Blockchain Bites: $10B in Bitcoin Futures, Price Wobbles and Liquidations

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Bitcoin topped $ 34,000 for the first time this weekend and has seen a double digital price correction since then. The cryptocurrency’s most recent rally took place when the Bitcoin network celebrated its 12th Genesis Block Day on January 3rd – the anniversary the first Bitcoin block was mined in 2009.

Top shelf

CBDC experiment
Ukraine plans to roll out a digital version of its hryvnia currency on the Stellar blockchain. This is the latest in a series of project projects by actors from the European government and institutions who have chosen Stellar, including a Euro Stablecoin promotion and a token bond pilot project from one of the oldest banks in the world.

red envelopes
Shenzhen is doubling the number of digital yuan residents who can win a lottery (up to 200 yuan) to test its novel government-sponsored payment system. The DCEP (Digital Currency Electronic Payments) platform is the most advanced and visible CBDC experiment to date.

Upcoming start
An Ethereum Layer 2 scaling solution is expected to have a network on January 15th (The Block). Edan Yago, a Bitcoin developer, recently argued in a statement that the rise of off-chain scaling solutions could mean the decline of alternative tokens.

Fast bites

  • MATURITY MINING: Blockchain platform Telos has launched non-fungible tokens (NFTs) called “T-Bonds” that imitate US government bonds. The idea is to allow cryptocurrency projects to sell tokens that are locked until maturity.
  • DELISTING, DERISKING: Bittrex will delist Monero, Dash and Zcash in the latest swing for “Privacy Coins”.
  • VENTURE GROWTH: According to The Block, Crypto Venture funding rose 32.5% to $ 5.7 million in 2020.
  • BTC AT 12: Forkast gives an overview of the “three lives” of Bitcoin.

On the game

Open interest
Bitcoin rose from around $ 19,000 to over $ 30,000 in the last four weeks of 2020 – a meteoric surge that several industry watchers believe is likely to continue. Yesterday, the cryptocurrency hit a new high of $ 34,347 before performing a “much needed reset.”

While Bitcoin is breaking new ground, many institutional traders and retailers are betting on future price. As of Sunday, there are more than $ 10 billion worth of open futures contracts, all of which aim to profit from the rise or fall of BTC. This is a record amount of capital, according to crypto data firm Skew.

Futures give traders the right to buy or sell assets at a set price, on a specific date, or within a time window. They are a way of getting exposure to a market without necessarily holding the underlying asset. Some kind of financial product, futures, and other options invite institutional players into crypto markets.

Emanuel Goh, CEO of Skew, told Noelle Acheson, Research Director of CoinDesk: “In 2020 the institutions finally introduced Bitcoin, but not always in the way one would expect. For example, sophisticated investors like hedge funds have attempted to capture spreads by studying the inefficiencies of this emerging market. In particular, this has resulted in the positioning of CME Bitcoin futures by leveraged funds reaching new record short positions almost weekly in the final quarter of 2020. “

In fact, last week the Chicago Mercantile Exchange (CME) topped the charts in terms of open interest for Bitcoin futures at more than $ 1.66 billion. CME has become synonymous with institutional crypto participation. Other derivatives platforms, including BitMEX, OKEx, and Huobi, are also seeing growing interest.

This inflow of capital coupled with Bitcoin’s 24/7 global market infrastructure has led to widespread speculation. Last week, one of the largest crypto options trading platforms, Deribit, opened a market that will see Bitcoin betting soar to $ 200,000 by December 21, 2021.

Volatility is the name of the game. When Bitcoin fell nearly 15% below $ 30,000 yesterday – the steepest since surpassing $ 20,000 in December – billions in futures and options positions were liquidated.

Industry publication Decrypt (citing data from tracking site Bybt) reported that over $ 1.14 billion was liquidated during that price drop. Liquidations happen automatically when Bitcoin price drops below a trader’s leverage position.

As several Cryptoratti have pointed out, Bitcoin’s decline (and recovery) was $ 6,000 greater than the value of Crypto at its lowest point last year.

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