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Ember Nuggets are a weekly update with commentary from the investment team on what’s happening within the crypto market - news, developments, market trends, and more.
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Bitcoin hit an all time high of $66,909 (according to Coinbase) on 10/20/21. This comes on the heels of Bitcoin’s highest weekly close last week at $63K, higher than $61.5K seen in April. Bitcoin has had a great week with strong macro indicators coming both from regulators and institutional investors.
The SEC approved a Bitcoin ETF, and the Fed mentioned that they have no plans of banning crypto in the US. All in all, it has been a good few weeks for Bitcoin. But with good news comes increased risk and leverage.
Bitcoin options open interest has hit all-time highs that were last seen in April. It has already reached an all-time high with exchanges like FTX, Binance and CME, while Chinese exchanges are still well-below their April highs due to the crackdown in the market.
Takeaways: Be careful, especially, when open interest, leverage and greed start reaching highs. It has usually been followed by liquidations and corrections, something that we have partially seen today.
The Quant is our key defensive, long-term hold strategy, that allows our customers to get conservative bitcoin exposure over a long-term time horizon. It should be a part of everyone’s hodl portfolio.
ETH transaction fees continue to be a burden on users, a large hurdle for newcomers, and pricing out others. The fees have slowly been climbing throughout the year, first driven by DeFi congestion and then NFTs. The average price for a transaction on the network has been above $40 recently, leading to many users being priced out of the ecosystem. Several scaling solutions have been launched to help solve this problem, like Arbitrum (mentioned in a prior Nuggets) and Optimism. It is unclear which technology will lead the space but they are all cheaper than ETH transactions fees today. See table below from The Block.
Private investments in the crypto space remain hot with the first three quarters of 2021 seeing an aggregate investment of $17.8B within the crypto space. Q3’21 saw $8B of investment in the crypto industry with NFTs and Gaming seeing more investment than DeFi. See chart below from The Block:
Thank you for reading!
Investment Associate | Ember Fund
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