Crypto Crypto Crypto

Crypto Weekly: Navigating the rumor-mill

Mads Eberhardt 400x400
Mads Eberhardt

Cryptocurrency Analyst

Summary:  The crypto-market has always been a place packed with rumors, often impacting the market rather significantly. Yesterday was no exception as a rumor that Amazon would soon allow customers to pay with Bitcoin began circulating. Amazon later denied the claim. Elsewhere, Goldman Sachs filed for a DeFi ETF, and last week, two major crypto futures exchanges limited leverage to 20 times.


The crypto-market went up on Amazon rumors, down on denial
Last week, Amazon posted a job opening for a digital currency and blockchain product lead. This fueled speculation that Amazon is working either on its own token or looking to accept cryptocurrencies as payment. To top it all off, the UK-based newspaper City A.M. published a story yesterday quoting an anonymous source claiming that Amazon is ‘definitely’ working on letting customers pay with Bitcoin by year-end, and in the future, possibly other cryptocurrencies as well. Additionally, the insider claimed that Amazon is also working on its own native token for its ecosystem. Not surprisingly, the crypto-market was keen on the plan, sending Bitcoin up by 15% to over $40,000, causing short positions worth nearly $900 million to be liquidated. After the stock market closed in the US yesterday, Amazon denied the claim via a spokesperson, who said: “Notwithstanding our interest in the space, the speculation that has ensued around our specific plans for cryptocurrencies is not true.” The denial immediately sent Bitcoin down by 7%, while other major cryptocurrencies tumbled between 5% and 10%. The crypto-space has always been a place filled with rumors impacting the market rather significantly, as the market is very easily influenced by word of mouth. As an investor in the space, it is important to not get carried away. This is not the first time the market has been impacted by rumors of this nature – and it will certainly not be the last.

Goldman Sachs has filed for a DeFi ETF
Goldman Sachs filed yesterday for an exchange-traded fund (ETF) focused on decentralized finance companies – also known as DeFi. The filing comes after the investment bank has made its entry into the crypto-market this year by reportedly launching a cryptocurrency trading desk, and clearing and settling cryptocurrency exchange-traded products (ETPs) for hedge funds in Europe. Even though the new ETF has been launched with the intent to allow clients to gain exposure to DeFi-related companies, there is not really much DeFi exposure in the ETF. By looking at the filing, it says the ETF will closely track the Solactive Decentralized Finance and Blockchain Index. However, the top components of this index are Nokia, Facebook, Alphabet, and Fujitsu along with other companies like Cisco, Visa, IBM, and Microsoft. These are not exactly companies with significant exposure nor products related to DeFi. The headline of this story is misleading in suggesting that this Goldman Sachs ETF would directly hold cryptocurrencies and tokens related to DeFi. Still, it is perhaps a modest beginning from Goldman Sachs to facilitate an ETF that holds physical DeFi cryptocurrencies and tokens down the road.

Binance and FTX to limit leverage to 20 times
In general, cryptocurrency futures exchanges have been notoriously known for letting traders trade with extremely high leverage, and even often letting more inexperienced retail traders trade with extraordinarily high leverage. Maybe this is coming to an end. The largest and second-largest cryptocurrency futures exchange measured on open interest, Binance, and FTX, have lowered the maximum leveraged allowed on their futures to 20 times, down from up to 125 and 101 times, respectively. According to both companies, it has been done to encourage responsible trading. FTX’s founder and CEO, Sam Bankman-Fried said on Twitter following the announcement that he does not think the extremely high leverage is an important part of the crypto-ecosystem, and in some cases, it is not a healthy part of it. He added that the average leverage used on FTX is around two times, meaning hardly any traders use leverage above 20 times. However, the leverage limitation from both exchanges fuels speculation on whether it is to please regulators. For the past couple of months, especially Binance has faced regulatory headwinds by regulators worldwide on different issues not specifically related to their leverage allowance. Nevertheless, regulators are most likely not happy with the high leverage allowance for trading cryptocurrency futures, given the trading limits traditional financial brokers require, especially for retail traders. Therefore, this may have contributed to the Binance and FTX exchanges lowering their leverage limits.

27_07_2021_Crypto_01
BTC vs. USD. Source: CoinMarketCap
27_07_2021_Crypto_02
ETH vs. USD. Source: CoinMarketCap

Disclaimer

The Saxo Bank Group entities each provide execution-only service and access to Analysis permitting a person to view and/or use content available on or via the website. This content is not intended to and does not change or expand on the execution-only service. Such access and use are at all times subject to (i) The Terms of Use; (ii) Full Disclaimer; (iii) The Risk Warning; (iv) the Rules of Engagement and (v) Notices applying to Saxo News & Research and/or its content in addition (where relevant) to the terms governing the use of hyperlinks on the website of a member of the Saxo Bank Group by which access to Saxo News & Research is gained. Such content is therefore provided as no more than information. In particular no advice is intended to be provided or to be relied on as provided nor endorsed by any Saxo Bank Group entity; nor is it to be construed as solicitation or an incentive provided to subscribe for or sell or purchase any financial instrument. All trading or investments you make must be pursuant to your own unprompted and informed self-directed decision. As such no Saxo Bank Group entity will have or be liable for any losses that you may sustain as a result of any investment decision made in reliance on information which is available on Saxo News & Research or as a result of the use of the Saxo News & Research. Orders given and trades effected are deemed intended to be given or effected for the account of the customer with the Saxo Bank Group entity operating in the jurisdiction in which the customer resides and/or with whom the customer opened and maintains his/her trading account. Saxo News & Research does not contain (and should not be construed as containing) financial, investment, tax or trading advice or advice of any sort offered, recommended or endorsed by Saxo Bank Group and should not be construed as a record of our trading prices, or as an offer, incentive or solicitation for the subscription, sale or purchase in any financial instrument. To the extent that any content is construed as investment research, you must note and accept that the content was not intended to and has not been prepared in accordance with legal requirements designed to promote the independence of investment research and as such, would be considered as a marketing communication under relevant laws.

Please read our disclaimers:
Notification on Non-Independent Investment Research (https://www.home.saxo/legal/niird/notification)
Full disclaimer (https://www.home.saxo/legal/disclaimer/saxo-disclaimer)
Full disclaimer (https://www.home.saxo/legal/saxoselect-disclaimer/disclaimer)

Saxo Bank A/S (Headquarters)
Philip Heymans Alle 15
2900
Hellerup
Denmark

Contact Saxo

Select region

International
International

Trade responsibly
All trading carries risk. Read more. To help you understand the risks involved we have put together a series of Key Information Documents (KIDs) highlighting the risks and rewards related to each product. Read more

This website can be accessed worldwide however the information on the website is related to Saxo Bank A/S and is not specific to any entity of Saxo Bank Group. All clients will directly engage with Saxo Bank A/S and all client agreements will be entered into with Saxo Bank A/S and thus governed by Danish Law.

Apple and the Apple logo are trademarks of Apple Inc, registered in the US and other countries and regions. App Store is a service mark of Apple Inc. Google Play and the Google Play logo are trademarks of Google LLC.