Opening bell │ #17 │ 11th June
Report highlights:
Bitcoin weekend risk
Near 0% Avg. weekend change: Bitcoin volatility all but disappears.
Investors, particularly traders who hold Bitcoin positions over the weekend—from the time the New York Stock Exchange closes on Friday until markets open in Japan on Monday—have experienced relatively stable positions throughout the year since ETFs began trading. The average change has been just -0.4% from the closing price to the opening price, with negligible drawdowns. Even the fluctuations between the low and high prices are minimal, making Bitcoin markets resemble a forex pair more closely.
BTC/USD weekend: from New York close (Friday) to Tokyo open (Monday)
Real-world assets?
Asset-backed tokenization products surpass $3bn on back of bonds.
Over 80 tokenized real-world assets have surpassed the $3 billion mark this year, with bonds being the primary driver of this growth, notably due to BlackRock’s entry into the market. However, the majority of these products remain closed to institutional investors. While this might be a small fraction in the larger context of financial markets, it represents a step towards institutions understanding the regulatory frameworks within which they can issue tokenized assets. Notably, equities have made little impact so far.
Bitcoin ETF AUM & flows?
Bitcoin within average bounds as social media calls foul.
Statistics are playing with people’s heads as demand pressures barely affect the price of Bitcoin. Numerous theories are circulating on social media after Bitcoin ETFs saw five consecutive weeks of positive inflows. Adding to the speculation, nearly $2 billion in inflows last week, equating to a massive purchase of 25,000 Bitcoins, has led to questions about why the price hasn’t surged.
While this may seem perplexing, it might be premature to accuse any market participant of foul play. Dollar cost averaging has long been the mantra of long-term Bitcoin investors, so why can’t this concept apply to ETF investors as well?
A quick glance at the average price of Bitcoin relative to the total underlying BTC holdings shows that the average open and close prices are closely tracking each other (see chart 1).
Average open/close price relative to ETF AUM in 25k increments |? BTC/USD
Markets are seeking indications of whether Bitcoin is over or underpriced, evident from the swings above and below the trendline. The data suggests that Bitcoin is currently trading well its average trendline.
Net US-based Bitcoin ETF weekly inflows?? |?? $mn?
Derivatives
Bitcoin perpetual open interest at record high.
Open interest in Bitcoin perpetual contracts on crypto exchanges has more than doubled since their low point at the end of January this year. In terms of Bitcoin, this is still nearly half of what was observed in October 2022. However, CME futures have significantly boosted open interest across the board for Bitcoin futures. Specifically, CME futures in BTC terms have increased by 18% since the start of Bitcoin ETF trading this year, which translates to a substantial 84% increase in dollar terms. Even Binance hasn’t experienced that level of growth in demand.
Bitcoin perpetual open interest?? |?? $bn
Bitcoin / Ethereum derivatives?
Ethereum estimated leverage ratio hits all-time-high.
The estimated leverage ratio used on exchanges, meaning the open interest relative to the exchange balance of reserves, has been increasing for both Bitcoin and Ethereum lately. However, it is Ethereum that has seen a steady incline in the use of leverage by traders, hitting an all-time high as traders grow bullish in anticipation of the awaited Ether ETF.
This year, exchange reserves for ETH have dropped by over 10%, while Bitcoin has seen a 6% decrease. Additionally, crypto-margined futures now account for over 40% of open interest, marking a 25% increase since mid-February.
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Derivatives
Funding rates move at different speeds across key crypto exchanges.
Short traders have been earning significantly on open positions on OKX this month, as funding rates have averaged more than twice those of Binance. Although Binance holds the most steady and predictable funding rate across all crypto derivative exchanges, there are numerous opportunities across the industry for traders to arbitrage the synthetic funding rate to their advantage using various cash and carry strategies. The annualized rolling basis trade on a three-month average is yielding a massive 14%, almost triple the return seen at the start of May following the tumultuous April market downturn.
Technical indicators (11 June 2024)?
Stablecoins
Tether reigns supreme across crypto ecosystem.
Crypto has had its fair share of controversies and hot-button topics back in the day, such as block size wars, the potential traction of the Lightning Network, Proof-of-Stake, Solana, but perhaps none as significant as Tether.
The issuance of this stablecoin has been so closely monitored that markets would react immediately to new supply entering the market.
Tether has become a major story in the crypto space, outperforming many national banks and emerging as the go-to stablecoin not only on exchanges but across the entire crypto ecosystem.
Between Circle’s USDC and Tether’s USDT, the latter now controls 77% of the market, up from 54% in 2022.
Most noteworthy is the substantial amount of Tether that has moved into smart contracts, alongside its explosive growth to nearly $120 billion of USDT.
While USDC has nearly 30% of its stablecoin in smart contracts, this has been a declining trend since 2020.
Since the end of 2022, over $10 billion worth of Tether has moved into smart contracts. For comparison, over $21 billion USDT sit in smart contracts alone, versus the total supply of USDC, which is just over $32 billion.
USDT vs USDC in smart contracts? |? USD bn
Supply in USDT vs USDC in smart contracts? |? %
The staggering difference is notable, but the trends across the two key market stablecoins are even more important. The larger disparity is showcased on centralized exchanges where USDT is almost 10 times that of USDC.
On DeFi markets, Tether doesn’t necessarily produce better yields, as markets tend to arbitrage, bringing returns to equilibrium across the two key stablecoins.
However, Tether has achieved network effects that are far-reaching and difficult to break, even with the emergence of yield-bearing stablecoins.
Supply of USDT vs USDC in centralized exchanges? |? $bn
Economic calendar
Key events this week: US-focus on Fed rate, CPI, Michigan Sentiment, Yellen speaks.
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