Bitcoin price derivatives look a bit overheated, but data suggests bears are outnumbered

February 16, 2023 Coin Telegraph

Bullish BTC traders are using excessive leverage, but bears’ reluctance to fight back could extend the current Bitcoin price rally.

Bitcoin (BTC) price rallied over 12% on Feb. 15, marking the highest daily close in more than six months. Curiously, the movement happened while gold reached a 40-day low at $1,826, indicating some potential shift in investors' risk assessment for cryptocurrencies.

A stronger than expected U.S. inflation report on Feb. 14 presented 5.6% growth year-over-year, followed by data showing resilient consumer demand caused traders to rethink Bitcoin's scarcity value. U.S. retail sales increased by 3% in January versus the previous month — the highest gain in almost two years.

On-chain data indicates that the recent gains can be traced back to a mysterious institutional investor that started buying on Feb. 10. According to Lookonchain's data, nearly $1.6 billion in funds have flowed into the crypto market between Feb. 10 and Feb. 15. The analysis showed that three notable USD Coin (USD) wallets sent out funds to various exchanges around the same time.

More importantly, news emerged that the Binance exchange is preparing to face penalties and settle eventual outstanding regulatory and law-enforcement investigations in the U.S., according to a Feb. 15 Wall Street Journal report. The exchange's chief strategy officer, Patrick Hillmann, added that Binance was "highly confident and feeling really good about where those discussions are going."

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

Bitcoin margined longs entered the “FOMO” range

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

For example, one can increase exposure by borrowing stablecoins to buy (long) Bitcoin. On the other hand, Bitcoin borrowers can only bet against (short) the cryptocurrency. Unlike futures contracts, the balance between margin longs and shorts isn't always matched.

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

The above chart shows that OKX traders' margin lending ratio increased between Jan. 13 and Jan. 15, signaling that professional traders added leverage long positions as Bitcoin price broke above the $23,500 resistance.

One might argue that the demand for borrowing stablecoins for bullish positioning is excessive as a stablecoin/BTC margin lending ratio above 30 is unusual. However, traders tend to deposit more collateral after a few days or weeks, causing the indicator to exit the FOMO level.

Options traders remain skeptical of a sustained rally

Traders should also analyze options markets to understand whether the recent rally has caused investors to become more risk-averse. The 25% delta skew is a telling sign whenever arbitrage desks and market makers are overcharging for upside or downside protection.

The indicator compares similar call (buy) and put (sell) options and will turn positive when fear is prevalent because the protective put options premium is higher than risk call options.

In short, the skew metric will move above 10% if traders fear a Bitcoin price crash. On the other hand, generalized excitement reflects a negative 10% skew.

*Bitcoin 60-day options 25% delta skew: Source: Laevitas*

Notice that the 25% delta skew has been neutral for the past two weeks, signaling equal pricing for bullish and bearish strategies. This reading is highly unusual considering Bitcoin gained 16.2% from Jan. 13 to Jan. 16 and typically, one would expect excessive bullishness causing the skew to move below negative 10.

One thing is for sure, the lack of bearish sentiment is present in futures and options markets. Still, there is some concerning data on excessive margin demand for leverage buying, although it is too soon to call it worrisome.

The longer Bitcoin remains above $24,000, the more comfortable those pro traders become with the current rally. Moreover, bears using futures markets had $235 million liquidated between Jan. 15 and Jan. 16, resulting in a decreasing appetite for bearish bets. Hence, the derivatives markets continue to favor bullish momentum.

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.

The views, thoughts and opinions expressed here are the authors’ alone and do not necessarily reflect or represent the views and opinions of Cointelegraph.

Breaking: Circle squashes rumors of planned SEC enforcement action

February 14, 2023 Coin Telegraph

Circle

Rumors swirled on Twitter that the stablecoin issuer received a litigation notice from the U.S. securities regulator but a Circle executive rebuffed the claim.

USD Coin (USDC) issuer Circle has denied rumors that it received a "Wells Notice" over its United States dollar-pegged stablecoin.

On Feb. 14, a now-deleted tweet from Fox Business reporter Eleanor Terrett claimed Circle had been ordered by the U.S. Securities and Exchange Commission (SEC) to cease the sale of USDC — due to the stablecoin being an unregistered security.

However, the rumor was swiftly rebuffed by Dante Disparte, Chief Strategy Officer and Head of Global Policy at Circle Pay on Twitter just 15 minutes after Terrett's tweet, noting his firm has not received a Wells Notice.

.@circle has not received a Wells notice. https://t.co/lE74zHVLka
— Dante Disparte (@ddisparte) February 14, 2023

A Wells Notice is a formal notice sent by the SEC informing a recipient that it's planning to bring enforcement actions against them.

In response to Circle's denial, Terrett said she "went with the word of several trusted sources" and apologized for the mistake.

Here is the response from @circle. I went with the word of several trusted sources on this. I apologize for the mistake @ddisparte. https://t.co/NjyD57PDuZ
— Eleanor Terrett (@EleanorTerrett) February 14, 2023

Dante responded to Terrett that her apology is accepted, adding:

"Alas, there is a lot of churn, swirl and rumors informing the market right now."

The original tweet from Terrett has since been deleted. Her account on Twitter was temporarily deleted but has since returned.

Fears of regulatory action against stablecoin issuers have been running high this week after Paxos Trust Company, the issuer of Binance USD (BUSD), confirmed it had received a Wells Notice that alleged it failed to register the offering under federal securities laws.

Asked earlier this week whether Circle had received a similar notice from the SEC concerning USDC, Disparte told Cointelegraph:

“Circle maintains that USDC is a regulated dollar digital currency issued as stored value under U.S. money transmission law.”

“Facts and circumstances in any type of regulatory action like this are all different, as are the structural and regulatory considerations with each of the cryptocurrencies that are in circulation around the world,” he added.

Top US Crypto Exchange Coinbase Adds Circle’s Euro-Backed Stablecoin to Listing Roadmap

February 10, 2023 The Daily Hodl

Stablecoin Market in Flux: More Than $2 Billion in USDC Redemptions in 30 Days

February 10, 2023 Bitcoin.com

Ethereum Network’s Rising Gas Fees in 2023: A Balancing Act of Growth and Cost

February 3, 2023 Bitcoin.com

Key takeaways from Circle’s $44.5B USDC reserve report

January 30, 2023 Coin Telegraph

<div>Key takeaways from Circle's .5B USDC reserve report</div>

Assets

Circle has released its reserve report for December 2022 highlighting over-collateralized asset holdings currently backing 44.5 billion USDC tokens in circulation.

USD Coin (USDC) issuer Circle has released an accountant-verified report of its treasury reserve holdings backing more than $44.5 billion worth of tokens currently in circulation.

Circle’s December 2022 reserve report, which was reviewed by GrantThornton accountancy group, breaks down the current make-up of the stablecoin issuer’s reserve vault. According to Circle, 44,553,543,212 USDC is currently backed by $44,693,963,701 U.S. dollars held in custody accounts.

It is worth noting that a significant portion of the latter amount is invested in a variety of U.S. Treasury bonds. As per Circle’s VP of accounting Timothy Singh, the fair value of assets in the USDC reserve is the total balance of USD denominated assets, including a mix of cash and treasury bonds.

Circle’s Reserve Fund is registered as a government money market fund. The equity interests in the fund are fully owned by Circle and include 14 different US Treasury Bills valued at over $23.5 billion. The fund also holds $48.9 million in cash while a further $33 million is due to the Fund, offset by ‘timing and settlement differences’.

Another two US Treasury Securities valued at $10.5 billion are reported in a separate reserve assets category, alongside another $10.5 billion in cash that is held by a number of financial institutions on behalf of Circle.

U.S. banks holding Circle’s cash reserves include the Bank of New York Mellon, Citizens Trust Bank, Customers Bank, New York Community Bank, Signature Bank, Silicon Valley Bank and Silvergate Bank.

Circle and payments platform Ripple were notable attendees that participated in cryptocurrency and blockchain focused workshops at the World Economic Forum in Davos in January 2023.

Circle’s vice president of global policy Corey Then said the organization had held discussions with policymakers, traditional companies, tech firms and humanitarian organizations to unpack the possibility of using USDC as a payment solution in the future.

Over the past two years, Circle’s position as a stablecoin issuer has consistently grown, leaving USDC as the second most used USD-backed stablecoin behind USDT Tether.

Circle denies blaming SEC for shuttered $9B plan to go public

January 26, 2023 Coin Telegraph

Circle denies blaming SEC for shuttered B plan to go public

8-K

A Jan. 25 report from the Financial Times which was widely shared characterized Circle as having "blamed" the SEC for its "jettisoned" public listing plan.

A spokesperson for USD Coin (USDC) issuer Circle has denied reports that it blames the United States Securities and Exchange Commission (SEC) over its failed $9 billion plan to go public in December.

The stablecoin issuer representative was responding to a Jan. 25 Financial Times article which characterized Circle as having “blamed” the securities regulator for its “derailed” listing as a result of dragging its feet on the approval of a merger agreement.

However, a Circle spokesperson clarified to Cointelegraph that was not the case and that it doesn’t hold any blame over the SEC for the termination of its merger agreement.

“Circle has not and does not blame the SEC for anything related to the mutual termination of our SPAC merger agreement with Concord, and any statements to the contrary are inaccurate."

Circle’s listing on the New York Stock Exchange (NYSE) was pegged on them being able to combine with Concord, a company set up by banker Bob Diamond via a Special Purpose Acquisition Company arrangement, also known as a SPAC deal.

However, according to the FT, Circle said the merger failed to be consummated as a result of the SEC not declaring the related S-4 registration effective in time, which would cause the agreement to lapse on Dec. 10.

Circle’s spokesperson however referred to previous statements made by the company in December, noting that “the deal simply termed out.”

Concord had not publicly disclosed a reason for the failed business combination, but filed an 8-K form with the SEC on Dec. 5 — the same day the deal was announced as terminated — which revealed that it was being delisted by the NYSE due to “abnormally low trading price levels.”

Indeed, in a Dec, 5 tweet Circle co-founder and CEO Jeremy Allaire had nothing but positive words regarding the SEC, and noted that while it was disappointing that they were unable to complete qualification in time it was still planning on becoming a publicly-listed company.

2/ From my perspective, I believe that the SEC has been rigorous and thorough in understanding our business and many novel aspects of this industry. This kind of review is necessary to ultimately provide trust, transparency and accountability for major companies in crypto.
— Jeremy Allaire (@jerallaire) December 5, 2022

As Cointelegraph had previously reported, the deal was first announced in Jul. 2021 at a valuation of $4.5 billion, before doubling in Feb. 2022 when it was revised up to $9 billion.

USDC