Academy Trading Ideas Article

Persistent Economic Uncertainty Hurts High-Risk Assets, Including Bitcoin: Market Watch Weekly

2020.06.15 Hunain Naseer

Bitcoin’s (BTC) price volatility was very low at the start of last week, running between a tight range of $9,500 to $9,800 until Wednesday, June 10. The leading cryptocurrency then tried to break through the $10,000 threshold on Wednesday night but was rejected at $9,999, as per OKEx Spot price

On the same day, the Nasdaq set a record high of 10,086, breaking the 10,000 level for the first time. However, the gains were not sustainable, with the Federal Reserve warning of medium-term downside risks at its recent meeting. 

With growing economic uncertainty, Bitcoin’s correlation with risky assets accelerated again. As the Volatility Index (VIX) soared again, Bitcoin made a huge correction, dropping as low as $9,077 — down 6 percent intraday. 

Historically, once Bitcoin starts to move in tandem with traditional assets, it continues for a while, though it is hard to say exactly how long the correlation persists. In the large-cap market, Cardano (ADA), the highest gainer among the top 10 altcoins in the week prior, posted a negative return of 12.28 percent this week.

Other large-cap coins primarily underperformed Bitcoin, with Ethereum (ETH) the second-largest digital currency, finishing the week with a 5.21 percent loss. Meanwhile, EOS dropped 8.55 percent in the same period.

coin performance weekly
Weekly returns of major cryptocurrencies 6/8 – 6/15. Source: Tradingview

Bitcoin Hashrate is expected to jump

According to OKLink, the number of active addresses on the BTC network between June 8 to June 14 totaled 4,843,297, up 4.47 percent from the previous week, while the number of transactions totaled 3,198,639.72 BTC, down 17.39 percent.  

At the time of writing, the total network hashrate of BTC is about 113.36 EH/s, which is 0.3 EH/s higher than last week’s average level. Given the hashrate increase, the upcoming difficulty adjustment tomorrow is expected to result in a rise of over 10 percent, taking the level to its highest since January 2018, as pointed out by Coinmetrics.

Bitcoin futures trading volume fell to new 2020 low

On June 13, the trading volume of Bitcoin futures across exchanges fell to a new yearly low of about $5 billion, as per data by Skew. Intraday’s top three exchanges were OKEx, Huobi and Binance, with trading volumes of $1.4 billion, $1.3 billion and $1.1 billion respectively. However, aggregated Open Interest returned to $4 billion last Monday, which was the highest level since the mid-March crash. 

BTC Futures Interest
BTC Futures – Aggregated Daily Volumes. Source: Skew

Meanwhile, the open interest of BTC options has hit a record high, topping $1.5 billion last week. As we noted in the June 10 Crypto Market Daily, the options market is very bullish on the future of Bitcoin, and the CME options open interest is almost entirely made up of calls. 

Bitcoin technical analysis

There is not a lot of buying going on right now due to the retracement over the weekend. We can see the Long/Short ratio on OKEx has dropped to a recent low of 0.9, along with a very low Margin Lending ratio on the spot margin market. 

Now that Bitcoin has lost the $9,300 support, a rebound may face significant selling pressure. The price is likely to test the end of May low of $8,750 per OKEx Quarterly Futures (BTCUSD0925).

BTC USD June 15
OKEx BTC Quarterly Futures (BTCUSD0925) 4H chart. Source: OKEx

Looking ahead this week 

The second wave of Covid-19 has hit Beijing over the weekend and triggered a subsequent lockdown. Traditional safe-haven assets may once again be in favor, as gold has climbed to above $1,730, and if Bitcoin’s correlation with risky assets remains high, it is likely to see selling pressure. 

In crypto, VSYS will have a smart contracts release this month. KNC is about to finish the Katalyst upgrade while Zilliqa (ZIL) will complete staking support this month.


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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