Market Wrap: Bitcoin Near $9,600 As Gold Hits High, Uniswap Liquidity Over $100m
As bitcoin closes in on $9,600, gold surpasses $1,900 and DeFi liquidity steadily grows.
Bitcoin (BTC) trading around $9,592 as of 20:00 UTC (4 p.M. EDT). Slipping 0.03% over the previous 24 hours.
Bitcoin’s 24-hour range: $9,475-$9,601
BTC above 10-day and 50-day moving averages, a bullish signal for market technicians.
Bitcoin trading on Coinbase since July 22.Source: TradingView
Gold is on the brink of an all-time high, up 0.80% Friday, at $1,901 per ounce. Sweden-based over-the-counter bitcoin trader Henrik Kugelberg sees gold nearing its all-time high as a positive for the world’s oldest cryptocurrency. “Bitcoin will pass $20,000 in a surge. I suspect a new normal discounted bitcoin price will be around $15,000 in 2021, like it has been around $9,000 in 2020.”
Bullish bitcoin traders love to talk about gold, since they see similarities between the yellow metal and the cryptocurrency. “I think we are just a couple weeks or months out from a strong continuation on bitcoin as gold reaches $1,900 today,” said William Purdy, a New York-based equity options and crypto trader.
Indeed, gold’s jump this week occurred as bitcoin eked gains and the S&P 500 U.S. Stock index performance was back to being flat for 2020.
Bitcoin (orange), gold (yellow) and S&P 500 (blue).Source: TradingView
Kugelberg is pessimistic on stocks for the balance of 2020. “I believe there will be at least a 30% drop in stocks on average at the latest in Q4. So where to go? To real assets with lasting value,” said Kugelberg. He mentioned gold, bitcoin and property as “real assets”.
“Bitcoin bulls have momentum on their side for now,” said Alessandro Andreotti, an Italy-based over-the-counter bitcoin trader. “The crypto market is likely to be heading towards a bullish continuation from here.”
Within crypto, ether is doing even better than bitcoin this week. ETH/BTC, that is, ether priced in bitcoin, has seen a jump in the past few days.
ETH/BTC pair on Coinbase since July 22.Source: TradingView
Ether prices have increased almost 12% against bitcoin, said Aaron Suduiko, a research analyst for cryptocurrency exchange OKCoin. “It will be interesting to see whether any trends develop in the event that more DeFi projects continue to grow.”
Uniswap crosses $100 million in liquidity
The second-largest cryptocurrency by market capitalization, ether (ETH), was up Friday trading around $283 and climbing 3.6% in 24 hours as of 20:00 UTC (4:00 p.M. EDT).
“The recent gains in ether are due to the on-going thematic chatter on social media around new DeFi projects that have been showing considerable strength,” said Purdy, the equity options and crypto trader. Indeed, Uniswap, a decentralized exchange (DEX), for trading various DeFi project tokens, surpassed $100 million in liquidity Friday.
All-time liquidity of DEX Uniswap. Source: Uniswap.Info
Instead of order books, Uniswap uses liquidity pools that investors can “stake” cryptocurrency into and profit or “yield” from trading fees on the DEX. This liquidity is what enables Uniswap traders to quickly exchange between ether and various Ethereum-based ERC-20 tokens, with total daily volume reaching $71 million per day, according to data aggregator Dune Analytics.
Other markets
Digital assets on the CoinDesk 20 are mostly red Friday. Notable winners as of 20:00 UTC (4:00 p.M. EDT):
Notable losers as of 20:00 UTC (4:00 p.M. EDT):
Oil is up 0.40%. Price per barrel of West Texas Intermediate crude: $41.21
U.S. Treasury bonds were mixed Friday. Yields, which move in the opposite direction as price, were down most on the 2-year, in the red 4.3%.
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.
After yet another day of heated debate in Congress, Americans are awaiting confirmation of their second stimulus checks by Monday.
According to reports, both Democrat and Republican parties are now in agreement - the new relief package will include another one-time stimulus check of $1,200 per person (and $500 per dependent) for all individuals earning $75,000 or less. There have been other accounts that indicate the income requirement could be as low as $40,000, however.
As unemployment remains at over 11% and many of the states are considering rolling back their reopening plans, most of us are looking forward to this welcome relief. Although many recipients will rush to deposit their checks into savings for a rainy day, here are the reasons why you should consider investing your $1,200 into Bitcoin instead.
Coinbase: Bitcoin USD price chart. Time Stamp - 11:25PM EST, July 23, 2020.
Coinbase
Inflation
The Federal Reserve’s balance sheet has increased by approximately $3 trillion since the start of the pandemic in March, or 14.3% of the 2019 GDP. We are likely to see an increase of $2 to $5 trillion more before the end of 2020. Although the U.S. Has the privileged position of supplying the ‘world’s reserve currency’ making the U.S. Dollar in high demand during the pandemic, inflation is likely to catch up in the next 2-3 years, making your $1200 world less than before. Bitcoin, however, is a non-inflationary asset, with a finite amount of 21 million units, that has increased in price and adoption since its creation in 2009.
Hedge Against Wall Street
Wall Street is experiencing an unprecedented and unexpected boom during a crisis, decoupling from the Main Street economy. The value of the American stock market today is approximately $35 trillion, while the U.S. GDP has decreased to below $21 trillion. Many argue that this is the perfect recipe for a crash. Bitcoin provides a hedge against traditional markets as an uncorrelated asset.
Price Appreciation
Born on January 3rd, 2009, Bitcoin has steadily appreciated in price. An investment in bitcoin five years ago, yielded a 3300%+ return. While investing in the beginning of 2020, would yield a 38% return to date. Although Bitcoin can be volatile and is considered a risky investment (do your own research!), it has outperformed many of the traditional assets in the long term.
Investing at the right time is important. According to a recent report from CoinTelegraph, while short-term bitcoin holders once experienced 10 – 19% price appreciation before selling, the current profit and loss ratio is –1%. While long-term bitcoin holders still have a profit and loss ratio of 5%, that’s a far cry from historical profit margin of 15%.
Institutional Investors Are Doing It
Once a fringe asset no one really understood, some of the biggest hedge funds and family offices globally are now investing in bitcoin. Established university endowments like Harvard, and billionaire hedge fund manager Paul Tudor Jones, have are buying bitcoin to diversify their portfolios.
“At the end of the day, the best profit maximizing strategy is to own the fastest horse. Just own the best performer and not get wed to an intellectual side that might leave you weeping the performance dust because you thought you were smarter than the market. If I am forced to forecast, my best is it will Bitcoin.”
- Paul Tudor Jones, Tudor Investment Corporation (Source: Investment Outlook - May 2020.)
Be Your Own Bank
Bank corruption has become a concern yet again as a result of the currency crisis in Lebanon.
Although more prevalent in developing countries, the financial crisis of 2008 has taught us that American financial institutions are not immune to failure. Holding some of your wealth in bitcoin allows you to maintain custody over your own funds, and makes it easy to travel with your wealth across borders.
In many countries, wealth can be confiscated by banks and governments with little to no warning. With bitcoin, all you need is your 12-word seed phrase to access your wallet. As long as you don’t share your phrase or your digital keys with anyone, your bitcoin can’t be taken away from you.
Bitcoin is Digital Gold
Many have compared bitcoin to gold, only digital, finite and easy to transfer. Gold has historically provided a stable store of value, maintaining its purchasing power over hundreds of years. But gold is difficult to buy and store. Bitcoin can also be used as a universal store of value, and can be accessed anywhere with a phone and a Wi-Fi connection.
Bitcoin Is Becoming Easier to Use
One of the criticisms of bitcoin is that it is not practical to use for smaller transactions due to high fees. This shouldn’t be a concern if you view bitcoin as a long-term investment. If, however, you want to spend your bitcoin, there are new technologies such as the Lightning Network which allow you to do so. Check out this surf town in El Salvador that built an entire economy on Bitcoin.
Bitcoin is also easy to send to others. Have family abroad? Companies like Western Union can take 5-10% of the international transfer, while the recipient may have to travel out of the way to receive the funds. Bitcoin allows you to send funds easy and quickly from your phone to theirs.
Proponents argue that bitcoin is the next generation of money and is the foundation of our future economy. If that prediction is true,
why not get in on the ground floor?
Disclaimer: This article is not meant to serve as investment advice and is for informational purposes only. Please do your own research before making any investments in the cryptocurrency space.
There are few indicators capable of accurately detecting professional traders’ sentiment on Bitcoin (BTC). To ascertain whether or not market participants are positioned in a bullish or bearish manner, analysts usually rely on technical analysis and derivatives markets, although those usually mix retail flow.
More recently some exchanges created internal metrics exclusively measuring top traders positions. Looking at exchange-provided data highlighting traders’ long-to-short positioning, one can see that the indicator currently shows a 30-day high on the long/short positions at Binance.
Despite launching its futures platform only ten months ago, Binance is a top-5 contender with $430 million BTC open interest. A similar long/short ratio has been observed at Huobi futures.
Bitcoin futures and options markets corroborate such a favourable thesis by displaying a positive contango and a negative skew.
By combining three indicators (top traders positions, options skew, and futures contango) there is indisputable evidence that professional traders are bullish in the short-term.
Top traders long-to-short ratio
The Binance net long/short notional exposure of its top BTC/USDT futures top traders typically favors longs but the indicator now stands at its highest level.
Binance top traders long/short ratio. Source:
Binance
As per the above chart, top accounts net exposure is currently 12% larger than shorts. This is a 6% increase from three days ago.
Huobi, also a top-5 BTC futures exchange, depicts a similar trend and currently shows $640 million open interest. What is notable is that Huobi’s indicator shows a more significant uptick as net shorts previously dominated ratio.
Huobi top traders long/short ratio.
Source: Bybt.Com
Huobi’s top traders long-to-short ratio had been below 1.00 until July 21, favoring net shorts. On that day the tide changed and currently the ratio stands at 1.14 which is the highest it's been in 30 days.
Bitcoin futures contango has held steady
The premium for Bitcoin futures 1-month contracts, known as basis, has sustained a healthy positive level.
Bitcoin futures 1-month basis.
Source: Skew
1-month BTC futures at OKEx and Kraken have been holding a 7% or more premium to current spot level, indicating contango. This indicator improved from a neutral 2% rate earlier this month.
Bitcoin options have also flipped bullish
Skew is a useful metric for gauging professional traders’ sentiment through options pricing. By comparing the implied volatility of put and call options, one can assert whether it is more costly to buy call (bullish) or put (bearish) options.
Bitcoin 1-month options 25% delta skew. Source: Skew
The chart above shows that the 1-month options 25% delta skew has just flipped to the negative side. A negative indicator means implied volatility for calls is more significant than puts, signaling a higher insurance cost for a favorable price move.
Although this is not necessarily a bullish indicator by itself (as other factors might influence options pricing), this trend change is unarguably an indicator of professional traders' positive sentiment.
All three indicators are bullishly aligned
Currently the top traders net positions, options skew, and futures contango signify short-term bullish sentiment from professional traders.
Adding to this, as all the indicators turned bullish, Bitcoin price showed strength by breaking the $9,400 resistance on July 22.
Large and savvy traders seem to be betting that the $10,000 level could be tested earlier than expected. With altcoins rallying, there's even more chance of continued uptrend.
The views and opinions expressed here are solely those of the author and do not necessarily reflect the views of Cointelegraph. Every investment and trading move involves risk. You should conduct your own research when making a decision.
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