Encrypted Currency Research Report | People still dancing, Come hell or high water


  • Affected by NYIG accusation of Bitfinex&Tether, USDT price fluctuations, platform funds fleeing or pushing up BTC premium on Bitfinex, panic emotional fermentation is the core driving force of BTC's recent rise;
  • During the BTC price increase process, the overall trading sentiment and risk appetite of the market did not increase substantially. Other mainstream currencies and small and medium-sized market currencies did not follow the rise, and the amount of field memory was insufficient. The Bitmex contract was deeply discounted, and the market upside was small. High risk;
  • Fundamental analysis models such as chain transfer amount, currency day destruction and NVTS show that Bitcoin is in the near term or facing a medium-term deep callback.

In the weekly report of April 19, the BlockVC strategy study elaborated on the view that the liquidity is gradually tightening and the market needs to be cautious to guard against the callback risk from the perspectives of historical trends and current indicators. Bitcoin has back to the support level of 5,100 USDT, but on April 26, the US Attorney General's Office (NYAG), the US exchange rate exchange Bitfinex and the stable currency issuer Tether, the "Ruoshengmen" incident on the $850 million fund continued. Fermentation eventually led to Bitcoin driving the market to continue its upside, up to $5,800, while Bitfinex in the eyes of the storm pushed the price of bitcoin on its platform to nearly $6,200, up from 400 on other currency exchanges such as Coinbase. A premium above the dollar.

Although bitcoin is experiencing the biggest increase since the November 2018 plunge in price, the basic pattern of the market “left side of the bull market” has not changed. The upswing from the beginning of the round of $4,000 has been more than a month, long The kinetic energy is gradually depleting. BlockVC strategy research will focus on the event-driven analysis of Bitfinex-USDT in this weekly report, combined with the indicators of volume and price sentiment, to grasp the main melody and the strongest sound in the current noise-spreading and chaotic market, and explore the optimal investment trading strategy. .

'You came at the King, you better not miss.' If you aim at the throne, don't miss it.

Investors who don't look at the American drama "Billions" may have no idea about the title of NYAG (New York Attorney General), and would not have thought that one day Attorney General would have any connection with Crypto Currency. But investors who have seen Billions are likely to sweat in the near future: Chuck Rhoades, the inspector of the show, is an embarrassing role in the lawsuit winning rate, which means that the reality of AG since Dare to Tether and Bitfinex Picking up the incident, you must have mastered the detailed evidence, and will not easily give up on this matter.

Since April 26, NYAG announced that Bitfinex used Tether funds to make up for the $850 million deficit. The BTC price jumped in the morning, but it was quickly recovered due to the USDT panic, and continued to fluctuate continuously for a high level. The market wait-and-see mood was strong; On April 30th, Tether lawyers reported that only 74% of USDT shares had a legal currency mortgage. Even though the Tether official changed the wording of USDT to “backed by cash and cash equivalents” a few months ago, this news still caused the market to USDT. The panic broke out, and with the follow-up rumors of Bitfinex's announcement of the platform currency, the panic continued to ferment, causing the BTC to surge to $5,900 in just four days.

Source: Bitcoinity.org

Chaos is a ladder. Only the ladder is real and climb is all there is.

Unlike the “one-day tour” panic in October 2018, the USDT event was extensive, and the USDT exchange rate and Bitfinex's BTC premium continued to affect market sentiment. As the event continues to ferment, USDT has dived against other stable currency exchange rates and gradually began to recover; Bitfinex platform spot price has a large premium relative to Coinbase and Binance spot prices; current USDT exchange rate and Bitfinex premium are obviously related to Bitfinex user behavior. And this anomaly is obviously not sustainable. The return of exchange rate and premium will cause BTC price to face downside risk. The exchange rate and spot premium transmission mechanism are shown in the following figure.

In the long run, stable currencies such as PAX/USDC/TUSD have continued to maintain a premium for USDT, with only two significant discounts in the last six months, from December 2019 to early January 19th and April 1st, 2019. On the 24th, as shown in the chart below, the two discounts are also the process of BTC shocks. Taking PAX as an example, the premium level is about 2.5%, which is lower than last year's highest 4%, close to the next highest point of 3%. The past large premiums are often accompanied by significant adjustments in BTC prices.

Source: Tradingview BlockVC Strategy Research

A more interesting finding is that the price of USDT/USD on the Bitfinex and Kraken platforms has changed significantly since April 22, and the price of USDT in Bitfinex is significantly higher than US$1, which continues to rise to a maximum of US$1.0484. The price of USDT in Kraken during the same period However, there was a diving in the opposite direction, which fell from 1.005 to a minimum of 0.9700, and the trading volume was significantly reduced after April 30. In fact, this shows that in the early days of Bitfinex's crisis, platform users' views on USDT are different from expectations. Due to Bitfinex's deposit and withdrawal restrictions, platform users generally choose to buy USDT withdrawals on-site and sell USD legal currency through OTC or other platforms.

Source: Tradingview BlockVC Strategy Research

From the perspective of Bitfinex's leveraged contracts, the withdrawal of funds on the platform is becoming more and more obvious. An analysis of the multiple positions and short positions shows that both of them had a large position decline on April 26 when NYAG was in trouble. In the following days, although the BTC price slammed, the contract positions were extremely small. The scope of the contraction is oscillating and no longer follows the price trend. This makes people wonder whether the main trading funds on the platform are out of the platform in order to avoid exposure to the systemic risk of the platform as a whole. In this context, although the BTC's long-short-ratio data has come to an alarming historical low, its guiding significance for the market may still be lower than before.

Source: Tradingview BlockVC Strategy Research

Affected by the USDT factor, BTC prices also showed unusual price performance in the most representative Bitfinex, Coinbase and Binance. Since October 2018, BTC prices on Bitfinex have remained at a premium relative to Coinbase, and the premium has suddenly risen from April 24 to 25, reaching a price difference of up to $360. In the following picture, Binance and Coinbase premiums, the Binance premium and the Bitfinex premium generally remain the same trend. Only in this year's preliminary market, a nearly one-month discount divergence occurred. From about April 24 to 25, the Binance premium followed Bitfinex. The premium rate has risen.

The main point is, but since April 28, the Bitfinex premium has continued to rise while the Binance premium rate has started to decline. The USDT exchange rate has begun to return, indicating that the main factors affecting the market in the near future are not the USDT depreciation risk, but the Bitfinex individual risk is greater. The abnormal deviation of the Bitfinex and Binance premium rates is not sustainable, and will soon return to the normal value. As the Bitfinex premium rate declines, the short-term sentiment will be released, and the BTC price will fall back as the premium rate decreases.

Source: Tradingview BlockVC Strategy Research

The Bitfinex premium level can also be seen from the Bitfinex premium level. The following picture shows the BTC price change of 10% on the Bitfinex and Bitstamp platforms. Bitfinex orders are thicker, but relative to Bitstamp. Words, Bitfinex has almost no sell orders within 10% of BTC prices. From the perspective of commissioning, the current price of the buy-in committee is relatively low, while the selling is significantly improved, and the price has a large correction pressure in the short term.

Source: Tradingview BlockVC Strategy Research

Influenced by panic sentiment, including the spread of Bitfinex premiums from investors, the BlockVC strategy study observed that the number of Bitcoin blockchain transfers continued to increase significantly, reaching the peak level near the beginning of 18, while Bitcoin Bitcoin Days Destroyed did not show a large increase, indicating that most of the currency holdings changed little, and most of the transfers came from new addresses.

Source: BitcoinVisuals Tradingview BlockVC Strategy Research

Due to the large disturbance factors in the spot market, the market participants can better observe the emotions and expectations of market participants. Since April 24th, the BitMEX far-month contract has started to be reposted, and investors have turned pessimistic about forward price expectations; from the basis of the basis (the red line in the figure below is relative to Bitfinex spot, the purple line is relative to Binance spot, the gray line is Relative to Bitstamp stock), BitMEX contracts continue to maintain a deep discount on spot prices, indicating that contract investors' current spot price increases are understood as panic behavior of on-market funds, rather than rising funds driven by new funds.

Source: Tradingview BlockVC Strategy Research

The Funding Rate from BitMEX can also be confirmed. The fund rate has remained negative in the most recent quarter. The overall market is still in the short market, and the recent fund rate has turned positive. In the process of Bitfinex short positions, Bitmex near-end contract investment After the encounter is forced to empty, but the reverse begins to level, the rising market may begin to enter the lure range, and the adjustment risk will be improved later.

Source: Tradingview BlockVC Strategy Research

'Chaos is a ladder. Only the ladder is real and climb is all there is'

Bitcoin volatility ushered in a concentrated outbreak in April after the silence in March. Bitcoin prices continued to rise in late April and early May after the early April, and the pressure of previous squeezes has passed. Several quick pulls have been released and the current BTC volatility has returned to the 2018 average. The volatility has stabilized at a higher level, to a certain extent, the trading sentiment in the market is heating up, and the degree of risk appetite may be improved. However, it should be noted that the improvement of the current trading sentiment is driven by multiple factors, among which the sharp depreciation of the stable USDT plays a major boost.

Source: Bitmex BlockVC Strategy Research

From the distribution of the chips in the BTCUSDT trading pair, the typical bimodal structure has not changed. After a period of wide fluctuations in the past period, the middle area has balanced some chips. However, in general, the price range of 5400-6200 coins is less, and the upward pressure and downward resistance are weak. However, the resistance in the 6300 area is still huge, and it is difficult for Bitcoin to break through in the short-term.

Source: Tradingview BlockVC Strategy Research

In the recent continuous rise of BTC, asset linkages, capital inflows and risk appetite are clearly insufficient to support the overall market.

From the perspective of asset linkage, the chart below shows the fit of the top 1000 currencies in the last three months to the BTC price. It can be seen that the thousand-dollar up and down currency generally showed a downward trend, and in the range of BTC price decline, the ups and downs were more drastically reduced, reflecting the high sensitivity of the Altcoins market to bitcoin price changes. Recently, BTC continued to rise in the market, other mainstream currencies could not maintain the same increase, and the small and medium-sized market value Altcoins fell sharply. In the same state, the funds in the field were lacking. The transactions in which the funds were concentrated in buying BTC were too crowded, and stamping might appear at any time.

Source: BlockVC Strategy Research

The following picture shows the sentiment index developed by the BlockVC strategy for evaluating market panic and greed. Since August 2018, the sentiment index is positive for the market to be greedy, the sentiment index is negative for market fear, and the gray bar chart for bitcoin. 7-day moving average of logarithmic yield. At present, the BTC has a slight correction, the sentiment index has turned sharply, and each time the price hit a new high, the greed depicted by the sentiment index has repeatedly decreased, and the divergence from the market suggests that the risk appetite remains at a low or even neutral stage.

Source: BlockVC Strategy Research

Although Bitcoin has completed two important breakthroughs in technical form as described in the previous report, namely, the breakthrough of the MA200 and the breakthrough of the downtrend line in the last round of bear market, the bitcoin price has not broken the upward trend of the previous round of bull market. Line, as shown in the figure below, in order to remove the USDT fluctuation interference, the BTC price is based on the Coinbase data of the US mainstream currency exchange:

Source: Tradingview BlockVC Strategy Research

For the encrypted digital assets led by BTC, the valuation model research is still in the early stage, and all parties are still exploring effective valuation methods. From the stock market's secondary market analogy, in addition to the Metcalf model, the P/E Ratio is the price-earnings ratio or a powerful model for measuring the relative position of the market value of encrypted assets such as BTC. The following picture shows the NVTS model, invented and iterated by Willy Woo, Chris Burniske, and Dmitry Kalichkin, using a 90-day moving average of the chain transfer amount to measure whether the BTC price is overbought or oversold. As shown in the figure, the lower NVTS is higher than 150 and marked as red. In the past six years, there have been 6 cases of NVTS higher than 150. The first 5 times have peaked ahead of the market, and all recent successes are predicted in November 2018. The current position, NVTS once again stood on the 150 line, currently at around 170, according to the model combined with the above volume and price analysis, the space above the BTC is small, facing a greater risk of callback.

Source: Tradingview BlockVC Strategy Research

'Just One Last Dance', bitcoin staged the last dance of the first half of 2019?

For Bitfinex's upcoming platform currency IEO, combined with its financial difficulties and the liquidity crunch environment of the entire market, BlockVC strategy research believes that there are several head-end transactions in the market before the launch of the IGO with the Gatechain. Under the background that the USDT limit has been opened, Bitfinex IEO has begun to absorb blood from market stock funds; for Bitfinex, the issue platform currency IEO can recover USDT liquidity and fundamentally change the supply and demand relationship of USDT. Stabilizing and even increasing the USDT price, and complementing the 850 million reserve fund that disappeared from the NYAG and Crypto Capital funds magic games, it is a two-pronged effort. The disclosed 2017-2018 operating data and token repurchase mechanism also give retail investors Investors have left some room for participation.

However, it should be noted that Bitfinex's 850 million US dollars reserve can be recovered. From the NYAG accusation, "the tiger's mouth is out of danger" is still unknown, and the current round of the market is due to IEO, the current IEO has also entered the twilight stage, in order to make up for the funds. The gap in the Bitfinex issuance of such a huge amount of IEO, investors who are willing to participate in the recruitment need to fully consider the benefits and risks. After all, the traditional financial regulatory layer's investigation of Bitfinex and Tether is not an isolated incident. The Bakkt exchange has been unable to obtain CFTC approval, and the ETF is still in the foreseeable future. It still reminds the encryption investors that the traditional world is not ready to embrace the centralized encryption assets. .

This risk is over the entire cryptocurrency market. The development of any new thing is bound to experience a long enough crouch in the early days, accumulate enough power in the patrol, and usher in the final dawn and awakening. The development of cryptographic assets such as Bitcoin is like an epic symphony orchestra, destined to sing the most dazzling notes and the most beautiful movements in the collision of the old and new worlds. Before the singularity, the bitcoin and crypto-asset markets will still be groping on the rugged music. In this era, every investor is a performer of this grand music movement, but some people may have got off the bus in the final chapter of the first movement, and have since left the field; some people are long in the third movement. After a low-pitched tone, a high-pitched treble rushed to the strings, as if it was the ultimate shocking glory. No matter where the long and tortuous sound stream is ultimately directed, the main theme is to see the direction of the baton, and not to dance after the music has stopped.


Source: BlockVC

Original title "People still dancing, Come hell or high water | BlockVC strategy"

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