Wednesday, 15 September 2021

Market Summary

Market Summary 15 September 2021

The State of Crypto Derivatives

  • Looking at the global open interest (every exchange, every contract, every strike price), we see a concentration of capital at $50K, $60K, $80K, and $100K. This doesn’t necessarily infer bullish sentiment, as for every ape buying an out-of-the-money call, there’s a seller who believes the option will expire worthless. The same goes for the “anti-apes” buying out-of-the-money puts at $20K and $40K.
  • BTC options open interest is heavily skewed towards the Sep. 24 expiry and the Dec. 31 expiry. Both of these are quarter-end option expiries, which tend to see the most interest. Given this quarter’s options are set to expire in 10 days, higher than normal volatility (compared to the last couple of months) is to be expected.
  • Pivoting to the futures market, leveraged funds trading on CME are net short BTC per CME’s weekly Commitment of Traders report. But this doesn’t really tell us the whole story. The net open interest for these funds hit their lowest level of -30K BTC in Dec. 2020 — just before BTC embarked on it’s journey from $10K to $65K. But net open interest was never positive, peaking at -10K BTC in July.
  • The likely scenario here is that these funds are long BTC on the spot market and hedging their position by shorting futures. In doing so, they earn a basis yield from the difference between the spot price and futures price (which is almost always higher than spot). So when net OI for leveraged funds climbed between Jan. 2021 and June. 2021, the logical explanation seems to be that they were taking profit on their spot BTC and unwinding their shorts to make sure they didn’t have naked short exposure.
  • We can somewhat confirm the above thesis by looking at annualized basis for various futures expiries across exchanges. CME’s traders are institutions, and thus more prudent. Seeing a 5-10% basis opportunity is extremely attractive to them. On the flipside, most traders on Binance or FTX are trying to increase their long exposure to BTC. As a result, we see a relatively lower basis on CME, as basis extraction is the crowded trade on the exchange.


Unsuccessful attack on Ethereum managed to trick a few nodes

  • A failed attack on the Ethereum blockchain that occurred Tuesday managed to trick a few nodes but was unable to hoodwink the rest of the network.
  • According to Ethereum developer Marius Van Der Wijden, the attacker published a chain of roughly 550 blocks, which had invalid proofs of work. This means that, instead of mining the blocks correctly according to the network’s rules, the blocks were created at will and broadcast to the network.


NFT scaling startup Immutable raises $60 million in Series B funding

  • The Australian startup Immutable, creator of the NFT-focused Ethereum Layer 2 protocol Immutable X, has raised $60 million in a new funding round — bringing its total raised to $77.5 million. 
  • BITKRAFT Ventures and King River Capital co-led the round, according to a press release. Other participants included Prosus Ventures, Galaxy Interactive, Fabric Ventures, Alameda Research, AirTree Ventures, Reinventure, Apex Capital, and VaynerFund.
  • Immutable X tackles the high cost of minting NFTs on Ethereum due to high transaction fees. ETH transaction costs are around $40 per The Block’s Data Dashboard — roughly double the fees of early April when Immutable first launched Immutable X.


Bitcoin worth $2 billion moves for just $0.78

  • An unknown wallet benefited from Bitcoin’s low-fee blockchain yesterday with a transaction worth $2 billion.
  • Block data from reveals that a colossal Bitcoin (BTC) transaction worth $2 billion was processed on Monday night. Despite the enormous financial value, the unknown wallet holder only paid 0.00001713 BTC fees equivalent to $0.78. 
  • Although it is unknown what the purpose of this transfer was, or indeed which individual or entity enacted it, what has clearly been showcased is the enormous potential of financial transactions utilizing cryptocurrency and blockchain technologies.


Paxful Integrates Lightning Network for Faster, Cheaper Bitcoin Transactions

  • Paxful, a popular peer-to-peer crypto marketplace with more than seven million users worldwide, has today announced the integration of the Lightning Network protocol into its platform to allow fast and cheap Bitcoin deposits and withdrawals.


Bitcoin Energy Consumption This Year Already More Than All of 2020

  • Bitcoin’s year-to-date energy consumption has already surpassed the cryptocurrency’s total energy consumption in 2020, according to research conducted by Bloomberg. 
  • “The Bitcoin network was estimated to consume about 67 TWh [terawatt hours] of electricity in 2020, and its total consumption has already surpassed this in 2021,” Bloomberg said. “By the end of this year, it looks set to have used 91 TWh of energy—as much as Pakistan,” the report added.

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