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The Hard Fork – Weekly Market Commentary

This Week’s Topics:
1) Bitcoin outperformed traditional assets during COVID
2) CME bitcoin options OI hits all-time high
3) Coinbase looks to add 18 new assets

Indices Round-up


TradeBlock Index Asset1 Price ($) 7d∆2
ZCX ZCash 49.80 -4.72%
XBX Bitcoin 9077.30 -6.77%
XMRX Monero 62.13 -7.85%
LTX Litecoin 42.46 -8.49%
ETX Ethereum 222.42 -8.70%
XRX XRP 0.18 -9.21%
ECX Ethereum Classic 6.09 -10.33%
BCX Bitcoin Cash 227.40 -10.51%
EOSX EOS 2.47 -11.15%
XLMX Stellar Lumens 0.07 -15.11%
1. Underlying asset sorted in descending order by 7 day price movers.
2. 7 day price movers monitored from 06/08/2020 06:00 ET thru 06/15/2020 06:00 ET.


7 day price movers

Digital currencies posted modest losses on the week as the asset class resumed its correlation with US equities. Among our indexed assets, XLMX traded down the most losing 15.11%. Conversely, ZCX traded down the least, losing 4.72%. In traditional markets, US equities declined posting one of their worst intra-day losses since the COVID-19 pandemic began. On Thursday of last week, the Dow Jones index lost more than 1,800 points closing the day down 6.9%.

Cautious commentary from the US Federal Reserve as well as heightened fears of a second wave of infections were primarily blamed for the sell-off, hitting industrials and hospitality sectors the hardest. The S&P 500 ended the tumultuous week down 4.98%.

Bitcoin outperformed traditional assets during COVID

Bitcoin outperformed traditional asset classes in both absolute and risk-adjusted metrics during the COVID-19 shutdown in the US. While nearly all asset classes initially declined in early March in a flight to cash and low risk short term bonds, bitcoin outpaced others in the rally in April and May to reclaim losses. In the figure below we diagram absolute returns across various assets during the COVID-19 crash and corresponding rally.

Figure 1: Asset class performance over time

Data for chart sourced from TradeBlock and the Wall Street Journal


Additionally, we found that a portfolio with a modest bitcoin allocation demonstrated superior risk adjusted returns relative to portfolios containing only traditional investment assets. Our analysis found that a traditional equity/bond portfolio with a modest allocation of 10% towards bitcoin showed higher risk-adjusted returns (as measured by the Sharpe ratio) relative to a 60/40 equity/bond portfolio as well as an equity/bond portfolio with a modest allocation of 10% to gold. Our full analysis on this topic can be viewed here.

CME bitcoin volumes rise

Open interest on the CME’s bitcoin options product hit an all-time high this past week. Earlier this year the CME launched bitcoin options contracts for the first time–complementing its bitcoin futures product offering that launched in late 2017. Similar to its futures product offering, activity in its bitcoin options contracts started off slowly before picking up in recent weeks. In the figure below we diagram bitcoin options open interest over the past monthly period.

Figure 2: CME bitcoin options open interest MTD

Data for chart sourced from the CME


In addition to a rising interest in its options contracts, the CME’s futures products have also seen increased trading volume recently. The push likely is coming as institutions are getting increasingly comfortable with bitcoin. In a recent survey conducted by Fidelity, the investment management firm found that 36% of large institutions had some exposure to digital currencies, with bitcoin being the most commonly held.

Coinbase looks to add 18 new assets

We highlighted in a note last week that the Coinbase listing pump has resumed with both MKR and OMG tokens seeing outsized gains on announcements they would be added to the popular exchange. This week, Coinbase significantly increased the number of possible new listings, announcing that the exchange would look to add up to 18 new assets. These new assets include, in alphabetical order: Aave, Aragon, Arweave, Bancor, COMP, DigiByte, Horizen, Livepeer, NuCypher, Numeraire, KEEP Network, Origin Protocol, Ren, Render Token, Siacoin, SKALE Network, Synthetix, and VeChain.

While it is unlikely that Coinbase will add each asset at one particular time, as the exchange requires significant compliance and in some cases regulatory approval prior to listing, the recent push does emphasize Coinbase’s desire to significantly expand the exchange’s listed assets. Despite recent increases in listed assets, our prior research has found that the vast majority of trading volume is still concentrated in its bitcoin-US dollar pairs.

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