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First Mover: Buying Bitcoin’s Dip, Betting Against Tether and Weighing the Jobs Report

Crypto traders appeared to be buying the dip after Thursday’s 11% plunge. ALSO: There’s a contract for that: How to hedge Tether’s credit risk.

Republished by Plato

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You’re reading First Mover, CoinDesk’s daily markets newsletter. Assembled by the CoinDesk Markets Team and edited by Bradley Keoun, First Mover starts your day with the most up-to-date sentiment around crypto markets, which of course never close, putting in context every wild swing in bitcoin and more. We follow the money so you don’t have to. You can subscribe here.

HOLIDAY NOTICE: First Mover will publish next on Tuesday, Sept. 8. Happy Labor Day to our U.S. readers.

Price Point

Bitcoin (BTC) was up in early trading to $10,500, rebounding after Thursday’s 11% tumble, the biggest single-day decline since March. 

The sell-off, which took prices as low as about $10,000, coincided with a rout in U.S. stocks, rekindling long-simmering discussions over whether the largest cryptocurrency was a safe haven like gold or merely another risky asset. Prices for ether (ETH), the native token of the Ethereum blockchain, slid 13%, potentially a sign of an unwind of the recent fervor in decentralized finance, or DeFi. U.S. 10-year Treasury yields fell and the dollar gained in foreign-exchange markets, indicating a flight to safety by traditional investors. 

Joe DiPasquale, CEO of the cryptocurrency-focused hedge fund BitBull Capital, told First Mover in an email that “$10,000 still stands as a strong support and has absorbed selling pressure fairly well in the last two instances.” John Kramer, a trader at crypto over-the-counter firm GSR, told CoinDesk’s Daniel Cawrey that “many investors will see this as an opportunity to buy the dip.”

Market Moves

After years of debating whether tether (USDT) is fully backed 1-for-1 with U.S. dollars, the  stablecoin’s critics and defenders alike can now put their money where their mouths are.

Opium, a derivatives exchange, has introduced credit default swaps (CDS) for USDT. The product, launched Thursday, insures the buyer in the event of default by Tether, the issuer of the world’s largest stablecoin and fifth-largest cryptocurrency overall

As Opium’s blog points out, USDT is the lifeblood of the borderless cryptocurrency marketplace. The oldest stablecoin, USDT remains the largest such cryptocurrency by market cap and a top-five coin overall with $13.8 billion  in issuance. Traders often use it to move money in and out of exchanges quickly to take advantage of arbitrage opportunities.

“You can use it to protect yourself against (or speculate on) a systemic failure of the most widely used stablecoin in crypto,” Opium said of the new CDS contract, in a blog post to be published Thursday.

fm-sept-4-tether-chart
Chart showing USDT’s fast growing in 2020 and dominance among dollar-backed stablecoins.
Source: Coin Metrics

There are nagging questions about the issuer’s creditworthiness. The firm behind USDT is under investigation by the New York Attorney General’s office for alleged misappropriation of funds, and Tether revealed in April 2019 that only 74% of USDT was backed by “cash and cash equivalents.” 

Paolo Ardoino, chief technology officer at Tether, said through a spokesman: “Tether is solvent. Therefore, this solution is not really interesting to us or our community.” 

Read More: New Crypto Derivatives Let You Bet on (or Against) Tether’s Solvency

The solution might be interesting to traders who just want a little extra assurance.  

-William Foxley

Bitcoin Watch

skew_btc_25d_skew-6-2
Bitcoin’s put-call skew.
Source: Skew.com

Bitcoin’s options market has flipped bearish with the cryptocurrency registering its first double-digit decline in six months on Wednesday. Prices fell to a low of $10,006 before recovering to $10,500.

  • The one- and three-month put-call skews that measure the cost of puts relative to that of calls have surged above zero, a sign of investors adding bets (put options) to position for a more profound price drop. 
  • Joel Kruger, a currency strategist at LMAX Group and macro trader at MarketPunks, who had warned earlier this week when prices were closer to $12,000 that a correction might be looming, also sees scope for additional price declines on the back of risk aversion in equity markets. 
  • “The next key support comes in the form of the June low at around $8,900,” Kruger told CoinDesk in a Telegram chat and added further that bitcoin would eventually realize its potential as store of value.

Read More: V-Shaped Recovery From Bitcoin’s Biggest Drop Since March Unlikely, Say Analysts

– Omkar Godbole

Token Watch

Ether (ETH): Vitalik Buterin, co-founder of Ethereum, released an ” improvement proposal” to address soaring transaction fee rates as network congestion rises. 

Bitcoin (BTC): “Supercycle” thesis from Stack Funds predicts breach of $14K in next 100 days.

Tether (USDT), USD Coin (USDC): Stablecoins are the closest thing to digital cash that exists today, Castle Island’s Nik Carter writes for CoinDesk. 

Chainlink (LINK), Tezos (XTZ): BitMEX plans futures on LINK and XTZ, the first new coins to appear on the exchange in over two years.

Gnosis (GNO): Investment firm Arca calls for tender offer of prediction market’s tokens as market value trades at 0.3% of project’s treasury balance, the Block reported. 

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CoinDesk Research’s latest Monthly Review features 15 charts that highlight bitcoin’s performance relative to macro assets, its relationship to the dollar and other fiat currencies, and Ethereum’s growing congestion problem. Download the report.

What’s Hot

Failure to coordinate stablecoin rules internationally may bring “confusion and regulatory fragmentation,” Bank of England governor says. (CoinDesk)

Binance, world’s biggest centralized crypto exchange, noses into DeFi with launch of automated market maker pools. (Binance)

DeFi users are “mostly crypto nerds or early adopters” with their own jargon and maximalist dogma, says William Mougayar (CoinDesk)

Vitalik Buterin and Ethereum’s developers are shifting focus back to “Eth 1” to tackle congestion that caused fees to spike over 600% in a month (CoinDesk)

The SEC will have a tough task regulating DeFi, says Hester Peirce (Decrypt)

Analogs

The latest on the economy and traditional finance

U.S. jobs increased by 1.4M in August, in line with expectations, though slowing from July’s pace, report shows. Unemployment rate drops to 8.4% from 10%, report shows.

U.S. presidential election in November could bring “incredible fireworks” in market volatility based on VIX futures premiums. (Bloomberg) 

HSBC strategist says China to let yuan strengthen versus dollar in bid to “promote yuan internationalization.” (Reuters) 

Wall Street investment banks are cashing in on fees from arranging emergency loans to companies as Federal Reserve props up credit markets. (WSJ)

Easy central bank monetary policies in Europe pushes interbank lending rates down further into record (negative) territory. (WSJ)

Tweet of the Day

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Disclosure

The leader in blockchain news, CoinDesk is a media outlet that strives for the highest journalistic standards and abides by a strict set of editorial policies. CoinDesk is an independent operating subsidiary of Digital Currency Group, which invests in cryptocurrencies and blockchain startups.

Source: https://www.coindesk.com/buying-bitcoins-dip-tether-jobs-report

Blockchain

Who pulls the trigger on Bitcoin’s volatility?

Republished by Plato

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The volatility that drove Bitcoin’s price below $31,000 has now brought it up to the $33,000-level, based on CoinMarketCap. In previous market cycles, the volatility has shown a cyclical nature. However, in the current market cycle, it depends on the momentum and activity of institutional investors.

Back in 2018, there was institutional participation. Alas, the momentum was high for only a short period of time and the short-term volatility was what led to a massive drop on the charts. More than the price, the perceived value of Bitcoin has had an impact on the current volatility. Since there was accumulation at the $34,000-level by most institutions and whales, the price was soon heading towards the $34,000-level on the charts again.

Who pulls the trigger on Bitcoin volatility?

Bitcoin Volatility || Source: Woobull Charts

Another metric, the active supply that increased significantly over the past 2 months, more so in 2021, may have led to increased volatility and the price drop on spot exchanges. A high active supply can be equated to increasing sell pressure. The price fluctuates in response to the cascading sell-off, and this is what happened during the “double-spend” sell-off on Thursday.

As demand for Bitcoin on spot exchanges is revived, sell-pressure is expected to ease off. In the current market cycle, institutional investors are pulling the trigger on volatility, even though the sharp sell-off on Thursday raised more questions on the sustainability of the price rally.

However, post the aforementioned price decline, Bitcoin made a comeback with 24-hour gains of over 5%, with the same trading at $33,460, based on CoinMarketCap, at press time.

In light of the inflows of investments into institutions’ Bitcoin products, it is likely that there may be an increase in demand and consequently, in volatility, leading to a short-term top in Bitcoin’s price.

Who pulls the trigger on Bitcoin volatility?

Grayscale’s Bitcoin Holdings || Source: bybt

When the price dropped, Grayscale added over 4% new Bitcoins to its holdings. Despite the significant drop in prices, institutions are not seen liquidating their holdings and if they continue to HODL, the price may continue on its onward trend. The immediate challenge is that of active supply on exchanges and that may drop once OI on derivatives exchanges increases to the level before the drop. This may occur post the Bitcoin Options expiry at the end of January. An increase in trade volume and volatility by institutions may lead the way.

Source: https://ambcrypto.com/who-pulls-the-trigger-on-bitcoin-volatility

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Blockchain

The race is on yet again for crypto ETFs as Valkyrie files registration

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In a move that may give seasoned investors flashbacks to 2018, Valkyrie Digital Assets is the latest asset management firm to file a registration with the SEC to form a Bitcoin ETF — a bid that joins a crowded field of prospective fund managers looking to capitalize on renewed retail interest in cryptocurrencies. 

Filed on Friday, the Texas-based family investment fund proposed listing the Valkyrie Bitcoin Trust on the New York Stock Exchange. The application did not include a possible trading ticker.

If history is any indication, however, the filing’s chances of leading to a tradable fund are slim. During the last Bitcoin bull run, multiple firms attempted to throw their hat into the ring as at least nine entities filed proposals for a Bitcoin ETF with the SEC, including ETF giants VanEck and Direxion, as well as Gemini, the crypto services firm formed by Cameron and Tyler Winklevoss.

In a previous interview with Cointelegraph, Kryptoin CEO Donnie Kim, whose firm filed for an ETF in October of 2019, says that the SEC has long been hesitant to move forward with proposals.

“At this moment in time the commission is listening and learning about this new asset class and they are in a holding pattern, partly to understand the consequences of the existing products on the market and partly to look for further guidance under the current political landscape,” said Kim.

Despite the commission’s historical reticence, as retail interest in cryptocurrency booms fund managers are once again clamoring to be the first to offer an ETF product.

On Thursday, Jan. 21 gold ETF giant VanEck — which was the first company to ever file for a Bitcoin fund — filed to form a Digital Assets ETF, which would track the performance of the Global Digital Assets Equity Index made up of crypto service companies.

While American ETFs have been hard to come by, other exchange-traded products are flourishing. Options for traders include a Swiss Bitcoin ETP, a bevvy of Grayscale products that may be expanding to include Chainlink in the coming months, and an Ethereum ETF in Canada that proved so popular trading had to be halted in its debut.

Source: https://cointelegraph.com/news/the-race-is-on-yet-again-for-crypto-etfs-as-valkyrie-files-registration

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Blockchain

Tezos, Verge, Nano Price Analysis: 23 January

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After Bitcoin clawed back to touch the $32,000-level from the sellers, the rest of the altcoin market took heart and posted gains of their own on the charts. Similarly, altcoins such as Tezos, Verge, and Nano were in the green at press time and projected more upside over the coming sessions.

Tezos [XTZ]

Source: XTZ/USD, TradingView

Taking cues from the broader market, Tezos skyrocketed by nearly 15% on the charts and traded close to $3.20, at press time. Gains over the past 24 hours pushed XTZ’s market cap north of the $2.5 billion mark as it climbed on the rankings to become the 16th-largest cryptocurrency by market cap.

A look at XTZ’s 4-hr chart showed that the price broke above its 20-SMA (red) and 50-SMA (black) and targeted the upper ceiling at $3.45. The next few sessions could be crucial for XTZ, as an extended bull run could push the price all the way to its August 2020 levels.

The Awesome Oscillator highlighted the strong shift of momentum towards the bullish side, as depicted by the green bars on the histogram.

The bullish momentum could perhaps be attributed to Tezos’ recent announcement related to its Homebase Project, a project that allows users to create DAOs on Tezos based on a new smart contracts framework.

On the other hand, the Stochastic RSI traded in the overbought zone and looked primed for a reversal. This indicated that further efforts by buyers would be required to maintain the price above its press time support.

Verge [XVG]

Source: XVG/USD, TradingView

At the time of writing, Verge traded at $0.012, up by 7.5% in the past 24 hours. The price broke above its previous resistance and headed towards the strong resistance line of $0.014. A northbound breakout from $0.014 could confirm an uptrend for XVG, but cues from the broader market would be needed to maintain such bullishness.

The Relative Strength Index was flat and rested in the neutral territory. If the index moves lower over the next few sessions, the price could move towards its latest support line once again.

On the flip side, the MACD witnessed a bullish crossover, signaling the onset of a potential bull run.

NANO

Source: NANO/USD, TradingView

NANO found support at $3.15 as the price seemed bullish over the last 24 hours. However, the bulls were unable to push the price above the resistance at $3.44 as the price settled close to its support level. Going forward, the price could consolidate between the aforementioned channels and an influx of additional buyers would be required for a northbound breakout over the coming days.

The Chaikin Money Flow highlighted the short-term bullishness for the cryptocurrency as the index looked to move above zero, a sign that capital was flowing into NANO.

The Parabolic SAR was also bullish as the dotted markers were observed below the candlesticks.

Source: https://eng.ambcrypto.com/tezos-verge-nano-price-analysis-23-january

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