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Bitcoin’s shortage on exchanges is a good thing

Republished by Plato

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The demand and supply have been holding up the economics of traditional finance and the crypto market has also been abiding by it. Bitcoin, which managed to return over 300% in 2020, has been recognized as a store of value by many investors as they continue to include a high number of Bitcoin in their investment portfolios.

As the BTC market rallied, investors wanted to hold on to their Bitcoins and not leave them on the exchanges. This created a narrative regarding a shortage of supply on the exchanges. Since the massive fall in March 2020, the percentage balance on exchanges fell by 21%, while the price continued to rally. The chart below highlighted this inverse relation.

Even though the value presented is negative it may end up having a positive impact on the value of the entire crypto market as noted in 2017.

Before the last bull run, the percent balance on exchanges had fallen by 15% and the value of Bitcoin had been close to $10k. Following the drop in supply on exchanges, the Bitcoin value was driven close to its ATH of $20k, at the time. This shortage was described to act as a loaded spring and as a similar trend forms in the market once again, it may cause a subsequent squeeze of BTC’s price.

This theory was also supported by the changing volume trends in the market. When the price had crashed in March 2020, there was a change in the number and size of the BTC exchange withdrawals.

While in the early 2019 period, accumulation was dominated by withdrawals between 10-100 Bitcoins, by March 2020 the size of these withdrawals had increased between 100-1000 Bitcoins.

Such a structural change was a sign that the market may be filled with big players holding large bags of the digital asset. These large withdrawals can only indicate the positive sentiment in investor attitude regarding the future of the crypto market. Clubbed with the shortage, this could spell more bullishness for Bitcoin in 2021.

Source: https://ambcrypto.com/bitcoins-shortage-on-exchanges-is-a-good-thing

Blockchain

Crypto Investment Fund to Sell $750M in Bitcoin for Cardano and Polkadot

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Dubai-based cryptocurrency investment fund currently sitting on $1 billion in AUM believes that the value of Cardano and Polkadot will be higher than that of BTC in the upcoming years. Consequently, the fund has announced plans to dispose of $750 million of its Bitcoin holdings and expand its exposure to ADA and DOT instead.

Crypto Fund To Replace BTC With DOT and ADA

FD7 (Fall Down Seven Times) Ventures describes itself as a crypto-oriented investment fund that “invests in entrepreneurs who stand up an 8th time” and has over $1 billion in AUM in various crypto assets. Naturally, those include the two largest – Bitcoin and Ethereum – as well as Cardano, Polkadot, and Cosmos.

According to a company press release, though, the fund plans to rebalance its portfolio by selling off $750 million worth of its Bitcoin exposure over the next month. Instead of holding BTC, FD7 intends to accumulate more of the “rising projects Cardano and Polkadot.”

The firm believes that this increase of altcoin holdings will “better serve the needs of FD7 investors who are looking to diversify their portfolios in the growing cryptocurrency space.”

The fund’s Managing Director had some harsh words to say regarding the primary cryptocurrency following the announcement:

“Aside from the fact that Bitcoin was the first to market and society has given it meaning as a store of value, I think Bitcoin is actually pretty useless.”

In contrast, he highlighted the potential of projects such as Ethereum, Cardano, and Polkadot, which he believes “will be more valuable than Bitcoin within the next few years.”

Ultimately, the statement informed that the fund has already started converting its BTC holdings to ADA and DOT.

Charles Hoskinson Welcomed The News

The press release described the founders of Cardano – Charles Hoskinson and Polkadot – Dr. Gavin Wood as “two of the brightest minds working in the crypto development space today” and outlined their vital role in establishing Ethereum years ago.

The fund’s decision to prioritize its ADA and DOT investments was primarily based on their reputation.

Hoskinson was quick to respond to the news from his Twitter account. Somewhat expectedly, he welcomed FD7 Ventures to the Cardano ecosystem and offered technical assistance if needed.

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Source: https://cryptopotato.com/crypto-investment-fund-to-sell-750m-in-bitcoin-for-cardano-and-polkadot/

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Wall Street Asset Manager Stone Ridge Files to Add Bitcoin to its Diversified Alternatives Fund

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New York City-based asset manager Stone Ridge has filed documents with the US Securities and Exchange Commission on behalf of its diversified alternatives fund to introduce BTC as the seventh investment strategy. 

  • According to the filing with the SEC, the addition will become effective on April 26th, 2021. However, it doesn’t necessarily mean that the giant asset manager will proceed with its BTC endeavor.  
  • The filing enables Stone Ridge to receive exposure for its diversified alternatives fund to Bitcoin through put options on BTC futures contracts. Put options allow investors to sell a certain amount at a pre-determined price in the future, but they are not obliged to.  
  • The Wall Street firm suggested that future allocations in BTC could include putting funds in pooled investment vehicles with exposure to the cryptocurrency. 
  • SkyBridge Capital’s Anthony Scaramucci also commented on the development and he classified it as a “big deal” that would “open the door for every mutual fund to add Bitcoin.
  • Since 2012, Stone Ridge provides services to accredited investors as a registered investment advisor (RIA) and had over $13 billion in assets under management as of late 2020. 
  • It’s worth noting that Stone Ridge already has substantial connections with the primary cryptocurrency. A Forbes article followed the path that started with staff members purchasing BTC for themselves years ago. 
  • As the company was struggling with storing their funds, it founded the crypto asset manager New York Digital Investment Group (NYDIG) in 2017. The new endeavor raised over $6 billion in AUM in its four years of existence, and the Executive Chairman, Ross Stevens, recently projected $25 billion by the end of the year. 
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Source: https://cryptopotato.com/wall-street-asset-manager-stone-ridge-files-to-add-bitcoin-to-its-diversified-alternatives-fund/

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Here’s what you should know about Bitcoin collateralized Futures

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Before DeFi was bursting onto the scene, bringing forward the idea of tokenized Bitcoin on Ethereum, the derivatives markets were the ones to introduce the concept of using digital assets as collateral.

The rise of derivatives has played a vital role for Bitcoin, allowing the asset to undergo price discovery. With growing traction, the financial structure around it continued to develop, and the collateral aspect of Bitcoin started to gain stability.

Other factors have assisted Bitcoin in idolizing the role of a good collateral asset. The growth of institutional interest has been key. Over the past year, the volume of Bitcoin currently accumulated by institutions has climbed as high as ~6% of the total circulating supply, a figure that comes up to around 1.3 million.

Improving social sentiment has provided collective acceptance as well. Multiple traditional stock investors such as Paul Tudor Jones have applauded Bitcoin’s emergence, suggesting that the asset class has a lucrative standing in the future.

The growth of Bitcoin collateralized futures was inevitable, but a change might have been taking place over the last 12 months.

BitMEX led the initial charge, but is there a shift afoot?

According to Arcane Research’s recent report, BitMEX was the derivatives exchange that introduced the idea of BTC collateralized Futures. Between 2017 and 2018, the trading volume of BitMEX completely surpassed the spot volume market of Bitcoin.

After BitMEX dominated proceedings post the 2017 bull run and during the bearish winter of 2018, the Open Interest on BTC Futures registered its biggest rise in 2020, with the market ballooning up to $14 billion in January.

Source: Arcane Research

However, after the March 2020 crash, the derivatives market appeared to radically shift towards stablecoins and USD collateralized Futures.

As can be seen from the attached chart, Open Interest by BTC margined Futures or perpetual swaps cater to 57% of the total Open Interest by collateral. Stablecoins margined Futures have risen by 43%. For context, Bitcoin margined Futures dominated 86% of the Futures market on 1 January 2020.

At press time, it was estimated that the size of BTC collateral in the Futures market was close to 20,000-60,000 BTC. Here, it is worth noting that the range is particularly wide because the derivatives industry is relatively opaque, especially when compared to the spot market.

While stablecoin margined Futures remain in the backseat because they are less complex than BTC-collateralized futures, a change in positions might just manifest sooner than expected.


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Source: https://ambcrypto.com/heres-what-you-should-know-about-bitcoin-collateralized-futures

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