There was a time when BitMEX derivatives exchange reigned sovereign over other exchanges, and the company effectively held a 50% market share until July 2019. For this reason, traders kept a close eye on every indicator connected to BitMEX, including its funding rate, open interest, and basis.
Open interest measures the total number of contracts held by market participants. As the figure rises higher, so does the potential size of liquidations. On Aug. 2, a $1,400 crash happened as $1 billion in futures contracts were forcefully closed due to insufficient margins.
Although there is no magic number, traders tend to get shaky as open interest nears $1 billion, causing a phenomenon some traders refer to as the BitMEX ghost. This became evident during the second half of 2019, when massive Bitcoin price crashes occurred on seven different instances when open interest tops $1 billion.
The perceived risk associated with high open interest depends on how liquid the underlying asset is. During the third quarter of 2019, Bitcoin’s regular volume on spot exchanges averaged $2.4 billion per day. Thus, a single contract totaling 42% of the Bitcoin volume seemed sizeable enough.
Bitcoin price vs. BitMEX perpetual open interest, USD. Source: TradingView
As the chart above depicts, there is little doubt that open interest near $1 billion coincided with relevant price crashes from July through September. It is worth noting that a notable number of contracts in play cannot be deemed bullish or bearish.
The second half of 2019 was mostly bearish
The latter half of 2019 was quite rough for cryptocurrencies, and as most investors will recall, even President Trump publicly bashed Bitcoin, as reported by Cointelegraph. All this happened while the United States Treasury Secretary Steven Mnuchin demanded additional regulation and oversight for the sector.
Aggregate Bitcoin futures open interest on Nov. 2019, USD. Source: Skew
The chart above shows much better detail of how relevant BitMEX’s 40% market share was back then. A single exchange held an open interest equivalent to half of Bitcoin’s daily spot volume.
Fast forward to 2020, and BitMEX has been dethroned by OKEx, where the total open interest on perpetual and fixed-month futures surpassed $1 billion on July 25.
Aggregate Bitcoin futures open interest, USD. Source: Skew
The remaining contenders kept growing their share, but it was only recently that Chicago Mercantile Exchange (CME), Binance, and Bybit managed to break the psychological $1 billion barrier.
Today’s market marginally resembles 2019, but with less risk
Oddly enough, this happened on Nov. 20, just four days ahead of the 16% crash to $16,334. The total futures open interest on Sept. 2019 totaled $3 billion to put things in perspective. This time around, four exchanges were able to break the $1 billion barrier.
Although futures open interest grew to $7.4 billion, so did the daily average volume on regular spot exchanges where the figure now reads $3.5 billion. Thus, unlike the previous year, a single exchange holding a $1 billion open interest should not raise eyebrows in the same manner that it did in 2019.
To sum up, the markets have grown and developed to the extent that the BitMEX ghost is gone but it might have been replaced by a similar phenomenon that occurs when four exchanges cross the $1 billion futures open interest mark.
Regardless, one should keep a close eye on such an indicator from now on as those four exchanges have replaced BitMEX as the market leader. Combined, Binance, CME, OKEx, and Bybit hold over half of the futures’ open interest. Although such a coincidence has only happened once, it indeed mimics the $1 billion effect from the past.
The views and opinions expressed here are solely those of the author and do not necessarily reflect the views of Cointelegraph. Every investment and trading move involves risk. You should conduct your own research when making a decision.
Binance Coin reaches 37% of Ethereum’s market cap: 3 reasons why BNB is soaring
Binance Coin (BNB), the native cryptocurrency of Binance Smart Chain, has been rallying after seeing an uptick in transaction volume.
Binance Coin, the native cryptocurrency of Binance Smart Chain, has been surging with a massive uptick in transaction volume.
Binance Coin (BNB), the native cryptocurrency of Binance Smart Chain and top digital asset exchange Binance, is starting to close in on Ethereum (ETH) in market capitalization.
As of April 12, BNB is valued at $87 billion at the price of just under $600. The valuation of Ethereum is hovering at around $246 billion, which is 2.8 fold larger than that of Binance Coin.
— Joe Grech (@JoeBGrech) April 12, 2021
The technical momentum of BNB has been so strong that it briefly surpassed the volume of the BTC/USDT pair on Binance.
This trend is significant because USDT is the biggest stablecoin in the global market and the BTC/USDT pair is one of the most liquid trading pairs in crypto.
Why is Binance Coin surging so hard?
Binance Coin has been rising due to the three key reasons: an overall uptick in the popularity of Binance Smart Chain, strong technical momentum, and the gap between BSC and Ethereum projects.
Binance Smart Chain transaction volume. Source: BSCScan.io
In recent weeks, the transaction volume on Binance Smart Chain has tripled the volume of the Ethereum blockchain.
Particularly in Southeast Asia, the usage of Binance Smart Chain has been rising, according to Coin98, the biggest venture capital firm in Vietnam that is building a DeFi ecosystem targeted at Asia.
Considering that the price of BNB was much lower than Ethereum until late March, this discrepancy between BNB and ETH likely made BNB a compelling trade.
There is also a big gap in valuations between the Ethereum DeFi ecosystem and Binance Smart Chain, which has been fueling a large portion of the demand for BSC projects.
This has caused the value of BNB to rapidly rise over the past two weeks while ETH has been relatively stable at just over $2,000.
A journalist who covers crypto in China known as “Wu Blockchain” explained:
“BNB broke through an astonishing $600, but Ethereum’s Fees fell to its lowest point in a month. Although the transaction volume of BSC is 3x that of Ethereum, the two are not in a competitive relationship. The top 10 addresses of BNB hold more than 88%, and Eth is 20%. The future of Ethereum depends on the upgrade of EIP-1559 and 2.0. The only two things Binance needs to worry about are the government suppression and hackers.”
Traders foresee BNB to undergo a more explosive rally in the foreseeable future if it breaks out against Bitcoin.
Kaleo, a pseudonymous cryptocurrency trader, said:
“$BNB breaking above this level on the $BTC pair could lead to the type of explosive momentum needed to actually close in on $1,000.”BSC/BTC 1-day price chart (Binance). Source: TradingView.com, KaleoWill the capital rotate back into Ethereum?
However, Kelvin Koh, the managing partner at Spartan Group, one of the largest DeFi-focused funds in Asia, said that for now, he expects the capital to rotate back into Ethereum as BSC projects near the valuation of ETH equivalents.
He emphasized that there is a huge valuation gap between BSC and ETH projects. This gap could be making BSC projects compelling to the market. He said:
“BSC is having its own DeFi summer….so much alpha to be discovered in BSC ($XVS, $CAKE). If you are wondering why Ethereum DeFi coins are lacklustre, its because of the huge valuation gap that still exists between the BSC coins and ETH equivalents. Until this gap closes, money isn’t rotating back to ETH DeFi coins.”
Our Man in Shanghai: Scandal as $45M of stolen government funds lost using 100X leverage
A blockchain security company’s future is in doubt after its CMO allegedly lost $45M betting on Bitcoin; Chinese netizens turn the other cheek to Peter Thiel’s warnings, and more
The Chief Marketing Officer a blockchain security company has been charged with embezzlement; Peter Thiel calls Bitcoin a ‘weapon’ of China (but no one cares), and CZ’s net worth rises to $1.9 billion.
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Blockchain security company Beosin has been the focus of a major scandal after its Chief Marketing Officer Gao Ziyang was taken into custody and charged with embezzlement of state-owned assets. He is alleged to have been using government funds to unsuccessfully short BTC, resulting in a massive liquidation of over 300 million renminbi, or $45 million dollars.
Beosin, also known as Lianan Tech, had a working relationship with Chinese authorities and was helping them investigate fraudulent fundraising schemes. After the seizure of funds back in 2020, Beosin was tasked with storing and selling the assets, to be later returned to the state treasury. Instead of selling the assets, CMO Gao Ziyang allegedly opened a short position in late August, hoping to increase the size of the positions for personal gain. At the time, BTC was trading around $12,000.
Authorities say that records obtained from OKEx show the position began using 10x leverage, before increasing to 100x, and eventually ended up in liquidation. They began to ask about the whereabouts of the funds, before finally realizing that the assets were no longer in the wallet. Online, people have marveled at the age of Gao Ziyang, who was described as in his twenties. The future of Beosin, which was once regarded as a credible blockchain security company in China, is now in serious doubt.
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On Wednesday, PayPal co-founder and venture capitalist, Peter Thiel warned that the Chinese government may be using Bitcoin as a “financial weapon” to undermine the stability of the U.S. Dollar. The reaction was quite muted, as only 30 comments responded to the story on Sina Finance, a social media account with over 23 million followers. One of the top comments simply pointed out that “Bitcoin wasn’t invented by China” while another comment simply stated “Impossible”.
On Thursday, Binance founder Zhao Changpeng, better known as CZ, appeared as #1664 on Forbes’s annual billionaire list. His net worth is now listed at $1.9 billion, an increase of $700 million from the last list in 2020.
Nanjing Ribensi bought by US company
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This weekly roundup of news from Mainland China, Taiwan, and Hong Kong attempts to curate the industry’s most important news, including influential projects, changes in the regulatory landscape, and enterprise blockchain integrations.
CoinMarketCap removes South Korea crypto exchanges from Bitcoin price tracker
The crypto analytics provider also removed South Korean exchanges from the price calculations of cryptocurrencies in 2018 “due to the extreme divergence in prices.”
“If the prices on South Korean exchanges stabilize, then we will add the data back in, but that hasn’t happened yet,” said a CoinMarketCap spokesperson.
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Crypto price trackin website CoinMarketCap has removed many South Korean exchanges from its calculations for the price of Bitcoin as the coin dipped under $58,000 again.
As of today, CoinMarketCap’s Bitcoin price tracker shows no data from major South Korean crypto exchanges including Upbit, Bithumb, Coinone, and Korbit. The website uses data from many exchanges to estimate the average price for cryptocurrencies. At the time of publication, the price of Bitcoin (BTC) is $57,721, having fallen more than 2% this morning.
Speaking to Cointelegraph, CoinMarketCap content manager Molly Jane Zuckerman said the removal was due to the premium observed on crypto exchanges based in South Korea. The crypto analytics provider estimates the BTC price to be roughly 6% higher than that on other exchanges.
“If the prices on South Korean exchanges stabilize, then we will add the data back in, but that hasn’t happened yet,” said Zuckerman.
The last time the price tracking website took similar action was in 2018, when CoinMarketCap announced it had “excluded some South Korean exchanges in price calculations due to the extreme divergence in prices from the rest of the world and limited arbitrage opportunity.”
During roughly the same time three years ago, the price of XRP was falling significantly after reaching an all-time high of $2.96 on Jan. 2. However, the token is looking bullish today, having briefly surpassed $1.00 for the first time since 2018 after it rose more than 20% in the last 24 hours. The price has since fallen to $0.9694 at the time of publication.
CoinMarketCap said only its Bitcoin price index was affected today, given the large volume of the crypto asset on South Korean exchanges. Last month, the volume of transactions in the South Korean digital currency market — driven in part by the price of BTC reaching an all-time — briefly exceeded the daily average transaction amount of the country’s stock market.
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