TI Weekly Market Review: Exhilarating: Bitcoin Surpass $40k, Altcoin Springs New High

In the first week of 2021, we have been through a volatile performance in both market and politics. Bitcoin’s price fluctuates more than $4,000 in 24 hours after the Capitol attack horribly happened on Thursday.  Ethereum surges above 70% after the New year, reaching all-time-high. Meanwhile, since the beginning of 2021, some altcoins attracted the market favours, large-cap altcoins like XLM and Cardano’s ADA show “Blue Chips” property, rising sharply this week. 

However, the uncertainty remains as we look through data like funding rate and transactions fee. Ethereum’s funding rate stays at an extremely high level. Some analysts believe this high level can not remain in the long-term.  

Bitcoin: From Peak to Summit

Bitcoin’s wild price swings crazy this week, jumping from $30,000 to $34,500 within 24 hours in the night on 2 Jan. Then immediately fell below $30,000, triggering wildly panic among retail investors.

BTC price in the last 7 days, chart from 9pm EST, Jan. 07. Source: tokeninsight.com

As a market sentiment indicator, the options market reflects different groups of investors’ sentiment information. OKEx’s data shows some retail investors’ sentiment in a very interesting way. According to OKEx’s trading data of the options market, on 3 Jan, there are 65.1% of investors holding a negative attitude toward Bitcoin. 

OKEx’s options market trading info, chart from 9pm EST, Jan. 07. Source:gvol.io

However, the price of Bitcoin did not go down. Since 4 Jan, Bitcoin bounced back to $40,000 on 8 Jan, breaking the all-time-high again. Although it fluctuates around the $40k’s line, the price did not show signs of dropping down. The weekly trading volume of both the spot and derivative market of Bitcoin reached $71.6 billion and $577.3 billion respectively, increasing about 70% compared to the last week. 

The market turns retail investors' attitude immediately. On 7 Jan, according to OKEx’s trading data of the options market, 61.7% of investors hold a positive attitude.

BTC perpetual historical trading volume in the last 30 days, chart from 9pm EST, Jan. 07. Source: tokeninsight.com

BTC/ETH trading volume changes in the last 7 days, chart from 9pm EST, Jan. 07. Source: tokeninsight.com

Will 2021 belong to Ethereum?

For Ethereum, the beginning of 2021 is undoubtedly wonderful. On the one hand, the Chicago Futures Exchange (CME) will launch Ethereum futures in February, representing the traditional market’s recognition of another mainstream digital asset after Bitcoin. On the other hand, the deployment and implementation of Ethereum 2.0 are also in progress steadily. The search volume of Ethereum on the Internet has also reached the all-time-high.

Support from both the market and technology pushed the price of Ethereum to a new high of $1,280, while the trading volume of spot and perpetual contracts has increased by more than 150%, and the trading volume of perpetual contracts has reached $169.4B, which is far beyond the $100B.

From the perspective of open interest, as of press time, the open interest of Ethereum has reached $2.6B, an increase of more than $1B compared to the beginning of the year. Even considering the price’s rising,  the influence from the number of contracts can no longer be ignored.

For Vitalik and everyone in the Ethereum community, this is a milestone moment.

ETH price in the last 7 days, chart from 9pm EST, Jan. 07. Source: tokeninsight.com

ETH perpetual historical trading volume in the last 30 days, chart from 9pm EST, Jan. 07. Source: tokeninsight.com

ETH perpetual open interest in the last 30 days, chart from 9pm EST, Jan. 07. Source: tokeninsight.com

However, some analysts believe that this round of rising is unsustainable for two reasons. First of all, although the market is wild and hot, the funding rate of perpetual contracts is about to reach the "unbearable" standard. BitMEX's Ethereum perpetual contract funding rate reached 0.6% on January 5, and other exchanges’ funding rates of ETH perpetual contracts have also exceeded the highest level in history. For the derivatives market, such a high funding rate is unsustainable. Institutional investors may continue to carry out arbitrage of open interest by selling perpetual contracts to hold the spot, which will undoubtedly affect the price of the perpetual contract, and ultimately influence the spot price.

ETH perpetual funding rates in the last 30 days, chart from 4:20am EST, Jan. 08. Source: tokeninsight.com

On the other hand, from the perspective of the options market, the implied volatility of Ethereum at-the-money options has reached unprecedented heights (more than 150%, please refer to the previous TI weekly review for the introduction of implied volatility). However, compared with historical volatility, even implied volatility underestimates the degree of the ETH market’s volatility. When the historical volatility is higher than the implied volatility, it often indicates that the volatility of the spot market has exceeded investors' expectations, which means huge risks.

ETH at-the-money options’ implied volatility in the last 30 days, chart from 1:00am EST, Jan. 08. Source: gvol.io

Comparison of ETH options’ historical volatility and implied volatility in the last 30 days, chart from 1:00am EST, Jan. 08.  Source: gvol.io

Will 2021 be the year of Ethereum? At least from the perspective of investors, their consensus on Ethereum has always been relatively optimistic. Whether spot, futures or options, this consensus has been reflected. Although market volatility is so huge, overall, the proportion of investors with a bullish attitude is always much higher than that of investors with a bearish attitude. What height will Ethereum reach? $1,600, or even more, $1920? It is not known yet, and we are looking forward to the performance of Ethereum in the new year.

Put / call ratio of ETH options in the last 30 days, chart from 1:00am EST, Jan. 08. Source: gvol.io

Find the ”Blue Chips”: Who is the Next Unicorn? 

The altcoin market also performs well this week. At the beginning of 2021, following the bull market pull by Bitcoin and Ethereum, altcoins like Steller’s XLM and Cardano’s ADA surges well this week. 

Price changes of XLM and ADA in last 30 days, source: TOKENINSIGHT.COM

Cardano will have some important network upgrades in 2021, and public chains like Stellar match investors' expectations after OCC’s approving stablecoins could be used in banking transactions. With the momentum pulled by the mainstream cryptocurrencies, altcoins and the DeFi market should have a better performance in 2021. Maybe it is time to call these altcoins “Blue Chips Token”. 

Who is the next unicorn among these blue chips? Let’s sit down and wait.

Highlights Picked by TokenInsight

OCC Approves the Use of Stablecoins for Banking Transactions

The Office of the Comptroller of the Currency, has approved the use of stablecoins for the settlement of financial transactions by banks.

Grayscale Digital Large Cap Fund Announces Rebalancing of Fund Remove XRP

The Fund has removed XRP and used cash proceeds to purchase the remaining Fund Components: Bitcoin, Ethereum, Litecoin, and Bitcoin Cash. 

Ukraine Government Picks Stellar Development Foundation to Help Build National Digital Currency

Announced Monday (4 Jan 2021), the Ministry of Digital Transformation of Ukraine and the Stellar Development Foundation (SDF) signed a Memorandum of Understanding to build out a “virtual assets ecosystem and national digital currency of Ukraine.”