TI Weekly Market Review: Bitcoin Volatile with Opportunities, DOT Doubled in a Week

TI Research

TokenInsight ‘Surfing and riding on the top of the wave’ would be a better description of this week. Mainstream cryptocurrencies dived huge this week with panic sentiment spread in the retailers. When investors start to turn from bull to bear, Bitcoin’s price surge back to nearly $40,000’s high level, shaping a ‘V’, and tuning the investors’ mentality. Among the mainstream cryptos, the performance of DOT dazzles this week as we predicted in Dec 2020. Accumulating enough momentum rallying on Bitcoin, the price of DOT doubled with five times trading volume surging. How long will the ‘Fluctural-Bull’ remain? What’s the trend of the short and long-term market? Hints and traces could be found in TokenInsight’s weekly market review.

Jumping Between $30,000 and $40,000

After the price of Bitcoin surpassed $30,000, the market was burnt as hell. It takes less than a week to break $40,000 (8 Jan 2020), reaching all-time-high and stabilizing for 2 days (10 Jan 2021). Meanwhile, Ethereum boosted over $1,300 following the step of Bitcoin.

BTC and ETH price in the last 7 days, chart from 9pm EST, Jan. 14. Source: tokeninsight.com

Lots of investors have anticipated the market’s callback, but almost no one realized that this callback is so huge that bitcoin fell by more than $8,000 (nearly 20%) in 24 hours, which was close to the $30,000 line at the lowest point. Ethereum also followed the trend and fell below $1,000. The trading volume broke a record on that day, for only the exchanges tracked by TokenInsight, the total daily trading volume of Bitcoin spot and perpetual contracts reached $203.61B, surpassing the weekly trading volume in many periods of last year.

BTC perpetual historical trading volume in the last 30 days, chart from 9pm EST, Jan. 14. Source: tokeninsight.com

Investors have done some preparations for the fall, generally speaking, the market's callback after the holiday bull market is a universal law, for many institutional investors would choose to close their positions at a high level to make profits and sell call options after the vacation, which will lead to an increase in supply and a sharp drop in spot and futures prices. At the same time, a large number of individual investors would also follow the institutional investors to choose to clear out at a high level and wait for the next opportunity to enter the market.

50% + Call Premium Sold from Deribit, chart from Jan. 12. Source: gvol.io

But this does not mean that panic did not happen. The huge short-term decline caused a large number of positions owned by futures traders to be liquidated, and the liquidation volume of positions reached the highest point of recent months on January 11. For individual investors, market trends are too complicated to judge: this may mean that the "Mar 12" incident will repeat itself after a year. The skewness of the options market (an indicator that can be used to judge market sentiment) was once below the zero lines on January 11, and the bearish sentiment was permeated. On the same day, the bit.com options exchange, where individual investors were more concentrated, showed a large number of put options buying volume.

1-hour skew trend in the last 30 days, chart from 9pm EST, Jan. 14. Source: gvol.io
bit.com options market trading info, chart from Jan. 12. Source: gvol.io

However, there is no shortage of gamblers in the market. OKEx, another exchange serving individual investors mainly and owns options business, on the day of the price plunge, many investors chose to gamble instead. They may think that this plunge was just a "technical adjustment" and then decided to buy a large number of short-term call options. This time,  they were right. The prices of mainstream cryptos rebounded rapidly within three days, and once again returned close to the level before the plunge.

OKEx’s options market trading info, chart from Jan. 12. Source: gvol.io

To be honest, gambling is not an investment strategy worth boasting about. The huge volatility of the market and the variability of cryptos’ prices mean that any investment in the near future must be carefully judged and considered. Let's take a look together, what the market might tell us.

BTC/ETH/DOT trading volume changes in the last 7 days, chart from 9pm EST, Jan. 12. Source: tokeninsight.com

Recent Waves Doesn’t Mean Long-term Shock

From the perspective of implied volatility and historical volatility, the continuous entanglement of historical volatility and implied volatility starting in Jan 2021 is not good news. Implied volatility determines the prices of options, and when the historical volatility is higher than the implied volatility, it often indicates that people are unwilling to pay more premiums for future market trends, which in turn reflects poor market sentiment.

Furthermore, The entanglement of historical volatility and implied volatility means that investors are hard to make judgments about the market and are in a mood of uncertainty. Although the prices of mainstream digital assets have rebounded, the trading volume reveals that investors still tend to be cautious in their trading attitudes.

Comparison of ETH options’ historical volatility and implied volatility in the last 30 days, chart from 9:00 pm EST, Jan. 14.  Source: gvol.io

From the perspective of the implied volatility surface, although the curve of options expiring in the short-term appears to be left-skewed (which often means investors are bearish in the short-term), for long-term options, the curve still maintains a right-skewed shape, and similar situations have been going on for months. This means that investors are still optimistic about the long-term of Bitcoin. Despite the recent high volatility, the mainstream attitude of the market still has not changed. From this perspective, long-term investment in bitcoin is still worthwhile.

However, investors still need to face crypto price shocks that may last for several weeks. For short-term traders, it is very necessary to adopt a cautious investment attitude in the near future, capture the turmoil from the market, and detect and control risks in time. The market is full of volatility, variability, and veers, and this will be a difficult but memorable period for investors.

Comparison of different terms of BTC options’ implied volatility surfaces, chart from 9:00 pm EST, Jan. 14.  Source: gvol.io

DOT Price Double with Five Times Trading Volume Increase this Week

As we could be expected from the traditional market, high waves bring up excellent surfers. ‘Blue chip’ token DOT dazzles this week as the market shacked. Though the price of DOT callback a little when Bitcoin dropped this week on Jan 11, it boosted to $15 on Jan 15, a 88% increase compared with last week, nearly doubled, reaching its all-time high. The trading volume reached $4.39 billion. Currently, the market capitalization of DOT has surpassed Ripple’s XRP and Litecoin becoming the 4th ranked crypto asset. 

As TokenInsight predicted in December 2020, Polkadot doesn’t let the investors down, which reflects a trend that ‘blue chips’ like DOT will become one of the most popular sectors in the crypto market. 

According to a report posted on Coindesk, some rumors among Asian traders thought Polkadot would become the next EOS. While its value is highly correlated with the popularity and the number of useful applications on the polkadot chain rather than the market or bitcoin rally. Polkadot has actively built its ecosystem during 2020 and it faces challenges like ‘Ethereum’s supremacy’  and opportunities like App transferring period from ETH 1.0 to Beacon Chain. Qualitative DeFi application needs to emerge during this period could the Chain win this serve competition, supporting DeFi’s rise.

DOT  price in the last 7/30 days, chart from 9pm EST, Jan. 14. Source: tokeninsight.com

Highlights Picked by TokenInsight

Acting Comptroller of the Currency Brian Brooks is Expected to Leave the Agency by the End of the Week

As the Democratic stepping to the Whitehouse, Trump nominated head of the federal bank, acting head of OCC, Brain Brook is about to step down by the end of the week. Biden nominated head of SEC, Gray Gensler will take over the role. 

Bakkt to Become a Publicly Traded Company via Merger with VPC Impact Acquisition Holdings

Jan 11, 2021, as a qualified cryptocurrencies custodian, Bakkt announced it was merged with a Chicago investment company called Victory Park Capital, changing its name into ‘Bakkt Holdings’. Bakkt investors will roll their equity into the combined company, with Intercontinental Exchange contributing an additional $50 million in the capital. Combined company valued at an enterprise value of approximately $2.1 billion.

HSBC Blocks Transactions From Crypto Exchanges

Jan 11, 2021, HSBC has become the latest banking giant to restrict what its customers can invest in by preventing them from transferring any profits from crypto exchanges to their bank accounts. This action may be correlated with the money laundry fined by FinCEN in September 2020.





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