on October 15th, before recovering to USD 1.00 by month end. Nevertheless, Tether’s market capitalisation finished the month below USD 2 billion, down -30% from last month. On October 16th, it was announced that Tether had found a new banking partner, the Bahamas-based Deltec bank.

Another widely covered story was Fidelity announcing Fidelity Digital Assets on October 15th. According to CNBC, Fidelity Digital Assets will provide enterprise custody, trade order routing and execution to institutional investors (such as hedge funds, family offices, endowments, etc.). Fidelity manages USD 7.2 trillion in client funds and has 13,000 institutional clients. It plans on using cold storage solutions and “multilevel physical and cyber controls”.

Crypto Fund Research published a report on October 10th showing that 20% of hedge funds launched in 2018 were cryptocurrency funds, representing a total of 90 funds launched in the first three quarters of 2018. The statistic is remarkable, given that cryptocurrency hedge funds only make up 0.1% of total assets in the hedge fund industry.

Finally, we noted with interest that the endowments of Harvard, Stanford and MIT have all made investments into at least one cryptocurrency fund, according to The Information.

 

Disclaimer: the information contained herein is being furnished for discussion purposes only and may be subject to completion or amendment through the delivery of additional documentation.  This communication does not constitute an offer to sell or the solicitation of an offer to purchase any security, future or other financial instrument or product. Information is presented as of the date and, if applicable, time indicated. CRYPTALGO does not accept any responsibility for updating any such information. Any historical or simulated results presented herein should not and cannot be viewed as an indicator of future performance. Market views and opinions are current opinions only. CRYPTALGO is not an adviser as to legal, taxation, accounting, regulatory or financial matters in any jurisdiction, does not act as fiduciary or financial, investment or commodities trading advisor for any of its counterparties, and is not providing any advice as to any such matter to the recipient.  The recipient should discuss such matters with the recipient’s advisers or counsel and make an independent evaluation and judgment with respect to them.

Past performance may not be a reliable guide to future performance.

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