The Derivatives Magazine #20
Last week trading on the market was held in conditions of low volatility. In the absence of significant news and force majeure, the crypto market movement was within 7% by the end of the weekend, total capitalization was about 890 billion USD.
The public definition of the rate hikes' target levels and the timing of when it is to be done by the Fed, allowed to determine future market risks more accurately. However, it appears that the upcoming period of high rates could drag on, leading to loss of traders’ optimism, and will impose more pressure on the market.
Low volatility also affected the volume of liquidations. Unlike last week, the figures were within the standard range for the market, and did not exceed 400m USD in total for the week (while last week the same figure was reached in just two days). Ethereum remains the leader in terms of amounts, with a volume of 170m USD.
The funding rate for perpetual contracts finally came to its average values for both BTC and ETH. The narrower and more multidirectional range for BTC (-2% to +4%) reflects less liquidity demand, as well as more consolidated trading range.
In turn, for ETH, margin trading indicators at several major venues point out the increased interest in long positions. Perhaps some traders are taking advantage of current situation to balance their portfolios.
The surge of open interest on futures contracts with an execution date in December is directly connected with options roll-out. This week quarterly options and futures are expected to be calculated. As a result, traders are buying futures with a new expiration date, but are not changing position sizes.
The super volatility that was in the ETH market after the merger in mid-September is over, and now it's time to lock in profits within the previously concluded spreads.
Open Interest indicators continue to decline for both ETH and BTC, to 6.2 billion USD and 11 billion USD respectively. The derivatives market is stagnating in the absence of local growth drivers and within the unfavorable macroeconomic environment.
Historically, the volume dynamics of the Open Interest (as well as trading volume) correlate with the direction of the market. Sometimes, when these parameters diverge, a market reversal can be expected, but not in the current circumstances. Based on these indirect parameters we should expect a continuation of the downtrend.
The market may be supported by the absence of active sales. After the wave of positions' forced liquidations from centralized credit and trading services (such as voyager, celsius, 3AC) occurred in early June, the vast majority of long-term holders (who have bitcoins in their wallets for over 6 months) are not selling their positions, accumulating or holding balances. Such behavior confirms the market consolidation thesis on the part of experienced participants, and is free to have a strong impact on the market in terms of supply, maintaining average prices.
Relative calm in the market and the absence of volatility does not provide significant support for cryptocurrency prices yet, and only a technical correction within the downtrend can be expected in the near term.
This overview was prepared by the analytics department of the Biqutex crypto derivatives exchange