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Bitcoin Bear Markets: What, Why, When?
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Reports are emerging that the U.S. Securities and Exchange Commission has rejected one, or possibly two, recent Bitcoin exchange-traded fund applications signaling that the regulator is not quite ready for more exotic futures products just yet.
Just a day or so after Valkyrie filed for a leveraged Bitcoin futures ETF and Direxion applied for an inverse fund for bears, the SEC appears to have vetoed them both.
On Oct. 28, Bloomberg’s senior ETF analyst Eric Balchunas referred to a Dow Jones alert indicating the Valkyrie leveraged fund had been shelved by the SEC. He added that the move was likely also to apply to the inverse fund application.
Looks like the SEC not having it w the levered (and likely inverse) Bitcoin futures ETFs. Can’t hurt to try tho. Had they gone through likely billion dollar trading vehicles in a few yrs. via Dow Jones pic.twitter.com/MspMRf3hL9
— Eric Balchunas (@EricBalchunas) October 27, 2021
On Oct. 26, ETF issuer Direxion filed for a Bitcoin Strategy Bear ETF that would enable speculators to buy futures that short the price of BTC. On the same day, Valkyrie filed for a leveraged BTC futures ETF that would have offered 1.25x exposure to the asset.
The Direxion product invested purely in futures, however, the Valkyrie one would have held futures, swaps, options, and forwards. Another Dow Jones alert reported the SEC only seems interested in direct futures products at the moment, funds that buy contracts from the Chicago Mercantile Exchange (CME).
The regulator does not seem keen to approve any products that invest in the asset itself or anything other than CME futures contracts at this stage. Balchunas confirmed:
“Would be interesting (and poss) if they let the Inverse one go through. That one was limited to futures. Valkyrie’s was a bit of a departure from that language.”
Related: Crypto breaks Wall Street’s ETF barrier: A watershed moment or stopgap?
ETF Store President, Nate Geraci, reported that two more ETFs had been applied for on Oct. 27 from AXS Investments. The SEC filings are for a regular Bitcoin Strategy ETF similar to the two already approved, and another shorting or inverse fund.
Another Dow Jones report states that Grayscale is confident that the SEC will be ready to approve a spot Bitcoin ETF by July 2022.
On Oct. 19, Grayscale filed an application with the SEC to convert its popular Bitcoin Trust (GBTC) into a spot fund that is backed by the asset itself as opposed to futures contracts.
Geraci, commented on the current lack of regulation over spot crypto markets, “So crypto markets/exchanges will be regulated by then? Seems ambitious.”
In related news, VanEck is making final preparations for the launch of its Bitcoin Strategy ETF which will trade under the ticker XBTF. On Wednesday, Balchunas said there was a “good chance” it could start trading on Friday, Oct. 29, but possibly Thursday.
Exchange-traded fund issuer Direxion has filed for a product that would enable speculators to buy contracts that short the price of Bitcoin.
In a filing made to the U.S. Securities and Exchange Commission on Oct. 26, the company unveiled the Direxion Bitcoin Strategy Bear ETF. Like other futures products, it will not invest directly in BTC, but will instead maintain managed short exposure position contracts issued by the Chicago Mercantile Exchange (CME).
Direxion stated that the fund may invest in other BTC futures, money market funds, deposit accounts, or short-term debt instruments. However, the firm did issue a dire warning that the value of the product could go to zero.
“The value of an investment in the Fund could decline significantly and without warning, including to zero. You should be prepared to lose your entire investment.”
Bloomberg senior ETF analyst Eric Balchunas described it as an inverse Bitcoin ETF. He reported that the company already has a ‘-1x BTC futures ETF’ in Canada called BITI, adding “while it’s gotten pretty wrecked, when it works it WORKS (as Bitcoin tends to sells off fast).”
INVERSE BITCOIN ETF: Direxion just filed for a -1x Bitcoin Futures ETF, which will seek to be short front month bitcoin futures, basically the $XIV of $BITO.. This comes mere hours after the first levered bitcoin ETF was filed. pic.twitter.com/bN2m7pIZw5
— Eric Balchunas (@EricBalchunas) October 26, 2021
Direxion originally filed for a Bitcoin ETF in 2018 but it ended up in the queue with all of the others that the SEC had delayed at the time.
Bloomberg reported that on Oct. 26, Valkyrie filed for a leveraged BTC futures ETF that will offer 1.25x exposure to the asset. If approved, it will trade under the ticker BTFX and can hold futures, swaps, options, and forwards.
Not everyone was impressed with the minimal leverage available, with user VandelayBTC referring to a Zoolander meme to throw shade.
1.25x? What is this? Leverage for ants?
— Vandelay ₿TC Industries (@VandelayBTC) October 26, 2021
Related: Too popular: Bitcoin futures ETF in danger of hitting upper limit for contracts
Commenting on the creative new futures products being proposed at the moment, ETF Store President Nate Geraci said that there will be more of these types of filings and ETH futures before a spot product wins approval.
“SEC has blessed CME Bitcoin futures from a regulatory perspective. If these leveraged & inverse products exist in other blessed markets, then no reason not to exist here.”
As if in response to the bearish product proposal, Bitcoin prices have retreated 3.6% over the past 24 hours to trade at $60,787 at the time of writing.
Fidelity Investments director of global macro Jurrien Timmer appeared on CNBC today to discuss his bitcoin price prediction models, market outlook, and opinion on the current rally. Timmer shared a bearish prediction for BTC, bullish inclinations towards the dollar as the world’s reserve currency, and a profound misunderstanding of the relationship between Bitcoin and gold.
Timmer said the over 30 percent rally that Bitcoin has experienced this month had not been fueled by momentum traders, indicating that it is being driven by organic spot demand instead and can be extended further. The director sees bitcoin reaching $100,000 by 2023.
“This has not been a momentum-fueled run by short-term speculators, so that gives me some confidence that this actually is a pretty sustainable move and is not a bubble that is about to burst,” Timmer told CNBC. “The trajectory is up and so far there really is no evidence that this is a bunch of momentum chasers bringing this up to $57,000.”
When asked about Bitcoin’s relationship with gold, Timmer said that despite their differences, both are complimentary. The Fidelity director acknowledges the superiority of Bitcoin but fails to realize that it will naturally supersede the inferior store of value that is gold.
“Bitcoin is a more convex version of gold. It has an ever scarcer supply and gold does not have the network dynamics that bitcoin does, so it makes sense that bitcoin would outperform gold,” Timmer said. “Bitcoin and gold are two different players on the same team.”
But perhaps Timmer’s short-sightedness is more clearly demonstrated with his thoughts on the dollar-bitcoin dynamics.
“I really don’t think bitcoin threatens the dollar or the dollar’s reserve status,” he said. “Maybe it actually further ensures that the dollar will maintain its reserve status…and it’s still probably going to be connected to the dollar in some way.”
“Bitcoin’s value proposition is that ultimately it goes from just being a store of value to also being a medium of exchange, and that depends on second layer [developments] that are being built right now,” the Fidelity director added.
Bitcoin second-layer is being developed and is being widely used. In this decade, Bitcoin and Lightning will obsolete gold and help the world realize that the dollar is a shitcoin. It is only natural that many “experts,” blinded by the asymmetric benefits they get from the status quo, will fail to realize that until the very last minute.
There are many who have opposed innovation that were proven monumentally wrong in their predictions.
There will always be people who criticize creators of breakthrough technologies. And their criticisms may affect no one or millions depending on their reach. However, the loudest are often leaders in their fields and influential because of their work.
These innovation antagonists oppose any who attempt what they deem impossible and ridicule those behind the most important inventions of their time. But their predictions age poorly as they are soon doused by the wave of adoption that follows their comments. As Bitcoin steadily becomes one of history’s most impactful innovations, notable contrarians are added everyday. And with each increase in price and relevance, its magnetic pull on these megaphone toters strengthens.
I will not speculate much on why they attack the alpha coin, but fear of harm or change is a likely cause. Many of the above are accomplished in business, finance, and technology — all sectors that are changing because of Bitcoin. Perhaps they feel threatened as does a small dog that barks at a larger one. Or as a child who cries when dropped off at school for the first time, they may pout about Bitcoin not realizing the lessons they can learn if they embrace the change they’re facing. Whatever their reasons, they choose to align themselves with the bears of innovation past and in time will be remembered for failing to impede the inevitable.
Here are five poorly-aged quotes from noteworthy figures and paired quotes from Bitcoin bears:
1a. Robert Metcalfe, 1995: “I predict the Internet will soon go spectacularly supernova and in 1996 catastrophically collapse.”
1b. Peter Schiff, 2021: “Bitcoin is not a currency. It’s just used for speculation. I don’t think these bitcoin collections are going to be worth anything when the music stops.”
2a. Western Union executives on Alexander Graham Bell’s telephone, 1876: “His device is hardly more than a toy.”
2b. Donald Trump, 2021: “Bitcoin just seems like a scam. I don’t like it because it’s another currency competing against the dollar.”
3a. Stanley Mosely, 1905: “It is complete nonsense to believe that flying machines will ever work.”
3b. Charlie Munger, 2021: “I hate the bitcoin success. I think the whole damn development is disgusting and contrary to the interests of civilization.”
This list, though short, is indicative of the famous forces aimed against Bitcoin. As we can see, Bitcoin is in great company with so many rooting against it. If these examples from the past are any indication, Bitcoin is on its way to mass adoption and world-changing status in the pantheon of great inventions throughout history.
This is a guest post by Josh Doña. Opinions expressed are entirely their own and do not necessarily reflect those of BTC, Inc. or Bitcoin Magazine.
Ether’s (ETH) $1.5 billion monthly expiry on June 25 was slightly favorable for bears, and at the time, Cointelegraph reported that the $2,200 price was critical to eliminate 73% of the neutral-to-bearish put options.
However, bulls were not able to sustain their advantage because the expiry price was near $1,950. In the end, the protective put options outnumbered the neutral-to-bullish call options by $30 million.
Fast forward to July, and after a noticeable 10% rally, Ether’s price again struggles to sustain the $2,100 support. Bitcoin’s negative 3.5% performance could partially explain last week’s price move, but the London hard fork scheduled for this month could also be responsible.
The proposal EIP-1559 will cap gas fees, making it more predictable for users. However, miners’ revenue will be negatively impacted. Any pushback from miners could delay Eth 2.0 even more, which could be a reason for the recent price weakness.
Lastly, regulatory pressure could also be blamed for the negative sentiment. For example, the United States Financial Crimes Enforcement Network announced that cryptocurrencies would be among its top national priorities for countering terrorism financing and ensuring proper Anti-Money Laundering policies.
Related: Bulls and bears fight over $34K Bitcoin price as $445M options expiry looms
The July 2 $230 million Ether options expiry perfectly reflects a scenario where both bulls and bears expected extreme price changes.
110,000 Ether contracts seem initially balanced between the call (buy) and put (sell) options. However, only 30% of the neutral-to-bullish call options have been placed at $2,200 or below, which is equivalent to a $36 million open interest. The remaining 70% of the call options are unlikely to take part in Friday’s expiry.
On the other hand, protective puts were mostly placed at $1,900 and lower. However, these contracts are now worthless as there are less than 14 hours before they expire. Therefore, the remaining neutral-to-bearish options down to $2,100 amount to a $26 million open interest.
In a nutshell, Friday’s Ether expiry will be relatively small, but the $2,200 mark is extremely important. Above that level, the bulls’ lead increases by $18 million, causing a $28 million imbalance that favors call options.
For bears, any expiry price below $2,100 is enough to balance out the situation. However, it is worth noting that Friday’s expiry size has been greatly reduced because both sides had extreme bets, but none of them were fulfilled.
At the time of writing, there is no reason to believe that either side will try to force Ether’s price in a particular direction ahead of the expiry. Traders will likely concentrate their bets (and efforts) for the end of July, depending on whether or not the London hard fork faces any delays or surprises.
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.
Despite the current battle between Bitcoin bulls and bears around the $50,000 price mark — and an 8.7% pullback over the past 24 hours — a raft of analysts and commentators have got out their crystal balls to tip a glittering future for Bitcoin prices.
On Mar. 4, Senior Commodity Strategist for Bloomberg Intelligence Mike McGlone pointed to historical data to suggest that Bitcoin is on the way to $100,000.
McGlone’s logic revolves around the growing discount for shares in the Grayscale Bitcoin Trust which is at the same level as last year’s Black Thursday collapse. The discount refers to when shares in the Grayscale Bitcoin Trust trade for less than the value of the underlying Bitcoin (normally they trade at a premium).
Looking at historical data, said that
Grayscale #Bitcoin Trust Discount May Signal March to $100,000 – Bitcoin’s end of February price disparities on U.S. regulated exchanges portend a firming price foundation, if history is a guide, and are evidence of just how nascent the crypto is. pic.twitter.com/qj6hfTvH8K
— Mike McGlone (@mikemcglone11) March 4, 2021
Twitter user “Lee Hendricks” wasn’t convinced, suggesting the catalyst for Grayscale’s discount could be the result of pressure from upcoming ETFs and other crypto funds. (Although that’s arguably bullish too.)
The Bloomberg strategist isn’t the only expert with high expectations for BTC, with influencer and YouTuber Lark Davis stating on Mar. 4 that “we are just now past the first major price wave,” with two more, larger waves to come.
This #bitcoin bull run has barely even started yet! We are just now past the first major price wave. Get ready for wave 2. pic.twitter.com/kRzAqlB2E8
— Lark Davis (@TheCryptoLark) March 4, 2021
On March 2, technical analyst Kaleo posted a chart predicting BTC will hit $100,000 near the start of April this year.
It’s a follow-up on his “Bitcoin Halving Reward Era Price” analysis chart two years ago predicting the price would reach $200,000 around mid-2021. He tweeted two weeks ago that he still has faith in it:
“It is by far the most accurate, long-term chart prediction I’ve ever seen for Bitcoin…
$BTC will hit $200K+ this cycle.”
Another analyst who goes by the Twitter name MasterChangz, told his 10,000 followers he believes Bitcoin will hit the $200,000 mark even earlier than mid-2021, potentially at the start of April. The next rise, he said, is to $77,000 over the next two weeks.
Ok this bull run fractal is become more insanely accurate by the day.
I’m literally making bank of trading it, its like a cheat sheet.
$77,000 next up.#BTC pic.twitter.com/JJS4Huu6ri
— (@MasterChangz) March 4, 2021
Other predictions are even bolder with Kraken CEO Jesse Powell stating the cryptocurrency could reach $1 million or even “infinity” in a Bloomberg television interview on Mar. 4, adding that it will eventually become the world’s currency.
“We can only speculate, but when you measure it in terms of dollars, you have to think it’s going to infinity,” he said. “The true believers will tell you that it’s going all the way to the moon, to Mars and eventually, will be the world’s currency.”
Kraken Head of Growth Dan Held, echoed this prediction on Mar. 5, claiming on Twitter that:
“Bitcoin is more likely to hit $1,000,000 than $0.”
Even past Bitcoin skeptics are becoming crypto converts with investment firm Sanders Morris Harris CEO George Ball admitting to Yahoo Finance on Mar. 4 that he believes cryptocurrencies are now “attractive” as a “small part” of any portfolio.
“With the cryptocurrencies, I think there is a fundamental hydra-headed shift that makes them attractive as a part, a small part, of almost any portfolio,” Ball said.
Despite this wave of optimism, history also suggests March could be a bloody month, with Bitcoin’s price falling across the month in six of the past nine years by an average of 5.8%. The most recent of these occurred last year on Black Thursday when the price plunged by 50%. That said, the second-biggest monthly candle in BTC history happened in March 2013, when the price shot up 179%.
The past 24 hours on the cryptocurrency market have been particularly intense. This time around, the action doesn’t seem to come from Bitcoin, which has been taking a breather.
Altcoins, on the other hand, are going parabolic. As CryptoPotato reported, they added almost $40 billion to the total market cap. Despite this increase, both long and short liquidations are off the charts.
As it’s oftentimes the case, when Bitcoin stops its advance, alternative cryptocurrencies take advantage and start to pop. This is what has been happening over the past couple of days. The primary cryptocurrency declined in value, which allowed room for others to step in.
The total trading volume in the past 24 hours alone surged to just shy of $400 billion. In the same period of time, more than $1.1 billion worth of short and long positions were liquidated. This translates to almost 120,000 traders on the major exchanges.
The largest single liquidation order over the past hour took place on Huobi and had a face value of the whopping $12.92 million. Over the same period of time, about $31 million worth of long and short positions were liquidated.
As seen in the above chart, the majority of positions were long, accounting for a total of $685 million. Leading the way is Binance, which doesn’t really come as a surprise. Next in line are Huobi, Bybit, and OKEx.
Trading is a zero-sum game. This means that for one to win, another has to lose. It’s a paramount principle that needs to be kept under close consideration when stepping into a market as volatile as this one.
This is especially true for newcomers. Data from Google Trends reveals that the interest in Bitcoin has increased substantially over the past month.
It’s obvious that the current levels are nowhere near their peak from back in 2017, but the massive volatility can cause serious capital loss unless risk management and proper principles are in place.
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FUCK THE BEARS.
FUCK THE FROGS.
FUCK THE PIGS.
AND FUCK COVID. https://t.co/YMDiXRgNUc