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The Hard Fork – Weekly Market Commentary

This Week’s Topics:
1) Chinese President embraces blockchain technology
2) Bakkt bitcoin futures volume hits new high
3) Zuckerberg testifies in front of Congress on Libra


Indices Round-Up
TradeBlock Index Asset1 Price ($) 7d∆2
BCX Bitcoin Cash 263.35 17.38%
EOSX EOS 3.37 16.51%
XBX Bitcoin 9,423.14 14.77%
LTX Litecoin 59.24 9.33%
ZCX Zcash 39.75 9.28%
ECX Ethereum Classic 4.83 8.25%
ETX Ethereum 183.55 5.45%
XLMX Stellar Lumens 0.07 4.07%
XMRX Monero 59.32 3.55%
XRX XRP 0.30 2.12%
1. Underlying asset sorted in descending order by 7 day price movers.
2. 7 day price movers monitored from 10/21/2019 06:00 ET thru 10/28/2019 06:00 ET.

7 day price movers

Digital currencies broadly traded higher on the week as bitcoin surged more than 20% in one day. The space was buoyed by comments from Chinese President Xi Jinping, who stated that China must seize the opportunity allowed by blockchain technology. His comments come as governments around the globe increase their focus on the space (see more in topic 1 below).

Among our indexed currencies, BCX rose the most, gaining 17.38% in a week, conversely XRX traded up the least, adding 2.12%. US equities pushed higher on the week, as the S&P 500 flirted with a new all time high on positive earnings outlooks and trade war optimism.


Chinese President embraces blockchain technology

On Friday, Chinese President Xi Jinping made positive remarks around blockchain technology as he pushed his party to embrace and harness the possibilities afforded by the technology. On the news, bitcoin surged more than 20% to trade back above $9,000 per coin.

While the President’s comments were positive for blockchain technologies, he refrained from discussing digital currencies, such as bitcoin. Over the years China has had a changing relationship with bitcoin as the country has put forth laws to restrict it and also loosen these laws at various times. Most recently, Chinese regulators sought to pass a bill that would prevent bitcoin mining farms from operating in China.

President Xi’s comments come as US lawmakers debate the challenges and opportunities of digital currencies, including those put forward by Facebook’s Libra coin (see topic 3 below). If China aggressively expands into blockchain based initiatives, it could push US policy towards embracing the technology in order to stay competitive with China on this front.


Bakkt bitcoin futures volume hits new high

Bakkt’s bitcoin futures trading product has begun gaining momentum as trading volume increased considerably. Over the past week, Bakkt’s bitcoin futures product reached its highest trading activity yet. While Bakkt’s product saw muted activity at launch, recent market volatility has caused volumes to increase. In the figure below, we diagram Bakkt bitcoin futures notional trading volume since inception.

Figure 1: Bitcoin futures notional trading volume

Data for chart sourced from Bakkt

Despite the uptick in volumes, Bakkt still trails the CME which has seen nearly 10 fold as much volume. Bakkt differs from the CME in that Bakkt offers a physically settled bitcoin futures contract whereas the CME only offers a cash settled product.

Additionally, on Thursday, Bakkt announced a move into new products, as the exchange plans to launch bitcoin options contracts beginning in December of 2019. Bakkt joins LedgerX in offering bitcoin options contracts on a US regulated marketplace..


Zuckerberg testifies in front of Congress on Libra

On Wednesday, Facebook CEO Mark Zuckerberg testified in front of the US Congress on his company’s plans for Libra. US lawmakers pushed Zuckerberg on various topics ranging from data privacy, centralization of the Libra initiative, and concerns Libra would challenge the reserve currency status of the US dollar.

Zuckerberg stressed that Facebook’s plans for the Libra association would not move forward without regulatory approval from the appropriate US agencies. He would not, however, agree to first receiving approval from a US congressional oversight committee specifically before launch. Relating to concerns that Libra would threaten the US dollar, Zuckerberg emphasized that the majority of the reserves backing the Libra stablecoin would be US dollars, which he argued could help strengthen the dollar as more users (such as those in Facebook’s network in other countries) would transact in an asset tied to the dollar.

Throughout Zuckerberg’s six hour testimony he refrained from specifically discussing bitcoin or other existing digital currencies. This has separated Facebook from other tech giants that have begun exploring digital currency opportunities in recent months. Following Zuckerberg’s testimony, Twitter CEO Jack Dorsey stated that Twitter would never join the Libra association and Dorsey emphasized his support for bitcoin as a payments option.

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