1. Market Wrap: Bitcoin, Ether Gain After Visa Deal as Stocks Struggle With Archegos Margin Call
The quick recovery to near $58,000 demonstrates stronger confidence from investors in the oldest and largest cryptocurrency.
Bitcoin (BTC) trading around $57,626.86 as of 20:00 UTC (4 p.m. ET). Climbing 4.38% over the previous 24 hours.
Bitcoin’s 24-hour range: $54,826.06-$58,353.53
BTC trades between its 10-hour and 50-hour averages on the hourly chart, a sideways signal for market technicians.
Bitcoin proved resilient to the latest instability in traditional markets, as the №1 cryptocurrency by market capitalization rose above $58,000 briefly Monday, well above last week’s low around $50,000.
The divergence offers a reminder of how bitcoin, which traded lightly in sync with the Standard & Poor’s 500 Index of U.S. stocks for most of last year, is now more or less back to doing its own thing: The 90-day correlation between the two has dropped to zero.
Some U.S. stocks went through an unprecedented sell-off on Friday after the forced liquidation of more than $20 billion in holdings linked to Bill Hwang’s family office, Archegos Capital Management. On Monday, stocks were mixed as traders weighed the potential fallout on Wall Street.
“We are still getting reports of continual liquidation by prime brokers on the Street,” Annabelle Huang, partner at Hong Kong-based market maker Amber Group, said. “But from a crypto-centric perspective, we observed 208.8K BTC ($11.05 billion worth) was withdrawn from Coinbase in the past four months, which is a bullish sign for bitcoin and the crypto market.”
The stock market in general has struggled in the recent weeks. The Nasdaq Composite is down 7% from a intraday record on Feb. 16.
2. Ether-Bitcoin Implied Volatility Spread Points to a Macro-Driven Market
Historically, the implied volatility spread has proven a reliable indicator of upcoming shifts in market leadership.
Cryptocurrency traders might be shifting their primary focus back to bitcoin after several weeks focused on ether, alternative digital assets and even non-fungible tokens (NFTs).
That might be one takeaway from an obscure data point pulled from the market for cryptocurrency options: the spread between the one-month implied volatility (IV) for ether (ETH) and bitcoin (BTC). It’s a measure of expected relative price turbulence between the two, and it has dropped to 8%, the lowest since Dec. 8, according to the data provider Skew.
Historically, the implied volatility spread has proven a reliable indicator of upcoming shifts in market leadership. In September the ether-bitcoin implied volatility spread fell to multi-month lows, signaling a change in traders’ focus to bitcoin from ether and decentralized finance (DeFi); some even called it the end of the “Summer of DeFi.” Then, during the final three months of 2020, bitcoin surged 168%, outperforming ether and other major cryptocurrencies.
3. Cryptocurrency Fund Flows Now at Lowest Since October 2020
No wonder cryptocurrency markets were so lackluster last week: There just wasn’t much appetite from investors to put new money into funds.
Flows into digital asset investment products declined by roughly $79 million to $21 million during the seven-day period through March 26, the lowest since October, according to a new report by CoinShares, a digital asset investment firm.
Slowing investor appetite for cryptocurrency funds reflects sideways price action in bitcoin (BTC). The cryptocurrency has traded between $50,000 and $60,000 over the past week.
“Investor appetite for digital assets has waned in recent weeks as volatility remains high and the price trades sideways,” CoinShares wrote in the report.
“We have recently witnessed a significant reduction in inflows, and in some cases outflows, for the larger and longer-established pre-2016 investment products,” according to the report. “We believe this is due to investors sitting on multi-year gains taking profits.”
Investment flows in the U.S. are slowing, while Europe and Canada continue to hold up.
Trading volumes in digital-asset investment products declined to $788 million per day last week, versus an average $900 million per day so far in 2021.
Bitcoin received the largest inflows, according to the report, “but Ethereum on a market capitalization basis (as we’ve seen in previous weeks) remains more popular with inflows of $5 million.”
4. ‘Continuous Vampire Attack’: The AMM Wars Are Getting Interesting With Integral
“Whenever another exchange tries to beat us with better liquidity, we mirror this liquidity onto ourselves.” Investors have poured $239 million into the platform on launch day.
Uniswap’s latest plans may be public, but that isn’t stopping rivals from building alternatives.
Integral, a new automated market maker (AMM) designed with a baked-in order book, went live early Monday. The protocol’s asset pools have attracted $239 million as of press time as savvy decentralized finance (DeFi) traders race for early token rewards.
The project — built by four Harvard friends and a cast of industry bigwigs — is hoping to syphon liquidity away from decentralized exchanges like Uniswap with its approach to impermanent loss and order book mirroring. Integral’s team members think their design can not only quote better prices but provide fairer returns for liquidity providers (LPs).
“Our primary research question was: ‘What would be the final form of AMMs?’ And the answer: ‘One that eats other exchanges’ liquidity,’” Integral wrote in documents shared with us, adding:
“Whenever another exchange tries to beat us with better liquidity, we mirror this liquidity onto ourselves until we regain the world’s best liquidity again. This process can be thought of as a continuous vampire attack until all world liquidity is integrated by us.”
Vampire attacks were made famous by SushiSwap, a clone of Uniswap created by the pseudonymous developer Chef Nomi. During that time, the platform offered token rewards for liquidity moved from Uniswap to SushiSwap. It now seems Integral is taking the idea one step farther by “mirroring” liquidity onto itself to gain adoption.
The founding team of nine, which has requested to remain nameless, is being advised by Polychain Capital founder Olaf Carlson-Wee, Gauntlet founder Tarun Chitra, Compound Finance founder Robert Leshner and Framework Ventures co-founders Michael Anderson and Vance Spencer.
Integral relies on two features to market itself as a competitor to Uniswap, whose latest version typically does $1.25 billion in 24-hour trading volume.
5. Visa Settles USDC Transaction on Ethereum, Plans Rollout to Partners
The pilot marks the first time Visa has accepted a cryptocurrency payment in lieu of cash for its services.
Visa has processed a cryptocurrency payment directly on the Ethereum blockchain as part of a new service the payment giant plans to introduce to its partners later this year.
The move, the latest sign of increased adoption of digital currencies by the old-guard financial industry, bumped the price of bitcoin (BTC, +4.04%) and ether (ETH, +7.17%) roughly 5% each.
Per a press release shared with us, Crypto.com sent a USDC (-0.01%) stablecoin transaction on Ethereum to an account at Anchorage custody under Visa’s name. Crypto.com issues “crypto-backed” Visa cards that allow its users to spend the coins in their Crypto.com wallet.
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March 30, 2021