Crypto Market: Bitcoin Holds $33K After A Week of Volatility
Most cryptocurrencies traded higher on Friday after a volatile week. Bitcoin was holding above $33,000 support at press time and is roughly flat for the week. According to Technical charts buyers could remain active above $30,000, although upside momentum is starting to slow heading into the weekend.
Head of research at crypto asset manager Valkyrie Investments, Sean Rooney, wrote in an email:
“The possibility of price action dropping into the mid-$20,000 range is alive, but traders looking for a retest of previous all-time highs will likely be disappointed.”
“The May price drop was dramatic, whereas the on-chain reaccumulation of the bitcoin sold in that downturn into longer-term holders has occurred throughout eight weeks of sideways price action. This sets up well for an end-of-summer rally heading into the fourth quarter.”
Bitcoin shorts keep adding up
More than 5,000 bitcoin shorts were added on the Bitfinex exchange on Thursday.
“When shorts close their positions, they do so by going long to offset their short exposure,” read a tweet from Delphi Digital.
2/ After a massive round of shorts closed in the last week of June, shorts are once again going ham on @Bitfinex. Over 5k BTC worth of shorts were opened in just the last few hours.
When shorts close their positions, they do so by going long to offset their short exposure. pic.twitter.com/6UMdRHg9XO
The recent buildup in shorts is still below peak levels in June, which suggests pessimism could continue as bitcoin remains in an intermediate-term downtrend that began in April.
if the trend continues, extreme pessimism could lead to a short squeeze as buyers respond to oversold conditions, fueling a price rally.
Ruffer Investment sold BTC
A UK-based investment manager, Ruffer Investments, realised a $1.1 billion profit from a BTC investment in just five months. Duncan MacInnes, investment director at Ruffer, explained in a blog post on Friday:
“So, what’s changed? The price. Last November, we gained exposure to bitcoin. We viewed it as an option on an emerging store of value with a highly skewed and attractive risk/reward profile.”
Retail speculation and peak liquidity indicated frothy market conditions earlier this year, which prompted Ruffer to realise all of its bitcoin exposure in April.
Chart shows bitcoin price with key events.
Bitcoin, S&P 500 and commodities
In past few weeks, BTC’s correlation with the S&P 500 has started to rise, while the correlation with commodities continues to fall. That divergence could make bitcoin attractive for investors looking to diversify exposure across equities, commodities and cryptocurrencies.
Chart shows 90-day correlations between bitcoin, commodities and the S&P 500.
Commodity strategist at Bloomberg Intelligence, Mike McGlone, preficts bitcoin to outperform Brent crude oil this year.
McGlone wrote in a Thursday report:
“The relative discount in the bitcoin price vs. the premium in crude oil may show that technicals and fundamentals are aligned for resuming the upward trajectory in the ratio.”
“Akin to similar conditions at the end of 2016, we see the bitcoin-to-crude ratio well poised to resume its uptrend, especially if a new low in relative bitcoin volatility at the end of 2020 is a guide.”
Chart shows bitcoin price and volatility relative to Brent crude oil.
Traders sells “strangles” as bitcoin goes quiet
Bitcoin is trading sideways in a narrow range above $30,000. Less than half the all-time high reached just two months ago. Despite all this, some options traders are busier than ever, taking relatively high-risk strategies to profit from the cryptocurrency’s continued price consolidation.
One of those strategies involves putting on “short strangles,” essentially a bet that bitcoin’s price won’t break out anytime soon.
Singapore-based QCP Capital said in a Telegram post on June 30:
“Our favorite trade continues to be short BTC strangles within the $30,000 to $40,000 range. With psychological resistance at $40,000 and strong support at $30,000, there’s a good chance that BTC trades in this $10,000 range in the near future, which would likely cause implied volatility to collapse.”
Short strangles involve selling out-of-the-money (OTM) call and put options with the same expiration dates. OTM calls are ones at strike prices higher than bitcoin’s current level, while OTM puts have strikes lower than bitcoin’s going price.
USDC’s potential
USDC, the second-largest stablecoin by market cap, has the potential to become “the most widely used iteration of the U.S. dollar,” according to Mati Greenspan, CEO and founder of Quantum Economics, after the currency’s backer, Circle, announced its plan to go public.
According Greenspan, “At the moment, there is only one that is widely circulated and is compliant with all known U.S. regulations, and that’s USD coin.”
USDC is gaining more shares as the stablecoin industry grows fast. Meanwhile, some of the top decentralized finance (DeFi) sites provide higher yields for staking the largest stablecoin USDT than USDC.
“Even though tether is more readily available and more liquid, USD coin is just seen as a more stable investment vehicle,” Greenspan wrote.
Stablecoin sees explosive growth
Altcoins
EOS price hike: The price of EOS surged 20.3%, after its creator, Block.one’s unit Bullish, announced its plan to go public on the New York Stock Exchange through a merger with Far Peak Acquisition Corp., a special purpose acquisition company (SPAC). Bullish is planning to launch a cryptocurrency exchange, while the deal will value the combined company at $9 billion.
Growth in Euro Stablecoins: As the circulating supply of euro-pegged stablecoin EURS tokens more than doubled this year to nearly 80 million, some token issuers are picturing a future of foreign exchange markets on digital rails. However, challenges remain with financing and regulations.
