Bitcoin (BTC) wallet and exchange platform Blockchain.com has announced the introduction of margin trading services.
In a blog post issued on Tuesday, Blockchain.com stated that Bitcoin margin trading had been a regular request from users since launching its exchange service in 2019.
According to the announcement, the platform will launch margin trading for the Bitcoin-U.S. dollar (BTC/USD) pair with up to 5x leverage.
The exchange’s Bitcoin margin trading service will be available to users in about 150 countries with significant exceptions like Italy, France, Canada and the United States. Other exempted jurisdictions include Japan, Germany, Austria, the United Kingdom and The Netherlands.
Only gold-verified users with full identity verification will have access to the margin trading feature according to Tuesday’s announcement.
In terms of cost, the announcement stated 0.12% in daily trading fees on open margin trading positions which is equivalent to 0.02% per four hours.
The launch of margin trading is the latest milestone for Blockchain.com since expanding its product catalog to include cryptocurrency exchange services.
Back in August, the platform crossed $1 trillion in crypto transactions and announced that it was mulling an initial public offering (IPO) by 2023.
Related:Blockchain.com says goodbye to the Big Apple, hello to Miami
Blockchain.com’s IPO plans are part of the emerging trend of exchanges and other crypto firms pursuing public listings, following in the footsteps of Coinbase. Indeed, the likes of Kraken and Circle are also considering public stock exchange listings.
The wallet and exchange platform also conducted multiple fundraising rounds earlier in the year and clocked a $5.2 billion valuation as of March. Blockchain.com reportedly utilized the capital to develop its institutional business.
As previously reported by Cointelegraph, Blockchain.com partnered with Unstoppable Domains to introduce username-based transactions to 32 million verified customers back in June.
Japanese eCommerce company Rakuten has announced plans to relist XRP margin trading on its cryptocurrency exchange platform.
Rakuten’s crypto-arm discontinued services related to XRP on December 24, two days after the US Securities and Exchange Commission (SEC) announced its landmark lawsuit against Ripple blockchain company and its XRP cryptocurrency.
During that, Rakuten stated that they were unsure if XRP’s liquidity could be secured and also raised concerns about XRP’s price stability in light of the aforementioned legal battle.
But now, Rakuten has disclosed that it will resume XRP margin trading on its platform from September 8 since the exchange has determined that liquidity can be secured. Stable price delivery to customers is possible.
Rakuten is certain of securing some amount in price liquidity on XRP margin trading and confirmed the potential delivery of price stability to its XRP investors.
Rakuten has stressed the importance of price stability and exit liquidity in leveraged derivative trading. Volatile price actions and low liquidity can contribute to huge losses for customers betting on the asset. However, the exchange has guaranteed to halt the XRP margin trading again if the cryptocurrency does not perform its trading as expected. Despite reinstating XRP, Rakuten does not have adequate faith in the cryptocurrency, given its compromising position because of the ongoing SEC’s lawsuit.
Rakuten launched its crypto exchange platform in August 2019 and started offering margin trading services, with cryptocurrencies on offer, including Bitcoin, Ethereum, and Bitcoin Cash.
In March 2020, the crypto exchange added margin trading for XRP and Litecoin.
The Fate of XRP Market
While Rakuten set to relist XRP, other exchanges, including Bitstamp, Binance.US, Kraken, Coinbase, among others, are yet to show interest in reinstating the trading of the controversial cryptocurrency on their platforms, with Ripple’s fate hinging on the outcomes of the SEC’s lawsuit.
In December 2020, major crypto exchanges such as Coinbase, Crypto.com, OKCoin, and others suspended the trading of the XRP token following the SEC’s complaint against its developer, Ripple Labs.
The SEC accused Ripple Labs, the company behind XRP, of effectively running a $1.3 billion unregistered offering with its sales of XRP, which the regulator considered security and not a cryptocurrency.
However, the latest development by Rakuten signals changing sentiments around Ripple and XRP, and this could imply that other exchanges might soon follow suit with similar positive updates. But such XRP relisting attempts may not happen unless the SEC-Ripple case is fully determined and resolved.
Crypto derivatives exchange FTX has decided to curb risky trading by limiting the leverage available to its users.
The exchange, founded by crypto billionaire Sam Bankman-Fried (SBF), has reduced the maximum leverage available on the platform down to 20x, a significant reduction from its previous limit of 101x.
In a July 25 tweet announcing the updated leverage limits, Bankman-Fried said that the decision was made in light of the exchange’s efforts to “encourage responsible trading.”
He asserted that leveraged trading is not a significant part of the exchange’s overall volumes, estimating the average open margin position on FTX is leveraged by roughly 2x, stating:
“This will hit a tiny fraction of activity on the platform, and while many users have expressed that they like having the option, very few use it.”
The reaction from the crypto community was largely positive, with many commenters highlighting the risks associated with high leverage.
Twitter user “Crypto Tolkien” asserted that many new traders have become “permabears on Bitcoin and crypto” after losing their shirt to high leverage in their first trades.
However, others said that 20x was still a lot of leverage, suggesting limits should be further reduced.
According to CoinGecko, FTX is the 13th-largest exchange by volume. As of this writing, FTX’s daily volume is nearly $1.5 billion, with volume surging 41% in the past 24 hours as Bitcoin rallied by more than 10%.
On June 16, Cointelegraph reported that Huobi Global made some of its own restrictions limiting margin trading for new and existing users. Citing concerns over increased regulation in China, Huobi dropped its allowable leverage from 125x to less than 5x.
The leverage reductions come as global regulators appear to be increasingly setting their sites on unregulated crypto platforms.
In late June, the U.K.’s Financial Conduct Authority ordered Binance to cease all regulated activities in the country following a review of its operations. A number of high-street banks followed up by restricting their customers from making transactions to and from the exchange.
Across the pond, financial regulators have been coming down hard on crypto lending firm BlockFi, with the Texas State Securities Board alleging the firm is offering unregistered securities on July 22.
Related:FTX’s Sam Bankman-Fried: Institutions are ‘desperate’ for crypto
Bitcoin (BTC) bears should watch out for a potential blow as the number of margined short positions on the Bitfinex exchange crashes by roughly 25%.
The dataset dropped to 11,066 BTC as of 12:20 GMT Saturday, compared to 14,897 BTC at the session’s open. Meanwhile, the drop came as a part of a bigger downside move that started on July 15. On the day, the total number of margined short positions had reached 17,053 BTC.
BTCUSDSHORTS on July 17 plunged as a part of a prevailing downside correction. Source: TradingView
In simple terms, BTCUSDSHORTS represents the number of margined bearish positions on Bitfinex, measured in BTC. Traders borrow funds from Bitfinex — their broker — to bet on bearish outcomes for the instrument BTC/USD. That said, the latest data shows that traders have reduced their leveraged bearish exposure in the Bitcoin market.
Bitcoin spike expected?
Popular trader Scott Melker claimed that each massive drop in the BTCUSDSHORTS positions on Bitfinex leads to a run-up in the spot Bitcoin prices, adding that he will be watching markest for a similar bullish reaction.
Bitfinex whale may be starting to wind down those shorts. Each time they drop, price has risen. Will be watching. pic.twitter.com/5F40LYjMVL
— The Wolf Of All Streets (@scottmelker) July 16, 2021
Throwing a closer look at the BTCUSD-BTCUSDSHORTS correlation showed an erratic positive correlation. The Bitfinex short positions went for a Bear Run after December 2020, a period that coincided with a spike across Bitcoin spot and derivatives markets.
In April-May, a run-down in Bitfinex short positions coincided with the Bitcoin price surging from sub-$45,000 to a record high of $65,000.
The recent correlation between Bitcoin spot prices and its margin short positions on Bitfinex. Source: TradingView
Nonetheless, similar BTCUSDSHORTS crashes in June—at best—kept Bitcoin stabilized above a psychological support level of $30,000, if not pumped it outright.
Grayscale FUD
Downside pressure on Bitcoin sustains despite a recent drop in BTCUSDShorts also as Grayscale Investments unlock 16,000 BTC worth of its Grayscale Bitcoin Trust (GBTC) shares on July 18, after a six-month lock-up period.
JPMorgan & Chase strategists led by Nikolaos Panigirtzoglou warned in June that Grayscale’s massive unlocking event could become the source of the next selling wave in the Bitcoin market.
On-chain analyst Willy Woo echoed similar concerns last week, explaining that when GBTC premium drops relative to the Bitcoin units held in Grayscale’s reserves, it tends to divert investors from spot markets.
“Investors now have more incentive to by GBTC shares rather than BTC, it diverts some of the buying pressure on BTC spot markets,” said Woo. “This is bearish.”
(1) is sudden and directly impactful than while (2) acts very slowly. Thus it’s a bullish.
The over all impact over the long term is neutral as it’s all arbitrage which balances out in time. What we are analysing is the short term demand/supply imbalances which may impact price.
— Willy Woo (@woonomic) July 6, 2021
Bitcoin holds $31K
As an optimistic BTCUSDSHORTS drop offsets a pessimistic GBTC unlock event, the spot BTC/USD exchange rate holds $31,000 as its interim support.
BTC/USD has repeatedly tested the $30,000-$31,000 range as support before rebounding higher. A maximum of its retracement has been able to pierce through the $35,000-resistance level. Nonetheless, profit-taking sentiment pushed the pair back toward $30,000.
As a result, the bearish sentiment for Bitcoin among analysts is extremely high, below $30,000. For instance, pseudonymous chartist Fomocap sees BTC/USD crashing to $20,000 if the pair closes below $30,000.
Weekly. Price get rejected from 39k. Then 35k. Cont to squeeze down with higher pressure. Below middle channel. Breaking below 30k definitely comes 20k support. It’s just how gravity works. But still holding so far .. #Bitcoin pic.twitter.com/2qpKWGL4cF
— Fomocap (@Workedia) July 16, 2021
NebraskanGooner also expects a “nuke” like scenario for Bitcoin should it drop below $30K.
#Bitcoin
Everyone talking about $30k level.
As far as in concerned, this is the support needing to hold to avoid a nuke. pic.twitter.com/t4Vv2msdAw
— NebraskanGooner (@nebraskangooner) July 14, 2021
The formation of a potential inverse cup and handle formation also sees Bitcoin crashing below $20,000 on the next breakdown below the $30K-$31K range, as shown in the chart below.
Inverse cup and handle pattern on the Bitcoin chart. Source: TradingView
Woo rested on on-chain fundamentals to predict a bullish outcome. The analyst said that smart money has ceased selling while long-term investors have been absorbing Bitcoin at peak levels just as price flirts with $30K-support.
Spot exchange net flows on a 2-week moving average. Source: Willy Woo Newsletter
“Coins are moving away from speculators to long-term investors (strong hands) now at a rate unseen since February when price propelled from $30k to $56k,” he wrote in his recent note to clients, adding:
“I’m expecting price to break from its bearish sideways band in the coming week followed by a recovery to the $50k-$60k zone before some further consolidation.”
The views and opinions expressed here are solely those of the author and do not necessarily reflect the views of Cointelegraph.com. Every investment and trading move involves risk, you should conduct your own research when making a decision.
Over the last 24 hours, bitcoin’s price has dropped by approximately 9% as more than $1,000,000,000 of leveraged bitcoin long positions have been liquidated across various exchanges.
Liquidated long positions over the last 24 hours
The pullback over the last 24 hours is a continuation of a move that started on April 14th, after Bitcoin hit an all time high of $64,800. From peak to trough, the market has retraced as far as -26.97% since the April 14th all time high, a common occurrence in a bitcoin bull market.
Bitcoin’s dramatic reduction in price, shown in Tradingview
Various reasons have been put forward by market commentators as to the reason for the pullback, one of which was U.S. President Joe Biden’s proposal to increase the capital gains rate for individuals with high incomes.
Although this headline may have had an effect on the markets and helped to spur this deleveraging event, ultimately, attempting to pin market fluctuations and volatility on a particular event or development can be quite futile. Bitcoin is a volatile asset, and its volatility is the price one pays for its outlandish returns.
Bitcoin realized volatility: last 6 months
Although the recent drop in price may frighten new entrants, it once again highlights the need to remain focused on bitcoin’s long-term fundamentals, and dollar cost average into a position. The Bitcoin network remains the strongest and most robust monetary network in the world, and nothing has changed in that sense over the previous 9-day span.
Enjoy the sale while it lasts and stack your sats, or someone else will.
Ether (ETH) price fell by 19.6% on April 18, resulting in the quick liquidation of $1 billion in long futures contracts. Despite the size of this record liquidation and its impact on Ether price, the futures’ open interest remained above $20.5 billion, which is 5% below the previous month.
After the sell-off, there were signs that investor sentiment deteriorated, which was evident in derivatives markets.
Historically, there’s much higher borrowing demand for Ether longs as opposed to shorts. Over the past couple of days, the long-to-short ratio flipped, reaching the lowest level since December 2018.
ETH futures aggregate open interest. Source: Bybt
There’s hardly any news that could justify the substantial price correction, as Ether has no direct relation with Coinbase ($COIN) shares receding, Bitcoin’s (BTC) falling hashrate or TV host Jim Cramer calling Bitcoin “phoney money.”
However, investors have reason to worry about potential harsh cryptocurrency regulation. Over the weekend, unsubstantiated news of the United States Department of Treasury bringing money laundering charges emerged. The focus would have been financial institutions that used cryptocurrencies, but little has come of this.
In February, Janet Yellen, the secretary of the U.S. Treasury and a known crypto critic, cited the misuse of cryptocurrencies for illegal activities as a growing concern. Meanwhile, the Department of Treasury’s Financial Crimes signaled that the reporting of foreign financial accounts could include digital currencies.
The potential move means FinCEN may soon require individuals to file annual Reports of Foreign Bank and Financial Accounts, or FBARs, for cryptocurrencies held on foreign exchanges.
Therefore, investors’ increased interest in Ether shorts could have been fueled by the potential regulatory changes. Curiously, Ether price currently stands less than 5% below its $2,550 all-time high.
Ether price (orange) and Ether long-to-short ratio at Bitfinex (blue). Source: TradingView
As the above chart shows, the average demand for Ether longs at Bitfinex exchange has been 65% higher than shorts over the last couple of months. On April 20, this indicator shifted, favoring the shorts and reaching its lowest level since December 2018.
Ethereum network congestion is another reason causing traders to act more carefully. Over the past couple of months, the average transaction cost stood near $16, making it quite impractical for individuals looking to facilitate smaller transactions.
The recent Berlin update has laid the groundwork for the much bigger London hard fork, which will activate EIP-1559. The controversial change will overhaul Ethereum’s existing fee structure, but experts stated that the new base fee mechanism would not provide a long-term solution for Ethereum scalability problems.
Whatever the reason behind Bitfinex’s margin markets shifts favoring bears, there’s no indicator better than the 20% ETH price increase that took place over the previous four days. As of now, this isolated indicator should not be deemed worrisome, and it appears that Ether price is en route to new all-time highs.
The views and opinions expressed here are solely those of theauthorand 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.
Newer traders might be unaware of this, but investors can also borrow BTC to margin trade a short position, thus betting on the price downside. This is why some analysts monitor the BTC, and USDT total lending amounts to gain insight into whether investors are leaning bullish or bearish.
Interestingly, data shows that even as Bitcoin price aims for a new all-time high, the BTC to USDT borrow ratio reached its lowest level since Nov. 20 at OKEx. While this figure still favors bulls, it raises questions about what catalysts are behind the move.
Bitcoin price in USD (above) and USDT / BTC lending ratio. Source: TradingView, OKEx
Whenever traders borrow USDT or other stablecoins, they are likely using it to long cryptocurrencies. On the other hand, BTC borrowing is mainly used for short positions.
This means that theoretically, whenever the USDT / BTC lending goes up, the market is angled in a bullish manner. The opposite movement indicates more demand for Bitcoin shorts.
As shown in the chart above, USDT loans at OKEx have been holding roughly eight times larger than Bitcoin-denominated loans. Albeit on the bullish side, this is near the lowest level since Nov. 17, 2020.
Borrowing rates for the bears have never been this low
Unlike perpetual futures (inverse swaps), margin trades take place in regular spot markets. To start margin trading, a trader only needs to transfer collateral funds to a margin account. Most exchanges offer 3 to 10 times leverage, depending on the asset’s volatility and market conditions.
This indicator halved since late February, although BTC marking a new $61,800 all-time high and sustaining daily candle closes above $55,000 for the past 17 days. Nevertheless, a hike in the Bitcoin borrowing rate would undoubtedly cause BTC shorts to reduce their leverage.
According to data from Bitfinex, BTC’s short-term lending rate plummeted to 1% per year. Therefore, high costs are definitely not behind the much smaller BTC borrowing activity. Although OKEx does not provide a chart, both Poloniex and Quoine exchange displayed a similar trend, according to data from coinlend.org.
Bulls kept their long positions despite the fee increase
Traders betting on a negative price swing must borrow BTC to margin trade a short position. Even in this situation, they will still need to pay interest and trade them to USD or stablecoin. To close the transaction, the buyer must repurchase the BTC while hoping for a lower price and return it to the lender with the additional interest.
This time around, there has been a massive spike in the USD lending rate in mid-March as Bitcoin surpassed $60,000. The leveraged long frenzy quickly reverted as BTC dropped 13% over the following days, and this caused fiat and stablecoin borrowing rates to normalize.
Traders looking to borrow USD or stablecoins to buy Bitcoin have been paying from 15% to 23% per year over the last couple of weeks. This rate is likely why the OKEx USDT and BTC borrow ratio fails to increase despite Bitcoin’s price strength.
Right now, the lending ratio favors bulls
A meager 1% annualized fee was not enough to entice borrowers to short Bitcoin, which is a positive indicator. Had there been any demand for that, the borrowing rate would have gone up.
Consequently, traders should not perceive that the OKEx margin lending ratio is at its lowest level in 5 months as a bearish signal.
Even though a 23% margin rate for longs is considerably expensive, there is room for further leverage. Hence, $60,000 becoming a support level for Bitcoin should come as no surprise.
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.
Margin trading allows an investor to borrow money or cryptocurrency to leverage their trading position and increase its size or the expected return. For example, borrowing Tether (USDT) will allow one to buy Bitcoin (BTC), thus increasing the exposure. Although there’s an interest rate involved with borrowing, the trader expects the BTC price appreciation to compensate for it.
