Blockchain

An analyst has explained how the growth in “paper BTC” could be counteracting a bullish Bitcoin supply shock from taking effect.

Liquid Bitcoin Supply Has Dropped, But Paper BTC Is Still At Significant Levels

In a new post on X, analyst Willy Woo shared insight into how the paper BTC compares against the real BTC being traded. According to the analyst, “paper BTC” refers to the combined futures open interest value.

Here is a chart that shows the trend in the ratio between the two types of Bitcoin over the past couple of years:

The graph shows that the ratio’s value has fluctuated between 0.2 and 0.3 in recent months, suggesting that the paper Bitcoin has been 20 to 30% more than the real coins during this period.

The real supply of the cryptocurrency may be divided into three categories: illiquid, liquid, and highly liquid. The on-chain analytics firm Glassnode puts coins into these divisions based on the behavior of the investors holding them.

To be more precise, the ratio between the cumulative outflows and inflows of the investor since they entered the market is used to define their liquidity. This ratio’s value approaches zero for the illiquid supply, as holders of this cohort rarely move coins out of their addresses.

Similarly, the value becomes close to 1 for the highly liquid supply, as investors of this class tend to shift their coins quickly. In the above ratio, Woo has only used this highly liquid supply as a measure of the “real BTC.”

As the chart below shows, this highly liquid Bitcoin supply has been going down recently.

The analyst notes that the less the number of coins in this supply, the more bullish is the outlook for Bitcoin since there are a lesser amount of coins available to be bought.

Another analyst, James V. Straten, replied to Woo’s post with a chart that combines the liquid supply into the ratio, which, while less fluid than the highly liquid supply, still constitutes a notable part of the BTC traded supply.

According to Straten, the liquid and highly liquid supplies have observed a combined drawdown of 500,000 BTC (around $13.3 billion at the current exchange rate) since May 2023.

However, as the paper BTC is still significantly more than the real BTC, any “supply shock” effects being created out of the real supply becoming less liquid are being more than made up for by the increase in the paper supply.

BTC Price

Bitcoin has registered a sharp decline in the past day, as the coin has lost the $27,000 level and is currently floating around the $26,500 mark.

In a recent disclosure, a former employee of Alameda Research, a trading firm led by Sam Bankman-Fried, has unveiled crucial information regarding the dramatic 87% plummet in Bitcoin (BTC) value during 2021. 

The incident, which occurred on October 21, 2021, witnessed BTC’s price on Binance.US nosedive from approximately $65,760 to $8,200 within a short period.

Insider Details Of Bitcoin Plunge And Alleged Manual Trading Error

The ex-employee, Baradwaj, alleged that the trading firm was directly responsible for the sudden price drop, attributing it to a “manual trading error” rather than solely relying on algorithmic trading. 

Baradwaj claimed that a trader at Alameda Research inadvertently entered an incorrect decimal while attempting to sell a block of BTC in response to breaking news. 

Consequently, the trade was executed at an extraordinarily low price, resulting in a drastic crash.

Highlighting Alameda’s trading operations, Baradwaj revealed that the firm primarily employed semi-systematic strategies, where traders fine-tuned algorithms to execute trades automatically at high frequencies. 

However, manual trades were occasionally employed in instances of system bugs or arbitrage opportunities on platforms where automated trading had not been implemented.

Unlike automated trading, which adhered to sanity checks and market prices, manual trades were discretionary and prone to human error. Unfortunately, an Alameda trader’s mistake triggered a chain reaction on that fateful day in October. 

The erroneous trade caused Bitcoin’s price to plummet from its peak of $65,000 to as low as $8,000 on certain platforms before swiftly recovering through the actions of arbitrageurs.

The incident created a stir on social media, with traders and news outlets scrambling to understand the sudden price movement. Binance.US, the platform at the center of the flash crash, issued a statement attributing the event to a bug in the trading algorithm of one of their institutional traders.

Baradwaj further states that the losses incurred by Alameda Research were substantial, amounting to tens of millions. Still, due to the genuine nature of the mistake, the firm took immediate action to enhance sanity checks for manual trades. 

This incident exposed a vulnerability in Alameda’s risk management practices, prompting implementing “robust measures” to prevent similar occurrences in the future.

The former employee shed light on the working culture at Alameda, characterized by a philosophy of moving fast to capitalize on opportunities, even if it occasionally resulted in unforeseen costs or vulnerabilities. 

This approach, championed by Sam Bankman-Fried, shaped the culture at Alameda Research and the now-bankrupt crypto exchange FTX.

For nearly two years, the BTC flash crash incident remained a puzzle to the public, leaving many wondering about the cause behind such a significant price drop. With the revelations made by Baradwaj, the veil has been lifted, providing valuable insights into the events that unfolded behind the scenes.

As of this writing, the largest cryptocurrency in the market, BTC, trades at $26,600, down by over 2.1% in the 24-hour time frame. 

Featured image from iStock, chart from TradingView.com 

The Bitcoin mining industry has risen steadily in the past few years thanks to the widespread adoption and increasing interest in the Bitcoin blockchain. This growth has led to a vast increase in Bitcoin’s hash rate, causing concerns regarding the carbon footprint left behind by mining activities.

A recent Bloomberg study has shown, however, that the carbon footprint left behind by the Bitcoin blockchain has stalled in recent years. 

Bitcoin Unlikely To Burn The Oceans

It’s no news that Bitcoin mining is now a big industry on its own, with some mining firms even contributing to the economy and grid of their locations. Major BTC mining companies have also turned years of profits, which have attracted many investors, including large investment firms. 

The issue of climate change and rising temperature have been the focus of many activists for years, with many accusing the energy-intensive activities of BTC mining of contributing negatively. As a result, regulatory agencies have been more insistent that mining corporations investigate safer and cleaner alternatives to fossil fuels for their energy needs. 

To this end, Jamie Coutts, an analyst for Bloomberg, revealed that the percentage of Bitcoin transactions that use sustainable energy has increased steadily since 2021 and is now over 50%. 

A new report has dropped on the Bloomberg @TheTerminal this morning – a further examination of this symbiosis between #Bitcoin mining and the global #EnergyTransition

pic.twitter.com/4lPt9cFAl9

— Jamie Coutts CMT (@Jamie1Coutts) September 20, 2023

This rise was particularly kickstarted by China’s ban on Bitcoin Mining in 2021 and Kazakhstan’s cap on the energy used by domestic crypto miners. Since then, the overall hash rate has increased by 286%, yet carbon dioxide emissions have decreased from 600 grams of CO2 per KWh to 296.5 grams of CO2 per KWh.

What Does This Mean For The BTC Ecosystem?

Bitcoin mining’s energy requirements take up around 50% of a miner’s operational cost. Cheaper clean energy is a way to offset these costs while simultaneously reducing the industry’s emissions or carbon intensity. 

The Cambridge Centre for Alternative Finance (CCAF) also recently lowered its Bitcoin electricity consumption estimates by 25% from 105.3 TWh to 95.5 TWh, showing the transition is having better effects.

A transition into cleaner energy methods speaks well for BTC and the crypto industry as a whole, considering the blockchain has been heavily criticized in the past by environmentalists. This leaves room for companies to accept Bitcoin as a payment method without facing any kind of backlash. 

Elon Musk’s Tesla, for instance, pledged in 2021 to resume allowing BTC payment for its cars when there’s a confirmation of 50% clean energy usage by miners.

Additionally, Climate technology venture investor and activist Daniel Batten argues that this metric is more than 50%.

Bloomberg Intelligence recently concluded that Bitcoin sustainable energy use has now surpassed 50%, contradicting Cambridge’s model.

Here’s a deep dive on why:

Cambridge’s model of Bitcoin emissions, which stopped updating in Jan 2022, states that Bitcoin is 37.6% from… pic.twitter.com/CP4QPmQvsb

— Daniel Batten (@DSBatten) September 18, 2023

On-chain analyst Willy Woo also estimates that the carbon footprint of the Bitcoin mining sector can be turned negative by an investment of around $450 million.

The price of Bitcoin was rejected as it approached critical resistance north of $27,000, and selling pressure continues over today’s trading session. If buyers can’t defend current levels, BTC’s price will likely re-test critical support, but this action could trigger a bounce for the cryptocurrency, according to fresh data.

As of this writing, Bitcoin trades at $26,650, with a 2% loss in the last 24 hours. Over the previous seven days, the cryptocurrency has recorded sideways price action and underperformed XRP and Toncoin’s TON, which recorded a 5% and 25% profit, respectively, across a similar period.

The Bitcoin Level To Watch If Bears Take Over

An analyst crypto research firm Material Indicators shared a fire chart showing the most significant liquidity levels for the BTCUSDT trading pair on Binance. On a monthly basis, traders on this venue have been selling the cryptocurrency and moving liquidity below current levels.

The chart below shows that the Binance orderbook for this trading pair looks “thin.” The analyst claims a “small buy wall” at around $24,700, which stands as a “line in the sand” that needs to be defended to prevent further downside price action.

Liquidity around this critical level is low, but bulls can inject capital to defend the level in case of further downside. If bulls succeed, Bitcoin will likely rally and reclaim previously lost territory.

Otherwise, bears will have the opportunity to press further on the price, returning it to critical support around $23,000 and $22,000. These levels display even less liquidity than $25,000, which could hint at a deeper correction of “Bearadise,” as the analyst called it.

Additional data provided by trading desk QCP Capital indicates that macroeconomic forces have played a critical role in influencing the price of Bitcoin. Yesterday, the US Federal Reserve (Fed) sent a “hawkish” surprise across financial markets, limiting any BTC upside momentum.

This event had a bearish impact on legacy markets, with the Nasdaq 100 and rates markets breaking “some very key levels,” QCP Capital stated. The trading desk added:

(…) reflexivity can take over with the bearish thesis from here. If we are right, then this macro move could seep into crypto markets and take BTC lower with it (Chart 3), albeit with a lower beta as compared to other very stretched macro markets like the NASDAQ.

Cover image from Unsplash, chart from Tradingview

Data shows Bitcoin shorts have been piling up on cryptocurrency exchanges Binance and Deribit during the past few days.

Bitcoin Funding Rates On Binance & Deribit Are Deep Red Right Now

According to data from the analytics firm Santiment, traders on the derivative market have continued to bet against the cryptocurrency recently. The relevant indicator here is the “funding rate,” which keeps track of the periodic fee that derivative contract holders on an exchange are paying each other right now.

When this metric has a positive value, it means that the long traders are paying a premium to the short traders in order to hold onto their positions. Such a trend suggests that the majority sentiment on the given exchange is bullish currently.

On the other hand, the metric being under the zero mark implies the traders on the platform hold a bearish mentality at the moment, as the shorts are the dominant force.

Now, here is a chart that shows the trend in the Bitcoin funding rates for Binance and Deribit over the past month:

As displayed in the above graph, the Bitcoin funding rate for both of these exchanges had been mostly positive during the last third of August and the starting third of this month, implying that the majority of the traders had been longs.

The bets of these holders had failed, however, as the price had seen an overall downtrend in this period. Since the rebound earlier this month, though, the sentiment has flipped in the market as shorts have piled up on both of these platforms.

These short traders haven’t been successful so far, either, as the value of the cryptocurrency has seen net growth since they have appeared. Historically, the market has actually been more likely to go against the expectation of the majority, so this pattern may be in line with that.

The reason why the asset would move against the bets of these contract holders is that mass liquidation events, called squeezes, become more likely to happen the more lopsided the sector is.

A large amount of long liquidations can amplify crashes, while short liquidations can provide the fuel for upward surges. Since Bitcoin is still seeing aggressive shorting, it may be a positive sign for the cryptocurrency’s current price rise, as a potential short squeeze could help it extend further.

Interestingly, while Bitcoin is being bet against right now, Ethereum’s funding rates are positive, as pointed out by analyst James V. Straten in a post on X.

From the graph, it’s visible that the funding rates of the top two assets in the sector have gone opposite ways recently. This means that while BTC may be able to build an uptrend off the shorts, ETH could face the opposite effect if the longs end up being liquidated.

BTC Price

Bitcoin has seen a drawdown of about 1.5% today as the asset’s price has now dropped towards the $26,700 level.

A recent announcement by the US Securities and Exchange Commission (SEC) suggests that the crypto industry may be in for more pain as it continues to endure the far-reaching consequences that the Commission’s enforcement actions have had on it. 

More Pain Incoming For Crypto?

During the Securities Enforcement Forum Central 2023, David Hirsch stated that his office plans to bring action against other crypto companies that were breaking the law. Hirsch heads the agency’s unit (Crypto Assets and Cyber Unit) that handles crypto enforcement, including the lawsuits against the biggest crypto exchanges in the world, Binance and Coinbase, and another against Ripple.

These actions are already negatively impacting these companies and, by extension, the crypto industry. As such, any further action could dampen the mood in the crypto market further. For instance, Binance US, the American arm of Binance, has seen a significant drop in its trading volumes since it began to face regulatory scrutiny. 

In June, the SEC sued Binance US for a range of infractions, including misrepresentation of trading controls and oversight on the platform. This forced the company to suspend trading for more than 100 token pairs, causing a significant drop in trading activity and investor confidence.

Also, despite securing a major victory against the SEC, Ripple’s XRP has lost most of its gains that resulted from the judgment. The XRP price has remained tepid overall, and one of the reasons for this could be that the Commission’s regulatory stance on Ripple has cast doubts in the minds of potential investors, especially with the SEC contesting Judge Analisa Torres’ ruling.  

The SEC’s continued clampdown on companies in the industry evidently influences how outsiders interact with stakeholders in the industry as they may be looking to avoid the SEC’s wrath. Ripple’s CTO, David Schwartz, also recently revealed how the SEC’s lawsuit made the company lose a deal with a stablecoin issuer. 

Meanwhile, others in the industry may be forced to leave the market or shut down certain parts of their operations, as in the case of crypto exchange Bittrex, which had to shut down its US operations earlier this year.

DeFi Not Exempted From SEC’s Wrath

So far, the SEC has been known to have largely gone after crypto projects that are more centralized. However, Hirsch stated that Decentralized Finance (DeFi) projects, which could be a direct reference to decentralized exchanges (DEXs), would not be exempted from his unit’s enforcement actions as the “label of DeFi” will not deter them from conducting investigations and doing their job. 

He, however, admitted that the Commission might not have enough resources to go after all these projects as they are already burdened with several lawsuits. This is in line with pro-XRP legal expert Fred Rispoli’s reasoning that the Commission may be looking to avoid any further legal battle as they do not have enough manpower to handle any additional lawsuit. 

Optimism has revealed its plans to sell 116 million OP tokens to seven private buyers. According to the update, this sale is for treasury management tokens. 

Based on current prices, this sale will transfer approximately $159 million worth of OP tokens to the buyers. Given the sheer amount of the sale, some traders believe it will likely cause a decline in OP’s price.

Optimism Announces Sale OF 116 Million OP Tokens Following Third Airdrop Event 

In detail, Optimism posted a community update on September 20 on selling approximately 116 million OP tokens. The tokens are from the unallocated portion of the OP Token treasury, and these tokens are part of the Foundation’s original working budget of 30% of the initial OP supply.

According to the update, the tokens are subject to a two-year lockup. During the lockup period, the purchasers can delegate the tokens to third parties for on-chain governance.

Also, the announcement stated that from September 20, several transactions will take place with the released tokens. It noted that the transactions are pre-planned. 

It bears mentioning that this token sale comes a few days after Optimism announced its third OP airdrop to reward community members for participation in on-chain governance. Optimism released over 19 million OP tokens to over 31,000 unique addresses. 

Meanwhile, the OP community received the announcement with mixed reactions, with one user expressing disappointment. He expressed concerns that the token sale will increase Optimism’s circulating supply, impacting the price.

Optimism’s Private Token Sale: Will It Affect OP’s Price?

Some observers have expressed concern that the sale will affect OP’s price negatively, as the buyers may dump their tokens. However, there are a few reasons why this is unlikely to happen.

Firstly, the sale is private, meaning the buyers are not required to disclose their identities or intentions for the tokens. Therefore, it makes it difficult for traders to anticipate the buyers’ actions.

Secondly, the tokens are from the OP treasury’s unallocated portion and are not part of the circulating supply. It means that the sale will have a minimal impact on the availability of OP on the open market.

Furthermore, the tokens are subject to a two-year lockup period. The lockup prevents buyers from selling them on secondary markets until at least 2025, reducing the likelihood of a sell-off that could depress price.

Overall, Optimism can fund its development by raising capital from investors without relying on the public. Such action could lead to increased demand for OP from bullish investors on the project’s long-term prospects.

Historical Data Suggests Private Sales Could Boost OP Price

Other projects have held similar private sales in the past. Recall that Polygon raised $450 million last year in a private token sale led by Sequoia Capital India. Also, in 2021, Arbitrum raised $120 million in a private token sale led by Lightspeed Venture Partners.

In both of these cases, the private token sales positively impacted the price of the respective tokens. The Polygon MATIC’s price increased by over 50% in the two weeks following the announcement of the private sale. 

Similarly, the price of AAVE increased by 20% in the two weeks following Arbitrum’s private sale announcement.

Therefore, based on this historical precedent, the private sale could benefit OP in the long run. However, note that the cryptocurrency market is volatile, and OP’s price is not guaranteed to increase.

Bitcoin analyst and fervent BTC advocate, Will Clemente, has recently shed light on a compelling macroeconomic landscape unfolding, potentially favoring the world’s leading cryptocurrency. 

Clemente suggests that the United States is currently facing an unavoidable predicament, where it must increase its money supply significantly to manage its mounting debt burden. This, he argues, sets the stage for substantial currency debasement in the near future.

Clemente’s analysis hinges on the growing probability of the United States further expanding its money supply over the coming years. With the relentless trend of rapid money printing, he raises a critical question: Which assets will emerge as the top performers in this volatile financial landscape? Among the contenders, including the stock market, commodities, real estate, and venture/angel investing, Clemente’s resounding answer is Bitcoin.

Despite being down nearly 70% from its 2021 highs, there is still a high likelihood that Bitcoin succeeds.

With the market going sideways, Bitcoin volatility near all time lows, and me losing my mind, decided to compile a few thoughts on why:

It is widely known that Bitcoin… pic.twitter.com/kNo9RBvyiR

— Will Clemente (@WClementeIII) September 19, 2023

Bitcoin: The Digital Safe Haven

As Clemente delves into his rationale, he highlights the unique attributes that make Bitcoin stand out in this tumultuous economic climate. He emphasizes that while gold has long been considered the go-to asset during periods of currency debasement, Bitcoin’s upcoming halving event will significantly bolster its stock-to-flow ratio, surpassing even that of gold and silver. 

Furthermore, Bitcoin’s advantages of being highly transportable, divisible, verifiable, and provably scarce position it as a superior alternative to traditional commodities.

The sentiment surrounding Bitcoin’s potential is not limited to crypto enthusiasts and analysts. Best-selling author of “Rich Dad Poor Dad,” Robert Kiyosaki, has echoed similar sentiments. Kiyosaki emphasizes the urgency of taking action in the current economic climate. 

He dismisses questions about future price predictions for Bitcoin, gold, and silver in 2025 as “silly.” Instead, he urges individuals to focus on their present holdings, emphasizing that time is running out to seize the opportunities presented by these assets.

Act Now Before Prices Surge

Kiyosaki contends that Bitcoin, gold, and silver remain relatively affordable investments at present but warns that this window of opportunity is closing fast. He predicts that as more people recognize the potential of these assets and rush to acquire them, prices will inevitably surge. 

I am constantly asked “What price will gold, silver, or Bitcoin be in 2025. My reply is that is a silly question. More important question is how many gold, silver, Bitcoins do you have TODAY? Gold, silver, Bitcoin are bargains today… but not tommow. America is broke. Buy GSBC…

— Robert Kiyosaki (@theRealKiyosaki) September 19, 2023

As Bitcoin’s current price hovers around $27,028.81, the recent 2.8% seven-day increase underscores the growing interest in these digital and precious metal assets.

The macroeconomic stage appears to be set for Bitcoin to shine amidst concerns about the U.S. economy. Analysts like Will Clemente and financial experts like Robert Kiyosaki are sending a clear message: the time to act is now, as the future of Bitcoin and precious metals becomes increasingly promising in an uncertain financial world.

Featured image from Inside Bitcoins

Ethereum has been one of the cryptocurrencies to maintain a reasonably high level even through multiple price crashes in the market. However, it seems like the altcoin will not be able to hold as it has done in the past with a dreaded bearish signal resurfacing to threaten the asset’s price.

Ethereum Addresses Holding More Than 1,000 Coins Fall

Over the last few years, the Ethereum whales have fervently held on to their coins. The large holders were some of the most convinced when it comes to the altcoin, with the number of wallets holding more than 1,000 coins maintaining above 2018 lows. However, the support has broken as conviction has declined.

Glassnode reported on Wednesday, September 20, that the number of ETH addresses holding more than 1,000 coins has finally fallen to 6,082. The last time that the figure was this low was back in 2018 when the bear market was in full bloom.

This means that for the last five years, this number has held, until now. The significance of this decline is evident in what happened the last time when the figure was this low. With the bearish trend that was recorded in 2018, expectations have turned to a decline for Ethereum’s price as well.

What Happened The Last Time?

In 2018 when this Ethereum metric was at this level, the altcoin’s price suffered massively. The year saw its price plunge from as high as $1,367 to as low as $80 in the span of 12 months. The low conviction that followed this would carry on into the next year, triggering a long bearish winter for ETH.

Ethereum’s already tepid hold on the $1,600 level is also threatened by massive sell-offs. Over the last few days, there have been a series of large transactions all carrying massive amounts of ETH toward centralized exchanges.

The most recent of these transactions include 22,343 ETH worth $36.2 million at the time of the transaction being moved to Coinbase. Two hours later, Whale Alert flagged another large transaction carrying 16,500 ETH ($26.77 million) to the OKEx crypto exchange.

Since one of the major reasons why investors transfer tokens to centralized exchanges is to take advantage of their deep liquidity and sell their tokens, it is possible these whales are looking to sell these coins. In such a case, investors could be looking at massive selling pressure on the horizon for ETH, which could send its price back below the $1,600 support.

Prominent analyst EGRAG CRYPTO has brought attention to the potential of a significant surge in the XRP price, based on a technical analysis that relies on Fibonacci retracement levels. According to a recent tweet from the analyst, “#XRP Color Code To $1.4: If XRP triumphantly closes above the Fib 0.5 level at $0.57 with undeniable confirmation, we’re setting our sights on the $1.4!”

The detailed analysis of the chart shared by EGRAG CRYPTO reveals key price points that are significant for the future movement of XRP. The “wicking” range is indicated between $0.3875 and $0.4719. A dip below $0.3875 would be a cause of concern as this would invalidate the chart setup.

The “ranging” area where XRP does not have any clear direction and is just moving sideways, is defined by the analyst as the range between $0.4719 and $0.5119. But iff the cryptocurrency manages to push past $0.5119, it enters the “bullish” territory that extends up to $0.5738, which is also the pivotal 50% Fibonacci retracement level.

According to EGRAG CRYPTO breaching this price level is the key catalyst for an extensive XRP price rally. The analyst assumes that XRP will not experience any significant resistance after pushing above the 50% Fibonacci level and could eventually break through the yearly high at $0.9310.

However, according to the analyst, this is not the end of the road. According to him, the final target of a 250% rally is the 1,618 Fibonacci extension level, which is at $1.4694.

Long-term XRP Price Prediction

EGRAG’s broader perspective on XRP’s price performance is rooted in his analysis of the historical accumulation trends. The concept revolves around the notion that the longer an asset remains in accumulation, the more formidable the subsequent breakout. A few days ago, he identified multiple accumulation zones for XRP, with each phase leading to significant price multipliers.

With XRP currently in its longest accumulation zone of 68 months, EGRAG CRYPTO believes this could be the prelude to an explosive rally. The analyst has provided potential price scenarios based on XRP’s all-time high (ATH) of $3.3. The most aggressive of these predicts a 27x surge from its all-time high, positioning the cryptocurrency at nearly $89.1.

The second assumption is a 6.75x increase from ATH elevating the token to approximately $22. Third assumption predicts a 2x multiplier from ATH landing at $6.6, whereas the fourth assumption by the analyst targets a 14x target concluding to $46.

At the time of writing, XRP was trading at $0.5093 after an attempt to regain the trend line (black) failed.