We had some proper trading action over the weekend: BTC$ moved down 14% after Friday’s close (5:30pm in Zurich).
There are several topics we would like to focus on. First, let’s turn to a technical analysis of BTC$. We broke through the lower leg of the potential triangle, which seemed to be one of the triggers that accelerated the down move. We fell through two support levels and stopped just shy of my first target level for the potential wave “C”.
The second point to highlight is the change in sentiment expressed through the term futures structure on BTC$. Both the Sep19 and Dec19 bases tightened a great deal over the weekend. Sep19 has moved roughly $500 lower since the end of June. Currently, it is trading at around $40.
Dec19 came in even more aggressively. It is down from $800 to roughly $120. In percentage points, you can see on our “altcoinfuturebasis” print screen that the BTC$ basis was the outperformer to the downside and that it dragged most of the altcoin bases down with it. Those bases are an expression of the bullish sentiment in the market as they mostly just represent the supply/demand overhang. In this case, the demand decreased dramatically over the past few days, which went hand in hand with the prices of the underlying products.
We also saw some action in ETH. 15k ETH was sold versus USD on Bitstamp all within 3 minutes. It looks like it was a market order and the orderbook of Bitstamp was not able to handle it. The price crashed to $191. Now, one could think that this was just bad execution or intentional due to the fact that this low print potentially triggered roughly $8 mio worth of DeFi loans plus almost $25 mio worth of liquidations on BitMEX in the ETH$ perpetual. This shows the fragility of the system. A $3 mio order on one exchange was able to trigger a set of orders 10 times that size. Price oracles and margin and liquidation processes need to be improved if this market wants to be a new playground for the big institutional money managers.
Judging by the orderbooks of the big 4 fiat ramp exchanges, it looks like the buy side is better populated. Especially around the 9.6k level some big buy orders are sitting and waiting to get filled.
And last but not least, there is still one last gap open on the CME BTC futures chart. I am not sure if the market will hunt it down, but there is a chance that the bears will try to push it down there.Read more