*data taken at 9:15 03/07/2020
Written by: Yves, Head of Trading at Wirex
A slow downward trend has emerged on the BTC/USD price this week, but it is still holding within the $8,500 - $10,000 range. Since the beginning of June, it is now clear that the BTC/USD price is reaching new lows week after week, with the lowest level recorded last Saturday at $8,830.
Derivatives traders have been very active these last few weeks with an open interest that remains still relatively high. Looking at the open interest of BTC options by strike as reported by skew, it is clear that there is specific demand for short term maturities above the $11,000 strike. In other words, the derivatives market considers the probability for the BTC/USD price to go above $11,000 in the coming months to be high . This is also consistent with a market that is either looking for leverage, or driven by the fear of missing out (FOMO). It is also consistent with the theory mentioned last month around the institutional “fear” of a bull run.
*BTC Options open interest by strike (kBTC) - source: analytics.skew.com
It is also interesting to point out that there is a concentration of the open interest below the $8,200 strike and around the $14,000 strike. As far as the derivative market participants are concerned, the question is not “whether” the bitcoin price will collapse or soar, but rather when . The higher leverage observed during the current lower volatility regime is like the quiet before the storm.
As we are often too caught up in the short term view of markets and events, let’s hit the pause button this time to look at the long-term trend, like any institutional with a 3-year investment horizon would. The UK’s Financial Conduct Authority (FCA), as an institutional-grade source of data, published on June 30th a thorough consumer research analysis. The report estimates that “3.86% of the general population currently own cryptocurrencies”, or “1.9 million adults in the UK population”, with “75% of consumers holding an amount below £1,000”. “ The proportion that has ever held cryptocurrencies increased from 3% to 5.35% year on year” However, “47% said they bought cryptocurrencies as a gamble”, compared to only “31% in the 2019 consumer research”. This is the cryptocurrency challenge: turning gamblers, “FOMOers”, into savers and consumers.
*TOP 5 main reasons for purchasing cryptocurrencies (more than one answer possible) - Base: all who currently own cryptocurrencies (492 people) - source FCA -
This year at least more former holders have transformed into savers. Solutions for Bitcoin and Ethereum borrowing pools have been on the rise. Among the strongest indicators this week, there is the “Bitcoin wrap” WBTC. A WBTC is a token on the Ethereum Blockchain that typically represents one BTC pledged. It is typically issued by Defi (“Decentralized Finance”) projects that let lenders pledge their BTCs (or ETHs) in a lending pool, with usually no lock-up, and the potential to earn interests on a daily basis. These interests can be substantial depending on the loans market (supply-demand). btconethereum.com reports that close to 109 million $ in WBTCs have been issued so far and Glassnode reports a soaring volume of transfers.
*Transaction count logarithmic evolution since 2019 - Data source: Glassnode
And this certainly explains the spectacular growth of the transaction count on the Ethereum blockchain (including this week) compared to the growth of transactions on the Bitcoin blockchain. However the potential value from this activity is not realised in actual market prices as the BTC/ETH price seems to gravitate since February (with large swings), around the BTC 0.023 mark.
On the retail side (Wirex), the BTC interest is positive and steady. The ratio of BTC bought versus BTC sold is at 1.30 versus 1.26 last week. The ETH interest is also steady (1.07 versus 1.09 last week) as well as the XRP interest (2.15 vs 1.99 last week). Retailers seem to be losing interest in XLM this week (0.84 versus 1.4 last week) confirming a three-weeks trend, and despite the positive XLM/BTC price movement observed since June 27th.
The above is an opinion piece and therefore should not be taken as financial advice. Please do your own research thoroughly when looking at Cryptocurrency.