Market Wrap: Bitcoin Retreats From All-Time High; Ether Outperforms

The ETF enthusiasm has faded but some investors expect pullbacks to remain limited for the remainder of the year.

Oct 22, 2021 at 8:30 p.m. UTC

Damanick is a crypto market analyst at CoinDesk where he writes the daily Market Wrap and provides technical analysis. He is a Chartered Market Technician designation holder and member of the CMT Association. Damanick is also an equity/fixed income portfolio manager and does not invest in digital assets.

Helene is a U.S. markets reporter at CoinDesk, covering US economics, the Fed, and bitcoin. She is a recent graduate of New York University's business and economic reporting program.

Bitcoin’s price continued to decline on Friday, ending the week down about 2% compared to a 1.7% gain in the ether cryptocurrency. Some traders who went long on BTC ahead of the launch of ProShares’ futures-focused exchange-traded fund (ETF) this week appear to be taking profits.

Still, some investors expect pullbacks to remain limited for the remainder of the year. And one firm mentioned that alternative cryptocurrencies such as ether could see further upside relative to bitcoin.

“We remain optimistic but are cautious about downside risk,” crypto trading firm QCP Capital wrote in a Telegram announcement. The firm noted that leverage levels are high in the bitcoin futures market, which typically precedes a price pullback. QCP also expects ether to outperform bitcoin in the near term.

Valkyrie Investments’ Bitcoin Strategy ETF, another futures-focused product, went live on the Nasdaq under the ticker BTF on Friday. The ETF’s share price tracked bitcoin lower during its first day of trading, down about 4% and closing at $24.30.

Latest prices

  • Bitcoin (BTC): $60,815, -3.0%
  • Ether (ETH): $3,974, -2.4%
  • S&P 500: $4,544, -0.11%
  • Gold: $1,793, +0.62%
  • 10-year Treasury yield closed at 1.65%

BITO pushes limits on CME Group

The amount of money locked in the CME-based futures contracts has tripled this month, with more than $1.5 billion flowing into the market after the ProShares Bitcoin Strategy ETF (NYSE: BITO) went live on Tuesday, reported CoinDesk’s Omkar Godbole.

However, BITO could be exposed to a significant tracking error, or the difference between bitcoin’s performance and actual returns from the fund.

This is because the CME allows a single entity to own a maximum of 2,000 contracts in the front-month futures while capping the overall positions across different maturities at 5,000 contracts. BITO appears to be close to hitting the limit in the October expiry and may continue to snap up longer duration futures, according to Godbole.

CoinDesk - Unknown

Ether gaining ground relative to bitcoin

Ether, the world’s second-largest cryptocurrency by market capitalization, slipped below the $4,000 price level on Friday. Similar to bitcoin, technical indicators show ether is at its most overbought point since September, which preceded a sharp price pullback. This time, however, ETH’s pullback could be limited to around the $3,700 support level.

The ETH/BTC ratio stabilized over the past week, suggesting that traders are beginning to rotate out of BTC and into ETH. The ratio held support around 0.06 and could face short-term resistance around 0.07 and 0.08.

CoinDesk - Unknown

Altcoin roundup

  • ETH second in Coinbase exchange trading volumes. Last week, ETH landed the second spot in terms of trading volume on the Coinbase exchange. “The ETH buy ratio has picked up, suggesting a bounce in ETH/BTC might be in the making,” Coinbase wrote in a Friday newsletter. Elsewhere, some layer one protocols maintained their relatively lackluster volumes.
  • Current taps Bison Trails to support Polkadot DeFi plans: Fintech company Current is working with Bison Trails, a blockchain infrastructure that was acquired by Coinbase in January, to sync up with Polkadot parachain networks Karura and Acala in an effort to bring DeFi services to its three million users, CoinDesk’s Eli Tan reported. The company has partnered with Ripple and Ethereum before but neither came to fruition due to technical limitations, the company said.
  • Ripple CEO says the SEC helped ether overtake XPR as no. 2 crypto: Ripple CEO Brad Garlinghouse says ether was able to surpass XRP as the second-most popular crypto by market cap because it had been granted a regulatory green light and received favorable treatment by the U.S. Securities and Exchange Commission, Cointelegraph reported. The SEC has been pursuing Ripple over claims that its associated XRP currency is an unregistered security. The SEC does not consider bitcoin or ether to be securities.

Relevant news

Other markets

Most digital assets in the CoinDesk 20 ended the day lower.

Notable winners as of 21:00 UTC (4:00 p.m. ET):

  • Algorand (ALGO): +6.32%
  • Filecoin (FIL): +2.97%
  • Dogecoin (DOGE): +2.83%

Notable losers:

  • Bitcoin (BTC): -2.34%
  • Ethereum Classic (ETC): -2.09%
  • Litecoin (LTC): -2%
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Damanick is a crypto market analyst at CoinDesk where he writes the daily Market Wrap and provides technical analysis. He is a Chartered Market Technician designation holder and member of the CMT Association. Damanick is also an equity/fixed income portfolio manager and does not invest in digital assets.

CoinDesk - Unknown

Helene is a U.S. markets reporter at CoinDesk, covering US economics, the Fed, and bitcoin. She is a recent graduate of New York University's business and economic reporting program.

CoinDesk - Unknown

Damanick is a crypto market analyst at CoinDesk where he writes the daily Market Wrap and provides technical analysis. He is a Chartered Market Technician designation holder and member of the CMT Association. Damanick is also an equity/fixed income portfolio manager and does not invest in digital assets.

CoinDesk - Unknown

Helene is a U.S. markets reporter at CoinDesk, covering US economics, the Fed, and bitcoin. She is a recent graduate of New York University's business and economic reporting program.

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