The Derivatives Magazine #26

The crypto market continues its movement within the paradigm of low liquidity and high uncertainty. The week started at $968 billion and by the middle of the period reached the local "bottom" at $944.88 billion. Then, by the end of the working week, amid relatively positive macroeconomic news and on-chain data, the index of total cryptocurrency market capitalization reached a local peak at $1.021 trillion (exceeding $1 trillion for the first time since September 13). At the weekend, the index began its first gradual and then sharp decline (the reasons for which we will discuss in the next sections), falling to $967.7 billion by the end of the period. Thus, at the end of the weekly period, the value of the index remained virtually unchanged.

The most important macroeconomic news of last week was the Fed rate increase by 0.75%. It completely corresponded to market expectations (probability of such increase was 87.5%). Moreover, together with expected decline of the rate hike in December (according to CME FedWatch Tool the market is inclined to 0.5% rate hike), it gave a slight positive impulse to the market. However, that momentum was small and later offset by the negative news backdrop, which we will talk about a bit later.

According to The Block, October cryptocurrency spot trading volume on the top 25 exchanges was the lowest of the past year, amounting to $543.8 billion (versus $733.9 billion in September). The last time such low spot trading volumes were seen was in December 2020.

If we talk about conditionally positive indicators, we should emphasize such an indicator as Seller Exhaustion Constant for bitcoin. This indicator is defined as the ratio of one-month volatility to the profitability of transactions in the network. Last week it reached its lowest values since November 2018. Such low values of the indicator are reached at the moment when volatility is low and realized losses of investors are high (hence, the potential for selling pressure on the price is reduced). An interesting fact is that out of 7 such episodes in the past, 6 preceded the volatility spike towards the asset's growth.

Binance to liquidate all its FTT tokens
A piece of news came out on Sunday that largely influenced the crypto market to go from green to red. In a recent tweet, Binance exchange founder Changpeng Zhao announced that the exchange is going to sell all of its FTT tokens (the exchange's native FTX token) as part of "risk management".  CZ attributed its decision to concerns that have surfaced online about the precarious financial condition of the exchange and the Alameda Research fund directly associated with it. The founder of FTX and director of Alameda hastened to refute this data, and there was a proposal to buy all the tokens from Binance at once at a price of $ 22 to reduce the negative impact on asset prices.  Whichever way this situation is resolved, such information (the collision of two leading players in the market) certainly causes concern among market participants, especially in the current atmosphere of uncertainty. The poor financial health of FTX and Alameda may cause new turmoil for the market, as these institutions hold large stakes in leading altcoins.

Google cloud and Solana partnership
The Google Cloud team announced that the platform will henceforth be the Solana blockchain validator. During the Solana Breakpoint conference, Google product manager Nalin Mittal also revealed that Google Cloud will integrate Solana into its BigQuery web service for big data analysis. The tool will get the corresponding functionality in the first quarter of next year. One can argue a lot about the degree of Solana's decentralization and the level of network stability, but for the crypto market as a whole the news is definitely positive.

Hong kong regulators and their plans on retail crypto
Hong Kong is considering lifting the ban on retail cryptocurrency trading. The decision is part of a program to turn Hong Kong into a digital asset hub. It would overturn a long-standing policy that officially restricted cryptocurrency trading on licensed exchanges for professional investors (although retail investors could trade over-the-counter or use overseas exchanges). The government announced the idea at the opening of the Hong Kong FinTech Week conference. The positive side of this news reveals the fact that Hong Kong could become a "gateway" to the world of cryptocurrencies for investors from mainland China, which are currently officially forbidden to conduct these activities.

This overview was prepared by the analytics department of the Biqutex, an innovative crypto derivatives exchange. Trade an extended list of instruments (Perpetuals Swaps, Futures, Options, Calendar Spreads etc.) with up to 125x leverage and deep liquidity!