Dear respected partners,
Welcome to the 5th edition of our monthly crypto industry newsletter, in which we provide thorough analysis on the industry events, markets and liquidity for the month of February.
We are proud to launch our Statistics segment, in which we provide insightful data on the usage of our platform.
Each month, you will get a snapshot of the crypto-markets as seen through our lens. Expect new segments, features and research to be added along the way.
As a company, we value transparency. This is why we publish raw data on what matters most to our customers: how much they can reasonably trade through us, and how much price improvement they can get.
We've compiled the average for both of these metrics over all of our customers' activity, regardless of order type and trading style.
- Price improvement is calculated by comparing the average execution price to the requested limit price for a basic routed order;
- Typical order size is calculated across all basic routed orders.
SheeldMarket deploys Volume Inline Order
The crypto-currency market is fragmented, and even on the most liquid exchanges, order books are quite shallow. This is why our customers use our Smart Order Router to execute across a dozen venues and get the best price on their trades. But what happens when you want to buy or sell a very large amount of crypto-currency, so large that doing it all at once cannot go unnoticed, even if spread across all of our venues?
To solve this issue, our tech team developed the Volume Inline Order. This advanced order allows you to participate in a certain percentage of the total volume of a given pair traded across all of our partner venues. While the order may take more time to execute for a non-liquid pair, you will benefit from the evolution of spot, and keep your impact to the bare minimum.
The results speak for themselves: some customers saw a 15bp price improvement.
Tesla buys $1.5B worth of Bitcoin
EV-company Tesla bought $1.5B worth of Bitcoin. This move came after founder Elon Musk expressed his bullish attitude towards the currency on social media like Twitter or Clubhouse. In its SEC filing, the company said it bought the bitcoin for “more flexibility to further diversify and maximize returns on our cash.”
The currency went up by 20% following the public announcement.
"Tesla made more money in 1 month with its treasury management than through its core business… of course these are two different concepts and have different timelines but it’s relevant to notice that both can actually complement each other." - FX
BNY announces plans to offer crypto custody
The world’s largest custodian bank will help customers in dealing with digital assets like Bitcoin. According to Head of Advanced Solutions Mike Demissie, the platform is ready and the digital custody unit will be rolled out later this year. He also stated that they “are certainly not building it entirely from scratch”, implying they are working with a technology partner.
"While native crypto-custody firms offer great tech, BNY brings something else to the table: balance sheet. For some institutional customers, that’s a go/no-go situation." - Oliver
Canadian regulators authorize world's first bitcoin ETF
The OSC has cleared the launch of Purpose Bitcoin ETF. An ETF is a security that tracks an index, in this case the bitcoin price, and can be exchanged on a regular stock exchange. Bitcoin ETFs are said to be a huge driver of institutional adoption. Purpose Investments Inc. will be the first fund in the world to invest directly into physically-delivered Bitcoin, not derivatives.
"One after another, developed countries are home to new investment solutions that facilitate access to cryptocurrency for retail investors. The US and Switzerland are staying well ahead vs the rest of the world in terms of ETP creation. In my opinion we shall very soon see additional players in Europe which should increase significantly the overall investments in the cryptocurrency space and might pull the prices of the biggest market caps." - FX
Coinbase filings suggest increasing institutional adoption
According to Coinbase’s S-1 filings and data compiled by The Block, leading US exchange Coinbase is seeing growing volumes from its institutional customers. Retail flow made up 80% of its volume in 2018, while it is only around 36% today, meaning that most of its flow is now professional or institutional.
"If you take professional vs retail flow market shares as an indicator of a market maturing there are definitively hints at the cryptos becoming more and more mainstream with the influx of traditional players. Good news indeed for retail traders: with institutional participants will inevitably come better protection for them. This is one of the occurrences where regulation directly benefits regular people." - Jacques
Public companies’ share value rises after bitcoin exposure
According to data compiled by our friends at Kaiko, the share price of the public companies that publicly announced having bitcoin exposure has risen since September.
These include payment companies Paypal and Square, crypto-friendly bank Silvergate, crypto-prime broker Galaxy Digital, EV-maker Tesla and software provider Microstrategy.
Oliver’s take: While Silvergate and Galaxy’s results can be lauded, they are crypto-native firms, and are expected to have deep exposure to the asset. On the other hand, Microstrategy’s 800% share price increase shows that the market is bullish on a traditional software company making the move.
A lack of liquidity in BTC?
Bitcoin liquidity supply has been in the negatives for most of 2020.
Historically, the negative liquidity supply indicator indicates a potential price surge according to Glassnode, a blockchain analysis firm, as per the chart below.
"This has never happened before for such an extended period of time, and could lead to a massive supply squeeze soon,” wrote Glassnode on February 2nd.
Three factors would drive the potential incoming price surge:
- Institutional and corporate investors are accumulating BTC at the moment, more than the quantity that is currently mined. This is one of the biggest factors that drove the price rally recently.
- Several long time holders withdrew important amounts from exchanges, which should decrease the supply for the coming months.
- Fewer bitcoins are available for institutions because of their higher standards, which might drive the price higher as they will look for cleaner liquidity sources.
The SheeldMarket team