Analytical review. Weekly 05.07.2021

The market has looked slightly more positive over the past week, but an exit from the sideways trend is still unclear. The week started with an increase in total crypto market capitalization, surpassing USD 1.46 trillion. This situation was followed by a correction to a local low of USD 1.326 trillion. From the middle to the end of the week, we could see a rise of 11.6%, with market capitalization coming close to USD 1.48 trillion. After a short decline, the value has consolidated at USD 1.412 trillion.

The BTC price movement (as the market-dominant with more than 45% share) had a similar trajectory, which is quite logical. After rising at the beginning of the week and reaching a local high around 36 400, there was a correction in the middle of the week. The price touched 32 800, but after recovering by 9.28% to the high of the beginning of the week, the price never regained its level. On the whole, since June 22, we can see the BTC growth trend formation.

ETH looked more confident last week, rising 22.12% and reaching a high of 2380 by the end of the week.

Analysis of cryptocurrency financial flows between exchanges, smart contracts, and users shows that the so-called “whales” have significantly increased their assets in BTC during the past week. That could be the reason for the growth of the coin itself this week and generally indicates a positive view of the market outlook by the big holders. ETH decreased in users’ wallets and increased in exchanges. The asset showed good growth this week, and some holders may withdraw from it for speculative purposes.

This week’s open interest levels in BTC and ETH futures responded to asset price movements and rose in the second half of the week. Trading volume is increasing but is constrained by continued levels of uncertainty.

The news backdrop has generally been positive. US cryptocurrency exchange Coinbase continues its expansion. From now on, the exchange is offering deposits at 4% p.a. in USDC, as well as expanding the list of fiat currencies for deposits and withdrawals to USD, EUR, and GBP and introducing trading pairs with the respective currencies. That will make trading easier for institutional investors and serve as a significant step towards making Coinbase a global trading platform.

Renowned philosopher and visionary Nassim Taleb released his version of the Bitcoin Black Paper, entitled “Bitcoin, Currencies, and Bubbles,” in which he criticized the primary cryptocurrency for being overly volatile and non-transparent and unflatteringly referred to people who support Bitcoin as “single-cell.” Taleb’s article does not make any revolutionary arguments about Bitcoin failure, but it would be interesting to hear other views on the subject in a public discussion, like the one of Bitcoin supporter Jack Dorsey, founder of Twitter.

Meanwhile, more and more politicians are expressing their interest in bitcoin. For example, Wyoming Senator Cynthia Lummis called bitcoin a great way to protect against inflation and diversify savings. She also invited miners to change jurisdiction to the state she represents in the US Senate. Wyoming has been in the news for more than that. In the week, it became the state where a DAO (Decentralized Autonomous Organization) was legalized for the first time as a subspecies of the LLC legal form. The first DAO in the US is CryptoFed. That puts Wyoming in the vanguard of crypto-friendly states on a par with Florida.

Analysts at JPMorgan have suggested that Ethereum version 2.0, with its transition to the Proof-of-Stake consensus, will make stacking a more attractive source of revenue for both institutional and retail investors. According to the forecast outlined in the financial holding company’s report, as a result of this transition and the growing popularity of stacking, annual revenue from locked-in funds could reach USD 40 billion by 2025.

One significant circumstance that could impact the market shortly will be the end of the lock-up period for buyers of Grayscale Trust shares. As part of the agreement, buyers of trust shares undertake not to sell them for a certain period (in this case, six months). Hence current potential sellers were buying trust shares when BTC was around 35 000. A mass sale (or lack thereof) would be a strong indicator for the market because early Grayscale sold the shares only to accredited investors. The shareholders’ behavior would reflect sentiment amongst the most potentially growth-capable market audience.

As part of the crypto optimism, practical implementation — a screenshot of an exciting transaction was posted on Twitter: a user-initiated an ETH CALL option purchase amounting to over 2 000 contracts priced at USD 15 000 with an exeсution date in June 2022. Anything is possible in crypto trading!)

This week we have shifted our focus to the market situation within the monthly options expiry. As a result, we can see that the loss level for options buyers (MAX Pain Price) has shifted from 40 000 to 36 000, reflecting an increase in CALL options trading volume at 40 000, 45 000, and 50 000. For PUT options, there was increased demand for contracts at 30 000 and 32 000. Total open positions increased by 19.5% to 29 030 BTC. Global price levels remain unchanged, except the 40 000 level, which accounted for most new trades.

For ETH, the market situation was more stable, with an 8.5% increase in open interest to over 218k spread evenly across all price levels. The average loss price among buyers is at the same 2 400. There is a central zone of peculiar symmetry between the PUT and CALL options on the chart, bounded by 1 600–1 800 at the bottom and 2 800–3 000 at the top.

The trade levels in the long cycle have remained at the same levels, but with an increase in purchased CALL options at 5 000, which could indicate some long-term optimism on the part of traders.

PRO MODE add-on

In addition to standard market analysis parameters such as the volume of open positions in futures and options available to a wide range of readers, under the new “PRO MODE” subheading, we provide a market parameters list overview that requires special training or experience.

MarkIV for short term BTC options (via Derebit info)

After the market has bounced back several times from the 30 000 level, thus forming a solid resistance, the volatility development of the short and medium-term options reflects two main points:

  1. The consolidation phase of the market over the next month continues.
  2. The high number of put options, which prevail in the time horizon, can be explained by the price decline fear. However, judging by the momentum of the volatility curve, expectations of a medium-term rise are beginning to recover.

MarkIV for long term BTC options

Volatility movements for options with March and June (long term) expiry dates reflect continued global optimism about the crypto market and the massively anticipated “Bull-Run.”

MarkIV for short term ETH options

The decline in overall volatility for ETH is linked to the price stabilization above the 2 000 level, and reflects increasing growth expectations within the monthly cycle, and has a more positive trend compared to BTC.

MarkIV for long term ETH options

Long-term ETH options valuations are more optimistic than BTC, suggesting a significant market strategic advantage for ETH. Perhaps due to the DeFi segment development, or the Ethereum 2.0 update expected next year, it is difficult to determine the reason. However, it is a fact that ETH has a better market opportunity for growth.

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