- Price Point: After a strong week for the crypto market, bitcoin and ether both slip. Crypto entrepreneurs Sam Bankman-Fried and Justin Sun are in talks to buy a majority stake of Huobi Global in what could be one of the biggest deals ever in crypto.
- Market Moves: The value of crypto derivative contracts traded rose 13.4% last month from June. That was the first uptick since March.
- Chart of The Day: The broadest tightening cycle in history signals pain for risky assets.
Bitcoin hit a two-month high of $24,900 on Thursday, but now appears to be struggling for momentum.
Bitcoin’s slower upward movement is in line with its declining dominance against altcoins. BTC dominance stands at about 40%, a decline from its recent high of 47% in June.
The decline in price for BTC on Friday might encourage some profit-taking over the weekend, according to Oanda analyst Craig Erlam.
“What's interesting about bitcoin at these levels is how little momentum there is in the rallies, which is going to make $25,000 very difficult to overcome,” Erlam wrote in a note on Friday.
“Is that a sign that we're seeing some profit-taking or that the correction has run its course and further downside pressure is on the horizon?” he added.
Traditional markets also had a good week, with the Nasdaq and S&P 500 both set to post their longest sequence of weekly gains since November.
In the news, Leon Li, founder of crypto exchange Huobi Global, is in talks to sell a majority stake in the company in a transaction that would value the firm at $3 billion or more, Bloomberg reported on Friday.
In a tweet, Sun denied any involvement.
Coinbase was in the news on Thursday, too, as credit ratings agency S&P Global said in a note that the outlook for the crypto exchange was "negative."
Crypto Derivative Trading Volume Rose for First Time in 4 Months as Market Rallied in July
By Omkar Godbole
The value of crypto derivative contracts traded rose 13.4% last month from June, the first uptick since March, CryptoCompare said.
The London-based data aggregator and index provider said $3.17 trillion worth of the contracts changed hands in July, while turnover in the spot market fell 1.34% to $1.39 trillion, the lowest level since December 2020. Spot trading volume on the Coinbase (COIN) crypto exchange, a venue preferred by institutional investors, declined 12.8% to $51.5 billion.
Unlike spot trading, trading derivatives offer leverage. While that allows investors to control a sizable contract value with a relatively small amount of money and increase their potential profits, it also increases their risk. Market observers consider derivatives market activity as a proxy for traders, or speculative interest, while the spot market is seen as representing long-term investors.
"The rise in derivatives trading volume indicates an increase in speculative activity as traders believe there is room for further upside in this rally, with no Federal Open Market Committee meeting scheduled for next month," CryptoCompare said in its monthly report. The rate-setting FOMC will meet in September, but not in August.
The use of leverage, not spot market trading, fueled a crypto market rally in July that restored $240 billion in market capitalization. While leverage boosts returns, it exposes traders to forced liquidations by exchanges if the traders can't meet margin shortages. Therefore, derivatives-led rallies like July's often inject volatility into the market. That said, overall leverage still remains low compared with early 2021.
Another key takeaway from the report is that there was no shortage of people chasing stablecoins despite the collapse of Terra's UST stablecoin in May and the ensuing volatility in other cryptocurrencies with values pegged to the dollar or other fiat currencies.
CryptoCompare's report shows the volume for bitcoin-to-stablecoin tether (USDT) spot trading increased 31.5% to 8.78 million BTC in July. Bitcoin spot trading into binanceUSD (BUSD) surged 80.2% to 2.13 million BTC, surpassing bitcoin-to-U.S. dollar turnover for the first time on record.
"Investors continue to prefer safety under macroeconomic conditions," CryptoCompare noted about the pickup in bitcoin-to-stablecoin volume.
The crypto market valuation on Thursday rose to a two-month high of $1.17 trillion, extending July's recovery. Volume could pick up further in coming weeks as the supposedly bullish Ethereum Merge is due in mid-September.
Chart of the Day
Broadest Tightening Cycle in History Signals Pain for Risk Assets
By Omkar Godbole
- The historically unprecedented synchronized monetary tightening across countries indicates that the path of least resistance for risky assets, including cryptocurrencies, is to the downside.
- Markets haven't seen this kind of global tightening in decades. During the previous Federal Reserve rate hike cycle of late 2015 to late 2018, other major central banks held on to low rates and liquidity-pumping asset purchase programs, providing a cushion to risky assets.
- Indian Authorities Freeze Nearly $46M Assets of Crypto Lender Vauld: The Peter Thiel-backed project filed for bankruptcy protection last month in Singapore.
- Abrdn Buys Stake in Digital Exchange Archax: With the investment, the U.K. asset-management firm has become Archax's largest outside shareholder.
- Netherlands Arrests Suspected Tornado Cash Developer: The country's Fiscal Information and Investigation Service hasn't ruled out making more arrests in the case.
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