GB Market Commentary 01/11/2021
by Marcus Sotiriou
Bitcoin continues to consolidate above the $60k region after its impressive rally from $39k to $66k. There is some cause for concern though as Open Interest on Bitcoin Futures is nearing an all-time-high (shown below).
This is typically a bearish signal as it means there is more leverage in the system – this increases the chance of a liquidation event where traders are forced to sell and the price cascades lower. However, this difference between now and April (previous OI all-time-high) is that the percentage of Open Interest holding BTC as collateral has decreased from 70% to 45 % approximately. If Bitcoin is being used as collateral there will be an increased chance of a mass-liquidation event, as the price drops lower in tandem with long trading positions. Aside from Open Interest, the euphoria seen from the rise in meme coins last week, notably SHIB, could contribute to a leverage flush in the short term, due to the increase in retail traders.
Since Ethereum’s London Hard Fork almost 3 months ago, over 700,000 ETH has been burned which equates to around $2.4 billion. As the ETH has been permanently removed from the circulating supply, this will give Ethereum bulls more confidence on the long-term price appreciation and gives more weight to the argument that ETH is a store of value.