March 29, 2020 Weekend Roundup

With much attention now focusing on anticipating and understanding the repercussions of the various responses to the COVID-19 pandemic, Smith + Crown has collected the most insightful commentary within the cryptoasset analyst community pertaining to the action in the cryptoasset market:

  • Cathie Wood of Ark Invest, an early fund to invest in Bitcoin and produce independent research on the asset class, in interviews this week, spoke to the potential for disruptive innovation to experience heightened growth and steal market share from legacy services. Blockchain technology is widely considered to fall into this category and the current uncertainty may hasten its adoption by legacy enterprise companies as well as allowing early-stage startups to capture market share.
  • Pantera Capital, a blockchain investment company, in its investor call suggested that institutional investment in the asset class may slow as the until-now dominant narrative about cryptoasset being uncorrelated to the broader financial markets was undermined by recent price action, where cryptoassets broadly traded in line with equity markets. However, the Pantera team did say that it believes the wave of global monetary stimulus that is accompanying fiscal stimulus efforts will ultimately be conducive to the appreciation of fixed-supply cryptoassets such as Bitcoin.
  • Matthew Dibb, COO of Stack Funds, wrote this week that a large part of the recent sell-off can be explained by the need for funds to sell assets and raise cash in order to meet margin calls pointing to the bearish price action that Gold has also experienced. However, he goes on to explain that while Gold fell by 15% and 30% respectively in the previous two recessions, the global liquidity increases that followed eventually led to the metal increasing by 100% from $700 to $1,400 within two years, suggesting that a similar sequence of events may happen to Bitcoin.
  • Commentary from Multicoin Capital focused on the luminary effect that recent volatility has had on the infrastructure of the cryptoasset markets, pointing to the incapacity of the Bitcoin and Ethereum networks to handle the transaction demands, caused by a need to move funds between exchange venues. Specifically, they point to the fact that the resulting congestion means that efficient arbitrage cannot occur, leading to extreme variations in prices across venues.
  • Coinmetrics focused on the effect that the volatility has had on stablecoins, pointing to a major increase in their demand. The aggregated transfer of stablecoins hit all-time highs according to the Coinmetrics team and that the demand can be explained by market participants looking for price stability. As an auxiliary note, they pointed to the stresses that GUSD appears to be under, as the USD-pegged stablecoin, issued by Gemini has been consistently diverging from its peg in recent weeks.

Smith + Crown continues to closely follow the industry's and broader global community's responses to the pandemic, and to seek to fully comprehend such responses' implications for project's developing cryptoeconomic systems.