Daily Bitcoin and Crypto Analysis

Daily BTC Analysis: The Weekender

January 10, 2021

Welcome to the Weekender! Every week, we review the top news stories from the digital asset world, as chosen by our readers' clicks. This week, it’s a one-two for EQONEX, with our CEO Richard Byworth’s interview with Cointelegraph taking top spot.

“The year ahead will return gains that some people might find “Shocking,” commented Richard, adding:

“Bitcoin is in the process of starting its post halving bull cycle. The demand side of this equation has been expedited by enormous bank stimulus and investors seeking safe stores of value against increasing monetary inflation. As a result, a large proportion of financial institutions are now assessing their sizing for Bitcoin positions right now. This is leading to massive exchange withdrawals as these participants move to secure cold storage. We have a supply side crisis in Bitcoin.”

Which leads us neatly to the second most read story this week: With ‘physical’ Bitcoin disappearing, the volumes of derivative contracts are soaring. EQONEX (Nasdaq: EQOS), announced that it has launched its Bitcoin Perpetual Futures Contract.

Richard Byworth, CEO of EQONEX commented: "A functional, robust derivatives market is critical to providing liquidity and risk management opportunities for traders and is key to attracting institutional investment into cryptocurrencies and digital assets more broadly."

"Our goal is to develop product with functionality that will facilitate wider institutional and professional trader adoption of cryptoassets. This is just the first in a product suite that will offer investors more dynamic hedging tools, fairer liquidation, a platform that is not trading against its users and reputational protection for investors seeking a KYC/AML compliant ecosystem."

The successful launch of the BTC Perpetual is a major milestone in the roadmap of derivative products that are being introduced by EQUOS. Derivatives linked to traditional financial assets like equities, commodities, or foreign exchange often eclipse the value traded in the underlying spot markets by hundreds of times.

As if to drive home the point, the Chicago Mercantile Exchange (CME) has taken the prime spot on the list of the biggest bitcoin futures trading platforms, indicating a continued rise in institutional participation.

With an open interest of $2.1 billion, the CME accounted for 19.09% of the global tally of $11 billion on Wednesday – the highest among major exchanges as tracked by Skew, a crypto derivatives research firm.

OKEx was the second-biggest exchange with an open interest of $1.97 billion, while Binance, the word's biggest crypto spot exchange by trading volume, ranked third with $1.82 billion.

Access to derivative products is allowing institutions a simple way to gain exposure to digital assets, which could see legacy products, such as the Grayscale trust, give up some growth. The news this week that shares in fund manager Grayscale Investments’ Ethereum Trust plummeted by 50% this past fortnight, despite Ethereum rallying by 75% over the same period, rounds off our news recap.

ETHE shares represent 0.09620794 of an Ether each and are currently trading for $13.80 — roughly a 21% premium over the spot price of ETH. Grayscale’s ETHE shares have been on a roller coaster ride, surging around 500% from $4.20 at the start of October, before topping out at $25 on Dec. 22. The shares have since plummeted by 50%, posting a local low of $12 on Jan. 5.

Joshua Frank, the CEO of crypto data aggregator TheTie, took to Twitter to offer a theory explaining the unusual price action.

Frank argued that institutional arbitrage may be fueling Ether’s recent gains, speculating that investors are buying ETH to close out loans used to purchase shares in Grayscale’s Ethereum Trust.

He suggested that many Ethereum Trust investors borrowed Ethereum at an annual interest of roughly 8%, before using the borrowed assets to purchase ETHE shares at the equivalent of Ethereum’s spot price to capitalize on the arbitrage opportunity presented by ETHE’s historic price premium — with ETHE having traded at a 100% premium over Ether in late December.

With the lock-up on many investors’ shares having expired, Frank concludes that ETHE investors are now selling their shares while purchasing Ether on the spot markets to close out their positions and realize a profit.

“A large number of Grayscale’s ETHE investors via private placements received their shares today. ETH’s run the last few days might be in large part due to those institutions buying ETH to cover their loans.”

A theory indeed!

Have a great Sunday...

Words of the Week

Technical Analysis

Bitcoin started the week with a print below $28,000, and by the end of Friday, had almost crossed the $42,000 level. It is easy to become blasé when a bull market is powering under full steam, but this exactly the time when one should double the focus. Failure to break above $42,000 this week will feel like a huge disappointment, and with it, bring those waiting to take some profit off the table into the market.

A move below $38,180 will be closely watched, as reliance on dip buyers to soak up selling pressure will be expected. Their absence will see a deeper retracement, with $34,820 and even $32,065 as possible targets for the bears.

Should we break back above $42,000, then we expect the market to continue its climb. With big numbers proving to offer little in the way of resistance, my upside target for Q1 is now $54,000.

The Market in Numbers 

This Weekend's Coffee Reading

Bitcoin turning 12: From the Genesis block to Wall Street adoption

The Bitcoin network as we know it today officially kicked off exactly 12 years ago last week, when Satoshi Nakamoto released the first software client.

Satoshi Nakamoto, the unknown Bitcoin creator, released the first client network on January 9th 2009, officially kick-starting what is perhaps the greatest monetary revolution of the 21st century.

Six days prior, on Jan. 3, 2009, Satoshi mined the Genesis block, known as #0, coding it into the software. Unlike the subsequent blocks in the chain, the coin base reward from the Genesis block cannot be spent, as only publicly mined “coins” can be transferred. So, the first block, or #1, was mined on Jan. 9, putting a true start to the network as it is known today.

At the time, Satoshi announced the news to the cryptography mailing list with a download link to Bitcoin 0.1.0 on the open-source software database platform Sourceforge.

Bitcoin 0.1.0 was only compatible with the Windows operating system. The first client version with Linux support did not come until December 2009 with the release of Bitcoin 0.2.0.

Less than a week before releasing the first client software, Satoshi mined the Genesis block, beginning the network. Hal Finney received the first-ever BTC transaction on Jan. 12, 2009.

At the time, early adopters were already alive to the possibility of creating monetary value from computing power. According to Finney: “The possibility of generating coins today with a few cents of compute time may be quite a good bet.”

The programmer and cryptographer enthusiast famously predicted that Bitcoin could attain world reserve currency status and reach $10 million per coin. Satoshi agreed with Finney’s optimistic expectations, adding: “It might make sense just to get some in case it catches on.”

However, it was not until October 2009 that Bitcoin (BTC) would receive its first official valuation. At the time, the New Liberty Standard, an early BTC exchange, created a benchmark price for Bitcoin set at 1,309 BTC to $1.

 Read more here!

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