Institutions look to sell BTC in a falling market

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  • Steven McClurgChief Investment Officer and Co-Founder, Valkyrie

  • Cory KlippstenCEO, Swan Bitcoin

  • Maxim GalashCEO, Coinchange

Market movements

It’s a new week but the same old story in the financial markets. The US Dollar is trading higher again as macro headwinds weigh on stocks, bonds and cryptocurrencies.

Bitcoin (BTC), the top cryptocurrency by market value, was trading at a 3.5-month low of $33,080 at press time, representing a 3% decline on the day, according to the data. from CoinDesk.

“Investors are clearly concerned about the Federal Reserve’s aggressive monetary policy as they will also begin quantitative tightening (drawback of liquidity from the market) in June,” said Marcus Sotiriou, an analyst at GlobalBlock, a digital asset broker based in the UK. UK. an email.

Institutional sale

A popular indicator suggests that institutions are selling in a falling market.

The “Coinbase premium index”, an indicator showing the spread between Coinbase’s BTC/US dollar (USD) pair and Binance’s BTC/USDT pair involving the stablecoin tether, recently turned negative and fell to a low of 12 months, according to data tracked by South Korea-based Cryptoquant.

“This [negative Coinbase premium] is telling because a greater percentage of institutions use Coinbase compared to retail, while the reverse is the case for Binance. Therefore, the mentioned pricing mismatch suggests that institutions are currently not as interested as retail,” Sotiriou said. “It will be good to keep an eye on the future and if/when that reverses. , this could coincide with some market relief or reversal. .”

CryptoQuant said in a quick blog post: “Usually there is a Coinbase premium. This means that the price of bitcoin on Coinbase is higher than on Binance. Net Worth) traded primarily on Coinbase. However… the past few days it’s been negative. This indicates strong selling on Coinbase Pro!”

Coinbase Bitcoin Premium Index (CryptoQuant)

the earth is shaking

Programmable blockchain Terra’s UST, the world’s largest decentralized stablecoin, lost its 1:1 dollar peg over the weekend after multimillion-dollar UST selloffs on Curve and Binance and a series of pullbacks highlights of Anchor Protocol, a lending marketplace offering high returns to UST depositors.

The depegging may have added to the downward pressure on bitcoin and the broader crypto market. “People are afraid that the Luna Foundation Guard [LFG] should sell its BTC to support the UST peg, so BTC sells,” Tagus Capital Multi-Strategy Fund partner Ilan Solot said in an email.

“Remember that the Terra Foundation is the second largest BTC holding company, between MicroStrategy and Tesla,” Solot added.

The stablecoin was 0.5% off its peg at the time of writing. Terra founder Do Kwon tweeted early Monday that the LFG had agreed to deploy $1.5 billion in capital to defend the peg while assuring the market that the foundation was not trying to abandon its position in bitcoin. .

From “hopium”

Amid the gloom and doom, two charts could offer “hopium” — crypto slang for hope — to bitcoin’s battered bulls.

The first is bitcoin’s implied volatility (IV) – options traders’ expectations of price turbulence over a specific time frame. One-week implied volatility has moved above the six-week gauge, signaling a spike in fear.

A similar IV pattern has marked temporary/interim price lows in the past.

Bitcoin One Week and Six Month IV (Skew, CoinDesk)

Bitcoin One Week and Six Month IV (Skew, CoinDesk)

Second, the technical chart for the Dollar Index (DXY) shows that the 50-week moving average is on track to break above the 200-week MA, confirming the so-called bullish crossover (Editor’s note: the newsletter stated mistakenly “monthly” moving averages). .

While the golden cross is a bullish indicator, according to technical analysis theory, it is a lagging indicator in reality and often traps traders on the wrong side of the market. In other words, the DXY might close on a tentative high. Dollar weakness is seen as a positive for risky assets, including cryptocurrencies.

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Today’s newsletter was edited by Omkar Godbole and produced by Parikshit Mishra and Stephen Alpher.