BTC begins the week at around $28K, but a consolidation to $25K is not impossible.

Happy Monday. Bitcoin starts the Asian business day up 1.7%, just below $28K at $27,966. Ether is slightly better than bitcoin, starting the day up 1.8% at $1,777.

Speaking to CoinDesk TV on Friday, Oanda senior market analyst Edward Moya said that the success of Coinbase dictates much of the future price movement of crypto.

“Crypto traders are keeping a close eye on everything with Coinbase.” Coinbase CEO [Brian] Armstrong noted that they were not entirely surprised by the SEC notice. No one knows how regulators are going to rule if all tokens are securities, he said. “Coinbase’s success is critical to long-term crypto growth. In the US, Coinbase is a critical alternative to how people get started with crypto”

Moya pointed out that while bitcoin has so far been unable to test the $30,000 level, it appears as if it is ready for a consolidation phase.

Joe DiPasquale, CEO of crypto-asset manager BitBull Capital, told CoinDesk in an email that the market has largely remained positive after the Federal Open Market Committee (FOMC) pushed for a relatively tame rate hike.

“While we expected a correction to $25K that didn’t happen, we think it’s still in play. For now, the bulls will want to see Bitcoin respect $25K and consolidate above that level,” he told CoinDesk in a note. Given some time with such price action, we may see altcoins start to rally again. On the flip side, a breakdown of $25,000 could put the breaks on this rally.”

All the while, ether traders are breathing a sigh of relief – and pushing up the price – after the latest Decentralized Finance (DeFi) crisis, this time with the Euler Finance protocol, appears to be coming to an end.

Team 1s such as Solana and Eos took the news positively, starting the Asia working day in the green.

Liquidity problem for decentralized derivatives

Liquidity is a major concern in today’s crypto market. Without market depth, large orders create price drifts, and extreme price swings capsize traders.

The liquidity crisis has often been talked about in connection with bitcoin. Kaiko’s research team has flagged that a shortage of fiat payment rails following the closure of Silvergate and Signature banks has reduced bitcoin’s liquidity to a 10-month low. But decentralized finance (DeFi) is also facing its own liquidity crisis.

One of the most interesting developments in DeFi has been decentralized derivatives exchanges. For centralized exchanges, derivatives are a much larger – and more lucrative – market than spot trading, but this comes with increased interest from regulators. At the same time, DEXs are far more efficient operations than their centralized counterparts, making them worth the regulatory risk for investors.

Perpetual futures DEX dYdX was first to the decentralized derivatives vertical, and by all accounts has done very well. But it is not purely decentralized, and combines a hybrid of a centralized order book with a decentralized repository.

The collapse of FTX was a booster shot of interest; On-chain transparency is the best antidote to dishonesty, and it’s impossible to hide things like funds commingling on the blockchain’s open book.

But dYdX’s competitors are running out of liquidity, leading to questions about whether the whole concept can scale.

As of Friday, Kwenta only had $1.27 million in open interest available for long positions on bitcoin perpetuals, and $450,000 in open interest available on the short side. The situation wasn’t much better for ether, with only $1.64 million in open interest available long-term.

GMX was in better shape, but has limited liquidity available for shorts, which can range from just over $1,000 up to around $700,000.

But this has not affected everyone equally. Perpetual Protocol, another perpetual futures DEX, continues to see its open interest grow.

“I think the challenge is that there weren’t many new crypto traders coming to DEXs after the FTX fallout,” its co-founder, Yenwen, told Coindesk in an email. “However, I remain optimistic and believe that DEX derivatives will be the key players for the next bull run.”

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