Bitcoin Descends as Regulatory Concerns Resurface

The latest moves in crypto markets, in context

January 31, 2022

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Good morning, and welcome to First Mover. Here's what's happening this morning:

Market Moves: Bitcoin Worth $670 Million Leaves Centralized Exchanges
Technician's Take: A Lesser-Known Token Jumps 20%

And check out the CoinDesk TV show "First Mover," hosted by Christine Lee, Emily Parker and Lawrence Lewitinn at 9:00 a.m. U.S. Eastern time. Today's show will feature guests:

Rayne Steinberg, CEO, Arca
Li Xin-Cohen, co-founder, TRLab
Wayne Huang, co-founder, XREX

Today's newsletter was edited by Omkar Godbole and produced by Parikshit Mishra.

Market Moves

By Omkar Godbole

Financial markets remained risk averse early Monday, with bitcoin and futures tied to the S&P 500 nursing moderate losses.

The U.S. two-year Treasury yield held at 12-months above 1.2% as Atlanta Fed President Raphael Bostic told Financial Times that the central bank may surprise with a 50 basis point interest rate hike in March.

Several Wall Street banks, including Goldman Sachs, penciled in five rate hikes form 2022. As of writing, markets were priced for a 25 basis point rate rise in March followed by four more hikes by the end of the year.

Renewed regulatory concerns

A controversial proposed rule that would enforce know-your-customer rules on unhosted or self-hosted crypto wallets may again be under consideration by the U.S. federal government, CoinDesk's Nikhilesh De reported over the weekend.

The rule first proposed at the end of 2020 and dismissed as short-sighted and not made in good faith by observers, if enacted, would require crypto exchanges to collect names and home addresses, including other personal details of anyone hoping to transfer cryptocurrencies to their own private wallets.

Prospects of increased regulatory surveillance may add to the ongoing market distress. Market flows continue to lean bearish.

Options market screams uncle

The bitcoin market appears plagued by negativity after the cryptocurrency lost half its value in 2 1/2 months.

The cryptocurrency's put-call open interest ratio, which measures the number of open positions in put options relative to those in calls, rose to a six-month high of 0.62 on Sunday, according to data provided by Skew. The ratio was 0.42 earlier this month.

"The put-call ratio suggests demand for puts is currently high," said Patrick Chu, director of institutional sales and trading at over-the-counter tech platform Paradigm. "We have seen a lot of risk reversal flow recently, where clients were buying puts/ selling calls."

Bitcoin's put-call open interest ratio (Source: Skew)

A put option gives the purchaser the right, but not the obligation, to sell the underlying asset at a predetermined price on or before a specific date. A put buyer is implicitly bearish on the market, while a call buyer is bullish.

Given the depth of bitcoin's drop from its Nov. 10 record near $69,000 – it was trading recently about 2.6% down on the day at $36,900 – increased buying of puts is hardly surprising. It might, however, indicate an excess of fear that's often seen at the end of bear runs.

Correction within historical norms

While bitcoin's slide from November highs near $69,000 may appear catastrophic to traditional market investors, it's business as usual for crypto investors, according to Morgan Stanley.

Bitcoin's 50% drop from November's record high is nothing new and the correction is within historical norms, Morgan Stanley said in a research note entitled "State of the bear market."

Also read: Bitcoin's 'MACD' Indicator Threatens Long Term Bullish Bias as Rate Hike Fears Linger

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Crypto Prices

Bitcoin (BTC)

See the latest price here

Ether (ETH)

See the latest price here

The following are the biggest movers in the CoinDesk 20 digital assets over the past 24 hours:

Biggest Gainers:

There are no gainers in CoinDesk 20 today.

Biggest Losers:

Asset	Ticker	Returns	Sector
Cosmos	ATOM	−7.2%	Smart Contract Platform
Bitcoin Cash	BCH	−6.7%	Currency
Polygon	MATIC	−6.6%	Smart Contract Platform

Sector classifications are provided via the Digital Asset Classification Standard (DACS), developed by CoinDesk Indices to provide a reliable, comprehensive, and standardized classification system for digital assets. The CoinDesk 20 is a ranking of the largest digital assets by volume on trusted exchanges.

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Latest Headlines

Introducing CoinDesk's Privacy Week. Cryptocurrency was supposed to be about privacy. While Bitcoin and its various knockoffs and descendants have become a $2 trillion asset class, privacy remains hard to come by, either for cryptocurrency users or everyday people. We take stock of the state of online privacy in 2022, in crypto and beyond, and where it might be headed in the years and decades to come. Explore Privacy Week here.

Technician's Take

By Omkar Godbole

Radicle's Native Token Jumps 20%

RAD Token's daily chart with MACD histogram (Source: TradingView)

RAD, the native token of open-source, peer-to-peer network for software collaboration Radicle, was trading nearly 20% higher on the day at press time.

While the exact reason for the price rally was unknown, the bullish divergence of the MACD histogram and signs of seller exhaustion near $5 seen on the daily chart indicates a price jump was perhaps overdue.

ICYMI

In case you missed it, here are the most recent episodes of "First Mover" on CoinDesk TV:

Bitcoin Worth $670M Leaving Centralized Exchanges After Hawkish Fed Comments, Fireblocks Raises $550M at $8B Valuation, FTX US Raising $400M

"First Mover" hosts speak to crypto custody firm Fireblocks CEO Michael Shaulov and FTX.US President Brett Harrison as both companies have attained $8 billion valuations after their respective funding rounds recently. Plus, CoinDesk concludes its Privacy Week with crypto OG and Electronic Coin Company CEO Zooko Wilcox sharing his insights into the state of privacy in crypto as the industry continues to expand.

Disclaimer: The information presented in this message is intended as a news item that provides a brief summary of various events and developments that affect, or that might in the future affect, the value of one or more of the cryptocurrencies described above. The information contained in this message, and any information liked through the items contained herein, is not intended to provide sufficient information to form the basis for an investment decision. The information presented herein is accurate only as of its date, and it was not prepared by a research analyst or other investment professional. You should seek additional information regarding the merits and risks of investing in any cryptocurrency before deciding to purchase or sell any such instruments.