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!
Whenever I have a strong feeling or theory about a potential scenario, I try to find evidence that the opposite could actually take place.
Yesterday, I told you about the uneasy feeling I was having about a possible trend reversal that could be around the corner. After several discussions with other traders and money managers, I decided to revisit a topic I've had in mind for a few weeks now, but never managed to follow up on: sell side liquidity crisis.
When we followed the rally on October 27th, I was watching the BTC$ heatmaps. Most exchanges had empty order books above 14k. Only Bitfinex had some "last coins standing" on their exchange. I thought to myself that there probably was a reason for this...
On-Chain Analysis
Yesterday night, I put together a quick on-chain analysis of "total exchange balances" and "net transfer volume from/to exchanges":
Click on the images to see the details:
We reached the ATH of exchange balances in February 2020 (right before the BitMEX liquidation debacle). Since then, we have a steady decrease of exchange balances across the major exchanges (not only spot but also derivative). Some of it is probably on account of improved infrastructure and new service providers that are making it obsolete to keep large amounts of funds on the exchange.
But, the speed and widespread decrease across all major exchanges makes me think. Also, in combination with the empty order books on pretty much the same exchanges I did the on-chain analysis on definitely shows some correlation.
So, with derivatives in rather neutral territory (term premium healthy in contango; perpetual funding around 0%), and not much selling firepower on exchanges, a large price drop should be bought up quickly...
Then again, if my uneasy feeling is wrong and we push towards 14k again and see no larger coin inflows to spot exchanges... Who can stop BTC$ from reaching a new ATH?
