Analytical review. Weekly 09.08.2021
Last week can be characterized as a week of growth (the third in a row), which was also marked by “local highs”. Started from 1.590T USD, the total capitalization of the crypto market remained almost unchanged by the middle of the week. However, from the middle to the end of the week there was a systematic growth to 1.822T USD (+22.8% since the beginning of the week).
BTC opened the week at 39,500, fell to 37,650, but then hit a local high of 42,500 again and then 45,000 (the last time it was at that level in the middle of May). BTC also “broke through” its 200-day moving average from the bottom, which might be an indicator of further growth towards the resistance levels of 50,000–55,000.
ETH was moving in its own mode this week, in isolation from BTC. The reason is the expectation of the “London” hard fork and its subsequent successful implementation. As a result, the growth at the end of the week was +26.2%, and the price reached the mark of 3200.
While analyzing cryptocurrency financial flows between exchanges, smart contracts, and users, we can see that as BTC reaches a price of 45,000 or more, the balance has shifted slightly towards inputs to exchanges. Of course, some traders didn’t miss an opportunity to sell at this level, but mostly they sell BTC which were bought 3–6 months ago, while earlier and bigger investors hold (according to Glassnode). ETH on the other hand was withdrawn from exchanges more actively. There is also some outflow of stablecoins, which is natural in this case, as the profit from fixed positions is withdrawn.
Open interest levels on BTC and ETH futures this week grew in parallel with the price of these assets. However, unlike the previous periods, the funding rate on futures consolidated in a positive zone. Such a situation is typical for increased demand from traders for borrowed capital while trading on the spot or derivatives market. At the same time, BTC receives a larger volume of interest than ETH.
Last week was quite rich in the number of news.
Developers of the well-known Ripple and Cardano networks announced the upcoming launch of important updates in their networks intended to enable the implementation of Ethereum network functionality, such as smart contracts, nft tokens, and decentralized finance.
All the crypto community’s attention is attached to the consideration of legislative initiatives as part of the infrastructure funding package in the U.S. The content of one of the amendments involves the introduction of mandatory reporting to the IRS for all participants in crypto transfers. The effect of this amendment is quite contradictory — on the one hand, it could potentially create quite strict legislative requirements for the entire crypto community. On the other hand, after this information was spread in social networks, there was a hot discussion on how to influence this process, which resulted in a number of publications in all news portals and newspapers with at least indirect relation to finances. The tremendous public attention is a kind of information victory of crypto-enthusiasts, showing how much importance crypto-economics has for society.
For the first time, the SEC has launched an investigation against a crypto project in the DeFi sphere. The DMM project came to the regulator’s attention after a petition from frustrated investors. The price of the governance token that was used to exchange for raised funds fell from $1.44 to $0.04 in less than a year. This is more likely a case of fraud than an attempt to do some actual regulation of the industry, but a precedent has been set.
Government involvement in crypto stablecoins issuance has raised concerns from investment bank JP MORGAN. A speech by FED member C. Waller regarding CBDC showed that the issue is under close regulatory attention. Potentially, the adoption of state-owned crypto stablecoins could significantly change the banking landscape in the US and reduce the role (and therefore earnings) of private banks.
The Binance exchange continues to respond to the actions of local financial regulators. By restricting the use of margin trading and derivatives for Hong Kong customers, the company wants to finally distance itself from possible legal problems in “toxic” jurisdictions for the crypto industry.
Based on data from the analytics service woobull.com, the main buyers last week were wallets that belong to the category of long-term holders, meaning that they bought assets more than a year ago and then held the purchased BTC. Information from the glassnode platform shows that about half of the trading volume was generated by transfers worth $1M or more. This liquidity characteristic suggests that the main buyers were large long-term owners, possibly also involving large “new wave” capital — buyers who came to the market this year from the traditional corporate finance market.
In general, by analyzing the size of transfers in trading after the fall in the price of BTC in May, it can be noted:
- Major transfers account for a large share of the volume
- At the moment, the market is approaching its April trading volume, but has not yet reached its previous highs.
The options market volume has been growing for the third week in a row. The amount of open interest on deals with an execution date at the end of the third quarter — September 24 increased by 13.7% to 41,395 BTC. The continued inflow of venture capital into the cryptocurrency market is directly affecting the growth in trading activity. Call options transactions accounted for 80% of the increase. The main levels that were traded were 50,000, 64,000 and 88,000. Potentially, they can be the nearest targets of the formed growth.
In terms of the size of the open interest, the options with execution in December are not inferior to the third quarter. There are two main ranges that the market trades in the context of its historically high volatility. The first is at 20,000 and 28,000, where the vast majority of the put options are concentrated, in case of a decline and cessation of the rise. The second starts at 64,000 with local highs at 100,000, 140,000 and 200,000.
The overall market size on all expiration dates is almost unchanged, but the ratio of call and put options has changed significantly. There are two times as many call options, which makes sense in the current environment.
The volume of open interest for options with an execution date of September 24 increased by 10.5% to 288,182 ETH. Put options were most actively traded at 1,600 and 1,920, forming possible near-term support levels. For call options, the main increases in market activity were seen at 5,000, 7,000, and 10,000.
For trades with an execution date in late December, levels in the range of 1,040–1,920 for put options, and 5,000–10,000 for call options are most relevant.
Analyzing the data on options at all execution dates, it should be noted that the value of the levels of 5,000 and 10,000 was the most significant increase in the trading volume of call options.
PRO MODE
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 category “PRO MODE”, we provide an overview of a number of market parameters that require special training or experience.
MarkIV for short term BTC options (via Derebit info)
The trend of increase in volume and number of call options has only intensified during the past week. Judging by traders’ activity, the market is sure that the rally will not stop there and the growth still has enough potential. The final signal of the end of the summer consolidation could be a test of the 50,000 level.
MarkIV for long term BTC options
For an option with a more extended execution date — in six months and a year, the level of optimism continues to increase with a steady and stable trend.
MarkIV for short term ETH options
After the launch of the “London” update, it became clear that it would not go unnoticed and would have a significant impact on the price and trading of ETH. Increased optimism in the short and medium-term was expected, but the full upside potential appears to have not yet been realized.
MarkIV for long term ETH options
In the long term, with the launch of PoS and ethereum 2.0, it seems that there are no more factors that can negatively affect the upward price movement.
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