Bitcoin's Derivatives Data Points to Price Volatility Ahead

Cardano's ADA fails to take out pivotal resistance

The latest moves in crypto markets, in context January 18, 2022 Sponsored by     If you were forwarded this newsletter and would like to receive it, sign up here.  Good morning, and welcome to First Mover. Here's what's happening this morning: Market Moves: Bitcoin's derivatives data points to volatility ahead. Technician's Take: Cardano's ADA fails to take out pivotal resistance. The CoinDesk TV show "First Mover," hosted by Christine Lee, Emily Parker and Lawrence Lewitinn, is on hiatus and will return on Tuesday. Today's newsletter was edited by Omkar Godbole.  Market Moves Bitcoin, ether and most alternative cryptocurrencies were lower on Tuesday, appearing to trade in sync with traditional markets as futures contracts tied to the tech-heavy Nasdaq stock index dipped 1%.   The U.S. two-year Treasury yield rose to an 11-month high of 1.05%, taking the month-to-date gain to 30 basis points, or 0.3 percentage point. The rising yield suggests that bond traders are preparing for aggressive interest rate hikes by the Federal Reserve.    Futures traders betting on the Federal Reserve rate are already pricing in three hikes this year. Several Fed officials and Wall Street banks have recently said the central bank might even deliver four quarterly hikes in a bid to control inflation that has climbed to its highest clip in nearly four decades. Historically, monetary-policy tightening has been bearish for cryptocurrencies and asset prices in general.   Quicker and faster rate hikes ahead?   The popular narrative says that the Fed won't do anything that would destabilize markets even if it means high inflation. That may have been true at one point but may not be the case anymore – partly because of the emergence of cryptocurrencies as alternatives to fiat, or government-issued, money.    Consistently high inflation dents confidence in fiat currencies, forcing people to look for alternatives with store of value appeal like bitcoin.    In other words, if inflation runs hot, the already growing popularity and adoption of cryptocurrencies as a payments alternative could explode. Bitcoin and several other cryptocurrencies have already found acceptance in countries facing high inflation.    It's no surprise; the International Monetary Fund recently urged the Fed to speed up policy tightening amid mounting inflation fears.    So, the possibility of central banks resorting to aggressive rate hikes cannot be ruled out. In the days before cryptocurrencies, there was little to no competition to fiat currencies such as the dollar, and central banks had plenty room to tolerate high inflation – without the constant reminder of currency debasement. (Bitcoin's supply is fixed by the underlying blockchain code, and other major cryptocurrencies including ether (ETH) have introduced anti-inflationary mechanisms.)     In essence, the growing popularity of cryptocurrencies may force central banks to do the right thing, i.e. – prioritize inflation control.   Derivatives data points to volatility ahead   Day traders bored of bitcoin's recent slumber may soon have to remain glued to their screens, as a large number of open futures positions signal renewed price turbulence ahead.   "Futures markets remain a powder keg for short-term volatility with Perpetual Futures Open Interest at ~250,000 BTC – a historically elevated level," blockchain analytics firm Glassnode said in a research note published on Monday.   An above-250,000 BTC open interest has coincided with volatility spikes in the past. "Since April 2021, this has paired with large pivots in price action as the risk for a short or long squeeze increases, resolved in a market wide deleveraging events," Glassnode wrote.  Charting showing elevated bitcoin futures open interest (Source: Glassnode) Open interest refers to the number of contracts traded but not liquidated with an offsetting position.   Abnormally high open interest indicates excess leverage – funds borrowed to amplify returns from the trade. In such situations, the market becomes vulnerable to liquidations and resulting price turbulence. Liquidations refer to the forced closure of long or short positions by exchanges due to margin shortage. These lead to exaggerated price moves, as seen several times over the past 12 months.   Read: Bitcoin May Soon Wake From Slumber, Derivatives Data Indicate   A Message from CME Step into Ether futures with a micro-sized contract Introducing Micro Ether futures (MET) – sized at 1/10 of one ether, the new contract provides an efficient, cost-effective way to manage your exposure to one of largest cryptocurrencies by market capitalization. Trade Ether futures in a smaller size Enjoy the same benefits as the larger Ether futures contract at a fraction (1/500) of the size and with lower margins, settled to the regulated CME CF Ether-Dollar Reference Rate. Precisely scale your ether exposure Add more control over the amount of ether exposure in your trading strategies. Enjoy price discovery and transparency Trade in a CFTC-regulated, transparent, and liquid marketplace, providing time-tested financial safeguards and price discovery.   Explore Micro Ether futures 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: Asset Ticker Returns Sector Ethereum Classic ETC +2.7% Smart Contract Platform Biggest Losers:  Asset Ticker Returns Sector Cosmos ATOM −8.4% Smart Contract Platform Polygon MATIC −7.3% Smart Contract Platform Litecoin LTC −6.8% Currency 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.  A Message from Brave Brave Wallet is the first secure crypto wallet built natively in a web3 browser. No extensions required.   Store, manage, and grow your portfolio, get NFT & multi-chain support. Even connect other wallets and DApps. All from the security of the best privacy browser on the market.    Whether you're new to crypto, or a seasoned pro, it's time to ditch those risky extensions. It's time to switch to Brave Wallet.  Download Brave today, and click the Wallet icon to get started. Latest Headlines Crypto.com's Stolen Ether Being Laundered Via Tornado Cash Morgan Stanley Says Crypto Markets Are Weakening as Central Banks Look to Tighten BIS Chief: Central Banks Are Best Sources of Trust in Money in a Digital Age Binance Destroys 1.6M BNB Tokens in First-Ever Auto Burn Multichain Says Around $1.4M Ether Siphoned From Users Who Failed to Update Approvals New Year, New Money New Money, a new series by CoinDesk, explores what it means to be part of the new "creator economy." In the talk show hosted by Spencer Dinwiddie and Solo Ceesay, we hear from pro athletes, celebrities and social media influencers who are on the cutting edge of interacting directly with fans and developing new ways to generate revenue from their own celebrity. Learn more here. Technician's Take By Omkar Godbole Cardano's ADA fails to take out pivotal resistance ADA's daily chart (Source: TradingView)  ADA was nursing losses at press time, having failed to penetrate the four-month descending trendline early Tuesday.    The failure has neutralized the immediate bullish bias, establishing the descending trendline as the level to beat for the bulls.    A UTC close higher would also confirm a breakout above the horizontal resistance of $1.59, opening doors for further gains.  ICYMI In case you missed it, here are the most recent episodes of "First Mover" on CoinDesk TV:   Crypto Market Seesaw, Bringing Bitcoin to Retail Locations Near You Cash transfer company MoneyGram is doubling down on its partnership with Coinme, investing in the crypto-cash exchange for a 4% ownership stake. MoneyGram CEO Alexander Holmes and Coinme CEO Neil Bergquist join "First Mover" to discuss their expansion plans and partnership, making it possible for consumers to purchase bitcoin at thousands of U.S. retail locations. Plus, what to make of the latest crypto market ups and downs? Brad Roth of Thor Financial shares his analysis and outlook. 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.  First Mover A newsletter from CoinDesk Were you forwarded this newsletter? Sign up here.  Copyright © 2021 CoinDesk, All rights reserved.  250 Park Avenue South New York, NY 10003, USA Manage your newsletter subscriptions  |  Unsubscribe from all CoinDesk email