Analytical review. Weekly 30.08.2021
The market started the past week with a fall. Barely past the 2.14T USD mark, total crypto market capitalisation fell to 1.95T USD by midweek. The index then rebounded back above 2T USD, but did not return to the level of the beginning of the week.
The 50 000 price proved to be quite a strong resistance level for BTC and, contrary to expectations, it has not been able to overcome it yet. In the middle of the week, the price was down to 46 700, followed by another “hike” to 50 000, but the price rebounded again. BTC is now trading around 48 000.
The price movement of ETH was almost exactly the same as that of BTC: decline at the beginning of the week, recovery, then another small decline. At the moment, the second cryptocurrency is trading between 3170 and 3190.
Analyzing the movement of cryptocurrency financial flows between exchanges, smart contracts and users, we can see that the moment the BTC price reached the 50 000 mark, there was a sharp outflow of BTC from exchanges.
The balance of ETH, on the other hand, shifted sharply towards entry as it reached its peak price. In parallel with these processes, there has been a renewed inflow of stab coins to exchanges’ balances. Recently, the amount of deposits has become larger than the amount of withdrawals by about $1.7B. Usually, such situation leads either to mass buying of cryptocurrencies, or vice versa — exchanges are preparing for mass sell-off and build reserves in stack coins in advance. The conclusion, however, is unambiguous: such mass of funds will not be placed without movement for a long time.
Open interest levels in BTC and ETH futures have stopped rising with the price of the major cryptocurrencies over the past week, but there is no significant drop in trading volume, as market participants are still waiting for a strong upward wave.
Among the major news items of the past week are the following:
The Central Bank of Cuba henceforth considers bitcoin and other cryptocurrencies as a potential legal tender. This is stated in a resolution that was published on Thursday in the state-run Official Gazzete. Thus, speculation about the next bitcoin region gets further confirmation.
BTC trading has shifted from East to West following the regulatory armageddon by the Chinese authorities. The peak in trading volumes is now seen in the US session. In the chart below, we can see BTC trading volume in the Asian market from April 1 to May 17 (left) and from May 17 to August 19 (right).
SEC has signed an agreement with AnChain.AI (a blockchain data analytics company providing security, risk and compliance solutions). The company will assist the regulator in monitoring the DeFi market (mostly related to the analysis of smart contracts). It is not possible to find the text of the contract in public sources, but it is known that the initial value of the contract is $125,000 per year (the contract has a duration of 5 years).
A Reddit user has posted a presentation by Fidelity’s chief macroeconomist, which presents BTC analytics (including the Stock-to-Flow model, S-curves, etc.). Examining the charts provided in the presentation, one can conclude that the company’s analysts are predicting that BTC will reach a price of $100M by 2035. This prediction may cause a lot of controversy among experts of different levels. Nevertheless, we should consider the fact that Fidelity is one of the largest financial companies in the world, and such an optimistic forecast from a company of such caliber is very positive news in itself.
Cryptocurrencies could displace fiat currencies within 5–10 years, according to a recent Delloite report, as a comprehensive survey of leading financial services professionals found. Financial services companies need to look at digital assets and blockchain otherwise they risk losing out to competitors.
Major mining equipment manufacturer Bitmain has announced that it has sold out all miners up to Q3 2022. Sales of Antminer S19j Pro with delivery in Q3 and Q4 2022 will start in September.
Ripple’s trial with the SEC has been postponed until November. According to prominent attorney Jeremy Hogan: “…the upcoming hearing is very important because Ripple could potentially get hold of some documents that would really help it in advancing its position: ‘XRP is like Ether, and in 2018 the SEC said that Ether is not a security and therefore XRP is not a security.’”
Cryptocurrency companies want to tap into the Federal Reserve’s payment systems that traditional banks use to move money quickly, but banks are against it. These companies include Avanti Bank, which plans to provide depository services for institutional investors in cryptocurrencies, and Kraken, a cryptocurrency exchange platform. They say direct access to the Fed’s payment systems will allow them to process customer orders to buy and sell digital assets faster and cheaper. Currently, they are forced to work with traditional banks that have accounts at the FED.
Three Arrows Capital is rather optimistic about Doge, seeing no future regulatory hurdles for the popular meme. The hedge fund is not the only Doge “ambassador”. Entrepreneur Mark Cuban, whose Dallas Mavericks basketball club sells tickets and team merch for Dogecoin at a discount, says that the cryptocurrency’s price will reach $1 and hold at that level. What’s more, popular stock trading app Robinhood reports that dogecoin accounted for 62% of its crypto trading revenue in the second quarter, with cryptocurrency transactions accounting for 41% of total revenue.
Options market volume increased for the sixth week in a row. The size of open interest on deals with execution date at the end of the Q3 — September 24 increased by 12.7% and amounted to 53 965 BTC. There were twice as many Call options traded as Put options. The most popular levels were at 54 000, 56 000 and 64 000, with 40 000 and 42 000 for Put options.
In terms of open interest, options with execution in December increased slightly, by 4%, to 48 069 BTC. The main levels that attracted attention were 80 000, 120 000 and 200 000 for Call options.
After the expiry of 27 August options, the total market size decreased by 6.9% to 156 381 BTC. Due to the large number of trades executed in the monthly cycle, it will take about a week to recover the global distribution of interest. However, at the moment there are a few levels that have clearly attracted the attention of traders — 54 000 and 64 000 for Call options.
The volume of open interest for options with an execution date of September 24 increased by 7.7% to 326 227 ETH. For Сall options, the main increases in market activity were seen at the 3 500 and 10 000 levels. The levels of 1 600, 1 920, and 2 240 were popular for Put options trading.
The options with an exercise date of December 31 were not very popular, trading increased by 1% and the total volume of open interest is at 430 807 ETH.
The 27th August expiration also affected the overall market, with interest down 5.8% to 1 197 404 ETH. There was a breakdown in activity at 3 200 and 4 500 for Call options.
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&GVOL info)
Last week was rather quiet, which did not slow down the volatility. After the price failed to quickly break the first barrier at 50 000, traders drew conclusions about the protracted nature of the move and shifted the level of interest to short-term options. The almost complete symmetry between the Put and Call options indicates a temporary price consensus in the market. To exit it, as well as to increase volatility, a strong incentive is needed and not necessarily a positive one.
MarkIV for long term BTC options
In the longer term, the parade of Сall options continues. Traders are unambiguously confident of a rising rate despite the impending withdrawal of stimulus measures and the possible start of a correction in traditional capital markets.
MarkIV for short term ETH options
For ETH options, the landscape of market volatility and thus option trading has changed slightly. In the short to medium term, traders do not expect a rapid rise and activity for put and call options is at parity.
MarkIV for long term ETH options
In the longer term, the expectation for growth in the last quarter of the year is still extremely high. The demand for Call options is very large, which opens up many opportunities for sellers of volatility. Try buying a Call option in October or November with an exercise price of around 6 000 and you will see what we mean.
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