Bitcoin is ready for a consolidation phase
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Good morning. Here’s what happens:
Prices: Bitcoin begins the week testing $28,000, but a consolidation of $25K is within the realm of possibility.
Insight: Decentralized derivatives platforms lack liquidity. What is in store for them?
Prices
CoinDesk Market Index (CMI)
1,231.08
+23.4 1.9%
Bitcoin (BTC)
$27,966
+470.9 1.7%
Ethereum (ETH)
$1777
+32.2 1.8%
S&P 500 daily close
3,970.99
+22.3 0.6%
Gold
$1,978
−3.7 0.2%
Treasury Yield 10 years
3.38%
0.0
BTC/ETH prices per CoinDesk indices; gold is the COMEX spot price. Prices from approximately 4:00 PM ET
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.
CoinDesk reported over the weekend that the hacker behind Euler Finance’s $200 million exploit has returned the majority of the funds stolen from the protocol.
Team 1s such as Solana and Eos took the news positively, starting the Asia working day in the green.
Biggest winners
Biggest losers
Insight
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.
In a December report, TokenInsight flagged the liquidity issue as detrimental to growth in the sector.
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.”
Important events.
16:00 HKT/SGT (8:00 UTC) Germany IFO – Business climate (March)
01:00 HKT/SGT (17:00 UTC) Bank of England Governor Bailey speech
05:00 HKT/SGT (21:00 UTC) Fed’s Jefferson speech
CoinDesk TV
In case you missed it, here’s the latest episode of “First Mover” on CoinDesk TV:
Do Kwon charged with defrauding US prosecutors; Binance temporarily halts spot trading
Federal prosecutors in New York are charging Terraform Labs founder Do Kwon with fraud after he was arrested by police in Montenegro. Former SEC Enforcement Branch Chief and Bragança Law Attorney Lisa Bragança shared her reaction. In addition, crypto exchange Binance suspended spot trading amid a problem on the world’s most widely used cryptocurrency trading platform. Innovating Capital General Partner Anthony Georgiades weighed in.
Headings
$119 Million in Stolen Crypto So Far in 2023, NFT Rug pulls on the Rise, Crystal Blockchain: DeFi protocols have been a favorite target of hackers since 2021. Now hackers are hunting NFT projects, says a blockchain intelligence firm.
Matter Labs opens zkSync era for users, claiming first in ‘Zero Knowledge’ technology on Ethereum: After zkSync Era launched for developers only last month, the project took the extra step on Friday of opening up to general users. The latest push comes just days before rival Polygon Systems’ planned rollout on Monday of its own “zero knowledge Ethereum Virtual Machine.”
Do Kwon charged, due in Montenegro court for extradition hearing, AFP: Terraform Labs founder Kwon was arrested in Montenegro on Thursday for document forgery.
Nasdaq Aims to Debut Crypto Custody Service by Q2 End, Bloomberg: The exchange operator announced its intentions last September as it appeared to respond to demand from institutional crypto investors
Arbitrum tokens rack up $2B in trading volume, analysts point to growth ahead: Integration into Arbitrum’s broader DeFi system could add some new impetus to bullish sentiment for ARB tokens, an exchange executive said.
