An overview of what is happening in the crypto markets, summarised daily by Crypto Finance AG Senior Trader Patrick Heusser in the market commentary.
Market commentary
Good Morning!
It has definitely been a crazy week!
The continued strength of bitcoin amazes me. Especially (or even because of) its market structure. So far, there has not been a short-liquidation party that caused the price to go up over a few hours only to watch it slide back down again. There has not been an event or news driven jump on the price, e.g. what we saw during last year's "China-Spike". Instead, it has been a steady grind higher with a great deal of spot buying interest across several weeks in combination with positive news and adoption developments.
Positive events for BTC
Some important news items were even overlooked by the market. E.g. we saw a bitcoin difficulty drop of over 16%, and the ETH 2.0 deposit contract went live.
On several occasions, I have pointed out that we might run into a sell-side or supply-side liquidity crisis. I think we are now in the middle of it. It is just one of the many factors that is driving the price higher. Order books are empty on exchanges, except Bitfinex, which seems to be able to reload its offered side every $1,000 higher. The difficulty drop gives miners more room to stack their bitcoins for a little longer, and the whales seem to be happy with the current price action (no coin movements from large addresses).
Negative events for BTC
But there are some events developing that might slow down the bitcoin rally. E.g. the US Feds seized the Silk Road bitcoins. They will auction them off, but this may not happen for a month. It is a sizeable amount: roughly $1 billion worth of bitcoin.
We have seen a decent amount of short liquidations over the past few days (roughly $750 million). These events also fuelled the price rally, and I believe there is not much more coming from that side. In fact, quite the opposite is now the case with perpetual funding being pretty expensive for longs, and also the term basis moving back out to more stretched levels. To me, it looks like we are running into the overheating zone. And doing that usually ends with a "nuke-correction".
However, it remains to be seen just how deep such a correction could go, especially if the spot buying continues as agressively as it has been. Our desk flow was very much skewed to the buy side of bitcoin all week.
In terms of traditional markets, I would say "Thank God It’s Friday". Time to relax over the weekend. But as you know... crypto never sleeps, So, stay safe out there, and happy trading!
