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The Hard Fork – Weekly Market Commentary

This Week’s Topics:

1) Tesla buys $1.5bn in bitcoin for balance sheet
2) Ether futures launch on CME; ETH pares gains after $1,700
3) Miller Value looks for GBTC exposure up to 15%


TradeBlock Index Round-up


TradeBlock Index Asset1 Price ($) 7d∆2
ETX Ethereum 1,662.33 24.27%
XLMX Stellar Lumens 0.39 18.53%
XBX Bitcoin 39,462.54 15.42%
LTX Litecoin 152.97 13.43%
ECX Ethereum Classic 8.54 12.90%
EOSX EOS 3.48 11.00%
ZCX Zcash 94.75 8.65%
XMRX Monero 153.90 8.57%
BCX Bitcoin Cash 455.13 5.24%
XRX XRP 0.43 -30.58%
1. Underlying asset sorted in descending order by 7 day price movers.
2. 7 day price movers monitored from 01/25/2020 06:00 ET thru 02/01/2020 06:00 ET.


7 day price movers
Digital currencies broadly saw large gains on the week with many DeFi tokens reaching new all-time highs. This morning, bitcoin is leading the broader digital currency market higher with the asset hitting $44,000–a new all-time high. Among TradeBlock’s Indexed assets, ether traded up the most, gaining nearly 25%. Conversely, XRP traded down the most, declining 30.58%.

In traditional markets, US equities ended the week up more than 4% with the S&P 500 back near all-time highs. In the bond market, 10-yr treasuries rose hitting 1.15% on improved unemployment numbers. US unemployment rate fell to 6.3% from 6.7%, according to jobs data released on Friday.

1) Tesla adds $1.5bn in bitcoin to its balance sheet
This morning it was announced that Tesla had purchased $1.5 billion in bitcoin to add to its balance sheet. The number is nearly 10% of the firm’s cash holdings on its BS. It is unclear to what extent MicroStrategy CEO Michael Saylor played a role in convincing Elon Musk to purchase the bitcoin. Michael Saylor held a conference this past week for institutions and public companies to educate them on how to gain bitcoin exposure via corporate balance sheets and the advantages in doing so. 1,400 corporates were said to be in attendance for the virtual event.

As of today, there are 19 publicly traded companies with bitcoin holdings on their balance sheets. The total aggregate bitcoin holdings across these companies is just over $5.5 billion. In the figure below, we delineate the largest public companies’ bitcoin holdings.

Figure 1: Public companies with the largest bitcoin holdings


2) Miller Value looks for GBTC exposure up to 15%
Hedge fund manager and bitcoin bull Bill Miller may be dialing up his bitcoin exposure. This past week, he indicated that his firm’s flagship fund will look to allocate up to 15% of its AUM to GBTC–Grayscale’s Bitcoin Investment Trust. GBTC uses TradeBlock’s XBX Index to benchmark its nearly $25bn in AUM.

“The Fund may seek investment exposure to bitcoin indirectly by investing in the Grayscale Bitcoin Trust, an entity that holds bitcoin…The Fund will not make any additional investments in the Grayscale Bitcoin Trust if, as a result of the investment, its aggregate investment in bitcoin exposure would be more than 15% of its assets at the time of investment,” the fund wrote in a filing with the U.S. SEC.

Miller Value currently has around $2.25 billion in AUM, and has gained bitcoin exposure in the past by owning the digital currency outright as well as taking part in Microstartegy’s convertible notes offering late last year.

3) Ether futures launch on CME
Exchange operator CME group launched its first Ethereum futures contract sunday night, with 77 contracts trading this morning on February 8th. The CME’s launch adds another offering among its digital currency derivatives product–the CME currently offers bitcoin futures and options. Ether, as the second largest digital currency by market cap, is the second digital currency derivative product that the CME is launching.

In 2017, the CME launch of a bitcoin futures product top-ticked the market with bitcoin reaching its prior all-time high within a few weeks of the offering before declining to a bottom around $3,500 in a multi-year bear market. While fears of a similar price decline permeated the market with ether paring gains from $1,730 to around $1,550 over the weekend before rebounding back near $1,700 this morning. We suspect that this time around the launch will be different from 2017:

1) a CME launch does not represent the frothiness of the market that was seen in 2017. Today, the CME has already had considerable success with its bitcoin product over the past year and a half with the product slowly beating volume numbers month-over-month, and the launch in and of itself is not a novel product.
2) The market is more mature today than it was in 2017 with various futures contracts already trading, and
3) market indicators are often led by bitcoin and not alt-coins, including ether.

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