1. Market Wrap: Cryptocurrencies Bounce Back, Traders Expect More Volatility
Bitcoin rebounds to above $42,000.
Bitcoin returned above $42,000 at press time as the broader crypto market bounces back after a sell-off earlier this week. Traders expect volatility to remain elevated ahead of bitcoin’s September options expiry on Friday. And technical charts show limited upside for BTC toward the $47,000 resistance level.
On Wednesday, the U.S. Federal Reserve signaled that it could start to scale back, or taper, its monthly asset purchases sooner rather than later. Fed officials are preparing to reverse the central bank’s pandemic stimulus programs in November and expect to raise interest rates by the end of next year.
While overall market sentiment is improving, some analysts are concerned that tighter monetary policy could be a headwind for assets deemed to be risky such as equities and cryptocurrencies.
“With so little room for additional central bank accommodation, given an already depressed interest rate environment, the prospect for sustainable runs to the topside on stimulus, should no longer be as enticing to investors,” Joel Kruger, currency strategist at LMAX Group, wrote Wednesday in a report.
Latest Prices
Bitcoin (BTC), $43,400, +3.3%
Ether (ETH), $3,023, +4.8%
S&P 500: +1.0%
Gold: $1,768, -0.4%
10-year Treasury yield closed at 1.306%
Bitcoin options expiry
Major crypto options exchanges, including industry leader Deribit, are due to settle billions of dollars’ worth of bitcoin options contracts on Friday. Analysts don’t expect the monthly expiration to have a notable impact on bitcoin, which has been under pressure this week because of macro and regulatory concerns.
Data provided by Skew shows a total of 73,700 options contracts worth $3.14 billion due for expiry Friday, of which nearly 50,000 are call options and the rest are puts. Deribit alone will be settling more than 85% of the total open interest.
While short-term prospects appear to be bleak, the options market continues to exhibit long-term bullishness, with the June 2022 expiry risk reversals holding above zero, according to Godbole.
Risk reversals measure the difference between the implied volatility of out-of-the-money (OTM) calls and OTM puts.
2. Dapper Labs Said to Reach $7.6B Valuation in $250M Funding Round
The firm behind NBA Top Shot and the Flow blockchain also announced a deal with Spain’s top soccer league, LaLiga.
Dapper Labs has closed a $250 million funding round, the company behind NBA Top Shot and the Flow blockchain said Wednesday.
Coatue led the raise, which also included Andreessen Horowitz, Google’s GV and Version One Ventures. According to a source familiar with the deal, Dapper Labs received a $7.6 billion valuation.
“We’ve proved the concept, which is why our investors are so eager to partner with us,” Roham Gharegozlou, CEO of Dapper Labs told.
Gharegozlou believes non-fungible token (NFT) highlights will be “the currency of fandom” and says the raise will help expand NBA Top Shot operations and lead to new sports ventures worldwide, including European soccer with its huge fan base.
The Dapper mega-round comes just a day after soccer NFT giant Sorare raised $680 million in a raise that valued the Paris-based fantasy sports platform at $4.3 billion.
Gharegozlou sees room in the burgeoning space for multiple companies.
“Companies like Sorare can be complementary to us,” he told us, adding:
“They’re much more focused on fantasy, while video is very important to us, and sets us apart.”
3. Custodian Cobo Wallet Closes $40M Series B to Expand Institutional DeFi Offerings
The firm wants to expand its so-called “DeFi as a Service (DaaS)” product.
Singapore-based crypto custodian Cobo Wallet raised $40 million in a Series B round led by DST Global, A&T Capital and IMO Ventures.
The funds will be used for Cobo’s so-called “DeFi as a Service (DaaS)” product.
Speaking to CoinDesk, COO Lily Zhuo described the product as a one-stop solution for institutions that want to access decentralized finance investment tools.
Cobo has served more than 300 institutions and has enabled $20 billion in transactions through its platform, the company said in a press release on Thursday.
DST Global is one of the world’s biggest venture capital firms. A&T Capital, which is a new VC based in Asia, is backed by a “world-leading fintech giant.” IMO Ventures is a China-focused VC that is active in blockchain and fintech.
Cobo, which recently moved from Beijing to Singapore, raised $13 million in a Series A in 2018.
4. Biden to Nominate Crypto Critic as Top Bank Regulator
Cornell University Professor Saule Omarova has criticized cryptocurrencies in the past.
The U.S. President is reportedly moving forward with the nomination of a crypto critic to run a federal bank regulator.
The Biden administration intends to nominate Cornell University Professor Saule Omarova to be the next Comptroller of the Currency (OCC), Bloomberg reported on Wednesday. The administration was first rumored to be vetting Omarova last month.
An OCC spokesperson declined to comment.
Omarova has criticized the existing bank structure and cryptocurrencies in recent years, according to the Bloomberg report. She has advocated for having the U.S. central bank provide consumer banking services, rather than existing private banks.
In a 2019 paper called New Tech v. New Deal: Fintech as a Systemic Phenomenon, Omarova wrote that fintech, including cryptocurrencies, is changing how financial transactions and services in the U.S. operate, but took a critical tone to the idea that cryptocurrencies or fintech at large may “‘revolutionize’ the provision of financial services.”
“Bitcoin’s amazing journey from an obscure techno-utopian experiment to Goldman Sachs’ market-making books and institutional investors’ portfolios is also fascinating in a deeper sense,” she wrote. “It provides a vivid example of how fintech technology can be, and is used to synthesize tradable financial assets effectively out of thin air.”
If nominated and confirmed, Omarova will be the first full-term Comptroller since Joseph Otting, who headed up the federal bank regulator between 2017 and 2020. Former Acting Comptroller Brian Brooks took over the regulator last year, overseeing a handful of guidance letters and conditional approvals allowing crypto companies to have greater access to banking services and letting banks interact more closely with cryptocurrencies.
Since May, the regulator has been run by Michael Hsu, who called cryptocurrencies innovative but warned the industry has to be more realistic about what it is doing and how.
“Those in traditional finance may laugh at this. But crypto/DeFi is able to pose a threat to the status quo because many people feel ignored, taken for granted, or exploited by banks,” Hsu said in a presentation with the Blockchain Association on Tuesday.
He advised crypto companies to present both the potential benefits and the drawbacks to different projects in the sector, likening crypto to “fool’s gold” due to the number of scams and fraudulent projects in the space.
“I strongly support the goal of increasing financial inclusion,” he said. “It is difficult to see how the current set of activities is achieving that goal however. How is crypto … making it less expensive to be poor? How is it helping to expand access to these banking services?”
5. Bitcoin Eyes $3B September Options Expiry After a Drop to $40K
The majority of options are set to expire without value.
Major crypto options exchanges, including industry leader Deribit, are due to settle billions of dollars’ worth of bitcoin options contracts on Friday. Analysts don’t expect the monthly expiration to have a notable impact on bitcoin, which is under pressure this week due to macro risks and regulatory concerns.
Data provided by Skew shows a total of 73,700 options contracts worth $3.14 billion due for expiry Friday, of which nearly 50,000 are call options and the rest are puts. Deribit alone will be settling more than 85% of the total open interest.
“I’m not expecting much fireworks unless we run through $50,000; there’s some concentrated open interest there,” Shiliang Tang, chief investment officer of crypto hedge fund LedgerPrime told.
Tang explained that if bitcoin breaks above $50,000, traders who sold calls in anticipation of a bearish move or consolidation may resort to hedging — buying the cryptocurrency in the spot or futures market to mitigate losses arising from the short call position. That could put upward pressure on the cryptocurrency, accelerating gains.
However, that scenario looks unlikely given this week’s 11% drop to $42,000.
Options are derivative instruments that give the purchaser the right to buy or sell the underlying asset at a predetermined price on or before a specific date. A call option gives the holder the right to buy, while the put buyer gets the right to sell. Open interest refers to a number of calls and put option contracts traded but not squared off with an offsetting position. A call buyer is implicitly bullish on the market, while a put buyer is bearish.
The chart shows maximum call option open interest is concentrated at strikes higher than bitcoin’s current market price, also known as out-of-the-money (OTM) calls. Most of the put options are located at lower strikes. So, the majority of options appear set to expire worthless unless bitcoin charts a big move before 08:00 UTC Friday, the designated expiry time on Deribit, where one option contract represents 1 BTC.
Currently, there are 3,500 open call positions and 537 open put positions at the $50,000 strike. The call option at $64,000 is the most popular for the Sept. 24 expiry, with an open interest of 4,400.
Also, there is a notable build-up of call options open interest between $46,000 to $50,000. “The larger expiries were at $46,000, $48,000 and $50,000, creating time decay concerns late last week with spot stagnating in the $47,000 to $49,000,” range, Adam Farthing, chief risk officer at B2C2 Japan, said. “Down here [around BTC’s current price], we only have $44,000 and $40,000 with any size on them (open interest 2,500 and 1,500, respectively), we’ve kind of moved away from the problem down here.”
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September 23, 2021
