Market wrap: Bitcoin stalls after short-term rally

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Bitcoin took a break on Tuesday after a price rally of nearly 20% in the past few days. The cryptocurrency went from $ 40,000 to resistance as Amazon denied rumors it would accept bitcoin payments. Bitcoin was trading around $ 37,000 at the time of publication and has fallen by around 4% in the past 24 hours.

Technical data suggests that weaker support around $ 34,000 could stabilize the current pullback.

Going forward, we expect bitcoin to continue pushing higher and testing the upper end of the $ 30,000 to $ 42,000 trading range, wrote Pankaj Balani, CEO of Delta Exchange, in a. email to CoinDesk. We also expect to see similar moves in altcoins, led by the ether.

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Only a definitive break above $ 50,000 in BTC would attract new flows and signal a change in the broader direction of the market, Balani wrote.

Some analysts expect bitcoin to rise further as institutional buyers find valuable opportunities in cryptocurrencies.

As institutional investors waited on the sidelines to take positions, the current market movement could be supported during the week, wrote Elie Le Rest, partner of crypto hedge fund Exo Alpha, in an email to CoinDesk.

The short-term rally sparked the most active trading session this quarter in the crypto markets, according to data from Skew.

Spot Bitcoin – aggregated daily volumes

Source: bias

The increase in volumes was driven by large buyers, usually institutions that had been expecting a more directional trend in bitcoin since the end of May, according to Le Rest.

Brief return to profitability

More than 2 million BTC returned to profitability based on their realized price after bitcoin’s rally in the past few days, according to data from Glassnode.

This indicates that 11.2% of the circulating supply has an on-chain cost of between $ 29,000 and $ 38,000, Glassnode tweeted Monday.

Bitcoin: total supply in profit

Source: Glassnode

Bitcoin reduction

Bitcoin withdrawal, or the percentage decline from the peak of nearly $ 63,000, has narrowed to around 40% over the past week. Typically, drawdowns above 50% indicate the start of a downtrend, similar to 2014 and 2017-2018.

The current decline suggests that the medium-term downtrend for bitcoin is leveling off given the strong rebound in prices over the past few days. However, declines can last much longer towards 70% to 80%, which previously occurred near bear market lows.

Source: Koyfin

Less bearish options

The month-to-month bitcoin put-call asymmetry, which measures the cost of puts, or bearish bets, versus calls, or bullish bets, fell sharply to 2% from 13% at the end of last week, according to data provided by the firm Skew crypto derivatives analysis. The one-week purchase gap fell from 13% to 5%.

The narrowing of the spread between put and call prices essentially means investors are no longer looking for downside hedges in anticipation of a prolonged price drop, CoinDesks Omkar Godbole wrote.

The put-call bias in the bitcoin options market has become less bearish.

Source: bias

Bitcoin futures return to contango

After Monday’s short squeeze, some unregulated futures are back in a 10% contango, but the base varies across different locations, and institutional traders still appear cautious, according to a report released Tuesday by Arcane Research.

Contango, a term used to describe bullish arbitrage, occurs when the futures price of bitcoin is higher than the spot price. Since April, the bitcoin contango has narrowed as bullish sentiment fades.

Were still far from the extreme 50% contango as of mid-April, but there is concern that traders on unregulated offshore futures are once again overtaking CME traders, Arcane wrote.

The growing contango is occurring as traders with a short bias are reluctant to re-enter short positions after Monday’s massive squeeze.

Source: Arcane Research

The Tether set

With the largest stablecoin, the USDT, once again in the news for less than auspicious reasons, worried permanent bears could now seek out the crypto market equivalent of a credit default swap instrument. derivative that allows buyers to bet on the creditworthiness of another trading counterparty.

The answer to this could be a put option on the tether, essentially a bet that the price of stablecoins will fall below its ostensible cash value of $ 1. Some traders are actively seeking such a trade, according to some players in the digital asset markets.

Although market makers have seen tether demand build up, it is difficult to meet that demand, wrote CoinDesks Omkar Godbole. Currently, there is no active market for tethered put options. The exchanges do not find a business case in this because, technically, there is no exposure to compensation. Participants fearing a tie collapse should find a seller in the over-the-counter (OTC) markets or approach market makers. It is a costly affair.

The solution may be to trade a tie at a much lower strike price or out of the money below $ 1.00. It would cost relatively less than buying a put at $ 1.00.

Altcoin balance sheet

Senator Warren Shoots Crypto Again: Longtime Crypto Senator Elizabeth Warren (D-Mass.) Once again urges the U.S. government to develop a regulatory strategy to mitigate the growing risks that cryptocurrencies pose to the financial system. In an open letter to Treasury Secretary Janet Yellen on July 26, Warren urged the Yellen Financial Stability Supervisory Board (FSOC) to provide a coordinated and holistic response to crypto risks. Warren cited decentralized finance (DeFi), crypto-enabled cyber attacks and the unique threats posed by stablecoins as risks to the financial system. Eco Raises $ 60 Million For High Yield USDC Savings App: Eco Raises An Additional $ 60 Million To Power Its First Successful Stablecoin Crossover As Regulators Increase Pressure On The Industry. Eco is part of a wave of fintechs offering banking-type services to a fiduciary audience, but one of the few to have a crypto back-end: it generates returns on customer deposits by lending them to institutions in the form of USDC stablecoin. This model could come under close scrutiny as global regulators probe the stablecoins industry with new strength, CoinDesks Danny Nelson reports. Solanas Saber Labs Raises $ 7.7 Million: Saber Labs, a senior contributor to a cross-chain stablecoin exchange named after her and built on Solana, has raised a funding round of $ 7.7 million. The funding was led by Race Capital with the participation of Chamath Palihapitiyas Social Capital, Jump Capital, Multicoin Capital and Solana Foundation, among others. DeFi Insurance Platform Goes Live on Polygon: Tidal Finance, an insurance offering aimed at the growing DeFi space, has launched its mainnet and token rewards system for participants contributing capital to its reserves. Announced Tuesday, Tidal Finance goes live on the Ethereum Layer 2 Polygon network with a handful of initial customers for its subscription insurance model, including StaFi, Xend Finance, Marlin, EasyFi and bZx.

Relevant news:

Other markets

Most digital assets on CoinDesk 20 ended lower on Tuesday. In fact, everything was in the red with the exception of the dollar-linked stablecoins.

Notable Losers by 9:00 p.m. UTC (4:00 p.m. ET):

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