Digital Asset Market Update – Week of March 29th, 2021

Largest Expirations of Options for Digital Assets Ever

 

A couple of days ago, the largest ever expiration of options of over $6 Billion, primarily through the exchange Debit. 

And from our funds perspective, what’s interesting here is that the nature of those options and how they’re composed of calls versus puts is starting to change and speaks to institutional participation growth.

Typically, if people are more like gamblers or speculators with smaller positions, they tend to buy long calls. You hope the price goes up, and they’ll make more if it does.

Fewer people bet on downward positions, or if you have to pick positions, you buy puts in order to protect your portfolio, even if you don’t expect them to be in the money. 

And so what we’ve seen is that there’s a huge influx of new institutional participants that are buying more of that put protection, which speaks to maturity and growth in the market. Our fund improves option spreads and the overall nature of the market, and its longevity.

And it’s just interesting to see this evolution evolve.

As these options expire, it tends to compress the price down and then pop back up post – expiration. 

We’ve seen those options expire, which tends to compress the price down after that expiration. The prices pop back up. The market is evolving as more institutional participants continue to buy Bitcoin and Ethereum.

 

Visa Settles Stablecoins using Ethereum

 

Visa announced that they would be using USDC stablecoins within their payments network and the Ethereum blockchain. This speaks to the continuation of Ethereum as the critical point of the new financial open finance infrastructure evolving.

With Visa, this adds a huge influx of new users and a whole new layer 2 settlement network. Interestingly, they chose USDC, a very long-time participant through circle that’s been really focused on scaling just their stablecoin and rolling off other divisions of their business. 

It’s a big win for circle for USDC as well as the Ethereum blockchain. Also interesting to note that this isn’t a central bank-backed digital currency.

However, it’s effectively the same. 

It’s almost like an OTT layer on the financial system that allows you to transact in this way but doesn’t need the government’s direct backing to effectively have dollars being moved through payment networks as big as Visa. 

Obviously, Visa knows where things are heading, and also, they’ll need to use ETH to pay for gas fees. So Visa is a new participant in buying ETH. And so for our fund, that’s why we are mostly focused on just Bitcoin and ETH because it gives you pretty much macro exposure to the entire marketplace.

 

Blockfi Changes Interest Rate Structure

 

Lastly, we saw a big re-rating of interest rates over a Blockfi by one of the space’s largest lenders. 

They just announced a series D and raised 350 million. A couple of days later, they were drastically lowering the interest rates they offer to people who borrow with them and use collateralized loans.

We’ve seen as the whole market need to lower interest rates and speak to a lot of the leverage and systemic risk. 

Blockfi is either trying to either prepare for acquisition, or IPO is really trying to cut margins and improve where they make money. Along the way, they’ve captured a lot of money to be the lender and interest rate giver of choice for many industries.

It will be interesting to see how people react and look for better rates elsewhere. Rates will naturally compress in a market that is maturing very quickly.