Sign in Subscribe
newsletter Featured

CF Benchmarks Newsletter - Issue 53

In fact, from CF Benchmarks’ perspective as an FCA regulated Benchmark Administrator, the most salient points to make in response are actually separate from and pre-exist this week's developments considerably.

Ken Odeluga

• 5 min read
CF Benchmarks Newsletter - Issue 53

Clarity

This current focus is crystal clear, at least: The SEC’s years-long antipathy towards crypto retail trading, based on platforms’ lack of registration as securities exchanges, has culminated in charges against the two largest exchange brands by volume, Coinbase and Binance.

The news is fully and multiply elaborated by now, so no need to rehash it here.

Here's what hasn't changed

In fact, from CF Benchmarks’ perspective as an FCA regulated Benchmark Administrator, the most salient points to make in response are actually separate from and pre-exist this week's developments considerably.

The crux is our track record of providing indices fit for use within regulated products.

That record is underpinned by compliance—proven by Deloitte audits—with UK Benchmark’s Regulation (which is equivalent to EU BMR.)

Again, the BMR stipulations that our indices adhere to have been published for as long as CF Benchmarks has existed.

You can find them in our Benchmark Statement for CME CF Cryptocurrency Pricing Products.

These stipulation include that our indices are:

  • “Robust and reliable”
  • “Rigorous and capable of validation…”
  • “Resilient…” and “can be calculated in the widest set of possible circumstances, without compromising its integrity”

Another critical component ensuring the integrity of our benchmarks:

Our CME CF Constituent Exchange Criteria

Note these are also fully public.

The criteria are centred on broad qualities determining eligibility, and procedures governing the addition, suspension and removal of Constituent Exchanges.

A selection:

  • “The venue has policies to ensure fair and transparent market conditions at all times and has processes in place to identify and impede illegal, unfair or manipulative trading practices”
  • “…complies with applicable law and regulation, including, but not limited to capital markets regulations, money transmission regulations, client money custody regulations, know-your-client (KYC) regulations and anti-money laundering (AML) regulations”
  • “…cooperates with inquiries and investigations of regulators and the Administrator upon request and must execute data sharing agreements with CME Group”

It’s worth noting that the Constituent Exchange Criteria have consistently prevented all Binance entities from ever being included as Constituent Exchanges (similarly, the criterial also blocked FTX from ever being a Constituent Exchange).

The Takeaway

Overall then, whilst some measure of uncertainty is inevitable over the potential outcome of the SEC prosecutions announced this week, the integrity, reliability and accuracy of our indices and other pricing measures remains incontrovertible.

Markets: Bitcoin regains its footing

Simplistically, the market's reaction was predictably negative on an initial basis, before segueing quite smoothly to an inconclusive stance. As CF Benchmarks' Lead Research Analyst Gabe Selby notes, bitcoin prices retraced back to a key support area around $25,300 representing "the mid-March breakout level that helped propel Bitcoin past $30K in mid-April".

As shown by the chart of our CME CF Bitcoin Real Time Index (BRTI) below, lows corresponding to the publication of the SEC's complaints against Binance and Coinbase on Monday and Tuesday respectively, correspond quite closely to those indicated as support in March, and the price region that had posed visible resistance in February, before giving way to the upside.

CME CF Bitcoin Real Time Index, Daily, 09-06-2023 / Source: CF Benchmarks

Gabe Selby Adds:

A further dynamic can be seen when we compare the performance of Bitcoin and Ether against small-cap altcoins. The chart below highlights our CME CF Bitcoin and Ether Reference Rates against the WisdomTree CF Altcoins Index (for which CF Benchmarks is Calculation Agent). A growing divergence in strength between the two mega-cap tokens and smaller cap coins is clear. Recent lawsuits have added more tokens to the ever-growing list of unregistered securities, and investor sentiment will likely continue to discount a regulatory risk premium into the price of these altcoins. Conversely, Bitcoin and Ether represent the two largest most decentralized blockchain protocols, and these qualities have continued to provide a measure of 'neutrality' from regulatory intervention. We should expect the implied differential to continue to favor Bitcoin and Ether so long as regulatory uncertainty over altcoins remains.

Source: CF Benchmarks, Bloomberg

Macro Outlook

Economic highlights for week beginning June 12 / Source: CF Benchmarks, Bloomberg

Market participants will have plenty to digest next week. The latest inflation data are set to be released just before the June FOMC rate decision. Headline U.S. CPI accelerated in the prior reading, primarily due to a rise in used car prices that partially offset earlier progress in 'goods' disinflation. On the other hand, forecast models are indicating that prices should cool further in May. The median forecast expects headline prices to rise just 0.2% month-on-month (MoM), while core prices remain more resilient (expected at +0.4% MoM). Markets remain uncertain as to whether the next FOMC decision will be a pause or hike. However, the outcome is likely to hinge on the committee's confidence, during the upcoming meeting, on whether year-end inflation is on track to meet forecasts, or not.

Gabe Selby

It's time for the latest CF Benchmarks cryptocurrency and digital asset Quarterly Attribution Report (QAR) for the quarter ending June 1st, prepared by Gabe Selby, CFA.

This set of reports is the principle research content produced by CF Benchmarks each quarter. It represents the only published market coverage utilizing similar techniques to and the comprehensive reporting standards of the kind deployed by institutional investors in traditional asset classes.

Our digital asset universe is elaborated by our CF Digital Asset Classification Structure (CF DACS), the only taxonomy of its kind published by a regulated Benchmark Administrator.

By mapping CF Benchmarks' growing suite of portfolio indices against the CF DACS and integrating our expertise in on-chain dynamics, our QARs offer a uniquely detailed and accurate attribution of the digital asset categories that drove performance during the quarter.

Read the summary

To read the full compilation report or a specific index's report, please click on the respective links below:

Additional Resources

The information contained within is for educational and informational purposes ONLY. It is not intended nor should it be considered an invitation or inducement to buy or sell any of the underlying instruments cited including but not limited to cryptoassets, financial instruments or any instruments that reference any index provided by CF Benchmarks Ltd. This communication is not intended to persuade or incite you to buy or sell security or securities noted within. Any commentary provided is the opinion of the author and should not be considered a personalised recommendation. Please contact your financial adviser or professional before making an investment decision.

CF Benchmarks Ltd (“CF Benchmarks”), a company registered in England and Wales with company number 11654816 and authorised and regulated by the Financial Conduct Authority. Information about us can be found on the Financial Services Register (register number 847100).

Registered Office: 6th Floor One London Wall, London, United Kingdom, EC2Y 5EB.

You agree not to, and have no rights to, use the CF Benchmarks Data to create, calculate, issue, settle, maintain, support or develop any financial instruments (including but, without limitation exchange traded products, certificates, warrants, contracts for difference, swaps, binary options, structured products), indices, products, services (including but without limitation, portfolio management services, pre- and post-trade risk management services, or valuation services) or any other derivative works without the express written consent of CF Benchmarrks.

You agree not to analyze, reverse-engineer or disassemble any CF Benchmarks data and not to insert any code or product to manipulate the Website content in any way that affects any user’s experience. Unless CF Benchmarks gives you prior written permission, use of any Web browsers (other than generally available third-party browsers), engines, scripts, software, spiders, robots, avatars, agents, tools or other devices or mechanisms (such as crawlers, browser plug-ins and add-ons, or other technology) to navigate, access, copy in bulk, retrieve, harvest, index, search or analyse any portion of the Website is strictly prohibited.

No part of this information may be reproduced, stored in a retrieval system or transmitted in any form or by any means, electronic, mechanical, photocopying, recording or otherwise, without prior written permission of CF Benchmarks Ltd. Use and distribution of the CF Benchmarks data requires a license from CF Benchmarks or its authorized licensing agents.

All information is provided for information purposes only. All information and data contained on this website is obtained by CF Benchmarks, from sources believed by it to be accurate and reliable. Such information and data is provided "as is" without warranty of any kind.

CF Benchmarks, nor its directors, officers, employees, partners or licensors make any claim, prediction, warranty or representation whatsoever, expressly or implied, either as to the accuracy, timeliness, completeness or merchantability of any information or of results to be obtained from the use of the CF Benchmarks indices or the fitness or suitability of the same indices for any particular purpose to which they might be put. Any representation of historical data accessible through CF Benchmarks indices is provided for information purposes only and is not a reliable indicator of future performance.

No responsibility or liability can be accepted by CF Benchmarks nor their respective directors, officers, employees, partners or licensors for any loss or damage in whole or in part caused by, resulting from, or relating to any error (negligent or otherwise) or other circumstance involved in procuring, collecting, compiling, interpreting, analysing, editing, transcribing, transmitting, communicating or delivering any such information or data or from use of this website or links to this website.

CF Benchmarks and its respective directors, officers, employees, partners or licensors do not provide investment advice and nothing accessible through CF Benchmarks, should be taken as constituting financial or investment advice or a financial promotion. Charts and graphs are provided for illustrative purposes only. Index returns shown may not represent the results of the actual trading of any assets.

CF Benchmarks is a member of the Crypto Facilities group of companies which is in turn a member of the Payward, Inc. group of companies. Payward, Inc. is the owner and operator of the Kraken Exchange, a venue that facilitates the trading of cryptocurrencies. The Kraken Exchange is a source of input data for certain CF Benchmarks indices. Payward, Inc. is the owner and operator of the Staked, a venue that operates the block production nodes for decentralized PoS protocols on behalf of institutional investors. Staked.us is a source of input data for certain CF Benchmarks indices.

Please refer to the individual product family documentation for more information about applicable input data sources.