Market Wrap: Bitcoin Rises After Volatile Week

Cryptocurrencies traded higher on Friday after a volatile week. Bitcoin was holding above the $ 33,000 support at press time and is roughly unchanged for the week. Technical charts suggest buyers above $ 30,000 will remain active, although the upward momentum slows towards the weekend.

“The possibility of price action falling in the mid-range of $ 20,000 is alive, but traders looking to retest previous all-time highs will likely be disappointed,” wrote Sean Rooney, chief research officer at crypto asset manager Valkyrie Investments, in an email to CoinDesk.

Current prices

  • S&P 500: 4369.55, + 1.13%
  • Gold: 1808.4 $, + 0.31%
  • The 10-year government bond yield closed at 1.358% compared to 1.297% on Thursday

“The fall in prices in May was dramatic while the accumulation of bitcoins sold in that downturn in longer-term holders took place during eight weeks of sideways price movements,” wrote Rooney. “This is a good starting position for an end-of-summer rally that goes into the fourth quarter.”

Bitcoin shorts pile up

More than 5,000 bitcoin shorts were added to the Bitfinex exchange on Thursday. “When shorts close their positions, they do so by going long to offset their short exposure,” Delphi tweeted Digital.

The recent build-up of shorts is still below its June high, suggesting that pessimism may continue as Bitcoin remains in a medium-term downtrend that began in April.

Finally, extreme pessimism could result in a short squeeze as buyers react to oversold conditions and fuel a price rally.

The chart shows Bitcoin shorts with price.

Source: Delphi Digital

Ruffer sold Bitcoin on signs of froth

Ruffer Investments, a UK investment manager, posted a profit of $ 1.1 billion in five months on a Bitcoin investment. “So what has changed? The price, ”wrote Duncan MacInnes, Investment Director at Ruffer, in a blog post on Friday.

“Last November, we started our bitcoin exposure,” MacInnes wrote. “We viewed it as an option for an emerging store of value with a heavily skewed and attractive risk-reward profile.”

However, retail speculation and peak liquidity pointed to foamy market conditions earlier this year, prompting Ruffer to sell all of its Bitcoin stake in April.

The diagram shows the Bitcoin price with important events.

Source: Ruffer Investments

Bitcoin vs. commodities

In the past few weeks, Bitcoin’s correlation with the S&P 500 has started to rise, while its correlation with commodities continues to decline. This divergence could make Bitcoin attractive to investors looking to diversify their exposure to stocks, commodities, and cryptocurrencies.

The chart shows the 90-day correlations between Bitcoin, commodities and the S&P 500.

Source: Koyfin

Mike McGlone, commodities strategist at Bloomberg Intelligence, expects Bitcoin to outperform Brent crude this year.

“Bitcoin’s relative discount to the premium in crude oil could show that technical and fundamentals are aimed at a continuation of the upward trend in the ratio,” McGlone wrote in a Thursday report.

“Similar to similar conditions in late 2016, we see the bitcoin-crude oil ratio well positioned to resume its uptrend, especially if a new low in Bitcoin relative volatility in late 2020 is a benchmark.”

The chart shows the Bitcoin price and volatility in relation to Brent crude.

Source: Mike McGlone, Bloomberg Intelligence

Traders sell “choke” while Bitcoin goes silent

Although Bitcoin has fallen into a coma in a narrow range of over $ 30,000, less than half of its all-time high two months ago, some options traders, as always, are busy pursuing relatively risky strategies to get off the sustained Benefit from price consolidation of the cryptocurrency.

One of these strategies is to put “short strangles,” essentially a bet that Bitcoin’s price won’t break out anytime soon.

“Our favorite trades are still short BTC strangles in the $ 30,000 to $ 40,000 range,” said Singapore-based QCP Capital in a Telegram post on June 30th. “With psychological resistance at $ 40,000 and strong support at $ 30,000, there is a good chance of trading in this $ 10,000 area in the near future, which would likely result in a collapse in implied volatility.

Short strangles are the selling of out-of-the-money (OTM) call and put options with the same expiration dates. OTM calls have an exercise price that is above the current level of Bitcoin, while OTM puts have lower strikes than the current Bitcoin price.

Potential of USD coins

USDC, the second largest stablecoin by market cap, has the potential to become “the most widely adopted iteration of the US dollar,” wrote Mati Greenspan, CEO and founder of Quantum Economics, in a note after the currency’s financier, Circle, announced his plan to go public.

“Right now there is only one that is widely available and complies with all known US regulations and that is the USD coin,” wrote Greenspan.

USDC gains more shares as the stablecoin industry grows rapidly. Meanwhile, some of the leading decentralized finance (DeFi) sites are offering higher returns for staking the largest stablecoin USDT than USDC.

“Although tether is more readily available and more liquid, the USD coin is only viewed as a more stable investment vehicle,” wrote Greenspan.

Stablecoin is experiencing explosive growth

Source: Messari

Altcoin summary

  • EOS price increase: The price of EOS rose 20.3% after its creator, Block.ones entity Bullish, announced its plan to merge with Far Peak Acquisition Corp., a special purpose vehicle for acquisitions (SPAC) on the New York Stock Exchange to go public. Bullish plans to launch a cryptocurrency exchange while the deal will value the combined company at $ 9 billion.
  • Growth in euro stablecoins: With the circulating supply of euro-linked stablecoin EURS tokens more than doubling to nearly 80 million this year, some token issuers are envisioning a future of forex markets on digital rails. However, challenges remain with funding and regulation.

Relevant news

Other markets

Most of the digital assets on CoinDesk 20 were higher on Friday.

Notable Winners as of 9:00 PM UTC (4:00 PM ET):

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