Analytical review. Weekly 02.08.2021
Last week was the second week of growth in the crypto market, after nearly two months of sideways movement. Having started from 1.385T, the total capitalization index peaked at 1.658T USD by the end of the week (cumulative growth amounted 17.5% in total). There was a slight correction then and the index is now around 1.580T USD.
At the beginning of the week BTC saw a sharp rise and the price finally moved out of the 30 000–35 000 corridor. On the very first day, 40 000 was reached, but the price did not go higher and reversed. Halfway through the week the level of 40 000 was reached again, but it also reversed again, this time to 40 850. Finally, at the end of the week, the price peaked at 42 550 (the highest level since mid-May). After that, the price fell below 40 000 but there are no clear prerequisites for a later drop, which is confirmed via further analysis.
ETH started the week at 2220 and at the end of the week actually reached 2710 (cumulative increase totaled 22.2%), but also corrected slightly then.
Analysis of cryptocurrency financial flows between exchanges, smart contracts and users allows us to observe a large volume of BTC withdrawals from exchanges at the moment the price reached a local peak. The market is definitely waiting for further growth of the major cryptocurrency.
During the last month, users have been steadily withdrawing ETH for placement in DeFi protocols (at the expense of Stablecoins arriving on exchanges). The balance on Tether has shifted towards withdrawals due to a flood of news about a possible escalation of litigation against the company’s management. Stablecoin outflows over the past week are largely due to pressure on Binance. Users are looking to reduce the likely risks that come with holding funds on centralized exchanges.
BTC and ETH futures’ open interest levels continued to rise this week, along with the prices of the underlying assets. However, in relative terms, trading volume for ETH futures showed larger growth. Also, in case of ETH, a softer reaction to price decline is visible. Such sentiment could be related to this week’s upcoming EIP 1559 update (Hardfork “London”), which, among other things, would make Ethereum a deflationary asset.
Speaking about the major news of the week, we should mention the bill “on digital asset market structure and investor protection” introduced in the US House of Representatives by Congressman Don Beyer. The law proposes to give the SEC and the CFTC (Commodity Futures Trading Commission) an authority to regulate digital assets, as well as to include digital assets in the Bank Secrecy Act to combat money laundering. The full report is available at the link.
According to international advisory firm PWC, more and more large funds are getting involved in cryptocurrency transactions, which in turn is “pushing the price up”. One recent example of such deal is the GoldenTree fund’s purchase of bitcoin ($45B under management).
Binance is responding to regulatory pressure: the exchange recently reduced the amount of cryptocurrency that can be withdrawn without going through KYC — from 2 BTC to 0.06 BTC, and also reduced leverage from 100x to 20x.
According to Ecoinimetrics analytics, BTC accumulation among various user groups (including “whales”) is increasing. In retrospect, bitcoin accumulation by “fish” (users with small amounts of BTC) alone has often been a signal of a subsequent price drop. In turn, the accumulation of BTC by whales (as seen in the current cycle) used to be the opposite signal. However, analysts note that this pattern did not work in all cases.
The level of open interest in options with an expiration date of September 24, 2021 rose for the second week in a row, this time by 16.5%, to 36 394 BTC. The increase in transaction volume is a direct reflection of the prevailing optimism at the moment. Spot prices after last week’s impressive spurt have not fallen back sharply, and the amount of positive news and public announcements on cryptocurrency investments is not diminishing. Such circumstances are attracting additional attention from traders. The main increase in trading activity came from CALL options at 50 000 to 64 000. The increase in PUT options was proportional to the overall increase concentrated at the 34 000 and 36 000 levels, likely to form the first support zone in case of a decline.
After the liquidation of options with an expiration date in July, the increase in activity for ETH was not as high as for BTC. The growth in open interest for options with an expiration date of September 24th amounted 5.5% and reached 260 644 ETH. The major boost in trading volume for CALL options came at the 2 880 and 7 000 levels. For PUT options, the main focus was on the 1 920 and 2 240 levels.
The global increase in options open interest was 8.5% and reached 1 171 816 ETH. Amongst others, contracts expiring in December 2021 were in high demand. For CALL options, the largest increases were in the area of 2 200 and 2 400, with PUT at 1 400 -1 800.
In addition to standard market analysis parameters such as the volume of open positions in futures and options, which are available to a wide range of readers, under the new “PRO MODE” subheading we provide an overview of some market parameters that require special training or experience.
MarkIV for short term BTC options (via Derebit info)
At the end of the week, overall trading activity and volatility increased. At the moment, mid- and short-term CALL option trades dominate, indicating that growth expectations are dominant.
MarkIV for long term BTC options
In the long term, traders have become even more positive and confident about the market.
MarkIV for short term ETH options
The dynamics of ETH options trading follow the BTC market. In contrast to the main cryptocurrency, the changes are less evident, but also positive. Contracts with an expiration date at the end of August indicate a more expressed optimism, perhaps because EIP-1559 update effect will become clear by that time.
MarkIV for long term ETH options
In the long term, traders are unequivocally positive, differing only in the degree and amount of this optimism.
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