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Bitcoin's Use as Margin Collateral in Crypto Futures Trading on the Rise
The use of Bitcoin (BTC) as a margin in futures trading has surged, increasing the potential for price volatility. As per Glassnode data, since July, Bitcoin futures open interest margined with BTC has grown from 20% to 33%. Although cash or stablecoin-margined contracts dominate with 65% of total open interest, BTC-margined contracts bring added risk due to their "double whammy" effect.
When traders use BTC as collateral, a decrease in BTC price reduces both the contract's value and the collateral's value, leading to quicker margin shortfalls and liquidations. Such volatility cascades were frequent pre-September 2021 when coin-margined contracts made up over 50% of global open interest. Blockware suggests this trend might be due to a cash shortage in the market, evidenced by diminishing stablecoin market values.
Chinese Court Recognizes Cryptocurrencies as Property
A court in Xiamen, China, declared cryptocurrencies as property under the nation’s legal framework, recognizing their "economic attributes" and legal circulation in overseas markets. This ruling emerges amidst Beijing's continued crackdown on digital assets and adds another layer to China's evolving stance on crypto, which has previously banned crypto-related activities without prohibiting ownership. Meanwhile, Hong Kong, adhering to its "one country, two systems" principle, has distinguished itself by setting clear digital asset regulations, recently licensing crypto firms, and having its High Court equate cryptocurrencies with other intangible assets like stocks.
Crypto Casino Stake Loses $40 Million in Multi-Network Exploit
Cryptocurrency casino Stake has reportedly fallen victim to an exploit, resulting in a loss of $16 million on the Ethereum network due to a "private key leak," as indicated by on-chain analyst Cyvers. This claim was further reinforced by blockchain investigator ZachXBT, who pointed out an additional combined loss of $25.6 million across the Polygon and Binance Smart Chain.
The siphoned funds have since been converted to ether (ETH) and distributed amongst multiple external wallets. Etherscan data reveals that the compromised Stake wallet still retains approximately $2.44 million in ETH and other altcoins. Stake, an Australian-based crypto casino and sportsbook boasted a revenue of $2.6 billion in 2022.
Trading Desk Insights
Equity futures displayed a downward trend on Tuesday morning, marking the commencement of a truncated trading week post the Labor Day break.
Historically, September has been a challenging month for equities. Investors are keenly analyzing economic updates, especially the upcoming inflation figures, in anticipation of the Federal Reserve's policy meeting. The Fed is set to reveal its interest rate decision on September 20.
The U.S. 10-year treasury yields climbed on Tuesday as investors considered what could be next for the economy following last week’s key data releases. Prices rebounded off the support level of 4.05% and are aiming to continue higher towards the yearly high of 4.36%.
Bitcoin has been under pressure for quite some time now as it keeps testing the recent lows between $25,500 and $26,000. It seems that market participants have been shorting the rallies with the intent of eventually breaking below the infamous support level near $25,000.
All moving averages are trending lower, a clear indication of a downtrend. Another bearish element would be the breakdown of the 50-day moving average on the 200-day moving average. This pattern is called the Death Cross and is usually followed by some pressure in price action. The last time the 50-day broke below the 200-day, was in January 2022 when Bitcoin was trading at $44,000.
ETHBTC remains muted as it continues to trade near its resistance of 0.064.
Economic calendar:
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US ISM Services PMI
US Fed Beige Book
Bank of Canada interest rate decision
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Technical Charts
Disclaimer
This research is for informational use only. This is not investment advice. Other than disclosures relating to Secure Digital Markets this research is based on current public information that we consider reliable, but we do not represent it is accurate or complete, and it should not be relied on as such. The information, opinions, estimates, and forecasts contained herein are as of the date hereof and are subject to change without prior notification. We seek to update our research as appropriate.
Any forecasts contained herein are for illustrative purposes only and are not to be relied upon as advice or interpreted as a recommendation. The price of crypto assets may rise or fall because of changes in the broad market or changes in a company's financial condition, sometimes rapidly or unpredictably. Past performance is not a guide to future performance, future returns are not guaranteed, and a loss of original capital may occur. Fluctuations in exchange rates could have adverse effects on the value or price of, or income derived from, certain investments. We and our affiliates, officers, directors, and employees, excluding equity and credit analysts, will from time to time have long or short positions in, act as principal in, and buy or sell, the securities or derivatives, if any, referred to in this research.
The information on which the analysis is based has been obtained from sources believed to be reliable such as, for example, the company’s financial statements filed with a regulator, company website, company white paper, pitchbook and any other sources. While Secure Digital Markets has obtained data, statistics, and information from sources it believes to be reliable, it does not perform an audit or seek independent verification of any of the data, statistics, and information it receives.
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Crypto and/or digital currencies involve substantial risk, are speculative in nature and may not perform as expected. Many digital currency platforms are not subject to regulatory supervision, unlike regulated exchanges. Some platforms may commingle customer assets in shared accounts and provide inadequate custody, which may affect whether or how investors can withdraw their currency and/or subject them to money laundering. Digital currencies may be vulnerable to hacks and cyber fraud as well as significant volatility and price swings.
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