Aug 30, 2022

The latest moves in crypto markets, in context

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Good morning, and welcome to First Mover. I'm Lyllah Ledesma here to take you through the latest in crypto markets, news and insights.

In today's newsletter:

Price Point: As investor sentiment began to stabilize Tuesday, bitcoin held the $20,000 level while altcoins Ether and Avalanche's AVAX rose.
Market Moves: Both ether and bitcoin's perpetual futures open interest ratios stood at lifetime highs above 0.03 and 0.02 at press time. "The rising ratio indicates open interest is outpacing market size and increases the risk of volatility," one researcher said.
Chart of the Day: Over 5,000 BTC that have been dormant for at least seven years have been moved in the past 24 hours.

The FBI just asked DeFi platforms to increase security and warned investors about the risks following several attacks this year. To find out how altcoins are performing later today, sign up for Market Wrap.

Price Point

Bitcoin (BTC) has managed to hold the $20,000 level after dipping to lows of $19,500 on Monday. The world's largest cryptocurrency by market value is up 3% over the last 24 hours.

Altcoins outperformed bitcoin with ether (ETH) up 8% on Tuesday while stocks rose as investor sentiment began to stabilize. U.S. futures climbed. Markets suffered a rough start to the week on fears of aggressive rate hikes by the Federal Reserve.

From Friday's peak to Sunday's low, bitcoin lost 10% whilst ether lost 17%.

Avalanche's AVAX token recovered, up 13% on the day after trading down Monday to its lowest price since July 13 after a self-described "whistleblower" website accused Ava Labs, the company behind the Avalanche blockchain, of paying lawyers to hurt competitors and keep regulators at bay. Since then, Avalanche's founder, Emin Gün Sirer denied that his company has been involved in a behind-the-scenes smear campaign against competitors of Avalanche.

Cosmos's ATOM was up 12% and the FLOW token surged 16%.

In other news, FTX CEO Sam Bankman-Fried said in a tweet Monday that the crypto exchange had no plans to acquire rival Huobi. Speculation had emerged that FTX, which has extended financial lifelines to several troubled crypto companies, might acquire Huobi.

Huobi's native token, HT, declined about 6% following Bankman-Fried's tweet.

Stablecoin issuer Tether (USDT) has refuted claims made in a Wall Street Journal report in relation to uncertainty over its balance sheet. The newspaper reported that Tether's assets outweigh its liabilities by just $191 million, implying a relatively "thin cushion of equity."

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Market Moves

Inflation Hedge or Not, Bitcoin's True Value Is Separation of Money and State

By Omkar Godbole

Traders love volatility and Ethereum's ether (ETH) and bitcoin (BTC) could soon offer plenty of it. That's the message from observers tracking the so-called open interest leverage ratio.

The metric is calculated by dividing the amount of dollars locked in open perpetual futures contracts by the market capitalization of the underlying cryptocurrency. The ratio represents the degree of leverage relative to the market size or sensitivity of the spot price to the derivative market activity.

Both ether and bitcoin's perpetual futures open interest ratios stood at lifetime highs above 0.03 and 0.02 at press time, according to data sourced from Decentral Park Capital and blockchain analytics firm Glassnode.

"The rising ratio indicates open interest is outpacing market size and increases the risk of volatility due to future [long/short] squeezes," Decentral's researcher Lewis Harland said.

Perpetuals are futures with no expiry. A futures squeeze refers to a sudden and rapid move in an asset's price caused by bears or bulls abandoning their positions. A short squeeze is a rally fueled by sellers dumping their bearish bets (shorts). A long squeeze is a decline caused by bulls closing their bullish bets (longs). The higher the leverage ratio, the bigger the impact of long/short squeeze on the asset's price.

Crypto research firm Delphi Digital's Andrew Krohn voiced a similar opinion in Monday's client note, saying the ratio suggests that open interest is large relative to the market size and "implies a higher risk of market squeezes, liquidation cascades or deleveraging events."

The futures market involves leverage, meaning a trader can take a large long/short position by depositing a relatively small amount of money, called a margin, while the exchange provides the rest of the trade value. That exposes futures traders to liquidations – forced closure of long/short positions due to margin shortages often caused by the market moving in the opposite direction of the trade.

These forced closures put upward/downward pressure on prices, leading to increased volatility. The greater the degree of leverage relative to the market size, the bigger the risk of liquidations injecting volatility into the market.

Read the full story here.

Chart of The Day

Dormant Bitcoins on the Move

By Omkar Godbole

Data tracked by lookintobitcoin.com shows over 5,000 BTC that have been dormant for at least seven years have been moved in the past 24 hours.
Historically, the market has seen increased downside volatility with the movement of coins that old and of that size, according to Philip Swift, founder of lookintobitcoin.com

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Crypto Prices

The following are the biggest movers in the CoinDesk 20 digital assets over the past 24 hours:

Biggest Gainers

Asset	Ticker	Returns	DACS Sector
Cosmos	ATOM	+12.0%	Smart Contract Platform
Avalanche	AVAX	+11.9%	Smart Contract Platform
Ethereum	ETH	+9.5%	Smart Contract Platform

Biggest Losers

There are no losers in CoinDesk 20 today.

Sector classifications are provided via the Digital Asset Classification Standard (DACS), developed by CoinDesk Indices to provide a reliable, comprehensive, and standardized classification system for digital assets. The CoinDesk 20 is a ranking of the largest digital assets by volume on trusted exchanges.

Latest Headlines

Stablecoin Tether Dismisses Wall Street Journal's Claim of Inadequate Reserves
The Wall Street Journal had reported that Tether's assets outweigh its liabilities by just $191 million, implying a relatively "thin cushion of equity."
Ether, Bitcoin Could See Turbulence as Open Interest Leverage Ratio Soars to Record High
"The rising ratio indicates open interest is outpacing market size and increases the risk of volatility," one researcher said.
Founder of Turkish Crypto Exchange Thodex Arrested in Albania
Faruk Fatih Özer disappeared in 2021, taking with him funds from 400,000 users.
South Korea Must Reverse Ineffective Ban on Crypto ICOs, Central Bank Says
The Bank of Korea says companies like stablecoin issuer Terra were able to circumvent the ban and sell digital tokens to locals by setting up corporations overseas.
Blockchain Gaming Platform Xterio Raises $40M Led by Partner FunPlus
The round was co-led by Makers Fund, FTX Ventures and XPLA.
Crypto Custody Firm Fireblocks Adds Support for Solana Blockchain's DeFi, NFT, Gaming Apps
The integration also pushes support for the WalletConnect2 protocol across the Solana ecosystem, said Fireblocks CEO Michael Shaulov.
Elon Musk Sends Second Letter Terminating Twitter Acquisition
The letter follows one sent July, in case the earlier one is deemed invalid, according to a filing.
Australia Starts Research Program to Explore Digital Asset Opportunities
On Monday, the Assistant Treasurer and Minister for Financial Services Stephen Jones officially started the program at the Australian Securities Exchange.
Indonesia's Biggest Tech Firm Enters Crypto With Purchase of Local Exchange: Report
GoTo Gojek Tokopedia bought Kripto Maksima Koin for 124.84 billion rupiah ($8.38 million).
Crypto Lender Hodlnaut Placed Under Interim Judicial Management by Singapore Court
The Singapore-based lender was placed under interim judicial management, a type of creditor protection, on August 29.
FBI Asks DeFi Platforms to Increase Security Measures, Warns Crypto Investors Against Vulnerabilities
The warning comes after a slew of DeFi hacks this year, which has led to investors losing billions of dollars worth of crypto.

What to Watch

Check out the CoinDesk TV show "First Mover," hosted by Christine Lee, Emily Parker and Lawrence Lewitinn at 9:00 a.m. U.S. Eastern time.

Rosh Singh, CEO and co-founder, Quadency
Nigel Eccles, chairman and co-founder, BetDEX Labs Inc

The Investing in Digital Enterprises and Assets Summit facilitates capital flow and market growth by connecting the digital economy with traditional finance through the Presenter's Mainstage, capital allocation meeting rooms and sponsor expo floor. Use code FM_20 for 20% off the General Pass. Register now.

Disclaimer: The information presented in this message is intended as a news item that provides a brief summary of various events and developments that affect, or that might in the future affect, the value of one or more of the cryptocurrencies described above. The information contained in this message, and any information liked through the items contained herein, is not intended to provide sufficient information to form the basis for an investment decision. The information presented herein is accurate only as of its date, and it was not prepared by a research analyst or other investment professional. You should seek additional information regarding the merits and risks of investing in any cryptocurrency before deciding to purchase or sell any such instruments.