With this barrier gone, financial advisors, mutual funds, pension funds, insurance companies and retail investors can now receive Bitcoin exposure without hassling with direct custodianship. More importantly, a taint has been scrubbed off from Bitcoin, previously likened to “tulip mania”, “rat poison”, or “index of money laundering”.

Following the unprecedented domino of crypto bankruptcies throughout 2022, Bitcoin price reverted to November 2020 level of $15.7k by the end of that year. After that great FUD reservoir was drained, Bitcoin slowly recovered during 2023 and entered 2024 at $45k level, first visited in February 2021.

With the 4th Bitcoin halving ahead in April, and with ETFs setting new market dynamics, what should Bitcoin investors expect next? To determine that, one must understand how Bitcoin ETFs elevated BTC trading volume, effectively stabilizing Bitcoin’s price volatility.

Understanding Bitcoin ETFs and Market Dynamics

Bitcoin itself represents the democratization of money. Not beholden to central authority like the Federal Reserve, Bitcoin’s decentralized network of miners and algorithmically determined monetary policy ensures that its limited 21 million coin supply can’t be tampered with.

For BTC investors, this means they can be exposed to an asset that is not on an inherent trajectory of devaluation, which is in stark contrast to all existing fiat currencies in the world. This is the foundation for Bitcoin’s perception of value.

Exchange-traded funds (ETFs) present another democratization pathway. The purpose of ETFs is to track an asset’s price, represented by shares, and enable trading throughout the day unlike actively managed mutual funds. The ETFs’ passive price tracking ensures lower fees, making it an accessible investment vehicle.

Of course, it would be up to Bitcoin custodians like Coinbase to enact sufficient cloud security to instill investor confidence.

In the ETF universe, Bitcoin ETFs have demonstrated high demand for a decentralized asset that is resistant to centralized dilution. Altogether in the last 15 days, they have resulted in $29.3 billion trading volume against $14.9 billion pressure from Grayscale Bitcoin Trust BTC (GBTC).

This is not surprising. As Bitcoin price moved up due to Bitcoin ETF hype, 88% of all Bitcoin holders entered the profit zone in December 2023, eventually reaching 90% in February. In turn, GBTC investors were cashing out, placing a downward pressure worth $5.6 billion on Bitcoin price.

Moreover, GBTC investors took advantage of lower fees from the newly approved Bitcoin ETFs, shifting funds from GBTC’s relatively high 1.50% fee. At the end of the day, BlackRock’s iShares Bitcoin Trust (IBIT) is the volume winner at 0.12% fee, which will go up to 0.25% after a 12-month waiver period.

To place this in the context of the wider ETF universe, IBIT and FBTC managed to outpace iShares Climate Conscious & Transition MSCI USA ETF (USCL), launched in June 2023, within a month of trading.

This is particularly indicative given that Bitcoin’s history is one of attacks coming from the sustainability direction. It bears reminding that Bitcoin price fell 12%, in May 2021, shortly after Elon Musk tweeted that Tesla no longer accepts BTC payments precisely due to eco concerns.

During January, IBIT and FBTC found themselves at 8th and 10th place respectively as ETFs with the largest net asset inflows, headed by iShares Core S&P 500 ETF (IVV), according to Morning Star report. With daily ~10,000 BTC streaming into ETFs, this represents a greatly lopsided demand over ~900 BTC mined per day.

Moving forward, as the GBTC outflow pressure wanes and inflow trend increases, the steady stream of funds into Bitcoin ETFs is poised to stabilize BTC price.

The Mechanism of Stabilization

With 90% of Bitcoin holders entering the profit zone, highest since October 2021, selloff pressures can come from many sources, institutional, miner and retail. The higher inflow trend in Bitcoin ETFs is the bulwark against it, especially heading into another hype event – 4th Bitcoin halving.

Higher trading volumes generate higher liquidity, smoothing out price movements. That’s because larger volumes between both buyers and sellers absorb temporary imbalances. During January, CoinShares’ report showed $1.4 billion of Bitcoin inflows, together with $7.2 billion from newly issued US-based funds, against the GBTC outflows of $5.6 billion.

In the meantime, large financial institutions are setting new liquidity baselines. As of February 6th, Fidelity Canada set up 1% Bitcoin allocation within its All-in-One Conservative ETF Fund. Given its “conservative” moniker, this signals even greater percentage allocations in future non-conservative funds.

Ultimately, if Bitcoin taps into 1% of the $749.2 trillion market pool of various asset classes, Bitcoin’s market cap could grow to $7.4 trillion, bringing Bitcoin price to $400k.

Given that Bitcoin ETFs provide a consistent and transparent market price reference point, large aggregated trades reduce market impact on potential selloffs coming from miners. This is visible from FalconX Research, showing a great uptick in daily aggregate volumes, previously from average 5% heading into the 10 – 13% range.

In other words, the new Bitcoin ETF-induced market regime is reducing overall market volatility. So far, Bitcoin miners have been the main price-suppressing driver on the other side of the liquidity equation. In Bitfinex’s latest weekly on-chain report, miner wallets were responsible for 10,200 BTC in outflows.

This matches the aforementioned ~10,000 BTC inflows in Bitcoin ETFs, resulting in relatively stable price levels. As miners reinvest and upgrade mining rigs ahead of the 4th halving, another stabilizing mechanism could come into play – options.

Although the SEC is yet to approve options on spot-traded BTC ETFs, this development will further expand ETF liquidity. After all, the greater spectrum of investing strategies revolving around hedging increases liquidity on both sides of the trade.

As a forward-looking metric, implied volatility in options trading gauges market sentiment. But the greater market maturity that we will inevitably see following the introduction of BTC ETFs, we’re more likely to see a more stabilized pricing of options and derivative contracts in general.

Analyzing Inflows and Market Sentiment

As of February 9th, Grayscale Bitcoin Trust ETF (GBTC) holds 468,786 BTC. Over the last week, the BTC price went up 8.6% to $46.2k. Concurrent with the previous forecast, this means that BTC dumping is likely to spread out over multiple rallies ahead of the 4th halving and beyond.

By latest numbers provided by Farside Investors, as of February 8th, Bitcoin ETFs have racked up $403 million inflows, totaling to $2.1 billion. GBTC outflows totaled $6.3 billion.

From January 11th to February 8th, GBTC outflows have steadily decreased. Within the first week, they averaged $492 million. In the second week, GBTC outflows averaged $313 million, ending in $115 million on average during the third week.

On a weekly basis, this represents a 36% reduction on sell pressure from week one to two, and 63% reduction from week two to three.

As GBTC FUD unfolded up to February 9th, crypto fear & greed index elevated to “greed” at 72 points. This represents a revisit to January 12th, at 71 points, just a few days after Bitcoin ETF approvals.

Looking ahead, it bears noticing that Bitcoin price is reliant on global liquidity. After all, it was the Fed’s interest rate hiking cycle in March 2022 that caused the avalanche of crypto bankruptcies, culminating in the FTX collapse. Current fed fund futures project the end of that cycle either in May or in June.

Moreover, it is extremely unlikely that the Federal Reserve will veer off the money printing course. And at such occasions, Bitcoin price followed suit.

Considering the insurmountable national debt of $34 trillion, while the federal spending keeps outpacing revenue, Bitcoin is positioning itself as a safe haven asset. One that waits for capital inflows into its limited 21 million coin supply.

Historical Context and Future Implications

As a similar safe haven asset, Gold Bullion Securities (GBS) launched as the first gold ETF in March 2003 on the Australian Securities Exchange (ASX). Next year, SPDR Gold Shares (GLD) launched on the New York Stock Exchange (NYSE).

Within a week from November 18th, 2004, GLD’s total net assets rose up from $114,920,000 to $1,456,602,906. By the end of December, this decreased to $1,327,960,347. To reach BlackRock’s IBIT market value of $3.5 billion, it took GLD up to November 22nd 2005.

Although not inflation-adjusted, this indicates Bitcoin’s superior market sentiment compared to gold. Bitcoin is digital, yet it is grounded in a proof-of-work mining network spanning the globe. Its digital nature translates to portability which can not be said of gold.

The USG showcased this point when President Roosevelt issued Executive Order 6102 in 1933 for citizens to sell their gold bullions. Likewise, new gold veins are frequently discovered which dampens its limited supply status in contrast to Bitcoin.

In addition to these fundamentals, Bitcoin ETF options are yet to materialize. Nonetheless, Standard Chartered analysts project $50 to $100 billion in Bitcoin ETFs by the end of 2024. Moreover, large companies are yet to follow MicroStrategy’s lead by effectively converting shares sales into a depreciating asset.

Even 1% BTC allocations across mutual funds are poised to skyrocket BTC price. Case in point, Advisors Preferred Trust set up a 15% range allocation into indirect Bitcoin exposure via futures contracts and BTC ETFs.

Conclusion

After 15 years of doubt and aspersions, Bitcoin has reached the apex of credibility. The first wave of believers in sound money ensured that the blockchain version of it is not lost in the bin of coding history.

On the back of their confidence, up until now, Bitcoin investors constituted the second wave. The Bitcoin ETF milestone represents the third wave exposure milestone. Central banks around the world continue to erode confidence in money, as governments cannot help themselves but to indulge in spending.

With so much noise introduced into the exchange of value, Bitcoin represents a return to the sound money root. Its saving grace is digital, but also physical proof-of-work as energy. Barring extreme USG action to sabotage institutional exposure, Bitcoin could even overtake gold as a traditional safe haven asset.

This is a guest post by Shane Neagle. Opinions expressed are entirely their own and do not necessarily reflect those of BTC Inc or Bitcoin Magazine.

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As the world’s largest cryptocurrency exchange, Coinbase has been at the forefront of the digital currency revolution. However, recent regulatory hurdles have cast a shadow over the company’s future, leading to predictions of increased volatility in its stock price. This article will delve into the challenges Coinbase is facing and the potential implications for investors.

Understanding the Regulatory Landscape

Regulation is a critical factor in the cryptocurrency market. As digital currencies gain popularity, governments worldwide are grappling with how to regulate them. The lack of clear regulatory guidelines has led to uncertainty, impacting companies like Coinbase.

• The U.S. Securities and Exchange Commission (SEC) has recently threatened to sue Coinbase if it launches its lending product, Coinbase Lend. The SEC argues that the product is a security and therefore falls under its jurisdiction.

• In the UK, the Financial Conduct Authority (FCA) has warned consumers about the risks of investing in cryptocurrencies and has taken steps to ban certain types of crypto assets.

• China has taken a more drastic approach, banning all cryptocurrency transactions and mining activities.

These regulatory actions have created a challenging environment for Coinbase, leading to increased volatility in its stock price.

Analysts’ Predictions on Coinbase’s Volatility

Analysts are predicting increased volatility for Coinbase due to these regulatory challenges. The company’s stock price has already experienced significant fluctuations since its direct listing in April 2021.

• According to data from Bloomberg, Coinbase’s stock price has swung by more than 10% on 14 different days since its listing, highlighting the high level of volatility.

• Analysts from JPMorgan have warned that regulatory scrutiny could lead to further volatility. They argue that the lack of clear regulatory guidelines creates uncertainty, which can lead to sharp price movements.

These predictions suggest that investors should brace for a potentially rocky road ahead.

Implications for Investors

While volatility can create opportunities for profit, it also increases risk. Investors need to be aware of the potential implications of these regulatory challenges for Coinbase.

• Increased volatility can lead to larger price swings, which can result in significant gains or losses. Investors need to be prepared for this and manage their risk accordingly.

• The regulatory uncertainty could also impact Coinbase’s business model. If the company is forced to change its products or services due to regulatory pressure, this could impact its revenue and profitability.

• Finally, the regulatory challenges could also affect the broader cryptocurrency market. If regulators take a more aggressive stance towards digital currencies, this could lead to a decrease in demand, impacting the value of cryptocurrencies and companies like Coinbase that facilitate their trade.

Conclusion: Navigating the Uncertain Waters

As Coinbase faces regulatory hurdles, analysts predict increased volatility in its stock price. The lack of clear regulatory guidelines creates uncertainty, leading to potential price swings. While this can create opportunities for profit, it also increases risk. Investors need to be aware of these challenges and manage their risk accordingly.

Despite the challenges, Coinbase remains a key player in the cryptocurrency market. The company’s ability to navigate these regulatory hurdles will be critical to its future success. As the regulatory landscape continues to evolve, investors will need to keep a close eye on developments and adjust their strategies accordingly.

In conclusion, while the road ahead may be uncertain, the journey promises to be an interesting one for Coinbase and its investors. As the world continues to grapple with the implications of digital currencies, companies like Coinbase will be at the forefront of these discussions, shaping the future of the cryptocurrency market.

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I know that I haven’t been a Bitcoiner for long. If I am being completely honest actually, this bear cycle is the first that I’m experiencing. It can be said that I haven’t been battle-tested enough to be considered a veteran with bear market toughened skin in the game. However, I know for certain that in the monetary energy, wealth preservation, and store of value conversation where Bitcoin is pitched against real estate, one of the most popular investment vehicles in modern day society, I would bet on Bitcoin. This conversation has gone on for quite some time already, I know. I also know that some interesting points have been made to back both sides. So, I may not be making any new points per se with this article, but simply emphasizing a few of them concerning the Nigerian context, and the African continent.

Real Estate In Africa

It is easy to think about Africa as just a place for safaris, pyramids, and wildlife. I dare say that that is as misinformed an opinion as one can have. Africa is also a place with skyscrapers, malls, mansions, and impressive urban and suburban structures, developed to cater to different segments of the market. The real estate industry in Africa has been booming over the past few decades, thanks to a combination of factors, population growth, economic development, urbanization, and rising incomes being just a few of them. From Cairo to Cape Town, Dakar to Addis Ababa, African cities have been massively transformed, and their skylines decorated with impressive architectural structures that are always a thrill to behold.

But among all these cities, one that stands out due to its size, diversity, and potential, and is of particular interest to me because I am Nigerian, is Lagos. Lagos is arguably the most populous city in the continent of Africa, and the economic hub of Nigeria, the 14th largest country in the continent by land mass. The city has a vibrant real estate market that offers opportunities for investors as well as developers. From skyscrapers in Eko Atlantic, luxury apartments with stunning views of the Atlantic Ocean, and beachfront villas in Lekki, to affordable housing units with modern amenities, or commercial spaces in prime locations that offer visibility, exposure, and accessibility, the city has it all. Projected to be one of the world’s megacities by 2030, Lagos does indeed have a lot going for it and has a strong position in the future of real estate in both the country and the continent as a whole.

The Caveat

As appealing as real estate in Lagos and any other city in Nigeria, as well as Africa may seem, it doesn’t come without its share of discommodities. These discommodities are some of the points that have been made against real estate investment as a sound vehicle for wealth preservation. From property taxes that have been known to be a complex maze that can leave an uninformed investor spinning in a head-splitting confusion, to excruciating construction costs that can drain a developer’s resources. From the constantly depreciating value of the Nigerian Naira to the US Dollar, due in part to the inflation rate in the country that’s currently sitting at 21.8% as of the time of writing, to lack of adequate funding, as a result of the shortage of mortgage institutions and capital markets that are often inaccessible to the average developer or investor, and where accessible, stringent, often unattainable requirements, as well as high interest rates, making it an impossible, unachievable option.

These are just a few of the criticisms that have been made. However, I’d like to focus on one in particular that might not be relevant in more developed nations where corruption within the executive branch of governments isn’t allowed as much free rein, and that is; state government land/property repossession.

Land/Property Repossession And Reclamation 

According to the Land Use Act, promulgated in 1978, which regulates land usage and ownership in Nigeria, all land in the different states is vested in the governors, held in trust for the people, and statutory or customary rights of occupancy by individuals or organizations are granted by the governor for various purposes. It is also stated that the governor holds the power to revoke right of occupancy, for overriding public interest and purposes, such as road construction, urban developments, mining, mineral exploitation and the likes.

The Act also makes provision for the payment of a fair compensation to the affected landowners or occupiers of properties repossessed by the state government. The problem is that despite the provision for the fair compensations in such scenarios, there are cases where these compensations were either non-existent, or inadequate, which have led to prolonged litigations that have often led to the overall abandonment of the property by the owners. There have even been cases where these litigations led to favorable judgements, but the governments refused to comply with court mandated orders.

Although these cases aren’t so recent, there hasn’t been any known amendments to the law to prevent such incidents from recurring, nor have there been reports of full settlement of those outstanding compensations.

Speaking of recent cases, in October 2023, in a bid to tackle the perennial flooding that has plagued some parts of the state, the Lagos state ministry of environment undertook yet another massive demolition of properties said to have been built on drainage channels in various areas of the state. As expected, the affected residents of those demolished properties have had to bear significant losses running into billions of naira because the affected areas are located in some of the affluent parts of the city. It would be easy to put the blame on the individuals who purchased properties designated to be drainage areas, but it isn’t that cut and dried. In a system riddled with corruption and self-serving government officials, it’s easy for an individual to purchase a property that seemingly has all the right papers and approvals, only to end up bearing losses, the likes of which not a lot of people can recover from.

Now, let’s leave Lagos, and head towards the south-western part of the country, to Benin city, the capital of Edo State. This is a slightly different case, in that the main culprit here isn’t the government per se, but a phenomenon commonly called; land grabbing. This is a scenario whereby certain individuals or groups of people, illegally acquire large expanses of land, by claiming ancestral heritage, and then selling those acquired lands to unsuspecting individuals who are none-the-wiser. In most cases, those lands turn out to be designated by the government to be for use for projects that are of public interest.

In 2022, the state government ordered and carried out the demolition of 90 residential houses, in a bid to reclaim 1,229 hectares of land that were sold by land grabbers. As you would expect, the owners of those lands were outraged by this and have expressed their pain. Though the government has stated that due compensations will be paid to those who are able to sufficiently prove ownership of the properties – of which we know how long and painful such processes can be, that’s if they truly intend to carry it out. Imagine how demoralizing and devastating it is to have your home demolished without adequate warning. I personally know a few people who were affected by this incident, and I know what it took from them. Imagine working for decades to secure a home for your family, only to have it demolished in one day, by the state government.

As I earlier stated; the government isn’t the real culprit in this case. However, I earlier mentioned, considering how much of a daunting task it is to verify the status of a property before purchasing it, due to a system, heavily ladened with excessively complicated administrative procedures, one can easily fall into the hands of these land grabbers or purchase land earmarked by the government for public use, thereby risking the wealth you have labored for years for.

Why Bitcoin Is The Better Choice

Before I proceed with this next paragraph, I would love to throw an itty bitty disclaimer out there; as bitcoiners, we all already know why Bitcoin is the better choice, so nothing new will be stated from here on.

With that bit out of the way, let us get into it.

So why is Bitcoin the better choice? The first answer is quite simple really, and it lies right there, embedded in the open source code that runs the Bitcoin time-chain, as well as the philosophy behind its creation. The thousands of nodes spread across the globe, ensures that every single bitcoin in circulation is verified, which means that the average investor doesn’t have to go to any government establishment to ensure the validity of the asset he or she is about to purchase.

Another reason that’s also embedded in Bitcoin’s code and philosophy, is its censorship resistance. Its decentralized nature ensures that it cannot be confiscated by any government. However, due to the fact that cryptocurrency exchanges are bound by the jurisdictions they function in, they are susceptible to government influence, so the best practice is self-custody. As we always say within the Bitcoin space; not your keys,not your coins.

With Bitcoin as a type of property for investment and wealth preservation purposes, you have successfully eliminated those excruciating construction and maintenance costs that have made real estate a nightmare for the inexperienced developer with limited capital. Property taxes are also eliminated, however depending on the country or state one lives in, you are expected to pay capital gains tax when you sell your bitcoin for profit. But, why would you even want to sell an asset that they’ll never make a 22nd million unit of – ever?

Here’s another one. Bitcoin’s innate portability makes it such that you can transfer value across space at near-lightning speed, unencumbered. You already know that moving cash or other physical assets across borders incurs huge fees and subjects your asset to a myriad of hazards during the course of the journey. Then imagine having your wealth stored in physical real estate and then having the urgent need to relocate. You obviously can’t move with it, so you’ll be subjected to offloading your wealth into a highly illiquid market at an unfair price seeing as it’ll be considered a distress sale. But if you hold bitcoin, that’ll clearly not be the case. With exchanges, both centralized and decentralized, spread across the globe, as well as bitcoin’s daily trade volume that surpasses most other major assets, you are offered seamless conversion or trades to your desired currency almost anywhere in the world, with the click of a few buttons, right there on your couch, hassle free.

Conclusion

It’s easy to conclude that by this article, the writer, yours truly, is implying that real estate is a bad idea, and that everyone should sell their homes to buy bitcoin. However, that’s far from the case. In the grand tapestry of our evolution as a species, both economically and otherwise, the real estate market, originally designed to fulfill the fundamental human need for shelter. It was meant to be a marketplace that facilitated the buying and selling of properties. But, it has now morphed into an unintended bastion of wealth preservation.

The intrusion of fiat, government-controlled currencies and their monetary policies, has distorted the narrative – a complete shift thereof, that has created an entirely new entity. I know this statement might be seen as an oversimplification of a complex interplay of factors with multiple layers. However, we can clearly see that inflation and regular debasement of fiat money has transformed real estate into a strategic tool for safeguarding wealth. In this complex tussle of economic forces, Bitcoin emerges as a revolutionary counterpoint, functioning both as a decentralized form of money – a damned good one at that – and an incomparable tool for wealth preservation. As fiat currencies continue down the precarious part towards an obvious end, Bitcoin stands resilient, offering the individual a means to transcend the pitfalls of a system that has veered so far from its intended course, from which there just might be no return.

This is a guest post by Emeka Ugbah. Opinions expressed are entirely their own and do not necessarily reflect those of BTC Inc or Bitcoin Magazine.

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Aug. 17, marked the return of the much-awaited and notorious bitcoin volatility. After several months of consolidating around the $30,000 level with historically low realized and implied volatility in the bitcoin market, the price finally awakened, bringing about the biggest liquidation event bitcoin has seen in years. Contrary to some opinions by reporters and analysts, the bitcoin crash was not triggered by rumors of SpaceX selling bitcoin or any other news-based event. Unlike a stock, bitcoin doesn’t have earnings calls or bad news about future prospects that can tank the price or dampen the network’s fundamentals.

Yes, events such as the approval (or dismissal) of a spot bitcoin ETF could change the market’s expected flows, but this was not the case during Thursday’s price crash. Instead, the market move was a good, old-fashioned derivative liquidation, a simple instance of more sellers than buyers, with the resolution being a price-clearing mechanism to the downside.

In previous issues, we wrote about bitcoin’s historically low realized and implied volatility, noting that such periods lead to large bounces in volatility and explosive breakouts in either direction. Obviously, the recent resolution was to the downside, but it could lead to a new regime in bitcoin, at least temporarily, as the market attempts to find a new equilibrium in the short-to-intermediate-term.

Since this was largely a derivative phenomenon, let’s explore some of the mechanics behind this massive move. In bitcoin, while the options market is less developed and mature compared to equities, there has been growth relative to the futures market in recent years, and growth in both markets compared to the spot market since 2017. It’s important to note that the proliferation of a futures/derivatives market isn’t necessarily good or bad. With an equal amount of long and short positions, the net impact over a long enough time frame is neutral. However, in the shorter-to-medium term, a developing derivatives market on top of the spot market can lead to large dislocations that result in unexpected volatility, with the market trading aggressively in one direction or the other to resolve the imbalance.

When observing a period of downtrending implied volatility derived from pricing in the options market, we can see what traders and speculators think an asset’s future volatility will look like. Short volatility strategies, whether simple or complex, are essentially bets on lower and/or stagnant volatility in the future. In this case, observing the trend in bitcoin’s implied volatility through the Volmex Bitcoin Implied Volatility Index (BVIV), we can conclude that selling or shorting volatility became a popular trade over the summer months, effectively restricting the bitcoin market to a given price range.

When market participants sell volatility through options, market makers respond by adjusting their hedges in the underlying asset, creating a stabilizing “pinning” effect near certain price levels where there is substantial open interest. To maintain a neutral position, market makers dynamically buy or sell the underlying asset in response to price movements of options, reinforcing the pinning effect. This equilibrium, however, can be shattered by unexpected events or shifts in sentiment, causing market makers to rapidly re-hedge. This leads to a sudden and significant price and volatility movement, reflecting the delicate and interconnected nature of options trading, market making and asset dynamics. This is precisely what occurred.

Looking at Deribit, the primary options marketplace for bitcoin/crypto, the spread between their perpetual swaps market and the spot bitcoin market widened massively as implied volatility expanded. Participants who had been making money by shorting or selling volatility were caught unexpectedly, leading to a massive dislocation and liquidation event.

All that being said, this wasn’t just an options-driven event. There was growing leverage in the futures market as well. Spot market volumes at multi-year lows combined with growing derivative volumes and open interest in addition to volatility near multi-year lows, was akin to lighting a match near a pile of dynamite and waiting for ignition. Alas, a spark was lit.

In bitcoin-denominated terms, the daily change in open interest was larger than the collapse of FTX, with 89,000 BTC less open interest than 24 hours prior.

As a percentage of the futures market, with a 24-hour period to match up the timelines, the move was equivalent to 18% getting wiped out or closing, something that hasn’t been seen since December 2021.

Looking only at open interest liquidations, Glassnode finds 8,141 BTC getting liquidated during Thursday’s move, the largest since November 2021, and approximately 2% of open interest that forcefully got liquidated or margin called.

Taking a look at funding rates — the variable interest rate paid between long and short positions in the perpetual futures market to incentivize traders to keep the contract price close to the spot market — funding fell to its lowest level since the March banking crisis when Silicon Valley Bank failed and USDC depegged. This shows just how large the dislocation in the derivatives market was relative to the spot market. While it’s too early to draw conclusions about a significant short bias in the market due to the negative funding rate, we will monitor the market over the coming days and weeks. A period of sustained negative funding with rising open interest could bring about conditions conducive to a short squeeze, although this has yet to develop.

Final Note:

In conclusion, while Thursday’s move was the largest bout of volatility seen all year and the largest bitcoin derivative-driven phenomenon in quite some time, it is typical of periods of extremely low realized and implied volatility in any market, let alone that of a notoriously volatile and unpredictable digital asset still in its monetization phase. In the short term, we now expect a pickup in volatility and greater uncertainty as the price tries to find a new equilibrium point, with plenty of news ahead regarding potential bitcoin spot ETF approvals heading into 2024.

That concludes the excerpt from a recent edition of Bitcoin Magazine PRO. Subscribe now to receive PRO articles directly in your inbox.

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Bitcoin (BTC) tracked $27,500 on May 10 as markets geared up for what should be a positive United States inflation print.

CPI set for months of decline

Data from Cointelegraph Markets Pro and TradingView followed BTC/USD as it lingered in a narrow trading range ahead of the April Consumer Price Index (CPI) release.

A classic volatility catalyst for risk assets, CPI forms one of the key metrics which the Federal Reserve considers when changing interest rates.

The next change is a full month away, but both government and private-sector metrics predict declining inflation to persist, and even accelerate, in the coming months.

“A little bit of stagnation now, but into the coming two to three months, we’re likely to see a gradual decline, and actually a pretty steep decline, in inflation,” financial commentator Tedtalksmacro said in part of YouTube analysis on May 9.

Tedtalksmacro referenced both the Cleveland Fed inflation forecast and, separately, “Trueflation,” an unofficial leading indicator for inflation trends which likewise showed further substantial declines to come.

In a subsequent tweet on the day, Tedtalksmacro separately showed potential BTC price changes relative to various possible CPI numbers, along with the probabilities as per JPMorgan Chase.

CPI gameplan for #Bitcoin

Above 5.5% –> $25,000 (4% probability)

5.3% to 5.5%–> $26,500 (25% probability)

5.0% to 5.2% –> $28,500 (50% probability)

4.7% to 4.9% –> $29,000 (20% probability)

4.5% or lower –> $30,000+ (1% probability)

*Probabilities according to JPMorgan

— tedtalksmacro (@tedtalksmacro) May 10, 2023

According to CME Group’s FedWatch Tool, meanwhile, market expectations for the Fed to pause its interest rate hikes to tame inflation in June stood at 80% at the time of writing.

Binance traders up spot selling

Turning to short-term BTC price action, the lasting impact of the Binance “FUD” episode earlier in the week meant that Bitcoin bulls remained unable to reclaim levels closer to $30,000.

Related: Binance ‘FUD’ meets CPI — 5 things to know in Bitcoin this week

Analyzing the status quo among traders, monitoring resource Skew described the market as “overly saturated with shorts,” with market makers still selling into small price upticks.

“Binance spot is the market selling aggressor today,” part of Twitter commentary stated.

Overnight, fellow monitoring resource Material Indicators noted bid liquidity increasing just below the $26,000 mark on the Binance BTC/USD order book.

“Expecting to see liquidity moving around the order book between now and the morning economic reports,” part of comments on an accompanying chart read.

“The question is, will some of what’s there now get cleared out and make way for volatility or will local support and resistance get insulated with buy and sell walls?”

Magazine: Unstablecoins: Depegging, bank runs and other risks loom

This article does not contain investment advice or recommendations. Every investment and trading move involves risk, and readers should conduct their own research when making a decision.