Yesterday afternoon, from 18:00 – 18:14 (Beijing time, July 9, 2019), there was a large sell-off of Bitcoin on the Currency Exchange, and nearly 7,000 BTC was sold on the BTC/USDT trade pair. At the same time, TokenGazer observed that the premium of USDT/RMB over-the-counter trading has disappeared and even a negative premium has appeared on the Firecoin.
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Under this circumstance, the impact of the nearly 80 million USDT sold by Bitcoin in the market may have to be explored.
Nearly 7,000 BTC sell-offs and USDT/RMB premiums disappeared in the short term. Mainstream currencies, especially the altcoin, are highly bearish, and the impact on Bitcoin is very limited.
In the short term, the probability of the exchange rate of the mainstream currency and the altcoin against the bitcoin exchange rate is lower, and the market share of bitcoin may be further increased.
The short-term operation strategy should continue to be based on the holding of bitcoin. It is not recommended to bet on the left side of the mainstream currency and the auspicious currency against the bitcoin exchange rate.
Below is a detailed analysis of TokenGazer. Our analysis of the disappearance of the USDT/RMB over-the-counter premium and the impact of the huge bitcoin sell-off on the post-market will be based on the following judgments.
Judgment 1: BTC's pricing power is in the USD trading pair and the US dollar market
In mid-June this year, TokenGazer released a research report titled “USDT is losing pricing power for BTC”. We found that the Coinbase Pro and Bitstamp dollar exchanges assume the role of leader in the main market for Bitcoin this year:
In the above picture, Coinbase Pro BTC/USD has a positive premium change (green shaded) relative to Bitfinex in the rising market after the main market this year started in April, and in the down market, Coinbase Pro BTC/ The negative change in USD relative to Bitfinex (red shaded) represents that Coinbase Pro BTC/USD dominates Bitfiniex in the market.
Our statistics on the bitcoin trading volume of the mainstream exchanges also support this judgment: Since the beginning of the year, as the bitcoin market has warmed up, the bitcoin trading volume of each exchange has also increased significantly, and the highest increase is Coinbase Pro and BitStamp. Two compliant USD exchanges illustrate the increase in BTC/USD's influence relative to BTC/USDT in the market.
Judgment 2: BTC/USDT and BTC/USD markets are relatively isolated
We compared the large sell-offs on the BTC/USDT in the currency against the big sell-offs on BTC/USD on Bitstamp on May 17 this year:
The sell order of the currency has caused its BTC/USDT to fall from 12,645 to 12,068. At the same time, at 18:00-18:14, the price of BTC/USD on Coinbase fell from $12,685 at 18:00 to a minimum of 12,107 at 18:14. Dollar. However, starting from 18:14, although there are still large sell orders hanging on the currency, the dollar-denominated bitcoin on Coinbase is not affected by the USDT-denominated bitcoin sell orders. As a result, the USD-denominated BTC has limited impact on the bitcoin prices of other exchanges, and more than 7,000 BTC/USDT sell orders have caused the price to fall by a maximum of 577, with a maximum decline of only 4.56%, and its own price is also limited.
On May 17 this year, the BTC/USD sell-off on Bitstamp continued to move, causing Bitcoin prices on Bitstamp to fall from $7,763 to $6,178, a drop of 20.4%. For some time, a 3,700 BTC/USD sell orders continued to move down, causing the dollar-denominated BTC price on Bitstamp to fall from $7212 to $6,247 in 10 minutes, a drop of 13.4 in 10 minutes. %. The sale of BitStamp this time has affected the entire market.
The impact of the occurrence of the currency and the BitStamp sell order is different, in addition to the depth of the transaction between the two, and the BTC/USD market and the BTC/USDT market cannot form an efficient closed loop, that is, the BTC/USDT cannot adversely affect the BTC/USD market.
We use a picture to make it clearer:
In the dollar and bitcoin compliant trading market, the volume of transactions continues to rise, and the dollar and dollar trading markets have become the most important currency access channel for bitcoin transactions. Bitcoin purchased on the US dollar trading market can now be relatively simple to recharge to the currency trading market, where it can conduct so-called “coin trading” with USDT and other digital currencies. The international intergovernmental organization FATF has adopted the "Guidelines for Risk-Based Virtual Assets and Virtual Asset Service Providers" to bring resistance to the movement between Bitcoin exchanges in the future, but the transfer of Bitcoin is still very short before the "Guide" takes effect. Convenient.
The USDT obtained by selling the digital currency on the currency exchange wants to return to the US dollar exchange to form a closed loop of trading. There are two options:
One is to convert into currency at the OTC OTC. At present, the Chinese mainland OTC market is the most important customer group for USDT and currency transactions, which we will explain in detail later in this article. The RMB obtained by the OTC transaction is affected by foreign exchange controls and cannot be returned to the US dollar market on a large scale.
The second is through the Tether official exchange withdrawal. However, in the history of Tether, there have been many problems such as suspension of redemption and long withdrawal time, and on its official website, it is stated that each customer can only exchange US dollars once a week. The New York State Attorney General's lawsuit against Bitfinex also brought huge uncertainty to Tether's future operations. The Tether official exchange of dollars and the return of the dollar market is currently very low.
This isolation of the BTC/USDT and BTC/USD markets is also the reason for the difference in pricing power between the USD and USDT for BTC. The example of two sell-offs again illustrates that USD has a more influential pricing for Bitcoin.
Judgment 3: The pricing of mainstream and altcoin depends mainly on BTC and USDT
The pricing power with Bitcoin is currently more dominated by US dollars. The pricing of Ethereum, EOS and other mainstream currencies, as well as other altcoins, depends mainly on Bitcoin and USDT. It is easy to prove this judgment by counting the proportion of US dollar and USDT transactions in Bitcoin and Mainstream (as EOS) on the Real 10 exchange since June.
Comparing the share of USD transactions between Bitcoin and EOS, we can see that the share of USD transactions in EOS is significantly lower than that of Bitcoin. The impact of USDT on EOS will be stronger than the impact of USD on EOS. The price of EOS will depend more on the USDT.
EOS is one of the few mainstream currencies with USD trading pairs. Other mainstream currencies and altcoin USD trading pairs usually have a lower trading volume, or more likely there is no USD trading pair. Therefore, USD has no direct pricing power for mainstream and altcoin, and the pricing of mainstream and altcoin depends on BTC and USDT.
Judgment 4: Chinese users are the main market for mainstream currencies
Since the Chinese government issued the 9.4 policy in 2017, the OTC transaction has become an important entry point for mainland users. Although the proportion of global legal currency transactions has fallen from zero to more than 90%, in fact, mainland China It is still a very important source of users for many currency exchanges. Because the OTC market is more fragmented, it is difficult for third-party data to obtain accurate volume summaries, so we must evaluate the impact of the Chinese market and Chinese users in an indirect way.
The changes in Lachpad's requirements for KYC provide some clues to assess the activity of Chinese users. On August 28th, Launchpad was opened to domestic users for the first time, and the success rate was also reduced from 58.38% of the MATIC project to 11.07%. This does not exclude some users who have done a good job because of the good yield of Launchpad, but Obviously, opening up to Chinese identity users is the most important driver. A decline in the success rate of more than 80% indicates that users from mainland China may still occupy half of the active users of the currency.
TokenGazer used Google Trend to query the search trends of Bitcoin, Ethereum and EOS respectively, and found that Chinese users ranked first in the search for Ethereum and EOS, but in the search for BTC, they showed different scenarios:
Search BTC's regional heat ranking
Search for ETH's regional heat ranking
Search EOS's regional heat ranking
This shows that compared with other parts of the world, Chinese users are more inclined to trade mainstream currencies such as ETH and EOS, while trading on Bitcoin tends to be inferior to other regions.
The article "Traders in Asia continue to put their faith, and funds, in Tether" published by TheBlockCrypto on 7/4 also mentions that exchanges from China are becoming more and more popular as recipients of USDT chain transactions. More than 60%. In this case, Chinese users may be the main market for mainstream currency and altcoin.
Image source: https://www.theblockcrypto.com/tiny/traders-in-asia-continue-to-put-their-faith-and-funds-in-tether/
Bitcoin, mainstream currency and altcoin re-pricing are different. Bitcoin pricing power is shifting from USDT to USD, while mainstream and altcoin are mainly priced by BTC and USDT. Conversely, the price impact of USDT on mainstream and altcoin is greater than the price of BTC – the price of BTC can be dominated by USD, while the mainstream and altcoin lack the USD channel.
The probability of a sell-off of the 7000 BTC is that the institution has a low probability of buying the mainstream currency and the altcoin. These USDT outflows will further eliminate the premium of the French currency against USDT. In OTC, the disappearance of the French currency against the USDT premium status indicates a decline in the purchasing power of the currency channel's traders.
Due to policy restrictions, Chinese users can only buy USDT through OTC transactions and then use USDT to buy Bitcoin or other cryptocurrency. The disappearance of the RMB premium to the RMBT means that Chinese traders have reduced their buying power in cryptocurrency. By analyzing the volume and trading habits of Chinese traders, Chinese traders are the main market for mainstream currencies. Compared with Bitcoin, Chinese traders trade and hold mainstream coins and altcoins. If Chinese traders buy less pressure, they will have a greater impact on mainstream currencies and altcoins.
In summary, TokenGazer judges that the currency is close to 7000 BTC and the USDT/RMB premium disappears. In the short term, the mainstream currency, especially the altcoin, is a big bearish, and the impact on Bitcoin is very limited; in the short term, the mainstream currency and the altcoin pair The probability of currency exchange rate rebound is low, and the market value of bitcoin may be further increased. The short-term operation strategy should continue to be dominated by holding bitcoin. It is not recommended to bet on the left side to beat the mainstream currency and the altcoin currency against the bitcoin exchange rate.