Daily market commentary from 05.10.2020

An overview of what is happening in the crypto markets, summarised daily by Crypto Finance AG Senior Trader Patrick Heusser in the market commentary.

Market commentary

Good Morning!

I thought it would be a good idea to compare the incidences from the March sell-off with the CFTC ones on BitMEX from October 1st.

The two are completely different in principle, but both triggered a risk averse move. Both traders and investors took away Bitcoin (BTC) from the BitMEX platform.

There is one clear takeaway from this: BitMEX is consistently losing relevance in the derivatives trading platform space on the back of those incidences. To back up my conclusion I tried (for the first time) to use on-chain data analytic tools. I used Glassnode Studio. I would be happy to receive some feedback from you pros out there – especially if you think I did not do it properly.

Bitcoin: Transfer Volume

To start with I looked at the “Total Transfer Volume from Exchanges – BitMEX” (see image below).

Market commentary

At first it looks like the CFTC case triggered a larger outflow. But, in fact, it just triggered a larger outflow on one specific day. This was supported by the very quick and professional response of BitMEX also allowing intra batch withdrawals. I think BitMEX saw roughly 50k BTC leave their wallets. Their current total holdings before the outflow was roughly 200k BTC.

In terms of the March case, which was much more difficult to handle for BitMEX due to the liquidation cascade plus the clocked up network, it took several days for traders and investors to reduce their exposure to the platform. And, in my opinion, the total outflow was about 100k BTC. Just before that day of horror, their total balance was nearly 300k BTC.

The result from March is a continuous net outflow from the BitMEX trading platform (see image below – Net Transfer Volume from/to Exchanges – BitMEX).

Market commentary

Bitcoin Balance

Where did the BTC end up from the CFTC case? This is a question that is much harder (at least for me) to answer. I know that The Block analysed it, and it looks like my results are similar.

– Gemini +7k
– Bitstamp +5k
– Binance +10k
– OKEx +8k
(see images below “Bitcoin: Balance on Exchanges – ExchangeName”)

Market commentary

The other exchanges I am able to get data from seem to show almost no balance change. My guess is that some of the BTC went into “cold storage”. In addition, I am not sure if the Gemini and Bistamp balance change has a 100% relation to the BitMEX CFTC case. Why would a trader send their BTC from a derivatives exchange to a pure spot exchange, such as Gemini or Bistamp? I see some logic behind the transfer to Gemini due to the fact that the first ones who took down their BTC are most probably US-based traders (or trading firms) who got shit scared after the announcement. So, you transfer your balances to a “regulated” US exchange (funnily enough, there was no balance increase on Coinbase). But, then again, would you as a US regulated exchange accept BTC from your US customers coming from a BitMEX address (that is a question for the compliance pros out there)?

The big winners

A more obvious and direct link to the decreasing relevance of BitMEX are the OI (open interest) numbers. Obviously, all exchanges suffered a massive OI decrease after the March sell-off due to billions of liquidated positions. But in the aftermath, most exchanges returned to their previous OI numbers except for BitMEX. The big winners are:

– Binance
– Bybit
– OKEx
– Kraken

In general, most of the derivatives exchanges saw a healthy increase of OI since March, and liquidation numbers have gradually decreased due to a less volatile market. And, in my personal opinion, we are sering a less leveraged overall market. (See image below BTC Futures – Aggregated Open Interest)

Marktkommentar

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About the author

Patrick Heusser

Patrick Heusser is a Senior Trader at Crypto Broker AG. Prior to joining the company, Patrick worked as an Interest Rate Trader at UBS and held various positions in the IRCC (interest rate, commodity and foreign exchange trading) in London, New York, Singapore and Zurich. Patrick is an expert in trading and risk management. He also gained experience in other areas, such as building start-up companies. Patrick has a degree in banking from a business school. He has also taken various courses in technical chart analysis.

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