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The Hard Fork – Weekly Market Commentary

This Week’s Topics:

1) Binance to generate $1bn in profit for 2020
2) Grayscale ranks at top in market penetration
3) MicroStrategy buys another $50m in bitcoin


Indices Round-up


TradeBlock Index Asset1 Price ($) 7d∆2
XMRX Monero 141.07 13.93%
LTX Litecoin 82.38 4.17%
XBX Bitcoin 19,109.29 2.61%
ETX Ethereum 590.75 0.29%
BCX Bitcoin Cash 283.98 -1.75%
XRX XRP 0.60 -3.56%
ZCX Zcash 73.86 -3.62%
EOS EOSX 2.96 -3.80%
ECX Ethereum Classic 6.12 -6.27%
XLM Stellar Lumens 0.17 -13.68%
1. Underlying asset sorted in descending order by 7 day price movers.
2. 7 day price movers monitored from 11/30/2020 06:00 ET thru 12/07/2020 06:00 ET.


7 day price movers
Digital currencies posted mixed results on the week. Among our indexed currencies, Monero traded up the most, gaining 13.93%. Conversely, Stellar Lumens traded down the most, losing -13.68%. Over the past two years, bitcoin has outperformed traditional equity indexes during a period when nearly every asset class has reached successive new all-time highs. In this ‘everything’ bull market, bitcoin is one of the fastest horses.

Figure 1: Bitcoin outperformance relative to other asset classes


In traditional markets, US equities ended the week positive with the S&P 500 closing up 1.8% and the tech heavy Nasdaq closing up 1.95%. In bond markets, US 10-year bonds ended the week yielding 0.97%.

Binance to generate $1bn in profit for 2020
Binance expects to generate between $800 million and $1 billion in profit for FY 2020. As one of the largest digital currency exchanges by trading volume, Binance has seen an uptick in revenues on the back of higher volumes. Binance increased its profit from $570 million–which it generated last year.

2020 has been a record year for digital currencies with bitcoin reaching a new all-time high recently. Exchanges benefited from an increase in volatility during the first quarter of 2020 during the COVID-19 crash. In the latter half of the year, exchanges benefited from a renewed investor interest in the asset class with various digital currencies hitting all-time highs.

In comparison to traditional banks, Binance ranks similarly to Deutsche Bank which generated just over $1 billion in pre-tax profit year-to-date. Morgan Stanley, one of the smaller of the large US banks, typically generates over $11 billion in profit each year.

Grayscale ranks at top in market penetration
This past week, we compared assets under management across investment products relative to the market size of the asset class. Grayscale’s Bitcoin Investment Trust (GBTC) stands out as a market leader in terms of market penetration. GBTC has seen a surge in assets over the past year rising from $2 billion at the start of the year to over $10 billion today.

In terms of market penetration, GBTC’s AUM is just shy of 3% of the total bitcoin market capitalization. This is considerably larger than other investment trusts and ETFs in different markets. The most popular S&P 500 ETF, SPY, has the next greatest penetration at 1.25%. In the figure below, we diagram AUM as a percentage of asset class value across the most popular funds in various assets.

Figure 2: GBTC market penetration comparison


MicroStrategy buys another $50m in bitcoin
MicroStrategy has added another $50 million in bitcoin to its treasury reserve, as announced this week by the company’s CEO, Michael Saylor. MicroStrategy paid an average price of $19,427 for the 2,574 bitcoins. The recent bitcoin purchase comes as the firm had already purchased more than $350 million worth.

MicroStrategy has been one of the most vocal public companies in encouraging other firms to transition its cash balance sheet to bitcoin. With its latest purchase, MicroStrategy has now bought 40,824 bitcoins for a total cost of $475 million. At current market prices, MicroStrategy’s bitcoin holdings are worth $791 million–a total unrealized gain of $316 million.

MicroStrategy is not the only firm looking to diversify its balance sheet into bitcoin. The payments giant Square has purchased $50 million in bitcoin recently, which now has a market value of $91 million making it the second largest public company by bitcoin holdings. Hut 8 mining ranks as the third largest publicly traded company by bitcoin holdings, with $57 million in the asset on its balance sheet.

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