Note: This post was originally published on LinkedIn in Sep't 2023
The iPhone 4s cost 162 BTC. iPhone 15 cost 0.031 BTC.Triggers a double take? Maybe because your reference point, or unit of account, is fiat currency.What is money?Money has three main purposes – it acts as a unit of account, a means of payment and a store of value.(https://lnkd.in/eTsBzn5W)Every now and then we hear noise about BTC transaction fees.The Block has some nice tables that demonstrate this over time. Bitcoin Average Transaction Fee (7DMA) is one table I like. Sometimes, those transaction fees spike. But why? Well part of the problem is your unit of account. You're referencing BTC transaction fees in USD, not in BTC (satoshis).(https://lnkd.in/esWDVjbU)This paper expands on the point nicely:Determination of Transaction Fees in the Bitcoin Network.(https://lnkd.in/ehwCjSzv)To save reading the 21 pages of this paper a crude summary would be: i) BTC transaction fees are charged in BTC (satoshis). ii) If BTC dramatically ramps up in price – the relative USD value of BTC transaction fee also jumps – but if our unit of account was BTC – there would be no such spike. (as evidenced by figure 2). iii) Be aware of block size (basically, if you don’t have enough transaction to fill a block, even zero fee transaction will get written).Ordinals (aka BTC NFTs) also make up a piece of the puzzle.(https://lnkd.in/eBxG8wVU)The iPhone price variance also highlights why institutions (asset managers) are interested in BTC and why sell side institutions want to support their customers getting price exposure to this asset class. Note well, price exposure does not mean operational risk exposure (like steal my keys!).I found the Acuiti Q3 2023 Crypto Derivatives Management Insight Report interesting. It confirms the polarisation of crypto-natives and TradFi (along the lines we would expect). It also confirms both the need for prime brokerage services and how TradFi is recognising this.(https://lnkd.in/e-iK2Zip)#acuitiFor those that are enjoying the RWC - WooHoo! The Wallabies may be going home after 15 days, but I'll still be enjoying the games. For some the Ryder Cup is also on. Regardless, whatever your leisure, may it be a pleasure.
Note: This post was originally published on LinkedIn in Sept 2023.Measure it, manage it. It's a mantra I often use. Measuring things allows us to mitiage, remediate, calibrate, communicate, be transparent etc.Earlier this week I read a LinkedIn post from HM Treasury. It struck me because of the message (Endometriosis - of which I was unaware) and the courage of the presenters. The awfulness of no diagnosis or mis-diagnosis. Not knowing how or what to measure can lead to dreadful outcomes.(https://lnkd.in/ewMM_auf) But sometimes we can measure too much. I found this piece by Vera Cherepanova an interesting take on transparency. Likewise, with DLT we often get "captivated by magical thinking that transparency will solve all our problems." Sometimes mandatory reporting is not what we want - it is what we are reporting.( https://lnkd.in/eM3wUe6P).Like most control frameworks, ours also incorporates industry best practice. I picked up this BIS paper on CCP non-default losses and thought I would find a nice list of all the items to check for. But if fact, it is most often common sense and experience that tells us what to look for. Our experiences are what gives context to what we are measureing for."Scenarios and assumptions concerning potential losses are commonly informed by expert judgment from both internal and external subject matter experts given the inherent challenges of modelling potential losses in what are low-probability, high-impact events with limited historical data." (2.1.2 p8).(https://lnkd.in/ezJH2wT3),Measuring things also means that we need to act or re-act."If a sense of urgency is both necessary and detrimental, this results in a dilemma. Management must simultaneously create pressure/urgency and refrain from doing so.....the problem is that urgency invokes a prevention focus. A prevention focus favors upholding current standards, risk aversion and error avoidance, something that is highly efficient in creating a faster set response. However, it is not sufficient in situations where new, creative solutions are needed."https://lnkd.in/eyj_f8NzSometimes, none of the above matters. Clarity, purpose and conviction clearly project the path forward. The project path and trajectory is clearly defined. Who cares who invented the scales? Just Do It! Get at it!This is the beauty of T-Cup: Think Clearly Under Pressure. (Clive Woodward's words in preparing England to win a world cup).By whatever measure, whatever your leisure, may it be a pleasure.The blindfold, sword and scales all have a role to play.https://lnkd.in/eieWVC8a
Note: This post was originally published on LinkedIn in Sep't 2023
FTX is back in the news this week. It was a nice write up in FT Alphaville that caught my attention. But as ever, some of the best insights are in the comments.
(https://lnkd.in/eQD5eJ2n)
What is starting to emerge is a more comprehensive picture of the assets held - circa US$7byn.
That is some market overhang, which in turn raises the questions of liquidity and transparency (information leakage).
There is also a variance in the quality of these assets - with only some US$560 million in BTC.
(https://lnkd.in/e6s7WNxy)
FTX is worried about information leakage and they need this pre-approved.
(https://lnkd.in/eQ6KHc_H)
What struck me about this, was in equity markets we had the debate about Dark Pools in 2017. (https://lnkd.in/e9QUw3sJ).
And we took our learnings from it in 2020. (Liquidity shifts, if you push it out of the Dark, onto the CLOB, it migrates to the closing Auction - kinda like a stress ball, squeeze one place, it'll pop up elsewhere).
(https://lnkd.in/e6rAczm8).
There is growing maturity in liquidity and how it is reported in crypto markets.
(https://lnkd.in/ePpYdNdw).
So all this gets me thinking about the learnings from TradFi that we cast across into the emerging digital (crypto) markets. Crypto natives have done a lot - but so has TradFi. Right now there feels like some polarisation between the two camps, but I believe this will converge.
There is also an interesting read out from WFE (TradFi) on a review of crypto-trading infrastucture. What this report is silent on, is latency and through-put. There is a (I would say material) difference between the resilience and capacity of regulated TradFi systems and the unregulated CEXs of the world.
(https://lnkd.in/et9cn6bE).
The picture, I do like. The associated video I can't really recommend, but what it does show, is the huge conflicts of interest that exist in unregulated CEXs.
(https://lnkd.in/egvRTQHP).
Meanwhile, there is a Rugby World Cup on. Already the Wales / Fiji and France / Namiba games remind us of the unique nature of these events. For those that follow the code - enjoy! But whatever your leisure, may it be a pleasure.
