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The Hard Fork – Weekly Market Commentary

This Weeks Topics:
1) Grayscale launches Stellar Lumens investment product
2) Bitcoin futures trading volume at the CME far outpaces volume at the Cboe
3) Ethereum Constantinople upgrade delayed until February

Indices Round-Up

TradeBlock Index Asset1 Price ($) 7d∆2
EOSX EOS 2.31 3.48%
ECX Ethereum Classic 4.27 2.26%
XMRX Monero 43.39 1.34%
LTX Litecoin 30.59 1.22%
ETX Ethereum 117.18 1.22%
XBX Bitcoin 3,527.98 0.60%
XLMX Stellar Lumens 0.10 0.37%
XRX XRP 0.31 0.19%
BCX Bitcoin Cash 121.82 -1.00%
ZCX Zcash 51.48 -3.37%
1. Underlying asset sorted in descending order by 7 day price movers.
2. 7 day price movers monitored from 01/13/2019 17:00 UTC thru 01/20/2019 17:00 UTC.

7 day price movers

Digital currency prices are flat to modestly higher this week. A spate of news hit the market late last week that may put pressure on asset prices moving forward. The Ethereum Constantinople upgrade was delayed after a security vulnerability was identified, which would allow ETH to be withdrawn without permission via a repeated malicious transaction called a re-entrancy attack.

Additionally, due to the US Government shutdown, the SEC and CFTC have furloughed non-essential personnel which will likely delay regulatory approval that is needed for certain bitcoin products. The Bakkt futures product, which was expected to launch in late January, will likely be delayed until a later date as the firm has not received approval from the CFTC yet.

Among our indexed assets, zcash saw the largest decline, losing a modest 3.4% on the week while EOS saw the largest price rise, trading up 3.5%. Bitcoin prices were nearly unchanged on the week.

 

Grayscale launches Stellar Lumens investment product

On Thursday January 17, 2019 Grayscale Investments announced the launch of its Stellar Lumens Investment Trust. The new investment product will offer investors exposure to Stellar Lumen’s native token, XLM. Stellar’s platform seeks to integrate financial institutions, such as banks, to offer low cost and fast transaction speeds for cross-border payments. Stellar is one of the largest digital currencies by market capitalization and is a competitor to the Ripple platform.

Grayscale’s new XLM investment trust will join eight other single asset digital currency products that Grayscale currently offers. Grayscale will be using TradeBlock’s XLMX index as the reference rate for the new XLM investment trust. Grayscale is one of the largest investment firms operating in the digital currency space with approximately $825 million in assets under management.

 

Bitcoin futures trading volume at the CME far outpaces volume at the Cboe

In December 2017, the Chicago Mercantile Exchange (CME Group) and the Chicago Board of Exchange (Cboe) launched competing bitcoin futures products to much fanfare. One year since inception of these offerings, we tracked notional trading volume at both exchanges over time. Our findings demonstrate that the CME has absorbed the majority of the trading volume market share while the Cboe has seen decreasing trading volumes each month.

Figure 1: CME vs Cboe Bitcoin Futures Notional Trading Volume

CME + Cboe Futures Volume

Data for chart sourced from the CME and the Cboe

In August 2018, the Cboe increased the number of bitcoin contracts that any trader can hold. The limit was extended to encourage greater trading volume and remain competitive with the CME, which had offered a greater limit at the outset.

 

Ethereum Constantinople upgrade delayed until February

The Ethereum Constantinople upgrade that was expected to occur last week at block height 7,080,000, was delayed by core developers when an unexpected security breach was identified. The Constantinople upgrade will now occur at block height 7,280,000, which is expected to be mined on Feb. 27, 2019.

ChainSecurity, a smart contract auditing firm, identified the vulnerability in EIP 1283. If EIP 1283 were to be implemented, it could allow a malicious actor to steal user funds through repeated re-entrancy attacks. EIP 1283 was set to introduce cheaper gas costs for certain operations, which as an unexpected consequence, would enable re-entrancy attacks when using certain functions in Solidity smart contracts.

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