Academy Trading Ideas Article

Bitcoin Remains Indecisive While DeFi Tokens Double Market Cap: Market Watch Weekly

2020.06.22 Robbie Liu

The past week saw volatility declining and Bitcoin’s (BTC) price staying relatively stable. The leading digital currency tested the $9,000 support level in the early hours last Monday, before a quick rebound to $9,600. Since then, BTC has consolidated in a tight range, losing a mere 0.2% on a weekly basis, and is currently trading around $9,350 as per OKEx Spot price

Last Tuesday was the first time Bitcoin’s mining difficulty increased following the recent halving. A surge of 14.95% took the difficulty to 15.78 T — the largest increase since January 2018. 

In terms of performance, Cardano (ADA) led the large-cap group for the second week in a row, gaining 3.43% weekly. Other large-cap coins primarily underperformed Bitcoin, with Ethereum (ETH) the second-largest digital currency, finishing the week with a 1.27% loss while BitcoinSV (BSV) dropped 4.26% in the same period.

altcoins performance weekly
Weekly returns of major cryptocurrencies 6/15 – 6/21. Source: Tradingview

Small-cap tokens saw bigger gains over the week. Cloud storage projects, such as Siacoin (SC) and Storj (STORJ) pumped on Wednesday, benefiting from the news about the launch of Filecoin’s main network by the end of July. 

The biggest winners, however, were DeFi tokens. The total market value of DeFi tokens has increased to $6.6 billion today, doubling from Thursday’s 3.2 billion, according to defimarketcap. The increase in the total market value of DeFi tokens mainly comes from Compound, which has jumped from Wednesday’s $67.96 to $330 this morning. 

Bitcoin Volatility nearing rebound zone

Looking back at the 7-day volatility of Bitcoin since 2018, we can see that the ratio is running around 5.2, reaching its historical rebounding area (although we have seen lower volatility at the end of October 2018 and March 2019). Since both monthly and quarterly contracts will expire this Friday, longing volatility is definitely a strategy to consider right now. 

bitcoin volatility 7-day chart
 7-day volatility of Bitcoin. Source: Tradingview

Most BTC options likely to expire worthlessly

More than 60% of the roughly $1.6 billion of Open Interest in the Bitcoin options market are set to expire on Friday. The put-to-call ratio picked up from a historical low of 0.4 on June 9 to the current 0.45 per Skew data. It means that about twice as much money is for call options as for put options.

BTC options open interest by expiry
BTC Options Open Interest by Expiry (thousands in BTC). Source: Skew

This large number of expiring options may push the price towards the “Max Pain” point, which is the strike price with the highest number of open put and call options, and will consequently cause the maximum financial loss to option holders at expiry. Right now the Max Pain price is sitting around $9,000, per coinoptionstrack data. We can see how most of the strike price concentration is between $11,000 and $14,000, but the flat price movement may have led to these positions losing a lot of value.

BTC Options max pain
Max Pain price for Options Contracts expiring June 26. Source: coinoptionstrack

Bitcoin technical analysis

Bitcoin continues to trade sideways as it hovers around $9,350. Technically, the pattern shows some weakness, since we have seen multiple lower highs after last Tuesday’s rebound to $9,600 per OKEx Quarterly Futures (BTCUSD0925). 

The Long/Short ratio on OKEx has been running in the 0.9 area for a couple of days, indicating market participants are not optimistic about the short term price appreciation prospects. 

We haven’t seen aggressive buying or selling in the last few days, while Bitcoin found support at the 60-day moving average again on Saturday, which can be seen as a short term threshold. Losing this moving average may result in further downside pressure.

OKEx BTC Quarterly Futures (BTCUSD0925) 1D chart. Source: OKEx

Looking ahead this week 

Market participants still need to keep an eye on the second wave of COVID-19, mainly in the South and West of the U.S. as well as in China’s capital.  The IMF will release its 2020 growth forecasts on Wednesday, and the latest U.S. jobless claims will come out on Thursday.

Cardano will finish its Shelley update on June 30. While ADA has been performing well in the last month, this upgrade could be the end of its short term bullish phase. Zilliqa (ZIL) completed a milestone last week, starting its staking mode, and has lost 10% since. 

CME June 2020 (BTC M20) Bitcoin futures will close at 4 p.m. London time on June 26. On the same day, OKEx Bitcoin June futures will close at 4 p.m. Beijing time. 

Disclaimer: This material should not be taken as the basis for making investment decisions, nor be construed as a recommendation to engage in investment transactions. Trading digital assets involve significant risk and can result in the loss of your invested capital. You should ensure that you fully understand the risk involved and take into consideration your level of experience, investment objectives and seek independent financial advice if necessary

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