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First Mover: Binance’s Shrinking Trading Spreads and Bitcoin’s Jackson Hole Fizzle

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Price point

Bitcoin was rising along with gold and U.S. stock futures early Friday as traders reacted to Federal Reserve Chair Jerome Powell’s plan to let inflation run hot in coming years as the economy heals from the coronavirus-induced recession. 

The largest cryptocurrency, seen by some investors as a hedge against inflation, changed hands around $11,451, staying in the range between $10,900 and $12,400, where it has been stuck since late July. 

In Asian markets, the Japanese yen jumped on haven buying after Prime Minister Shinzo Abe, who has pursued inflation-boosting policies, said he would resign due to an illness. 

You’re reading First Mover, CoinDesk’s daily markets newsletter. Assembled by the CoinDesk Markets Team, First Mover starts your day with the most up-to-date sentiment around crypto markets, which of course never close, putting in context every wild swing in bitcoin and more. We follow the money so you don’t have to. You can subscribe here.

Market moves

Getting in and out of a large bitcoin trade on cryptocurrency exchanges like Binance or BitMEX isn’t costing as much as it used to. That might be a healthy sign that digital-asset markets are maturing. 

At Binance, the world’s biggest cryptocurrency exchange by trading volume, the daily average spread between buy and sell orders on bitcoin futures for $10 million quote size declined to a record low of 0.25% on Monday, according to data provided by research firm Skew. The spread, which typically narrows as an exchange’s order book depth increases, spiked to 7.95% during the March crash but dropped shortly after. It has been in a declining trend ever since.

The so-called bid/offer spread is the difference between the best available price to sell or buy something in a market. It essentially represents liquidity – the degree to which an asset can be quickly bought or sold on a marketplace at stable prices. 

A narrower spread implies a deeper market where there is sufficient volume of open orders  so buyers and sellers can execute a trade without causing a big change in the price. That’s in contrast to a weak liquidity environment, where large orders tend to move the price, increasing the cost of executing trades, and deterring traders – especially institutions – and, in turn, causing a further decline in liquidity. 

Binance and BitMEX offering record low spread on a $10 million quote is a healthy market development, according to Denis Vinokourov, head of research at London-based crypto prime broker Bequant. 

“The tighter the spread, the deeper the order book, the more the market is able to withstand shocks [price volatility],” Vinokourov told CoinDesk in a Telegram chat.

Bid-offer spreads on bitcoin have been shrinking on Binance, BitMEX and other exchanges.
Source: Skew.

Bitcoin watch

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Bitcoin’s four-hour chart
Source: TradingView

Bitcoin and gold are reversing losses seen on Thursday following Federal Reserve’s (Fed) announcement of a more relaxed approach to fighting inflation. 

  • The top cryptocurrency has recovered to levels above $11,450 on Friday, erasing nearly 70% of the post-Fed decline from $11,594 to $11,141, according to CoinDesk’s Bitcoin Price Index. 
  • Gold, too, has risen back to $1,960, having dropped from $1,976 to $1,910 following Powell’s inflation speech, as per data source  TradingView. 
  • Both assets fell on Thursday, as the U.S. dollar gained ground despite the Fed unveiling an aggressive inflation strategy. 
  • The greenback, however, is facing renewed selling pressure at press time.
  • The dollar index, which gauges the greenback versus a basket of its main competitors, is currently trading at nine-day lows near 92.35, representing a 0.68% decline on the day. 
  • “Powell’s speech suggests that there is no end in sight [for easy monetary policy]. In parallel, safe havens or dis-inflationary assets continue to offer investors an alternative from playing that central bank manipulated game, bitcoin among them,” John Kramer, trader at GSR told CoinDesk in a Telegram chat. 
  • “Powell has shown that there is ZERO tolerance for deflation so they will do ANYTHING to stop it, and that is good for the two hardest assets – gold and bitcoin,” Raoul Pal, founder and CEO of Global Macro Investor and Real Vision Group tweeted early Friday. 
  • Put simply, the speech strengthened bitcoin’s long-term bullish case.
  • While bitcoin has regained some poise, it has yet to cross the descending trendline hurdle, as seen above. 
  • A break higher would imply an end of the pullback from the Aug. 17 highs above $12,400.
  • On the downside, $11,100 is crucial support. That area around that level has consistently restricted losses over the past two weeks. 

Token watch

Polkadot (DOT): With “protocol of protocols” weeks away from release of bridge to Ethereum blockchain, token’s market cap tops $5 billion, now in top 10 of all cryptocurrencies. 

fm-aug-28-chart-on-polkadot
In just a couple weeks, Polkadot’s DOT token has reached a market valuation of more than $5 billion.
Source: CoinGecko

Analogs

The latest on the economy and traditional finance

Selected commentary on Fed Chair Jerome Powell’s Jackson Hole speech Thursday:

  • Matt Blom, Diginex: “The initial market reaction was positive, but now the real fun begins. If stocks head south, the Fed will step up the printing machines.”
  • Ian Shepherdson, Pantheon: “Powell and his colleagues have given themselves significantly more room to maintain zero rates and a swollen balance sheet over the next couple of years.”
  • Mati Greenspan, Quantum Economics: “If their intention was to cool down the markets, then they failed miserably.”
  • Bank of America: “Price action in the foreign currency market today reinforced to us that Powell’s speech marked no revolutionary policy change but rather a shift that, to an extent, has already been the Fed’s de facto approach for some time.”
  • Simon Peters, eToro: “With interest rates not looking to move any time in the near future, the Fed’s new monetary policy could impact savers as they hold potentially fruitless investments such as fixed income assets.”
  • QCP Capital: “Powell’s backpedaling and fuzzy inflation framework has disappointed the market that was hoping for a formalization of inflation policy in this speech itself.”
screen-shot-2020-08-27-at-8-06-30-am
Federal Reserve Chairman Jerome Powell speaks at the Kansas City Fed’s first-ever virtual Jackson Hole Economic Policy Symposium.
Source: Federal Reserve, modified by CoinDesk

What’s hot

Bitcoin miners are hanging onto their holdings, possibly a sign of optimism that the cryptocurrency’s price rally will continue (CoinDesk)

Digital Currency Group (CoinDesk’s parent company) to put $100M into bitcoin mining (CoinDesk) 

Voyager to Pay Interest on DeFi Tokens to Gain Brokerage Clients (CoinDesk)

Critical software bug leaves 13% of Ethereum nodes useless (CoinDesk)

Turns out crypto might be the perfect asset for quant trading (CoinDesk Opinion)

Crypto lender BlockFi to use CF Benchmarks to value customer deposits and collateral (CoinDesk)

Inflation-Resistant Portfolio? No problem, here’s 3 assets to help you do that.(Hacker Noon)

Tweet of the day

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Disclosure

The leader in blockchain news, CoinDesk is a media outlet that strives for the highest journalistic standards and abides by a strict set of editorial policies. CoinDesk is an independent operating subsidiary of Digital Currency Group, which invests in cryptocurrencies and blockchain startups.



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MicroStrategy Buys Additional 13,005 Bitcoin for $489 Million

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With the current BTC price, MicroStrategy’s total Bitcoin holding is worth more than $3.4 billion.

MicroStrategy Inc (NASDAQ: MSTR) has continued its Bitcoin acquisition spree as it has purchased another $489 million worth of BTC. As of the 21st of June, the Nasdaq-listed business intelligence company holds 105,085 Bitcoins.

The company announced its latest Bitcoin acquisition earlier today. According to the company, the newly acquired BTC totaled 13,005 at an average price of about $37,617, fees and expenses included. The purchase came after MicroStrategy generated $500 million in cash from the sale of debt to fund the purchase of BTC.

Before MicroStrategy purchased the most recent Bitcoin, the company had unveiled plans to buy Bitcoin in a filing with the US Securities and Exchange Commission (SEC). In the filing, MicroStrategy said it would be selling up to 1 billion of its class A common stock through an “Open Market Sale Agreement” with Jefferies LLC. The company added that proceeds from the stock sales would be used to buy more Bitcoin. MicroStrategy explained:

We intend to use the net proceeds from the sale of any Class A common stock offered under the prospectus for general corporate purposes, including the acquisition of bitcoin, unless otherwise indicated in the applicable prospectus supplement.

MicroStrategy Focuses on Bitcoin Acquisition

In addition, MicroStrategy has made Bitcoin acquisition a focus for the company. The company said that it mainly pursues two corporate strategies. Apart from growing its enterprise analytics software business, a major strategy for the company is to acquire and hold BTC.

In the SEC filing, the Nasdaq-listed company added that it is currently seeking opportunities to implement Bitcoin-related technologies like blockchain analytics into its software offerings. Also, the company intends to hold its Bitcoin holdings long-term and not engage in regular trading.

MicroStrategy became the first publicly-traded company to buy Bitcoin in August 2020. At the time, the company bought 21,454 BTC worth $250 million, making BTC its primary treasury reserve asset. When MicroStrategy made its initial Bitcoin purchase, BTC was trading at $11,653 per coin. This means that the price of Bitcoin has surged about 5 times since the first purchase.

After debuting into the crypto space in August last year, MicroStrategy had purchased more and held more than 90,000 BTCs before its latest acquisition, announced on the 21st of June.

At the time of writing, Bitcoin is hovering around $33,000. With the current BTC price, MicroStrategy’s total Bitcoin holding is worth more than $3.4 billion. According to MicroStrategy, its new subsidiary – MacroStrategy, manages about 92,079 BTC of its coins.

MSTR stock is currently at $595.79, a 7.64% decline over its previous close of $646.46. The company has grown nearly 403% in the last twelve months and 53.57% in its year-to-date record. In addition, MicroStrategy stock has gained more than 26% over the past month. However, MSTR has shed 17.65% over the past three months and has dropped 0.30% in the last five days.

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Ibukun is a crypto/finance writer interested in passing relevant information, using non-complex words to reach all kinds of audience. Apart from writing, she likes to see movies, cook, and explore restaurants in the city of Lagos, where she resides.



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Wise Fintech to Go Public via Direct Listing on London Stock Exchange

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In the future, Wise plans to roll out OwnWise, a client shareholder program that will allow its users to own a stake in the company.

British fintech Wise, formerly TransferWise, announced Thursday its plans to go public via a direct listing on the London Stock Exchange (LSE). The money transfer company said it had sufficient funding and therefore, did not require underwriters or issuing of new shares.

Wise will pioneer direct listing in London, a deal which will be finalized on July 5. Sources speculate the listing could value Wise at anywhere between $6-7 billion, up from its latest $5 billion valuations. This would also make it one of the biggest floats this year.

Founded in 2010, Wise has managed to accumulate 10 million customers who use its services to send £5 billion ($7 billion) every month. Its rivals include Western Union and MoneyGram in addition to startups like WorldRemit and Revolut.

Since 2017, Wise’s track record shows consistent profitability with a 54% annual growth rate. The latest 2021 fiscal year report shows it made £30.9 million in profits out of the £421 million ($589 million) sales revenue. This year, the company’s payments app registered £54.4 billion of international transfers for 6 million clients.

Wise Listing on LSE

Listing the giant company is a great accomplishment for London as it competes with “The Big Board”, New York Stock Exchange Group (NYSE), to attract more high growth and Blue-chip firms. As of 2020, the NYSE had 2800 company stocks and its market cap as of June, 2021 was $24.68 trillion. LSE, on the other hand, has listed over 1300 companies and its market cap is at 40.08 from today’s MarketWatch data.

To further this development, the British government is considering increasing leniency in firm enlisting guidelines to encourage issuing of dual-class shares. However, European stock markets have been hit with a lot of volatility this year, with at least two IPO cancellations in recent weeks.

The dual share structure is what Wise is opting for as it allows them to retain voting control while accommodating investors and customers into their shareholder base. At present, however, it locks them out of the lucrative Financial Times Stock Exchange (FTSE) indices.

Nevertheless, the company intends to issue both class A and class B shares with the latter holding the privilege of 9 votes per share. The expiry for Class B shares is in the fifth year following Wise’s IPO. It is likely for concerns to arise over this structure as it may give executives excessive influence on shareholder votes.

In the future, Wise plans to roll out OwnWise, a client shareholder program that will allow its users to own a stake in the company. Financial endeavors for the company are advised by Goldman Sachs, Morgan Stanley, Barclays and Citigroup.

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A financial analyst who sees positive income in both directions of the market (bulls & bears). Bitcoin is my crypto safe haven, free from government conspiracies.
Mythology is my mystery!
“You cannot enslave a mind that knows itself. That values itself. That understands itself.”



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JPMorgan Acquires Nutmeg Robo-Advisor, Furthering UK Retail Banking

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Before the deal, JPMorgan and Nutmeg had partnered late last year to offer clients an assortment of globally diversified exchange-traded funds (ETFs).

JPMorgan Chase & Co (NYSE: JPM) said Thursday it has closed a deal to purchase Nutmeg, an online investment management service, for an unnamed price. US biggest bank hopes the agreement, which awaits regulatory approval, will complement its launch of a standalone digital bank brand in the UK during the year.

Using the latest technology from Nutmeg will help boost JPMorgan’s retail and institutional push since the company aims at establishing as many branches as it can outside the US.

With over £3.5 billion (4.9 billion) worth of assets under management, the decade-old Nutmeg is one of the UK leading and award-winning robo-advisors. The company offers various investment accounts including Individual Savings Accounts (ISAs), general investment, and pensions accounts.

Additionally, its competitors include Wealthsimple, Moneybox, and Moneyfarm. Before the take-over, Nutmeg had raised over $150 million in investments from Goldman Sachs and the British venture capital firm – Balderton Capital.

JPMorgan CEO Jamie Dimon stated last year that the banking giant would be “much more aggressive” in adding assets by conducting more acquisitions. The bank may also be stepping up to competition from adversary Morgan Stanley (NYSE: MS) which, in recent years, has spent $20 billion in merger agreements with E-trade and Eaton Vance.

Dimon also mentioned leveling up against blue-chip tech firm Alphabet Inc (NASDAQ: GOOGL) and other fintech firms such as PayPal Holdings Inc (NASDAQ: PYPL).

JPMorgan Stock Market and Nutmeg Acquisition

Before the deal, JPMorgan and Nutmeg had partnered late last year to offer clients an assortment of globally diversified exchange-traded funds (ETFs). This is not the first time the bank has partnered with a company then acquired it later. In October 2020, JPMorgan partnered with 55ip, a tax-smart fintech start-up, then bought it a couple of months down the line.

Differing regulatory guidelines in Europe and the UK made it necessary for JPMorgan to purchase the robo-advisor, rather than use investment technology available in the US. However, its US-based investment service You Invest is currently doing well, with assets valued at about $50 billion, as Dimon states.

JPMorgan’s tech initiative marks one among many happening in Britain’s retail banking sector. Banks such as Revolut, Starling, and Monzo manage digital-only checking accounts which have attracted a host of clients. Going by data from Innovate Finance, FinTechs in the UK probably make up the world’s largest markets, having pulled in $4.1 billion investment from venture capitalists as of last year.

JPMorgan Securities served as financial advisor in the JPMorgan-Nutmeg transaction, while Freshfields Bruckhaus Deringer acted as legal counsel. Arma Partners was Nutmeg’s financial advisor and Taylor Wessing was legal counsel.

As of June 17, 2021, at 7:59 p.m. EDT, JPMorgan stock closed at $151.76, down 2.89%. In the after-hours session, it was trading at $151.48, down 0.18% in 24-hours.

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A financial analyst who sees positive income in both directions of the market (bulls & bears). Bitcoin is my crypto safe haven, free from government conspiracies.
Mythology is my mystery!
“You cannot enslave a mind that knows itself. That values itself. That understands itself.”



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