Liquidity Crisis: A Post Mortem of Yesterday’s Events
- $4B and $3.6B of BTC and ETH open interest were respectively wiped out yesterday. BTC’s open interest ran up from its local low of $10B in Jul. 2021 to over $18B a few days ago. An 8B rise in OI, and half of that was wiped out yesterday. If you look at the absolute open interest levels, it’s quite clear we were growing too fast. But looking at open interest growth relative to market cap helps us discern if leveraged traders were getting ahead of themselves and piling into positions before BTC had the chance to move.
- Liquidations are a great way to sell BTC at an exorbitant premium or buy it for far below its fair value. Yesterday was a case of longs get liquidated, implying whales buying cheap BTC from leverage traders who got in over their heads. Often times, larger players engineer liquidations by forcing price down to a certain level and allowing to leveraged positions to cascade. The reason for doing so, as mentioned above, is the ability to generate a large amount of liquidity to purchase BTC below fair value.
- More often than not, events like yesterday are completely explained by a sudden collapse in liquidity. Looking at the bid-ask spread for a $5M BTC futures buy, the spread was never above half a percent, until suddenly it jumps up to 4% on Deribit and around 1.5-2% on other exchanges for a brief period yesterday.
- Realized volatility is now on the rise and it’s very possible the market goes through a period of ranged price action. Short-term vols would also rise if the market posed a heroic comeback to highs seen earlier this month. Either way, it’s starting to look like we could be in for a period of high volatility — so prepare accordingly.
Bitcoin-Hungry Ukraine Moves to Legalize Cryptocurrency
- The Ministry of Digital Transformation drafted legislation that would legalize cryptocurrency within Ukraine.
- The Ukrainian Parliament today voted to make cryptocurrency legal within the country and allow crypto exchanges to officially operate in the country..
- Cryptocurrencies, including Bitcoin, have heretofore been in a legal gray area in Ukraine, the seventh-most-populous country in Europe. Nonetheless, blockchain data firm Chainalysis ranked Ukrainians the top adopters of cryptocurrency in the world in September 2020.
Delta Exchange launches options trading for Solana and Cardano
- Crypto derivatives platform Delta Exchange announced Wednesday that it has launched futures trading on Solana (SOL) and Cardano (ADA), giving investors a new access point to the leading altcoins.
- The initial rollout of SOL and ADA call and put options will have daily maturities, with weekly and monthly maturities to be made available at a later date.
$100,000 Worth of Ethereum NFTs Destroyed by OpenSea Bug: ETH Dev
- A bug in the OpenSea marketplace code reportedly resulted in at least 42 NFT collectibles being accidentally burned, or destroyed.
- The issue was reportedly tied to the use of ENS names, which are like easy-to-read domains that point to Ethereum wallets.
Roxe hires ex-IMF economist to lead Bitcoin-backed CBDC project
- Global payment network Roxe has recruited a seasoned economist from the International Monetary Fund, or IMF, to help lead its central bank digital currency project backed by Bitcoin’s (BTC) hashrate.
- Andreas Jobst, whose career spans the IMF, World Bank and Bermuda Monetary Authority, has been appointed as Roxe’s chief currency economist, the company announced Wednesday. Jobst will be tasked with helping to scale Roxe’s CBDC Plus Program and payment network, which allows countries to issue new primary or secondary fiat currencies backed by the computational power of Bitcoin.
Eden, priority transaction network for Ethereum, raises $17.4 million in token sale
- Eden Network, a priority transaction network for Ethereum that provides protection against miner extractable value (MEV) and arbitrary transaction reordering, has raised $17.4 million in a seed funding round.
- The round was secured via selling EDEN tokens, Caleb Sheridan, a core developer of Eden Network, told The Block. Multicoin Capital led the round, with Jump Capital, Alameda Research, Wintermute, GSR, and DeFiance Capital also participating.
- Angel investors, including Andre Cronje, founder of Yearn Finance, and Joshua Lim, head of derivatives at Genesis Capital, also backed the round.
