First Mover: Bitcoin's Best Week Since July Shows Limited Toll of UK Retail Crypto Futures Ban

Bitcoin holds above $11K after biggest weekly gain since July, despite FCA ban on retail crypto futures trading and inventory drawdowns by miners.

Oct 12, 2020 at 12:38 p.m. UTC
Updated Sep 14, 2021 at 10:07 a.m. UTC

Not everyone is happy with the U.K. Financial Conduct Authority’s decision to ban individual investors from speculating on bitcoin and other cryptocurrencies, and there's an argument to be made that the agency's rationale was hollow.  

But the ban is likely to have a minimal impact, partly because the market is so small, CoinDesk's Muyao Shen reported Monday, citing analysts and industry executives who track the trading business.

Some U.K.-based brokerages that had offered the crypto derivative products to retail traders could see a drop-off in revenue, though big cryptocurrency exchanges including Kraken say the impact is likely to be minimal. While U.K. individuals can still trade the actual cryptocurrencies, there may be some traders who will seek to skirt the rules by trading on offshore exchanges. 

The ban is set to take effect in January. Professional investors weren’t barred from trading cryptocurrency derivatives partly because they “have greater understanding of the risks and greater capacity to absorb potential investment losses,” according to an FCA report this month

“Those still keen on trading crypto derivatives will just find ways to open accounts in unaffected regions,” Don Guo, CEO of Broctagon Fintech Group, told CoinDesk in an email. “There is a stark risk that retail traders will simply trade on unregulated exchanges, which in fact puts them at more risk.”

Among those affected, the proposal does appear to be quite unpopular: The FCA report indicated that some 97% of comments submitted in connection with the rulemaking were opposed to agency’s proposed ban.

CoinDesk Research Director Noelle Acheson argued in her weekly Crypto Long & Short newsletter that the agency overstepped, since its "job includes protecting investors, not passing judgment on new asset groups." One of the agency's reasons for the ban was the "extreme volatility" in cryptocurrency prices, but bitcoin is far less volatile than many stocks, including Tesla. 

Bitcoin's volatility is less than Tesla's.

Bitcoin Watch

Table showing MRI readings above 100% over recent timeframes, indicating bitcoin miners are selling more units of the cryptocurrency than they’re producing.

Bitcoin is struggling to extend the preceding week's 6.6% gain, the biggest percentage rise since the last week of July. 

The cryptocurrency is currently trading in the red near $11,250, having printed highs near $11,500 over the weekend. 

The decline could be short-lived, as the global equity markets are trading in the green despite the resurgence of the coronavirus concerns across Europe. 

Besides, the bitcoin market looks strong – the cryptocurrency rallied last week even though miners ran down inventory by 1,000 BTC by selling more than they mined, according to the MRI figure provided by data source Bytetree.com

The miner’s rolling inventory (MRI) figure, which tracks the changes in miners' inventory levels, held well above 100% last week, as those responsible for generating coins boosted supply. The five- and 12-week MRIs are also holding above 100%.

In other words, the buying pressure has been strong enough to absorb extra supplies from those responsible for generating the cryptocurrencies. That's a bullish sign.  

Also, the payment company Square's recent disclosure of their bitcoin investments has given market players a fresh shot of confidence, and technical bias has turned bullish with the cryptocurrency's weekly close above $11,200.

As per charts, resistances are located at $11,500 and $12,000. On the downside, support is seen at $11,000, which, if breached, could cause some short-term technical traders to exit the market. 

- Omkar Godbole

Token Watch

Bitcoin (BTC): Someone just moved $11M of bitcoin that was tucked away in idle wallets since being mined in 2010.

Yearn.Finance (YFI): Project creator Andre Cronje tells CoinDesk he's quitting the project, then tweets a denial.

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