Daily Markets Update - October 17, 2020- Weekend Edition-Record Bullish Futures Bets on BTC

Institutions recently raised their bullish bets in bitcoin (BTC) futures listed on the Chicago Mercantile Exchange (CME) to the record level set last month amid signs of market maturity.

  • In the week ended Oct. 13, institutional investors increased long positions by over 9%, taking the tally of bullish bets to the record high of 3,500 contracts reached in mid-September.

  • The numbers were revealed by the Commitment of Traders (COT) report published by the U.S. Commodity Futures Trading Commission (CFTC) on Friday.

  • The cryptocurrency’s price reached multi-week highs above $11,700 during the seven days to Oct. 1, confirming a breakout on technical charts.

  • BTC’s recent resilience to several exchange-related issues may have given institutions the confidence to increase their bullish bets.

  • The cryptocurrency remained largely bid above $10,000 earlier this month despite news of the KuCoin exchange hack and U.S. regulators bringing criminal and civil charges against BitMEX.

  • Similarly, buyers defended support at $11,200 on Friday after prominent crypto exchange OKEx suspended withdrawals.

  • ‘Had these events happened last year, the [bearish] impact on bitcoin’s price would have been much greater,” Sui Chung, CEO of CF Benchmarks, said in a statement to CoinDesk.

  • The derivatives market is now less dependent on exchanges like BitMEX and OKEx than a year ago.

  • In September 2019, the two exchanges accounted for over 70% of the global BTC derivatives’ open interest. That number has now dropped to 40%.

  • As such, the cryptocurrency is less sensitive to exchange-related issues. That’s a testament to the growing maturity of the cryptocurrency space, according to Chung.

Are speculators bearish?

  • Speculators or leveraged funds – hedge funds and various types of money managers that, in effect, borrow money to trade – increased their short positions by 4% to 14,100 – the record low seen in August.

  • That does not necessarily imply bearish implications for price.

  • According to Patrick Heusser, a senior cryptocurrency trader at Zurich-based Crypto Broker AG, cash and carry trading may have pushed bearish bets to record highs.

  • “Cash and carry” is an arbitrage strategy that involves buying the asset on the spot market and taking a sell position in the futures market when the latter is trading at a significant premium to the spot price.

  • Futures prices converge with spot prices on the day of the expiry, yielding a risk-free return to a carry trader.

OKEx Suspends Withdrawals, Founder Arrested

  • OKEx, one of the three biggest exchanges serving Chinese retail investors, suspended withdrawals.

  • The exchange reported that a "keyholder" had been detained by investigators.

  • China has been cracking down on OTC shops of late.

  • The price of BTC plunged more than 2.5% on the news, before starting to recover.

Chinese crypto exchange OKEx suspended withdrawals today, apparently because police are talking to "key holders," it said in a statement. The company, though registered  in Malta, serves many Chinese retail investors. Huobi, Binance and OKEx are the three biggest Chinese exchanges.

"One of our private key holders is currently cooperating with a public security bureau in investigations where required," the company said in its statement. "In order to act in the best interests of customers and deliver exceptional longtime customer service, we have decided to suspend digital assets/cryptocurrencies withdrawals as of [October 16, 2020 at 11:00 (Hong Kong Time)].  We assure that OKEx’s other functions remain normal and stable and the security of your assets at OKEx will not affected."

Total Cyrpto Market Cap has moved up $23B this month, but down $3B this week to $354B levels, largely seeing the majors trading range-bound with a fair bit of volatility happening on DeFi-related tokens, as the community seems to be waiting for the next large announcement to determine the next swing. With that being said, we saw the likes of Square, MicroStrategy, and Grayscale making similar announcements that have provided a vote of confidence into the world of digital assets.

Crypto Markets

  • $BTC broke above the $11,500 resistance after moving up $81 overnight from its range-bound territory for the past four days. Next target is at $11,730, whilst trading at overbought levels currently, and trading $320 above 10d SMA. Month to date, $BTC performing well, up 9.81% from $10,460 levels

  • $ETH trading $10 above 10D SMA currently ($380 vs $370), recovering slightly after dropping three days consecutively, support levels at $370 still and trading at neutral RSI levels with ETH fees hovering around 38 Gwei

  • $BCH corrected slightly (-0.7% to $263) after breaking thru its two month highs and targeting $291 with increased volume traded. Current local ATH at $337, as set on Aug 2nd.

  • Desk seeing increased flow in major coins such as $BTC and $ETH, consistent with the market trends. Payment processor flows have been relatively consistent, with a decreased window for arb for those trading USDT.

Alts and DeFi watch:

  • Andre Cronje releases a statement confirming he is stepping away from the DeFi world (hopefully for now) and his explanation for “I test in prod” statement on social media

  • $YFI traded down 4% overnight to $14,100 levels, but it seems to have found support at $13,700.

  • $LINK down two days in a row now at -5%, currently trading at $10.70 levels after circling around 11 levels throughout the week

News that caught our eye:

  • Binance announces a substantial investment, $100M, into 6 projects that are currently developing the BSC: AnySwap, Arkane Network, BakerySwap, Bitquery, PancakeSwap, and Proxima

  • Hackers infiltrated the Robinhood platform and reportedly stole funds from nearly 2000 account holders using email accounts to create fake Robinhood credentials. It’s a cautionary tale to ensure you safeguard your online profile and activities. Always enable additional safety protocols such as 2-factor authentication on your accounts where available. Please exercise caution when dealing with anyone that asks for access to your private information or proposes a transaction or business arrangement involving your digital assets, regardless of how and where it is requested.

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