Matrixport and Bloomberg Talks About The Future of “Crypto Volatility: Risk and Opportunity”
On June 18th, Bloomberg Professional webinar brought together experts and analysts from cryptocurrency sector to share their insights on “Crypto volatility: Risk and opportunity” The speakers were Mike McGlone, Senior Commodity Strategist of Bloomberg Intelligence, Daniel Yan, COO of Matrixport, Cynthia Wu, Head of Business Development and Sales of Matrixport, Eugene Ng, Director of Business Development and Sales, Matrixport, and Emily Chan, Specialist, corporations and commodities of Bloomberg.
Matrixport is a spin-off from Bitmain, the world’s largest cryptocurrency mining equipment manufacturer. Launched in Feb 2019, the company’s vision is to make crypto easy for everyone and offers one-stop digital assets financial services to both retail and institutions.
The fireside chat was moderated by Francis Chan, Senior Industry Analyst of Bloomberg, and joined by Mike, Daniel, Cynthia. In the wake of unlimited QE, Daniel pointed out that bitcoin as an alternative investment asset class “is the best hedge against QE expansion.”
“Bitcoin was born 11 years ago when the first round Fed QE happened. Bitcoin by design is anti-inflationary, and it is impossible to corrupt or exploit the protocol given the extremely high network difficulty level,” said Daniel “ In traditional markets, options trading volume is between 20% to 50% of spot trading volume. Let’s look at the ratio in bitcoin. In early 2019, the ratio was 0.1%. Now, it’s 1% — the 10x change happened within 18 months. We think the ratio will become at least 10% in 3 years — that’s another 10 times to go.”
With respect to the mainstream adoption/participation by financial institutions in cryptocurrency industry, Cynthia shared a few evidence “Fidelity Investment recently surveyed nearly 800 institutions in US and Europe, 36% of large institutional investors own digital assets such as bitcoin and Ethereum, including endowment funds, FOs, HNWI, investment advisors, digital and traditional hedge funds. The ratio was 22% a year ago.” Cynthia also argued for a few reasons that might contribute to a healthy institutional adoption, such as “the increased availability of institutional custody solutions, the listing of crypto derivatives on regulated exchanges, the development of Facebook libra that fuels awareness and relentless effort of ETF applicants, and the prevalence of negative rates and unlimited QE”.
Finally, Cynthia shared some points for individual investors to be mindful of when they invest in bitcoin or other crypto assets. First is to figure out your investment objective (whether you want to diversify, or counter inflation or enjoy price upside). Once the objective is clear, it is easier to set your exposure. 0.5–1% of your personal account is probably a good place to start. Also, security is the most important. In the world of crypto, private key is the only representation of ownership. You need to pick reputable platforms with strong security capability.
Depends on your risk appetite and yield expectation, there are a couple of strategies Cynthia shared:
“If you want to buy and hold bitcoin, buy from an OTC dealer or a spot exchange and enjoy the upside potential, but also undertake the volatility risk. If you want to invest in fixed income products with a higher annual yield than the bank deposit, make sure the platform is secure and the loan is backed by over-collateralized crypto assets. If you would like to enjoy a higher yield, you can consider to use option products and take advantage of the ultra-high implied vol to earn double to triple digits annual yield. At last, if you are interested in mining itself. You can purchase mining equipment or a hashrate contract that is linked to real hash-power (cloud mining) and then gain a share of the mined bitcoin.”
In the Crypto Mining Industry 101 session, Eugene also shared his point. “Bitcoin offers better risk-adjusted returns when you compare its Sharpe against stocks, commodities and even professional money managers. It is almost a mistake in an asset allocation exercise not to have an allocation into cryptocurrencies.”
“You are getting high implied volatility from crypto that goes up as high as 150%. If you look at traditional assets such as the EURUSD vol it’s less than 10%. So there is a lot of juice to capitalise. When trading derivatives, please bear in mind of counterparty risk, and it’s imperative to deal with either high quality venues or credible counterparties,” he said.
If you’d like to watch the full footage, please access [https://bloomberg.cwebcast.com/ses/7Pf0qH3iHeQTkBoeKcwQYQ~~?ref=Post&ek=51329b24-f9c8-4b89-989b-46a80ebcc2b1].