deen

11 Juni 2021

Market commentary: Trading volumes and realised volatilities are normalising

Mike Schwitalla

Mike Schwitalla

Senior Trader bei Crypto Broker AG

Über den Autor

Since last Friday, the overall market has lost roughly 3.4% in market cap. BTC$ has outperformed the overall market (-0.5%). Small caps in particular have suffered disproportionately this week (FTX SHIT Index -14%).

Yesterday at noon, the Basel Committee on Banking Supervision published a consultative paper, which has been long awaited by the market. As expected, cryptocurrencies are placed in the highest category with 1,250% risk weighting. In fact, banks would have to fully back their cryptocurrencies (8%*1250%=100%). Lower risk weightings are to apply to tokenised assets and stablecoins. These should be based on the traditional backed asset (capital addon possible).

The market seems to have received this paper positively. Following the publication, BTC$ gained nearly 1,000 points.
Link to the paper: https://www.bis.org/bcbs/publ/d519.pdf
BBG article: https://www.bloomberg.com/news/articles/2021-06-10/bitcoin-put-in-highest-risk-category-in-bank-capital-proposal

The market also seems to be settling into a broad range. Trading volumes and realised volatilities are normalising.
In terms of funding/futures, we still see historically flat curves and slightly negative funding.

I expect we will see a quiet end to the week – due to the market structure (small options expiration, falling realised vs. relatively high implied volatility), and subdued sentiment (Google trends, Twitter, retail moves from crypto to meme stocks).

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