3 reasons why Ethereum price is still pinned below $1,900

August 10, 2023 Coin Telegraph

3 reasons why Ethereum price is still pinned below ,900

Activity

PayPal’s stablecoin announcement and a handful of Ether ETF applications are bulls’ biggest hopes for a price trend reversal.

Ether (ETH) price has been locked within a tight trading range spanning from $1,800 to $1,900 since July 21. This remarkable lack of volatility has instilled a sense of uncertainty and skepticism among investors, despite recent positive developments which include the launch of PayPal's Ethereum-based stablecoin, and a surge in requests for Ether-based exchange-traded funds (ETFs).

PayPal's entrance into the world of cryptocurrencies could signify a major step toward mainstream adoption for Ethereum. However, this move also raises concerns about centralization and the potential loss of control over personal assets.

At the same time, the United States Securities and Exchange Commission (SEC) has recently witnessed a surge in applications for Ether exchange-traded funds (ETFs), which mirrors a trend of major asset management firms seeking to establish spot Bitcoin ETFs.

ETH’s drop in DApp deposits and active users is concerning

The Ethereum network is having problems because of high gas fees, which are the costs for transactions, including those done with smart contracts. For the past two months, the average transaction fee has been more than $4, which limited the demand for its decentralized apps (DApps).

*Ethereum network applications' total deposits in ETH. Source: DefiLlama*

There has been a noticeable decline in the total value of deposits locked (TVL) in the Ethereum network. This decrease marked the lowest TVL level observed over the past three years, as reported by DefiLlama.

While there may have been some shifts in this trend over the past week, the current scenario still reflects a substantial reduction in Ether deposits, specifically around 12.9 million, in contrast to the 14.75 million recorded three months ago.

To ascertain whether the decline in Ethereum's TVL correlates with a decline in its user base, investors should monitor the utilization of decentralized applications (DApps). It's important to note that certain DApps, such as gaming platforms and marketplaces, do not require substantial deposits.

*Ethereum's 30-day DApp activity. Source: DappRadar*

The number of active addresses using DApps is also down, which is concerning. In the last 30 days, the main DApps on Ethereum had 25% fewer active users. This might reflect that investors aren't satisfied about how much it costs to transact on the network.

Now, let's examine Ether derivatives to figure out whether the $1,800 level could actually prove a reliable support based on how ETH investors are positioned.

Derivatives metrics show balanced demand between bulls and bears

Ether quarterly futures are popular among whales and arbitrage desks. However, these fixed-month contracts typically trade at a slight premium to spot markets, indicating that sellers are asking for more money to delay settlement. As a result, ETH futures contracts in healthy markets should trade at a 5 to 10% annualized premium — a situation known as contango, which is not unique to crypto markets.

*Ether 3-month futures annualized premium. Source: Laevitas*

As per the futures premium, also referred to as the basis indicator, professional traders in the Ether market have remained unable to adopt a bullish stance since July 16. The current level of 5% hovers on the brink of neutral-to-bearish threshold, indicating a state of equilibrium in demand between leveraged long and short positions.

The recent unveiling of Coinbase's Base network on Aug. 9 could contribute to Ether's challenge in surpassing the $1,900 mark. Several development teams within the ecosystem have announced their offerings for the Base network, which presently incorporates a version of the decentralized exchange Uniswap.

While Ether's bullish prospects are fueled by the potential approval of an ETF and the substantial user base facilitated by PayPal's stablecoin, the network finds itself confronted by the competition from existing smart contract platforms and challengers with ample resources. Such a scenario introduces an element of uncertainty surrounding the resilience of the $1,800 support level.

This article is for general information purposes and is not intended to be and should not be taken as legal or investment advice. The views, thoughts, and opinions expressed here are the author’s alone and do not necessarily reflect or represent the views and opinions of Cointelegraph.

Ether ETFs pending — Grayscale, VanEck and others file SEC applications

August 2, 2023 Coin Telegraph

asset managers

A handful of United States asset managers have filed fresh applications to launch ETH futures ETFs.

Six major asset managers, including Grayscale and VanEck, have filed fresh applications in a bid to launch Ether (ETH) futures exchange-traded funds (ETF) to United States customers.

Separate filings submitted to the U.S. Securities and Exchange Commission reviewed by Cointelegraph outline respective applications from the likes of Grayscale, VanEck, Bitwise, Volatility Shares, ProShares and Round Hill Capital.

We officially have 5 different #Ethereum futures ETF filings submitted to the SEC. Would love to know what has changed since May, other than the fact that someone (Volatility Shares) applied on Friday. ProShares went straight for the inverse/short ETF. https://t.co/Qi8he0OwrU pic.twitter.com/qVVUwrUjOI
— James Seyffart (@JSeyff) August 1, 2023

Grayscale’s filing includes two applications: a proposed Grayscale Global Bitcoin Composite ETF and a Grayscale Ethereum Futures ETF. Grayscale’s Ether ETF will invest in futures contracts that are set to be traded on the Chicago Mercantile Exchange.

The SEC filing notes that Grayscale’s fund will primarily invest “front-month” Ether futures, which are contracts with “the shortest time to maturity.” Grayscale added that it intends to “roll” Ether futures contracts before they expire.

Volatility Shares also outlined plans to list an Ether futures ETF, investing its assets in cash-settled contracts referencing ETH trading on the Chicago Mercantile Exchange. It’s noted that the fund will not invest directly in Ether.

Volatility’s filing also notes that it intends to enter into cash-settled Ether futures contracts as the buyer. Cash-settled futures markets typically see a counterparty pay cash to the buyer if the price of a futures contract goes up, while the buyer would pay the counterparty if the price of the futures contract goes down.

VanEck’s filing also indicates that its investment strategy will look to invest in ETH futures contracts so that the value of ETH that the fund has exposure to is equal to 100% of the total assets of the fund.

The filing notes that any changes in the value of ETH would result in larger changes to VanEck’s Ether ETF fund. This would include the potential for “greater losses than if the Fund’s exposure to the value of ETH were unleveraged.”

ProShares gave an overview of their Short Ether Strategy ETF, which will invest in daily contracts that look to profit on losses of the S&P CME Ether Futures index. As explained, the ProShares fund would gain as much as the index loses on a given day, while the converse would apply.

These applications come in the wake of recent applications from various mainstream asset management firms looking to launch Bitcoin ETFs. The world’s largest asset manager, BlackRock, is among those looking to offer what would be the first Bitcoin (BTC) ETFs offered in the country.

Magazine: ‘Elegant and ass-backward’: Jameson Lopp’s first impression of Bitcoin

OPNX launches ‘oUSD’ credit currency for crypto margin trading

July 5, 2023 Coin Telegraph

Coin Telegraph

The new “credit currency” will allow users to rely on cryptocurrencies as collateral without needing to obtain loans from other institutions.

Crypto futures exchange OPNX has launched a credit currency for margin trading, according to a July 5 statement made to Cointelegraph from the exchange’s co-founder, Mark Lamb. Called “oUSD,” the currency is available in its “phase 1” iteration, meaning that users cannot receive it without depositing crypto assets into the exchange.

In a future “phase 2” version, the platform intends to make oUSD available to users who deposit crypto into on-chain contracts to allow for possible “bankruptcy remoteness,” Lamb stated.

In the currency’s litepaper, oUSD is identified as a solution to three problems. First, lenders do not want to trust platforms to hold cash loans backed by crypto collateral. Second, exchanges and lending platforms don’t want to lend cash to margin traders, as this practice led to multiple bankruptcies during the 2022 bear market. Third, crypto derivatives traders want “portfolio margin,” or the ability to borrow and trade based on their crypto holdings rather than their stablecoin holdings.

To solve this problem, oUSD exists as a “credit currency.” It can be purchased at a 1-to-1 ratio with Tether (USDT) or used to measure profit and loss when users rely on Bitcoin (BTC), Ether (ETH) or other cryptocurrencies as collateral. Users with a negative oUSD balance must pay an interest rate determined by holders of the platform’s native token, OX. Users who have a positive balance cash out by redeeming it for USDT.

In a conversation with Cointelegraph, Lamb claimed that users would eventually be able to acquire oUSD by staking cryptocurrency within smart contracts outside the platform. This will allow them to have bankruptcy remoteness, protecting them from any possible insolvency at the exchange.

“The problem with most exchanges is that [...] you’re the broker, the exchange, the ATS, the reporting agent, you're every leg in the financial interaction," Lamb stated, further explaining:

“If we can instead remove that custodial aspect and put that custody on-chain, we end up with a system where users have provable solvency, and they know that their collateral is not being touched. [...] And so you give users that bankruptcy remoteness, that protection of their assets, they then are able to trade on a safer exchange.”

OPNX has been controversial since its inception, as two of its co-founders, Kyle Davies and Su Zhu, were also the co-founders of failed hedge fund Three Arrows Capital. The exchange has been so heavily criticized that its CEO, Leslie Lamb, has scolded investors for allegedly misleading the public by distancing themselves from it.

In response to a question about this criticism, Lamb argued that Davies’ and Zhu’s mistakes have helped them make OPNX a better exchange.

“I think Kyle and Su kind of portrayed the zeitgeist of the last crypto bull market well, and they lost the majority of their net worth, but they are building back, and that’s what I am doing as well, and that’s what everyone should do, [...] is just build back.”

Bitcoin options: How will tomorrow’s $4.7B expiry impact BTC price?

June 29, 2023 Coin Telegraph

<div>Bitcoin options: How will tomorrow's .7B expiry impact BTC price?</div>

Analysis

Bitcoin ETF requests, miners' sell pressure, and regulatory hurdles create uncertainty for the $31,000 BTC price resistance.

The $4.7 billion Bitcoin (BTC) monthly options expiry on June 30 might play a decisive role in determining whether the $30,000 price will consolidate as long-term support and open room for further bullish momentum.

Why is Bitcoin breaking yearly highs?

Many analysts consider Bitcoin's recent breakout above $27,000 a bet on the multiple spot Bitcoin exchange-traded fund (ETF) request applications, including those of BlackRock and ARK Invest.

The news also fueled expectations for Grayscale to be able to convert its Grayscale Bitcoin Trust (GBTC) to a Bitcoin ETF.

$31,000 caps Bitcoin price gains for now

On the other hand, Bitcoin bears will try to take advantage of macroeconomic and regulatory headwinds, including exchanges implementing mandatory Know Your Customer (KYC) procedures.

On June 28, KuCoin announced the upcoming KYC system upgrade in a move to increase compliance with global Anti-Money Laundering regulations.

Moreover, there’s increasing concern over the impact of miners' sell pressure as the network hashrate reached 400 exahashes per second. The Glassnode analytics firm noted that miners sent an all-time high in BTC revenue percentage to exchanges over the past week, totaling $128 million. Curiously, the movement mimics spikes seen during the 2021 bull run as miners took profits.

Additionally, during the European Central Bank forum in Portugal, Federal Reserve (Fed) Chair Jerome Powell warned that most policymakers expect two more rate hikes this year. According to the CME FedWatch Tool, investors are pricing in 82% odds of a 25 basis point interest rate increase on July 26.

*Bitcoin four-hour price movements during option expiries. Source: TradingView*

Bitcoin price last flirted with the $31,000 level on June 27, but the resistance proved stronger than anticipated. The subsequent correction to $30,000 supports the thesis of sideways trading in the short term as investors evaluate the impacts of additional interest rate increases by the Fed.

Such a restrictive scenario for the global economy might explain why some Bitcoin traders decided to take profits, which limited the price upside.

$4.7 billion out of reach as bulls were too optimistic

The open interest for the June 30 options expiry is $4.7 billion, but the actual figure will be lower since bulls were expecting $32,000 or higher price levels. These traders got excessively optimistic after Bitcoin’s price rallied 25.5% between June 15 and June 23, testing the $31,000 resistance.

Deribit *Bitcoin options aggregate open interest for June 30. Source: Deribit*

The 0.56 put-to-call ratio reflects the imbalance between the $3.1 million in call (buy) open interest and the $1.7 million in put (sell) options.

But if Bitcoin’s price remains near $30,500 at 8:00 am UTC on June 30, only $630 million worth of these call (buy) options will be available. This difference happens because the right to buy Bitcoin at $31,000 or $32,000 is useless if BTC trades below that level on expiry.

Bitcoin bears aim for sub-$30,000 to balance the scales

Below are the four most likely scenarios based on the current price action. The number of options contracts available on June 30 for call (bull) and put (bear) instruments varies depending on the expiry price. The imbalance favoring each side constitutes the theoretical profit.

Between $28,000 and $29,000: 7,200 calls vs. 16,200 puts. Bears in control, profiting $250 million.
Between $29,000 and $30,000: 13,000 calls vs. 12,600 puts. The result is balanced between put and call options.
Between $30,000 and $31,000: 1,500 calls vs. 2,100 puts. The net result favors the call instruments by $440 million.
Between $31,000 and $32,000: 3,300 calls vs. 800 puts. The net result favors the call instruments by $670 million.

This crude estimate considers the call options used in bullish bets and the put options exclusively in neutral-to-bearish trades. Even so, this oversimplification disregards more complex investment strategies.

For instance, a trader could have sold a put option, effectively gaining positive exposure to Bitcoin above a specific price. Unfortunately, there’s no easy way to estimate this effect.

Consequently, it will come down to whether BTC price bears are willing to risk exposure while a potential spot Bitcoin ETF approval is being analyzed by the SEC.

Although it is impossible to estimate the potential inflow or the timing of such an event, it paves the way for bulls to secure a $440 million profit by keeping Bitcoin price above $30,000 in the short term.

Will $30K be a new springboard for Bitcoin bulls?

June 27, 2023 Coin Telegraph

Will K be a new springboard for Bitcoin bulls?

Binance

Bitcoin margin and futures markets display strength as institutional appetite surges after multiple spot ETF requests.

After a failed rally above $31,000 on June 23, Bitcoin (BTC) has sustained the $30,300 resistance for the past three days. Curiously, this happened while gold reached its lowest level in three months, trading at $1,910 on June 22, down from a $2,050 peak in early May.

Investors now question how solid Bitcoin’s $30,000 support is. So analyzing what caused the recent price rally is essential to understanding how traders are positioned on BTC margin and futures markets.

Why did BTC price break above $30,000?

Some analysts attribute Bitcoin’s recent 21.5% gains in 11 days to BlackRock’s spot Bitcoin exchange-traded fund (ETF) filing. But other events might have fueled the cryptocurrency gains. For instance, on June 26, HSBC Bank in Hong Kong reportedly introduced its first local cryptocurrency services using three listed crypto ETFs.

Moreover, the ProShares Bitcoin Strategy ETF, a Bitcoin futures fund, experienced its largest weekly inflow in a year at $65 million, with its assets topping $1 billion. It was the first BTC-linked ETF in the United States and is one of the most popular among institutional investors.

But, more importantly, the U.S. crypto regulatory environment may be improving after a period marked by enforcement actions from the Securities and Exchange Commission (SEC) aimed at exchanges supposedly operating as unregistered securities brokers.

On June 25, Federal Reserve governor Michelle Bowman said that financial institutions had been left in a “supervisory void” in terms of emerging technologies, including digital assets. Bowman added that policymakers have been relying on “general but non-binding statements,“ leaving substantial uncertainty and imposing new business requirements after significant investments have been made.

In that sense, a draft bill in the U.S. House of Representatives aims to prohibit the SEC from denying digital asset trading platforms registration as a regulated alternative trading system. Published on June 2, the proposed legislation would allow such firms to offer “digital commodities and payment stablecoins.“

Bitcoin margin, futures suggest bullishness

Now let’s look at Bitcoin derivatives metrics to better understand how professional traders are positioned amid improved regulatory perspectives and a sizable institutional inflow.

Margin markets provide insight into how professional traders are positioned because they allow investors to borrow cryptocurrency to leverage their positions.

OKX, for instance, provides a margin-lending indicator based on the stablecoin/BTC ratio. Traders can increase their exposure by borrowing stablecoins to buy Bitcoin. On the other hand, Bitcoin borrowers can only bet on the decline of a cryptocurrency’s price.

*OKX stablecoin/BTC margin-lending ratio. Source: OKX*

The above chart shows that OKX traders’ margin-lending ratio bottomed at 17 on June 20 but has improved over the past four days. The movement indicates a prevalence of margin longs as the present 24x ratio favors bullish stablecoin lending.

Still, investors should analyze the Bitcoin futures long-to-short metric, which excludes externalities that might have solely impacted the margin markets.

*Exchanges’ top traders Bitcoin long-to-short ratio. Source: CoinGlass*

There are occasional methodological discrepancies between exchanges, so readers should monitor changes instead of absolute figures.

Top traders at Huobi vastly increased their longs between June 22 and June 24 as Bitcoin price broke above the $30,000 resistance.

On the other hand, OXK’s top traders initially increased their shorts on June 22 and June 23, but subsequently reverted their positions by adding bullish bets.

Lastly, the top traders at Binance started adding longs on June 21 and have kept increasing bullish positions until June 23.

Bitcoin’s $30,000 support showing strength

Overall, Bitcoin bulls have added leverage-long positions using margin and futures markets backed by the positive momentum from multiple spot Bitcoin ETF requests, heavy institutional inflow and a more rational approach from U.S. lawmakers.

The SEC’s regulation-by-enforcement approach is not backed by some U.S. Federal Reserve governors and has faced some serious backlash in the U.S. House of Representatives. For example, Representative Warren Davidson has introduced the SEC Stabilization Act, citing “ongoing abuse of power” and demanding the removal of Gary Gensler as chair of the SEC.

Given the favorable scenario toward cryptocurrencies, Bitcoin bulls should now have the upper hand to sustain the $30,000 BTC price support level in the coming weeks.

This article does not contain investment advice or recommendations. Every investment and trading move involves risk, and readers should conduct their own research when making a decision.

Bitcoin (BTC) Shatters $30,000 Level As Traders Get Liquidated for Over $207,000,000

June 21, 2023 The Daily Hodl

US CFTC issues letter on digital asset derivatives, clearing compliance in 3 areas

May 30, 2023 Coin Telegraph

CFTC

The letter is a reminder, but a highly specific one that is reminiscent of the SEC’s recent custody rule proposal in part.

The United States Commodity Futures Trading Commission (CFTC) has issued a staff advisory letter to registered derivatives clearing organizations (DCOs) and DCO applicants, reminding them of the risks associated with expanding the scope of their activities. The letter from the CFTC Division of Clearing and Risk (DCR) specifically addressed digital assets.

Staff advisory letters can remind addressees of their legal obligations or provide clarity on those obligations. The “DCR expects DCOs and applicants to actively identify new, evolving, or unique risks and implement risk mitigation measures,” it said, continuing:

“Over the past several years, DCR has observed increased interest […] in expanding the types of products cleared and business lines, clearing models, and services offered by DCOs, including related to digital assets.”

The DCR said it will emphasize compliance in three areas: system safeguards, conflicts of interest and physical deliveries. Systems safeguards require attention because of the “heightened cyber and other operational risks” associated with digital assets. Potential conflicts of interest were seen in “dependencies on affiliated entities or services (i.e., dual-hatted executives, shared systems and resources, etc.).”

“Physical delivery” is used in the letter in its technical sense to mean the transfer of ownership rights — that is, transferring digital assets from one account or wallet to another. This concern, in part, mirrors the U.S. Securities and Exchange Commission’s reported plans to propose a new rule that would impact crypto firms serving as custodians of their clients’ assets. That proposal brought on harsh criticism in the crypto sector.

Today the CFTC’s Division of Clearing and Risk issued a staff advisory on the risks associated with expanding the reach of Derivatives Clearing Organizations (DCO) to clear digital assets. Learn more: https://t.co/9lEPMVXB1W
— CFTC (@CFTC) May 30, 2023

Alexander Grieve, vice president of the Tiger Hill Partners communications firm, noted in a tweet that Bitnomial has a DCO application before the CFTC. LedgerX, recently purchased by MIAX from FTX, is also a CFTC-regulated clearinghouse.

Magazine: Crypto regulation: Does SEC Chair Gary Gensler have the final say?

Bitcoin price rejects at $28K as analysts eye CME futures gap dip

May 30, 2023 Coin Telegraph

Bitcoin

BTC price action sees weakness a day from the May monthly close, with Bitcoin analysts closely monitoring bid liquidity.

Bitcoin (BTC) fell into the May 30 Wall Street open as the return of United States equities failed to boost performance.

*BTC/USD 1-hour candle chart on Bitstamp. Source: TradingView*

Bitcoin pauses into monthly close

Data from Cointelegraph Markets Pro and TradingView showed BTC/USD heading to $27,700, having briefly spiked above the $28,000 mark.

The pair encountered resistance below its local highs from around the weekly close, and stocks also treaded water after the opening bell.

Excitement around a possible deal to raise the U.S. debt ceiling, which had boosted crypto previously, also cooled as market participants waited for its first test in Congress.

“Bitcoin has been having a hard time reclaiming the weekend high,” monitoring resource Material Indicators summarized in part of analysis on the day.

“With the Monthly candle close approaching tomorrow, bulls and bears are fighting to control the momentum.”

An accompanying chart of the BTC/USD on Binance showed strengthening bid liquidity in the active trading range.

*BTC/USD order book data for Binance. Source: Material Indicators/ Twitter*

Popular trader Daan Crypto Trades suggested that that liquidity represented genuine interest in BTC, rather than forming part of an order book “spoof.”

#Bitcoin $22M+ Spot Buy Wall still sitting between $27.4-27.5K.

Some of the bids got filled yesterday already.

Looks to be genuine orders that want to get filled. pic.twitter.com/IjgMrnss8M
— Daan Crypto Trades (@DaanCrypto) May 30, 2023

Fellow trader Jelle was also optimistic, offering May 31 as a potentially good date for bulls.

“Quite liking how Bitcoin shapes up here. Still holding the key support, and looks like we're building a little hidden bullish divergence here,” part of Twitter commentary stated.

Additional posts included coverage of a potential triple breakout for Bitcoin when it comes to market structures.

#Bitcoin is at the cusp of breaking out from three different bullish patterns.

Just a little bit higher, before these all confirm a move higher.

Who's ready? pic.twitter.com/8yZnTnn6xx
— Jelle (@CryptoJelleNL) May 30, 2023

CME gap looms large

On the radar meanwhile was the looming gap in CME futures markets and Bitcoin's potential to "fill" it next.

*CME Bitcoin futures 1-hour candle chart. Source: TradingView*

The weekend's upside left a blank space on the futures chart between $26,900 and $27,850, providing a potential short-term downside target for spot price.

Popular trader Justin Bennett included that scenario in part of the day's price analysis, suggesting rangebound behavior would continue.

Nice bounce from $BTC so far, exactly as explained in Monday's blog post.

This is your range for now. Get above $28,250 and we likely see a liquidity grab toward $29k and $30k.

But if $27,500 fails, expect the CME gap to fill.#Bitcoin https://t.co/kFabrgykZH pic.twitter.com/U5BnJgzvzm
— Justin Bennett (@JustinBennettFX) May 30, 2023

Fellow trader Mikybull Crypto meanwhile took the opportunity to present a summary of other unfilled CME gaps for the year.

"Note: gaps don't get filled immediately but they're not to be neglected," he argued.

*Bitcoin futures chart with gaps shown. Source: Mikybull Crypto/ Twitter*

Magazine: AI Eye: 25K traders bet on ChatGPT’s stock picks, AI sucks at dice throws, and more

This article does not contain investment advice or recommendations. Every investment and trading move involves risk, and readers should conduct their own research when making a decision.

Valkyrie Leveraged Bitcoin Futures ETF gets inspiration from TradFi memes

May 17, 2023 Coin Telegraph

bitcoin futures

After being initially discussed in 2021, the investment fund is now capitalizing on the meme-worthy ticker for its new leveraged Bitcoin ETF.

In its latest futures-based exchange-traded fund (ETF) filing, Valkyrie Funds utilizes one of the popular memes from the financial Twitter community, known as “fintwit,” to capture attention and interest.

On May 16, the investment firm submitted a new application for a Bitcoin (BTC) futures-based ETF to be listed on the Nasdaq with the ticker symbol “BTFD.“

Both of Valkyrie’s Bitcoin-centric funds do not have direct exposure to Bitcoin itself; instead, they invest in Bitcoin futures traded on the Chicago Mercantile Exchange. Bitcoin futures are financial contracts that allow investors to speculate on the future price movements of Bitcoin. These contracts obligate the buyer to purchase or the seller to sell Bitcoin at a predetermined price on a specific future date. Unlike trading Bitcoin — which involves owning and holding the digital asset itself — Bitcoin futures enable traders to speculate on the price of Bitcoin without directly owning it.

Initially intended for the first fund, the suggestive ticker was reportedly modified by the firm in October 2021.

In contrast to the firm’s existing block trading facility (BTF) fund, this newly proposed fund will offer leverage, allowing speculators to increase their exposure to the dominant cryptocurrency. A BTF is an actively managed ETF available through Nasdaq that invests primarily in Bitcoin futures contracts.

Up to this point, the market has witnessed the introduction of four distinct Bitcoin futures-based ETFs. The first, ProShares Bitcoin Futures ETF, was l aunched in October 2021.

Thus far, the Securities and Exchange Commission (SEC) has denied several attempts to introduce Bitcoin spot ETFs or funds that provide direct exposure to the dominant cryptocurrency, citing concerns regarding potential market manipulation in the Bitcoin market.

Grayscale, a digital asset manager, is currently involved in a prolonged legal dispute with the SEC as it seeks to transform its struggling Grayscale Bitcoin Trust product (GBTC) into a spot Bitcoin ETF. The investment firm criticized the Commission's decision to authorize futures-based ETFs instead of spot ETFs, deeming it "illogical."

In March, the judges presiding over the dispute between the two entities in the United States (U.S.) Court of Appeals for the D.C. Circuit expressed the view that the SEC "must provide a thorough explanation" regarding its understanding of the connection between Bitcoin futures and the spot price of Bitcoin.

Magazine: Ordinals turned Bitcoin into a worse version of Ethereum: Can we fix it?

Bitcoin’s dive under $27K liquidates $100M — So why aren’t margin traders flipping bearish?

May 12, 2023 Coin Telegraph

<div>Bitcoin's dive under K liquidates 0M — So why aren't margin traders flipping bearish?</div>

Analysis

BTC price falls below the 55-day support level at $27,000, but futures market resilience sparks hope for a recovery toward $28,000.

Bitcoin’s price (BTC) broke below its 55-day support at $27,000 on May 12. In result, the two-day, 7% correction to $26,155 caused $100 million worth of long BTC futures contracts to be liquidated.

However, Bitcoin margin and futures markets displayed strength during the down-move, fueling hope of a recovery toward $28,000.

Regulatory pressure, stronger U.S. dollar bite

Regulatory uncertainty in the United States significantly increased after Bitcoin miner Marathon Digital received yet another subpoena. The publicly traded mining company informed investors on May 10 that it received a subpoena from the U.S. Securities and Exchange Commission (SEC) concerning whether it may have violated federal securities laws, among other things, by using related-party transactions.

Furthermore, there’s the additional risk of the 627,522 Bitcoins held by the Grayscale GBTC Trust Fund, which has been trading at a steep discount for over a year while Grayscale’s holding company, Digital Currency Group (DCG), struggles with some failing subsidiaries. DCG’s crypto lending and trading firm, Genesis Capital, filed for Chapter 11 bankruptcy protection in January.

Despite having separate corporate structures, Genesis Capital had "intercompany obligations" with the holding company DCG, so the consequences for the administration of the Grayscale funds are unknown. Additionally, the group reportedly owes Gemini's clients about $900 million, and the U.S. SEC charged Genesis and Gemini in January.

Bitcoin’s 7.2% correction happened as the dollar strength index (DXY), which measures the U.S. currency against a basket of foreign exchanges, displayed strength. The indicator reached 101 on May 8, nearing its 12-month low, a sign of low-confidence in the government’s ability to curb inflation while simultaneously managing to increase the debt limit.

Historically, there has been an inverse correlation between the DXY index and risk-on assets such as Bitcoin, given that a weaker dollar tends to drive demand for alternative store-of-values and scarce assets.

Let's look at derivatives metrics to better understand how professional traders are positioned in the current market environment.

Bitcoin margin market traders slightly less optimistic

Margin markets provide insight into how professional traders are positioned because they allow investors to borrow cryptocurrency to leverage their positions.

OKX, for instance, provides a margin lending indicator based on the stablecoin/BTC ratio. Traders can increase their exposure by borrowing stablecoins to buy Bitcoin. On the other hand, Bitcoin borrowers can only bet on the decline of the cryptocurrency's price.

The above chart shows that OKX traders' margin lending ratio decreased between May 8 and May 11. Still, that is not concerning, given that those traders remain favoring bullish strategies as the stablecoin (long) demand currently surpasses the BTC (short) demand by a factor of 18 times — which is healthy.

No signs of panic selling after Bitcoin price crash

To exclude externalities that might have solely impacted the margin markets, traders should analyze the long-to-short metric. The metric gathers data from exchange clients’ positions on spot, perpetual, and quarterly futures contracts, thus offering better information on how pro traders are positioned.

There are occasional methodological discrepancies between different exchanges, so readers should monitor changes instead of absolute figures.

Even though Bitcoin broke below the $28,000 support, professional traders have increased their leveraged long positions using futures, according to the long-to-short indicator.

At crypto exchange OKX, the long-to-short ratio increased, from 0.92 on May 8 to 1.01 on May 12. Meanwhile, at Binance, the long-to-short ratio stabilized at 1.13, indicating there was no shift to a bearish position from whales and market makers.

Therefore, despite the 12% price decline from a high of $29,865 on May 6, traders using margin and futures contracts did not abandon their bullish stance. The movement indicates confidence that Bitcoin is more likely to reclaim $28,000 than succumb to the next support level near $24,500.

futures