Written by Richard Wynn, Institutional Services and Sandro Huwyler, Trade Desk of Bitcoin Suisse AG
19th May, 2019
Since we left our last briefing we’ve seen Bitfinex raise USD 1bn in a 10 day private funding raise to plug its liquidity gap at the centre of the New York Attorney General’s court order and the Trump/China trade war intensifying a sell-off in traditional markets. Although opaque, it is plausible to suggest some flows have entered BTC as a non-correlated asset to stock markets, particularly from the Chinese where the government has continuously tried to prevent people from selling Yuan in order to move funds out of the country.[i]
Price action in May has seen the bulls grab the popcorn as BTC broke the USD 6,400 resistance level, a key level for the favoured short positions built throughout April’s 35% positive price action. The large scale purchasing of BTC to liquidate the shorts sent the No.1 cryptocurrency by market cap through USD 8,000 and eventually peaking around the USD 8,400 level.
Blue: BTCUSD Short Positions on Bitfinex / Yellow: BTCUSD Long Positions on Bitfinex
At the time of writing BTC is above USD 8,000, however, reading between the lines and at the blink of an eye you may have missed an 18% drop to USD 6,250 on Thursday. A large sell order executed on the Bitstamp exchange around 3am UTC effectively cleaned out the order book resulting in the liquidation of USD 250m of long positions on another exchange, BitMEX. The reason for the mass liquidation was due to the calculation of the BTC index price on BitMEX being 50% weighted to the Bitstamp exchange price of BTC. [ii]
BTC might be coming of age in 2019, with more complex rhetoric, less concerns of fraud, and talk of the future rather than past[iii], however, one-sided trades can cause complacency. After a quick recovery of BTC to trade back above USD 8,000 our support and resistance levels remain as previous to Thursday’s whale trap.
A final glance to the Bitfinex exchange, as of our last commentary BTC was being traded up to a 6% premium due to concerns about Bitfinex’s USD liquidity highlighted by the New York Attorney General’s announcement in April. At the time of writing BTC is now trading at a slight discount on Bitfinex, a sign of maturity in how less favourable news is being analysed and absorbed than times past but also a highlight to inefficiencies of price discovery.
Blue: BTCUSD on Bitfinex / Orange: BTCUSD on Bitstamp
1.1.1 Institutional News
As BTC rallied up to USD 8k the CME declared its BTC futures product had recorded it’s new all-time high of 33.7k, the third time this year a new all time high for contracts sold in a day. Whereas CME futures are cash settled, Bakkt, the first regulated BTC settled futures exchange owned by the Intercontinental Exchange announced its long waited launch is planned for July.
Meanwhile Grayscale Bitcoin Trust Fund reported it’s April inflow of plus USD 58.2m, almost as high as the USD 60.8m in December 2017. The first Annual Crypto Hedge Fund report published by PwC and Elwood Asset Management found that while 2018 saw a 72 per cent fall in the price of BTC, the median crypto hedge fund returned -46% over the same period. An indication that managers were successfully able to outperform their benchmark with quantitative funds overperforming fundamental and discretionary funds. The report was conducted on the 100 largest global crypto hedge funds by AuM.[iv]
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