Funds flowing into Bitcoin structured products continue to grow

Price trend. The stable token Tether enables an artificial foreign exchange market for the Ukrainian currency.

Trading volume. Trading volumes in South Korea have fallen 140% since November under stricter regulation.

Liquidity of orders. The BTC -USD spread has recovered after a month of volatility.

Derivatives. Despite the $1 billion expiry volume, option volume has remained steady.

macro trends. The AUM of the BITO ETF is up 11% this year.

Price trend

Bitcoin ends the week up 13%

95a77c439a6427397ba580a73d373350-sz_101835.png

Crypto-asset markets ended the week on a positive note, even as currency markets re-raised expectations of monetary tightening following hawkish comments from the Federal Reserve chair. Bitcoin and Ethereum closed up 13% and 14.7%, respectively, on Sunday, with altcoins earning their fair share of gains. Layer 1 tokens in particular performed well, with Cardano ’s ADA up 33% and Solana’s SOL up 21%.

In other industry news, Goldman Sachs completed its first over-the-counter crypto-asset transaction, Bridgewater – the world’s largest hedge fund – is said to be planning to invest in a crypto-asset fund, and micro-investing app Acorns adds bitcoin Currency risk as an option for long-term investments.

Fiat and crypto assets Ukrainian money market diverges

51d4d3b1a493b1a5859734f59421c2ad-sz_161647.png

Ukrainian currency markets have experienced intense dislocation since the start of the war, with uach plummeting to an all-time low relative to the dollar. The Central Bank of Ukraine has since halted currency trading, restricted cross-border transfers and fixed the exchange rate at around 29 uguiya per dollar in an attempt to defend its currency and limit bank runs. By contrast, cryptoasset markets continue to operate 24/7 and have become a source of liquidity, enabling an artificial market form of the U.S. dollar through the stablecoin Tether. Since the inception of the central bank’s currency restrictions, we have observed a strong divergence between the Ouguiya-USDT exchange rate and the actual Ouguiya-USD FX market, which remains fixed. Today, 1USDT is trading at around 32UAH on Binance.

On March 19, Ukraine’s largest commercial bank suspended deposits of uyar to crypto-asset exchanges in an effort to reduce currency outflows. The exchange rate divergence on Binance suggests that a free foreign exchange market will lead to further currency depreciation, and is an interesting example of the ability of cryptoassets to facilitate parallel markets.

Bitcoin Discount Appears in South Korean Market

6bbfeb5b4b9ac695d9f6a536f3a214f3-sz_141159.png

Bitcoin traded at a 3.2 percent discount against the U.S. dollar in South Korean markets last week after new crypto-asset regulations took effect on March 25. South Korea’s unique regulatory framework, which restricts cross-border capital transfers by foreigners, has led to the emergence of so-called “Kimchi Premium” since 2016 – a gap between the price of bitcoin on the Korean market and that of other exchanges around the world. At times, bitcoin traded at a premium of up to 20% in the South Korean market relative to the U.S. market.

However, for the first time in years, that premium has turned into a discount as traders anticipate the passage of the Financial Action Task Force (FATF) travel rule, which requires virtual asset service providers to collect and disclose all transactions that exceed a threshold. Customer information, in this case about $820.

Trading volume

Trading volumes on South Korean exchanges plummet amid tighter regulatory environment

5bfdd2bf95203567c9e07fd94ad40d73-sz_184767.png

The rising cost of complying with crypto-asset regulations and strict reporting requirements has led to the consolidation of the South Korean crypto-asset market and the withdrawal of major exchanges such as Binance and Okex from the region. Tighter regulations may also have affected transaction volumes over the past few months. We can observe that the weekly trading volume of the “Big Four” exchanges that dominate the Korean market – Upbit, Bithumb, Coinone and Korbit – has dropped by more than 140% relative to the November average. For context, BTC-USD trading volumes on the top 10 global exchanges fell by only 25% over the same period. Upbit remains the market leader, accounting for around 80% of the total trading volume, with the sharpest decline in trading volume.

ETH market structure has changed since 2021

78a4c1a7f35b87f27c96536c3956adbe-sz_200292.png

Over the past year, the cryptoasset market structure has undergone significant changes, with the growing interest in Ethereum as an investment asset. We can understand this shift in market structure by looking at the average daily volume of BTC and ETH. While the 2021 crypto asset bull market saw a strong divergence in daily volume, with Bitcoin trading on average 50% higher than Ethereum, the gap between the two has been declining since May 2021, Currently hovering around 30%. The gap widens and falls when the market enters a bearish period – when traders rotate funds out of altcoins – and a bullish period – when traders invest more in Ethereum .

When we further chart the average transaction size of Bitcoin and Ethereum, a slightly different trend can be observed.

bc628299cdf59d784864fc5b0cf5580b-sz_210160.png

Over the past year, Bitcoin’s average transaction size has mostly surpassed Ethereum’s, even as total transaction volume has converged. The divergence in trend is likely due to an increase in the overall trading volume of Ethereum. Ethereum’s average transaction volume has recently spiked in March, driven by bullishness ahead of the network’s imminent upgrade, but it is still around $500 lower than Bitcoin. Overall, the average transaction size for both Bitcoin and Ethereum has declined since 2021.

Liquidity of orders

BTC and ETH market depths are also converging

cfcdec5d8850d524bfccaf8ea748a3e1-sz_227855.png

Like volume, market depth for BTC and ETH has been converging since the beginning of 2021. Kaiko’s measure of market depth is the number of bids and asks within 2% of the mid-price, derived directly from our order snapshot. Market depth is usually measured in raw units of crypto assets, but to compare different assets, we multiply the depth by the median price to get an approximate dollar value of the total amount of assets on a paired order. Among the most liquid dollar pairs today, roughly $150 million worth of BTC and $100 million worth of ETH are clustered within 2% of the mid-range.

Overall, BTC-USD orders remain more liquid than ETH-USD orders, but not as much as in early 2021, when we first observed a shift in market structure towards Ethereum. Today, ETH has about 40% less depth than BTC, and the same exchange has about a 30% difference in volume. This shows that market maker activity is still catching up.

Spreads recover after volatility in February

399bc1a34b66b63b7a96ae71c0f9aff1-sz_262507.png

The bid-ask spread for the BTC-USD pair has recovered after experiencing volatility in February and early March. Average hourly spreads have fallen across almost all exchanges. Bitstamp and Binance.US saw the biggest improvements, with spreads dropping from 6 basis points to 4 and 4 to 2, respectively. Other exchanges have more stable liquidity as the market recovers and continues to gain.

Derivatives

Weekly options volumes remain subdued despite big expiry

592053f81ee1d405fb8709199b968fd4-sz_156743.png

Last week was one of the largest quarterly options expirations for Bitcoin and Ethereum, with $5 billion in options contracts expiring on March 25. Although traders rolled their positions after expiration, overall options volume remained subdued. We can observe that the weekly trading volume of Ethereum and Bitcoin is around $3 billion and $1 billion respectively, which is lower than the weekly average in February. Bitcoin spot prices surged 13% last week, despite the expiry of a chunk of BTC call options with strikes in the $45-50K range. Typically, this is expected to provide upside resistance for spot prices. However, while the options market has gained traction over the past year, the market remains small and its impact on spot prices remains limited.

macro trends

BTC-ETH correlation hits highest level since July 2021

e77d5e368a46c6ba1892e2819358ea0f-sz_139799.png

Correlations between assets always tend to be consistent during times of market volatility. We observed a similar trend for cryptoassets, with the 30-day correlation between Ethereum and Bitcoin reaching the highest level since July 2020. The two assets generally tend to be closely linked, and despite brief slumps in April and November, their correlation has been rising over the past year.

BITO AUM climbs 11% since 2021

4e4bbf14c2206be50b98afd51b0feda1-sz_168566.png

Inflows into bitcoin-related investment vehicles gained traction in March, while crypto markets also rose modestly. The chart above is the percentage change in assets under management (AUM) of the futures ETF BITO versus the BTC spot price since the beginning of the year. While the price of bitcoin is still down 5% throughout the year, BITO’s AUM has risen by 11%. Inflows accelerated in March, suggesting an improved appetite for this type of vehicle after investors aggressively de-risked their portfolios in early 2022. Overall, risk assets are on the cusp of one of the best rallies in history at the start of a monetary policy tightening cycle. Yet fears of stagflation remain rampant, the U.S. yield curve — a leading indicator of a recession — remains close to inversion, and the Federal Reserve signaled last week that it would deliberately push growth below trend to fight inflation.

Posted by:CoinYuppie,Reprinted with attribution to:https://coinyuppie.com/funds-flowing-into-bitcoin-structured-products-continue-to-grow/
Coinyuppie is an open information publishing platform, all information provided is not related to the views and positions of coinyuppie, and does not constitute any investment and financial advice. Users are expected to carefully screen and prevent risks.

Like (0)
Donate Buy me a coffee Buy me a coffee
Previous 2022-04-06 10:31
Next 2022-04-06 10:34

Related articles