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Bitcoin futures open interest jumps by $1B: Manipulation or hedge?

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Bitcoin’s (BTC) open interest on derivatives exchanges experienced a sudden surge of $1 billion on Sep. 18, prompting investors to question whether whales were accumulating in anticipation of the unsealing of Binance’s court filings.

However, a closer look at derivatives metrics suggests a more nuanced picture, as the funding rate did not exhibit clear signs of excessive buying demand.

The decision to unseal these documents was granted to the U.S. Securities and Exchange Commission (SEC), which had accused Binance of non-cooperation despite previously agreeing to a consent order related to unregistered securities operations and other allegations.

BTC futures aggregate open interest, USD (green, left). Source: CoinGlass

The open interest spiked to $12.1 billion while Bitcoin’s price concurrently increased by 3.4%, the highest point in over two weeks at $27,430.

However, investors soon realized that, aside from a comment by the Binance.US auditor regarding the challenges of ensuring full collateralization, there was little concrete information revealed in the unsealed documents.

Later in the day, Federal Judge Zia Faruqui rejected the SEC’s request to inspect Binance.US’s technical infrastructure and share additional information. Nevertheless, the judge stipulated that Binance.US must furnish more details about its custody solution, casting doubt on whether Binance International ultimately controls these assets.

By the end of Sep. 18, Bitcoin’s open interest had receded to $11.3 billion as its price dropped by 2.4% to $26,770. This decline indicated that the entities behind the open interest surge were no longer inclined to maintain their positions.

These whales were likely disappointed with the court’s outcomes, or the price action may not have unfolded as expected. In any case, 80% of the open interest increase disappeared in less than 24 hours.

Futures’ buyers and sellers are matched at all times

It can be assumed that most of the demand for leverage was driven by bullish sentiment, as Bitcoin’s price climbed alongside the increase in open interest and subsequently plummeted as 80% of the contracts were closed. However, attributing cause and effect solely to Binance’s court rulings seems unwarranted for several reasons.

Firstly, no one anticipated that the unsealed documents would favor Binance or its CEO, Changpeng “CZ” Zhao, given that it was the SEC that had originally requested their release. Additionally, the Bitcoin futures contract funding rate, which gauges imbalances between long and short positions, remained largely stable throughout this period.

BTC futures average 8-hour funding rate. Source: CoinGlass

If there had indeed been an unforeseen demand surge of $1 billion in open interest, primarily driven by desperate buyers, it’s reasonable to assume that the funding rate would have spiked above 0.01%. However, quite the opposite unfolded on Sept. 19, as Bitcoin’s open interest expanded to $11.7 billion while the funding rate plunged to zero.

With Bitcoin’s price rallying above $27,200 during this second phase of open interest growth, it becomes increasingly evident that, regardless of the underlying motives, the price pressure tends to be upward. While the exact rationale may remain elusive, certain trading patterns could shed light on this movement.

Market makers’ hedge could explain OI spike

One plausible explanation could be the involvement of market makers executing buy orders on behalf of substantial clients. This would account for the initial enthusiasm in both the spot market and BTC futures, propelling the price higher. After the initial surge, the market maker becomes fully hedged, eliminating the need for further buying and leading to a price correction.

During the second phase of the trade, there is no impact on Bitcoi price, as the market maker must offload the BTC futures contracts and purchase spot Bitcoin. This results in a reduction in open interest and may disappoint some participants who were anticipating additional buying fervor.

Rather than hastily labeling every “Bart” formation as manipulation, it is advisable to delve into the operations of arbitrage desks and carefully analyze the BTC futures funding rate before jumping to conclusions. Thus, when there is no excessive demand for leveraged long positions, an increase in open interest does not necessarily signify a buying spree, as was the case on Sep. 18.

This article is for general information purposes and is not intended to be and should not be taken as legal or investment advice. The views, thoughts, and opinions expressed here are the author’s alone and do not necessarily reflect or represent the views and opinions of Cointelegraph.

Cryptocurrency

LINK Explodes 18% Daily, BTC Maintains $66K as Bitcoin ETF Inflows Continue (Market Watch)

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Bitcoin’s price tapped a multi-week high yesterday at around $66,600 before it was pushed down by about a grand but has reclaimed the $66,000 level as of now.

Several altcoins have continued their recent rally, with LINK taking the main stage following a massive 18% surge.

BTC Back to $66K

The primary cryptocurrency had a tough end of the previous business week when it was brought down to just inches above $60,000. Instead of going below that coveted round-numbered milestone, though, the asset bounced off during the weekend and especially on Monday.

The bulls initiated an impressive leg-up at the start of the current week that drove bitcoin to just over $63,000. It failed there at first, dropping to $61,200 amid some Coinbase issues, but went back on the offensive on Wednesday after the US announced the CPI numbers for April.

As the spot Bitcoin ETF inflows kept increasing on Wednesday and Thursday, BTC’s price soared to a three-week high of just over $66,500. The asset retraced slightly yesterday evening but has jumped back above $66,000 as of now amid the fourth consecutive day of positive flows into those ETFs.

Its market cap remains slightly above $1.3 trillion, but its dominance over the alts has taken a hit and is down to 51.7%.

Bitcoin/Price/Chart 17.05.2024. Source: TradingView
Bitcoin/Price/Chart 17.05.2024. Source: TradingView

LINK Skyrockets

Most alternative coins turned green yesterday in a similar fashion to bitcoin. While some, such as BNB, DOGE, TON, TRX, and SHIB, are slightly in the red now, most others have kept climbing.

Ethereum and Ripple are up by 0.5-1%, which has helped the former maintain $3,000 and the latter $0.5. More gains come from the likes of SOL, ADA, AVAX, DOT, BCH, HBAR, and ICP.

However, Chainlink has stolen the show from the larger-cap alts. LINK has skyrocketed by more than 18% in the past day and now trades above $16.

The total crypto market cap has remained relatively still on a daily scale at just over $2.5 trillion on CG.

Cryptocurrency Market Overview. Source: QuantifyCrypto
Cryptocurrency Market Overview. Source: QuantifyCrypto
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Disclaimer: Information found on CryptoPotato is those of writers quoted. It does not represent the opinions of CryptoPotato on whether to buy, sell, or hold any investments. You are advised to conduct your own research before making any investment decisions. Use provided information at your own risk. See Disclaimer for more information.

Cryptocurrency charts by TradingView.

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Cryptocurrency

Here’s Why Chainlink (LINK) Surged by Double Digits to Monthly Highs

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Chainlink (LINK) went through a massive price surge in the past day, rising over 18% following the successful completion of a pilot program with the Depository Trust and Clearing Corporation (DTCC).

The pilot, known as Smart NAV, is an initiative aimed at streamlining the tokenization of traditional finance funds, paving the way for broader institutional adoption of blockchain technology.

DTCC Completes Blockchain Pilot Project

The DTCC, the world’s largest securities settlement system, collaborated with Chainlink and several major U.S. financial institutions to conduct the Smart NAV pilot. According to a report published by DTCC on Thursday, the project aimed to establish a standardized process for delivering and disseminating net asset value (NAV) data of funds across both private and public blockchains using Chainlink’s interoperability protocol, CCIP.

The pilot’s completion demonstrated that structured data could be effectively delivered on-chain and embedded into various on-chain use cases, such as tokenized funds and bulk consumer smart contracts. These smart contracts hold data for multiple funds and support future industry exploration and numerous downstream applications, including brokerage portfolio tools.

By integrating on-chain data delivery and creating standardized roles and processes, the DTCC found that it could enable real-time, more automated data dissemination and provide built-in access to historical data.

This innovation could power several future industry explorations and operational processes, offering benefits such as enhanced efficiency, faster settlements, and greater transparency.

Chainlink’s LINK token responded positively to the news of the pilot’s success, rising more than 18% at one point and exceeding $16 for the first time since April 12. At writing time, the token is trading at $16.5, with a daily trading volume of slightly over $1 billion, marking a 195.4% increase in the last 24 hours.

LINK/Price/Chart 17.05.2024. Source: TradingView
LINK/Price/Chart 17.05.2024. Source: TradingView

Real-World Assets Tokenization

The pilot comes amid a broader trend of tokenizing real-world assets (RWA) such as bonds, funds, and other traditional investments. Tokenization has emerged as one of the most popular applications for blockchain technology, attracting financial heavyweights such as BlackRock, Citi, and HSBC.

These institutions seek the benefits that blockchain technology offers, including operational efficiencies, faster settlements, and improved transparency compared to traditional financial systems.

Prominent financial entities participated in the Smart NAV project, including American Century Investments, BNY Mellon, Edward Jones, Franklin Templeton, Invesco, JPMorgan, MFS Investment Management, Mid Atlantic Trust, State Street, and U.S. Bank.

Smart NAV is centered around providing trusted, verifiable data across blockchain networks to support business workflows. DTCC served as the data provider and governor of the on-chain solution, while Chainlink’s CCIP acted as the interoperability layer.

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Important Shibarium Indicator Jumps by 200% Amid Shiba Inu (SHIB) Price Revival: Details

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TL;DR

  • Shiba Inu’s layer-2 blockchain solution, Shibarium, saw daily transactions surge by 193%, although still below its peak activity from mid-April.
  • A 4,000% increase in SHIB’s burn rate and positive analyst predictions hint at the potential for further price gains of 20-50%.

The Latest Spike

Shiba Inu’s layer-2 scaling solution – Shibarium – continues to make great strides, witnessing a substantial increase in transaction activity. Data shows that daily transactions on the network have soared to almost 18,000, a 193% jump compared to the figures observed a day earlier.

However, the metric is far from its glory days, which were registered in mid-April. Back then, daily transactions were in the millions.

Launched in the summer of 2023, Shibarium aims to foster the development of the meme coin by enhancing scalability, lowering transaction fees, and improving speed. It blasted through numerous milestones in the past few months, while its further development is considered a bullish factor for the price of Shiba Inu.

The asset has entered into green territory as of late, with its value jumping by 9% on a daily scale and 18% monthly. Meanwhile, those interested in learning more about Shibarium, feel free to check our dedicated video below:

Additional Bullish Elements

Shiba Inu’s burn rate increase can also contribute to a SHIB rally. The metric recently exploded by 4,000%, destroying millions of tokens. 

The mechanism’s ultimate goal is to reduce the tremendous circulating supply of the token, making it scarcer and potentially more valuable in time. 

Users on Crypto X are generally quite optimistic about SHIB’s potential price movements. Such an example is the popular analyst Ali Martinez, who recently said that the asset’s price can rise by 20% should it break “the upper boundary of this descending parallel channel at $0.00002444.” Interestingly, SHIB has gone above that level during the recent market revival and now sits at $0.0000248. 

Dami-Defi was even more bullish. In case SHIB breaks out of the recently formed falling wedge pattern on the 1D time frame, its price could surge by 50%. 

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