Bitcoin futures data shows retail is cautious now despite long-term optimism
Bitcoin Outperforms Traditional Assets While DeFi Continues to Grow
Market Watch Weekly is a review of crypto markets and developments each week.
With three trading days left until this month's close, financial markets are now increasingly driven by global central bank policy rather than by fundamentals. The upside risk of a stronger dollar is putting pressure on the prices of many assets, resulting in the S&P 500 Index recording its fourth straight week of declines. Meanwhile, the price of gold also plummeted from last week's opening price of $1,950 to $1,860. In comparison, however, Bitcoin (BTC) fell just 0.61% in the last week and is back above $10,800 after a rally over the weekend, as per the OKEx BTC spot price.
Overall, the cryptocurrency market capitalization rose for four straight days after the Sept. 23 sell-off, returning to levels around $350 billion, as per CoinGecko's data.
Polkdot (DOT) lost another 7% last week, falling from $4.70 to as low as $3.90 before bouncing back to $4.30. The price of Ether (ETH) plunged due to a mid-week sell-off in the decentralized finance sector, and it did not rebound as strongly as Bitcoin, falling 4.46% for the week. Notably, the one-month realized volatility of Ether has now increased sharply to 112%, while the one-month implied volatility has fallen to 61%, which speaks to the price fluctuations on display in the markets.
CME also released the latest (as of Sept. 22) Bitcoin futures position data on Sept. 26. Bitcoin prices took a big hit during this reporting period, and open interest dropped from an all-time high of 9,383 to 8,426, in which the long positions held by asset manager accounts fell sharply from 717 to 285. This shows that the short-term price correction significantly impacted market optimism.
According to the report, leveraged fund accounts saw their long positions fall from 2,819 to 2,280, while short positions dropped from 5,224 to 4,480. Meanwhile, in terms of other reportable accounts, long positions fell from 1,653 to 1,580, and short positions decreased from 2,766 to 2,062. The large reduction in the shorts was likely triggered by profit-taking activities.
Overall, we can see that the sharp price correction in the last reporting period triggered risk-control actions by institutional investors, and a large number of long positions were closed. We will continue to watch how institutions respond to the weekend's price rally in the next reporting period.
Moreover, data from Bybt shows Grayscale Bitcoin Trust (GBTC) bought 17,100 BTC in the last seven days, increasing its aggregate Bitcoin position to 449,900 BTC. This accumulation does explain, to some extent, why Bitcoin price didn't dip further despite strong bearish market expectations last week.
The DeFi sector also cooled off last week after the Uniswap (UNI) boom, and while it rebounded after the mid-week sell-off, many tokens lost more than 10% of their value. UNI was down 9.92%, while its forked project, SushiSwap (SUSHI), tumbled 18.34%. The worst performers, however, were the TRON (TRX) ecosystem tokens, with Jackpool.finance (JFI) and SUN down 32.22% and 31.60%, respectively. This goes to show that the underlying value of TRON isn't as reliable as Ethereum.
Synthetix (SNX) surged 27.44% last week amid the adoption of Layer-2 scaling solutions. The protocol is scheduled for another implementation of a proposal called Deneb on Sept. 29. Meanwhile, yearn.finance (YFII) was up 10.85%.
The TVL of all DeFi protocols reached another all-time high of $14.74 billion today, indicating that the DeFi boom continues despite the mid-week sell-off.
Looking ahead this week
Major events of this week include the first U.S. presidential election debate on Tuesday and a vote in the House of Representatives on the Democratic Party's proposal for a second round of pandemic stimulus before the House goes into recess on Friday. For global assets, there is still significant uncertainty about both technical patterns and fundamentals.
In the crypto space, the "Mint Rush" event is underway for Flamingo, a new DeFi protocol being developed by the Neo Global Development (NGD) team for the Neo blockchain. OKEx users can participate in the event by staking their OKB via Jumpstart Mining to earn FLM.
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