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

You are reading First Mover, CoinDesk’s daily market newsletter. First Mover was put together by the CoinDesk Markets team and edited by Bradley Keoun. It starts your day with the latest mood in the crypto markets, which of course never ends and puts every wild swing in Bitcoin and more into context. We follow the money so you don’t have to. Here you can sign up.

HOLIDAY NOTE: First Mover will be released next Tuesday, September 8th. We wish our US readers a nice Labor Day.

Cost point

Bitcoin (BTC) rose to $ 10,500 in early trading and rebounded after falling 11% on Thursday, the biggest drop in a day since March.

The sell-off, which saw prices only hovering around $ 10,000, coincided with a decline in U.S. stocks and sparked long smoldering discussions about whether the largest cryptocurrency was a safe haven like gold or just another risky asset. Prices on Ether (ETH), the indigenous token of the Ethereum blockchain, fell 13%, possibly a sign that the recent passion for decentralized finance (DeFi) has subsided. Ten-year Treasury yields fell and the dollar rose in the currency markets, suggesting a flight for traditional investors to safety.

Joe DiPasquale, CEO of cryptocurrency-focused hedge fund BitBull Capital, told First Mover in an email that “$ 10,000 is still strong support and has absorbed selling pressure pretty well in the last two cases.” 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 debates about whether Tether (USDT) is fully hedged 1: 1 with US dollars, the critics and defenders of stablecoin can now put their money where they can.

Opium, a futures exchange, has introduced Credit Default Swaps (CDS) for USDT. The product, launched on Thursday, insures the buyer in the event of a failure by Tether, the issuer of the world’s largest stable coin and the fifth largest cryptocurrency overall.

As Opium’s blog points out, USDT is the lifeblood of the limitless cryptocurrency market. USDT, the oldest stable coin, is still the largest cryptocurrency of its kind by market capitalization and one of the top five coins with an issue volume of $ 13.8 billion. Traders often use it to get money in and out of exchanges quickly to take advantage of arbitrage opportunities.

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

Graph shows USDT’s rapid growth in 2020 and its dominance among dollar-backed stablecoins.

Source: Coin Metrics

There are delicate questions about the creditworthiness of the issuer. The firm behind USDT is under investigation by the New York attorney general for alleged misappropriation of funds, and Tether announced in April 2019 that only 74% of USDT was “cash and cash equivalents”.

Paolo Ardoino, Tether’s Chief Technology Officer, said through a spokesman: “Tether is solvent. Therefore this solution is not really interesting for us or our community. ”

Read more: With new crypto derivatives you can bet on (or against) the solvency of Tether

The solution could be interesting for traders who just want a little extra security.

Bitcoin Watch

Bitcoin’s put-call offset.

Source: Skew.com

Bitcoin’s options market has turned bearish as the cryptocurrency posted 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 variances, which measure the cost of puts compared to calls, have risen above zero. This is a sign that investors are adding bets (put options) to get a deeper price drop.
  • Joel Kruger, currency strategist at LMAX Group and macro trader at MarketPunks, who warned earlier this week that a correction could be imminent when prices were closer to $ 12,000, also sees scope for additional price declines due to risk aversion in the equity markets.
  • “The next major support comes in the form of the June low of around $ 8,900,” Kruger told CoinDesk in a Telegram chat, adding that Bitcoin would eventually reach its potential as a store of value.

Read more: V-shaped rebound from Bitcoin’s biggest drop since March unlikely, analysts say

Token Watch

Ether (ETH): Vitalik Buterin, co-founder of Ethereum, posted a “Suggestion for Improvement” to address rising transaction fees as the network becomes congested.

Bitcoin (BTC): The Stack Funds “Supercycle” thesis predicts a breach of $ 14,000 in the next 100 days.

Tether (USDT), USD coin (USDC): Stable coins are the closest thing to today’s digital money, writes Nik Carter of Castle Island for CoinDesk.

Chain link (LINK), Tezos (XTZ): BitMEX is planning futures on LINK and XTZ, the first new coins to appear on the exchange in over two years.

Gnosis (GNO): Investment firm Arca is calling for a takeover bid for the forecast market tokens as the market value is 0.3% of the project’s treasury balance, the block reported.

CoinDesk Research’s latest monthly report features 15 charts highlighting 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 is hot?

If the stable coin rules are not coordinated internationally, it can lead to “confusion and regulatory fragmentation,” says the Governor of the Bank of England. (CoinDesk)

Binance, the world’s largest centralized crypto exchange, joins DeFi with the introduction 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)

The developers at Vitalik Buterin and Ethereum are again focusing on “Eth 1” to combat the congestion that caused fees to rise by over 600% in a month (CoinDesk).

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

Analog

The latest on economics and traditional finance

US jobs rose 1.4 million in August, as expected, despite slowing from the pace in July, the report shows. The unemployment rate drops from 10% to 8.4%, as the report shows.

The US presidential election in November could lead to “incredible fireworks” of market volatility based on VIX futures premiums. (Bloomberg)

According to HSBC strategist, China should strengthen the yuan against the dollar in order to “promote the internationalization of the yuan”. (Reuters)

Wall Street investment banks benefit from corporate emergency loan brokerage fees when the Federal Reserve supports credit markets. (WSJ)

The simple monetary policy of the central bank in Europe is pushing interbank lending rates further into the record range (negative). (WSJ)

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