Altcoin Crash May Be on the Cards

Plus, BTC reverses Monday's decline below $25K

Sept 12, 2023 The latest moves in crypto markets, in context By Jamie Crawley, CoinDesk news reporter Was this newsletter forwarded to you? Sign up here.  Supported By Happy Tuesday! Here's what you need to know today in crypto: Bitcoin bounces back to $26K. An altcoin crash is coming, according to Matrixport. Bitget establishes $100 million pot to invest in exchanges, analysts and media organizations.   Latest Prices CoinDesk Market Index (CMI) 1,080 +17.2 ▲ 1.6% Bitcoin (BTC) $26,134 +442.9 ▲ 1.7% Ethereum (ETH) $1,612 +22.5 ▲ 1.4% S&P 500 4,487.46 +30.0 ▲ 0.7% Gold $1,939 +15.6 ▲ 0.8% Nikkei 225 $1,939 +15.6 ▲ 0.8% BTC/ETH prices per CoinDesk Indices, as of 7 a.m. ET (11 a.m. UTC) CoinDesk Market Index (CMI): 1,080  +1.6%  Bitcoin (BTC): $26,134  +1.7%  Ether (ETC): $1,612  +1.4%  S&P 500: 4,487.46  +0.7%  Gold: $1,939  +0.8%

Nikkei 225: $1,939  +0.8% 

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Bitcoin (BTC) reversed Monday's decline to three-month lows under $25,000 during Asian trading hours, jumping back to over $26,000 as open interest on Binance, Bybit, OKX and Deribit fell to $4.8 billion from $5.05 billion. The decline in open interest suggests short traders were abandoning their bearish bets in what's known as a short squeeze. The price recovery may remain capped due to a lack of immediate bullish catalysts. The bitcoin spot ETF optimism has faded, with observers shifting focus to the impending liquidation of FTX's altcoin holdings.

An altcoin crash is coming, with around $3.4 billion worth of crypto tokens likely to be sold by bankrupt exchange FTX, according to Matrixport. FTX wishes to sell $200 million worth of crypto assets a week in order to return fiat currency to users, which would mean an overhang for altcoins for the remainder of the year. "Crypto venture capital (VC) funds are also under immense pressure to return funds to their investors," Markus Thielen, Matrixport's head of research, wrote in a Monday report. "Those VC funds are likely to remain as crucial sellers of altcoins and must cash out."  Bitget has established a $100 million pot to invest in exchanges, data analytics firms and media organizations as it seeks to broaden its horizons beyond its crypto trading business model. The firm said it expects tightened regulations and growth of layer-2 blockchain networks and DeFi technologies to bring about an evolution in how centralized exchanges operate. It is, therefore, seeking to diversify the services it can offer and capitalize on merger and acquisition opportunities that will be presented in the coming months. The fund, called the EmpowerX Fund, follows just months after Bitget set aside $100 million to target Web3 startups in Asian countries.

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Market Insight: Bitcoin Price-Volatility Correlation Turns Negative Again   The correlation between bitcoin and its implied volatility has turned negative again, indicating investor concerns about moves to the downside. The 60-day trailing correlation between bitcoin's price and implied volatility flipped negative a week ago and fell to -0.29 early Tuesday. A decrease in price alongside an increase in implied volatility indicates a bias for put options, or derivative contracts offering protection against price slides. The negative correlation stems from expectations of FTX selling off its crypto holdings. Griffin Ardern, a volatility trader from crypto asset management firm Blofin, said concerns of additional monetary tightening in global markets are also behind the shift in the volatility trend. "The impending U.S. August CPI data will likely show a rebound in inflation, which means the Fed will probably take additional liquidity-tightening measures to curb reflation. In liquidity redistribution, crypto assets are prioritized last, which means that the liquidity stored in crypto assets could be withdrawn and invested in assets such as cash or U.S. stocks," Ardern said. "That has pushed up investors' preference for puts, bringing a negative correlation between prices and volatility." Read the full story by Omkar Godbole

Chart of the Day The chart shows ether's price and Ethereum's revenue since May 2019. As of today, the token's price appears overvalued relative to Ethereum's dwindling narrative. "Fundamentals — as measured by the revenue generated across the Ethereum blockchain — have failed to pick up. This has led to a notable overvaluation of Ether prices relative to underlying fundamentals," Matrixport's head of research and strategy Markus Thielen, said in a note to clients on Monday. Source: Matrixport - Omkar Godbole

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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.

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