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Market Wrap: Bitcoin Recovers to $18.2K While Market Dynamics Juice DeFi Total Locked

Bitcoin fell below $18,000 Wednesday while DeFi closing in on $15 billion locked may have more to do with price than actual cryptocurrency parked there.

Dec 9, 2020 at 9:15 p.m. UTC
Updated Sep 14, 2021 at 10:41 a.m. UTC

Bitcoin is holding just above $18,000 but analysts are mixed on where it will head, DeFi’s total value locked looks to have momentum but that might have to do with crypto market conditions.

  • Bitcoin (BTC) trading around $18,355 as of 21:00 UTC (4 p.m. ET). Slipping 1.9% over the previous 24 hours.
  • Bitcoin’s 24-hour range: $17,630-$18,836 (CoinDesk 20)
  • BTC near its 10-day moving average and below the 50-day, a sideways-to-bearish signal for market technicians.

Bitcoin trading on Bitstamp since Dec. 6.

The price of bitcoin fell for the third straight day this week, dropping to as low as $17,630 Wednesday, according to CoinDesk 20 data. Price has bounced back somewhat to $18,355 as of press time. 

“Obviously we are now seeing the impact of temporary bullish exhaustion,” said Andrew Tu, an executive for crypto quant trading firm Efficient Frontier. “After failing to break the all-important $20,000 psychological figure several times, having been held down repeatedly between $19,000 and $20,000 over the last two weeks, we are now seeing a correction for BTC.” 

On Dec. 3, bitcoin hit a high of $19,464 before slumping, according to the CoinDesk 20.

Bitcoin price the past three months.

“In the medium run, the continued bullish news from institutional players, like the recent Wells Fargo report, should drive the price upwards past the $20,000 resistance, assuming that the macro landscape doesn't dramatically change,” Tu added. 

“The recent run-up from $10,000 was primarily driven by spot volumes as U.S. financial institutions are increasingly buying up bitcoin,” said Jason Lau, chief operating officer San Francisco-based exchange OKCoin. “This means that funds are not overextended on leverage right now like in previous rallies and these institutions have capital to deploy to buy any dips.” 

Total volume on major CoinDesk 20 exchanges were higher Wednesday than they have been any other day this week, at $1.3 billion as of press time.

Spot volumes on major exchanges the past month.

“Since bitcoin didn’t break the $20,000 threshold, we have started to witness a weakening bullish trend,” said Jean Baptiste Pavageau, partner at quant trading firm ExoAlpha.

According to data from Skew, funding rates for long leveraged positions are dropping, indicating a more bearish trend. That’s because traders appear to be seeking more downside exposure than rocket-fueled bullish positioning.

Bitcoin swaps funding on the derivatives market the past month.

“We expect the price to retest $16,000 first and to bounce on its major support at $13,000 in case of further correction,” added Pavageau. “The bullish trend would still be intact on a larger scale since the second part of this year.”

DeFi 'locked' metric near all-time high

Ether (ETH), the second-largest cryptocurrency by market capitalization, was up Wednesday, trading around $573 and climbing 1.8% in 24 hours as of 21:00 UTC (4:00 p.m. ET).

The amount “locked” in Ethereum-based decentralized finance, or DeFi, has been flirting with an all-time high of $15 billion for the first time, according to data aggregator DeFi Pulse. Locking value in DeFi provides these protocols with liquidity. In turn, investors get a “yield” on their assets, usually quoted in average percentage yield (APY) terms on those assets. 

Total value locked (TVL) in DeFi the past month.

Drilling down, the amount of ether locked is still hovering near 7 million total ETH.

Total ether value locked (TVL) in DeFi the past month.

Meanwhile, the amount of bitcoin locked has been dropping for most of the past month and was at 162,703 BTC as of press time.

Total bitcoin value locked (TVL) in DeFi the past month.

John Willock, chief executive officer of Tritum, a diversified crypto investment firm, says market dynamics are playing a role in total value locked nearing $15 billion while crypto appears to be withdrawn from DeFi. 

“The total value in dollar terms of assets locked in DeFI is highly levered to the price change of ETH, BTC and to a lesser extent the long list of other non-stablecoin crypto tokens circulating in the ecosystem,” Willock said. “Price buoyancy and positive sentiment drive a lot of the activity in chasing speculative opportunities in all of crypto, and DeFi is very much the same.”

Other markets

Digital assets on the CoinDesk 20 are mixed on Wednesday. Notable winners as of 21:00 UTC (4:00 p.m. ET):

Notable losers:

Equities:

Commodities:

  • Oil was flat, up 0.08%. Price per barrel of West Texas Intermediate crude: $45.62.
  • Gold was in the red 1.6% and at $1,838 as of press time.

Treasurys:

  • The 10-year U.S. Treasury bond yield climbed Wednesday jumping to 0.939 and in the green 2.1%.

The CoinDesk 20: The Assets That Matter Most to the Market

DISCLOSURE

The leader in news and information on cryptocurrency, digital assets and the future of money, CoinDesk is a media outlet that strives for the highest journalistic standards and abides by a strict set of editorial policies. CoinDesk is an independent operating subsidiary of Digital Currency Group, which invests in cryptocurrencies and blockchain startups.

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