A Phoney Silent? TI Weekly Research: A Phoney Silent?
The theme of this week is ‘Silence’. After about 2 months’ prosperity from October, the crypto market steps into doldrums. It seems like investors finally calm down to some extent. Breaking market news doesn’t bump up frequently this week. What worth mentioning is that Singapore is conducting lots of actions to accelerate the layout of its blockchain ecosystem, especially in the field of financial services. No one queries Singaporean vital position in finance, therefore, the crypto market is simmering below the surface seemingly. Let’s look forward to the performance of the crypto market next year.
Trading Volume Shrinks, But the Future is Still Expectable
Unlike the hot stock market, the crypto market is quiet in December this year. Compared with last week, the trading volumes of main cryptos shrink more than a quarter in both the spot market and contracts market, which goes back to the level of October. Although bitcoin’s prices dropped from $19,500 to lower than $18,000 at this period, there is no significant increment of trading from the probable panic.
BTC and ETH trading volume info of this week, chart from 9pm EST, Dec. 10. Source: tokeninsight.com
BTC and ETH historical trading volume in the last 30 days, chart from 9pm EST, Dec. 10. Source: tokeninsight.com
Market Sentiment Implied in Three Indicators
Some analysts believe that this silent atmosphere very likely happens near the end of the year. Lots of investors and traders clear their inventory for vacation and are waiting to re-enter the market after Christmas and the new year. Perhaps this is true, but not always the case.
We can find some clues from the crypto options and futures market. The funding rate is a useful indicator. It is able to reflect the change of confidence in the market. From the perspective of BTC, its perpetual contracts’ funding rate turns negative, which means that more traders holding short positions, and they don’t have so much confidence in the short-term market.
Funding rates of BTC in the last 30 (Up) / 90 (Down) days, chart from 9pm EST, Dec. 10. Source: tokeninsight.com
Similarly, ETH contracts’ volatility of funding rates has decreased and been concentrated near the 0% line, which means that the scales of investors with long positions and short positions are roughly the same, and all of them are still holding their assets to see the trends of the market.
Another clue is open interest. Unlike the trading volumes, open interests of futures and contracts still maintain at a high level. Compared to the booming Nov., there is no trend about falling at present. This illustrates that investors didn’t trade frequently or clear their inventories for Christmas. They are just watching the fluctuation and waiting for a good chance.
Open interest of BTC in the last 6 months, chart from 11:00am EST, Dec. 10, Source: skew.com
Furthermore, implied volatility also hides some information.
Generally speaking, implied volatility reflects unequivocal future anticipations of market performance, and investors will sell options with higher volatility and buy options with low volatility, so analysts are able to know what traders are thinking about by this indicator.
From the perspective of the recent volatility surface, we can find that investors tend to sell options. According to the concept mentioned above, we speculate that investors lack confidence for the short term of the market.
Recent implied volatility surface of BTC options, chart from 11:00am EST, Dec. 10, Source: gvol.io
However, investors are still keeping enough confidence in the long-term future. On one hand, the forward volatility surface illustrates that investors are tending to buy options, which implies positive predictions from the aggregate market. On the other hand, from the perspective of the term structure of implied volatility, the market is in a state of contango, indicating that the possible peak of trading will come next year.
Term structure and forward implied volatility surface of BTC options, chart from 11:00am EST, Dec. 10, Source: gvol.io
The present value of BTC & ETH market caps can also be regarded as a proof of confidence. They are still increasing, step by step.
Therefore, please give some patience to our crypto market. The future will be better.
BTC & ETH market cap changes in the last 30 days, chart from 9pm EST, Dec. 10. Source: coinmarketcap.com
Singapore: Blockchain and More
As one of the financial centres in Asia, obviously, Singapore has always been a pioneer in discovering the blockchain technology and cryptocurrency trading industry. Recently, Singapore has issued the Payment Services Act, PSA. However, according to the information from the website of the Monetary Authority of Singapore (MSA), there is no company acquiring the license yet. According to the research from TokenInsight, MAS tends to give license to traditional financial institutions, although lots of new companies applied for the PSA license, including exchanges and wallets.
Singapore does not keep in peace like the crypto market of this week.
- The Singapore government approved to invest $9,000,000 into blockchain research and development on Monday.
- Government-backed DBS Bank’s digital exchange will begin providing crypto trading services for institutional clients and accredited investors next week.
- Swiss digital exchange will also build a crypto exchange in Singapore with Japan’s institution, slated for launch in 2022.
- On Thursday, Singapore published the Singapore Blockchain Ecosystem Report 2020 and presented that blockchain is the breakthrough of financial services for Singapore. Nowadays, Singapore has applied blockchain into central bank digital currency (CBDC), business networks, AML/CFT, first digital bond issuance, and others.
Compared with Hong Kong and Tokyo, Singapore's advantages in IT technology have enabled it to succeed in the blockchain industry. In addition, according to anonymous sources, Singapore has already begun to take steps in compliance with crypto assets. It is believed that compliance related to digital asset transactions will be implemented in Singapore as soon as possible.
However, unlike Hong Kong and Tokyo, Singapore can only rely on itself. Let us wait and see.
Highlights Picked by TokenInsight
MassMutual Invests $100 Million in Bitcoin
Massachusetts Mutual Life Insurance Co. has purchased $100 million in Bitcoin for its general investment fund, the latest mainstream firm to dabble in digit assets.
Fidelity Digital to Hold Bitcoin as Collateral for Cash Loans
Fidelity Digital Assets will allow its institutional customers to pledge Bitcoin as collateral against cash loans in a partnership with blockchain startup BlockFi.
Apple Co-Founder Wozniak Lists Token to Help Fund Energy Efficiency Projects
Steve Wozniak has launched Efforce, a company that facilitates investments in energy efficiency projects via cryptocurrency and blockchain technology.