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Friday Metrics Watch; CBOE Pulls Out of Bitcoin Futures

CBOE, the first US exchange to list Bitcoin futures during the height of the bull run in late 2017, is discontinuing its Bitcoin Futures contract product due to tepid interest and waning demand. The decision comes after CBOE continued to lag behind its rival CME in capturing institutional investors’ interest in the Bitcoin futures market. As shown in the figure below, after the initial spike in trading volumes, CME trading volumes increased significantly while CBOE volumes have been on a persistent decline.

The CBOE XBT futures were cash-settled contracts based on the Gemini exchange’s bitcoin auction price. CME, on the other hand, used a sort of aggregated, average pricing from four major exchanges – Kraken, Itbit, GDax, BitStamp. There is a good breakdown of the key differences between the CBOE and the CME versions here.

Bitcoin Trading Volumes Comparison (CBOE vs. CME)
Bitcoin Trading Volumes Comparison (CBOE vs. CME)

The drop in futures trading volume for CBOE does not necessarily mean that Bitcoin is losing institutional demand. As we noted earlier, CME volumes have been steadily increasing, not to mention volumes in exchanges such as Bitmex. ICE-backed Bakkt is expected to debut later this year and Bitcoin ETF is still in the pipeline.

Average Daily Bitcoin Futures Volumes
Source: https://www.cryptoglobe.com/latest/2019/03/latest-research-shows-why-cboe-had-to-concede-the-bitcoin-futures-game-to-cme/

In general, institutions are pro-cyclical; the system and the incentive structures are designed with a view to prioritize capital preservation over capital enhancement, so the vast majority of institutions are likely only coming in once the current winter thaws and bitcoin prices again starts inching back up towards five figures. It does not really make sense, and it goes against the whole ethos of ‘being greedy when others are fearful and vice versa’ that Warren Buffet talks about, but it also makes sense within the construct of these institutional investor incentive mechanisms.

And now on to out Friday Metrics watch….

Currently, DeFi along with the Lightning Network are probably the two most interesting user applications out there in the crypto space currently. To present our readers with updates on how fast the DeFi and Lightning Network ecosystems are going, we wanted to make our Friday edition of newsletter primarily dedicated to tracking the progress of key metrics in both these ecosystems. In Satoshi&Co future Friday editions, we will therefore try to present to our readers more data-driven research on different components of the DeFi stack, LN as well as other adjacent ecosystems such as DEXs (decentralized exchanges) and stablecoins.

Ethereum Locked in DeFi

MakerDAO still accounts for a lion’s share of ETH locked up in collateral, with more than 2.1 million of ETH locked up. Augur and dYdX have shown strong w/w growth, partly because of their low base values. 

Ethereum Locked in DeFi

(For reference, some previous articles on DeFi herehere and here)

Lightning Network Growth

Lightning Network is continuing its stellar growth in nodes and channel capacity as the total number of nodes grew by 18% and the network capacity also grew by 22% over the past one week.

Lightning Network Growth

(For reference, some previous articles on LN, here)

DEX Tracker

Trading volumes on DEXs have declined on a w/w basis, with the average daily trading volume averaging 20k ETH for this week. IDEX remains the biggest DEX in terms of trading volume and DAI is the highest traded cryptocurrency on DEXs.

DEX Tracker

(For reference, some previous articles on DEXs, here and here)

Crypto Loans Tracker

Compound Loans

Total loans issued on Compound for the last week stands at approx. $135k for the week. WETH is the most borrowed cryptocurrency on Compound followed by DAI and BAT.

Dharma Loans:

Total loans issued on Dharma Lever (still in alpha) for the last week stands at approx. $130k for the week. DAI is the most borrowed cryptocurrency on Compound followed by WETH and USDC.

MakerDAO Loans

Barring the day when ~800k was issued in DAI, MakerDAO’s daily run rate has stabilized between 300k and 400k for the remaining days. The total outstanding DAI debt currently stands at ~$93 million.  

(For reference, some previous articles on MakerDao, here and here).

You can also check out last week’s Metrics Watch here.

Meanwhile in Crypto Wonderland….

“SBI Holdings to Venture Into Mining Chip Manufacturing” SBI Holdings, Inc. announced the establishment of its chip mining arm, the SBI Mining Chip Co., Ltd or SBIMC. With this development, the Tokyo-based firm will foray into the manufacturing of mining chips, a strategic move to enhance its existing digital asset business. SBI group partnered with a US-based semiconductor firm to roll out the new manufacturing unit. SBIMC will be leading chip manufacturer, Nvidia’s latest competitor.

“Bakkt Valued at $740 Million” After reportedly being valued at around USD 740 million, much-anticipated and oft-delayed crypto trading platform Bakkt will need a lot of trading volume to ensure satisfying returns to their investors, the Block reported, citing undisclosed sources. Bakkt’s proposed fee of USD 0.50 per contract is rather small, some equating it to less than 1 basis point, or 7 basis points lower than the next cheapest U.S. trading option. The launch of the platform was delayed twice due to regulatory issues.

“Numerai Raises $11 Million” Numerai, a crowd-sourced hedge fund and predictions market startup based in San Francisco, has raised $11 million in a private sale of its NMR tokens. The token sale was led by Paradigm and Placeholder. Numerai, created by South African technologist Richard Craib in October 2015, provides a blockchain and cryptographic token-based ecosystem for incentivizing anonymous data scientists to create predictive models. The technological innovation Numerai provides is in its use of structure-preserving encryption that they apply on their data feeds. Its aim is to prevent biases and overfitting, it also makes possible for Numerai to share their data feed for free with its users.

“Sirin to Integrate MEW in its Blockchain Smartphone”Swiss developer Sirin Labs will integrate popular cryptocurrency interface MyEtherWallet (MEW) in its Finney blockchain smartphone. Sirin, which released Finney late last year, will now allow MEW users to purchase the device through the latter’s mobile and web interface. In addition, MEW will feature as the go-to wallet interface for Finney users.

Crypto Twitter Pick

What We’re Reading / Listening To

Bitwise’s “The Real Bitcoin Presentation” to the SEC
Why Ethereum 2.0 Could Fail and How It Could Be Fixed

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Satoshi&Co Daily Crypto Newsletter

By Ramani Ramachandran and Rohit Alluri

ZPX - Daily Crypto Update