Analytical review Weekly 19.07.2021

Starting at USD 1.405T, the total capitalization index fell to USD 1.276T. The decline then continued to a local low of USD 1.258T (-10.33% from the beginning of the week) and by the end of the week, the fall had stopped. The index had consolidated only slightly above this point at USD 1.280T. We could see a brief episode of recovery to 1.347T USD halfway through the week.

The price movements of market leaders — BTC and ETH actually followed a similar trajectory to the total capitalization index, differing only in amplitude at specific points. The difference between the maximum and minimum price on the weekly timeframe in the case of BTC was 9.15% (falling from 34 560 to 31 400), while in the case of ETH — 14.85% (falling from 2170 to 1850). In the case of both assets, by the end of the week, there was a slight recovery. The price consolidated just above the point of local low — 32 063 (BTC) and 1907 (ETH).

According to the analysis of cryptocurrency financial flows between exchanges, smart contracts, and users, the week saw a sharp increase in BTC volume in “whales” wallets (more than 3.5 times). Growth of ETH can also be observed on users’ addresses. Clearly, experienced users didn’t neglect the opportunity to buy up assets on the local lows.

The BTC future open interest levels this week (as well as the previous week) were somewhat indifferent to the price decline. In the case of ETH, there is a slight decrease in trading volume, yet the price is not affecting this indicator as much as it used to do at the end of last month, for example. Combined with the increasing volume of BTC and ETH in user accounts (especially large ones), this suggests stable optimism about the market’s future growth. Said optimism is unaffected by price fluctuations within the current support and resistance levels.

It has been just under a month since the bitcoin hash rate reached its lowest value in (almost) two years. Since then it has managed to grow by 55%, although it is still quite low. This is mainly due to the fact that a large part of the miners who were forced to leave China after the mining ban are still in the process of transferring to other jurisdictions. The most popular place to move is the US: property rights are secure there and electricity is fairly cheap (some of which is “green”). Miners are also moving to Canada and Kazakhstan. The latter shares its borders with China, plus electricity is cheaper there. After the full relocation of miners to other countries and the restart of all the capacities, the hash rate should reach the previous peak values or even exceed them after some time. The mining itself will be more profitable during the capacity recovery period, as well as more environmentally friendly — at least the part that will move to developed countries.

The epic pressure on Binance in various jurisdictions continues. This week, Italy’s national financial regulator banned all transactions on Binance for residents of the country. The arguments used are the usual ones: “cryptocurrencies are volatile”, “cryptocurrencies are insecure”, “cyberattacks are possible” and so on. Prior to that, similar decisions were made at the level of regulators in the US, Canada, the UK, and a number of other countries. There is no direct evidence to suggest that the “regulatory attack” on Binance is happening precisely because of the ability to trade tokenized shares. However, recently the platform has announced the immediate suspension of trading since the publication of the letter and the end of the services of stock storage on the platform from October 15. Nevertheless, users should not be upset, because a large market niche is being freed up for other players. One of those players is Delta.Theta, where tokenized stock trading will be available from September, along with all the benefits of decentralization. And nobody would be able to suddenly shut down trading. NOBODY.

Regulatory pressure exists not only in the form of outright bans. US Federal Reserve Chairman Jerome Powell said at the Congressional hearing that cryptocurrencies in general and stablecoins, in particular, will lose their importance with the advent of the US CBDC (Central Bank Digital Currency). He also called his arguments “strong”. At the same time, the SEC again postponed WisdomTree’s application for a Bitcoin ETF, while the US Government’s Commerce Department announced a public discussion of the US CBDC under the Presidential Commission. Under these circumstances, one can only hope that the US authorities are committed to the principles of a free market economy and are willing to compete with cryptocurrencies within that framework. Rather than through outright bans and restrictions, like China, which is now finishing the mass testing of its CBDC (the digital yuan) has done.

There has been some positive news this week. For example, Bank of America approved bitcoin futures trading for certain client groups. This is quite an interesting decision for a bank that has previously distanced itself from cryptocurrencies.

Microstrategy CEO Michael Saylor supported the positive agenda, stating in a recent interview that there is no bitcoin price at which he would sell it. The entrepreneur even compared bitcoin to such fundamental innovations in human history as fire and electricity. He suggested, however, that bitcoin may never become a means of payment in the US, stressing that bitcoin is more of an asset than a means of payment. “Bitcoin is digitally transforming assets, gold is not,” Michael said, referring to bitcoin’s advantage over gold as an asset.

There is good news in the world of DeFi: Twitter founder and bitcoin evangelist Jack Dorsey announced that his company SQUARE will be developing a new DeFi platform on the bitcoin blockchain. So far, little is known about the technical side of the project. It is also not clear how much potential competition the new platform could pose to similar products based on Solana or Polygon, and how the interoperability problem will be solved. At the same time, competition is profitable as it practically always leads to the development of the whole market.

Activity in the options market is declining. As volatility falls, so does liquidity. The volume of open interest in 30 July contracts increased by only 0.3%, indicating the exhaustion of traders’ interest. Based on trading volumes — the next benchmark level could be trading options with an exercise date at the end of September, where contract volume amounts to 28k BTC. As of today, if the 30 000 level fails to hold, the support levels will increase to a range of 25 000–28 000.

What is noticeable about the September exercise date options trade is the presence of open interest, both at 10 000 and 8 000, which are not in the July orders’ structure.

Trading in ETH options market has been more active. The volume of trades with an execution date of July 30 increased by 8.7% and amounted to 249k ETH. CALL options at 2200, 2500, and 2600 were the biggest gainers. Demand for put options was 1.5 times higher and took place at the levels of 1500 and 1600. This dynamic reflects the uncertainty in the direction of the price move this month and the prevailing fears of declining prices.

The situation on the global options board has followed shorter-term option trading trends — most of the increase in new contracts was for PUT options at 1400–1500, which could also be explained by partial hedging of collateral positions in COMP, MKR, AAVE protocols.

PRO MODE

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, we provide an overview of some market parameters that require special training or experience under the new “PRO MODE” subheading.

MarkIV for short term BTC options (via Derebit info)

In the short term, the change in the ratio of put and call options in favor of the former indicates that traders are anxious about the near-term prospects of BTC. In times of low volatility and low liquidity, PUT and CALL strategies look preferable to other trading methods.

MarkIV for long term BTC options

In the longer run, no change so far — the market sees no arguments for a trend reversal to the upside.

MarkIV for short term ETH options

Short-term ETH options dynamics were more intriguing. The increase in the curve on half of the CALL options (on the right side of the charts) signals a clear increase in optimism about price movements ahead of the important EIP 1559 update and the general development of the DeFI application and platform ecosystem.

MarkIV for long term ETH options

Over an extended time frame, overall optimism has only marginally corrected within a slight decrease in the dominance of call options in the medium term.

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