First Mover Americas: Bitcoin Holds $20K Level; Altcoins Recover as Market Sentiment Improves

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Bitcoin (BTC) has managed to hold the $20,000 level after dipping to lows of $19,500 on Monday. The world’s largest cryptocurrency by market value is up 3% over the last 24 hours.

Altcoins outperformed bitcoin with ether (ETH) up 8% on Tuesday while stocks rose as investor sentiment began to stabilize. U.S. futures climbed. Markets suffered a rough start to the week on fears of aggressive rate hikes by the Federal Reserve.

From Friday’s peak to Sunday’s low, bitcoin lost 10% whilst ether lost 17%.

Avalanche’s AVAX token recovered, up 13% on the day after trading down Monday to its lowest price since July 13 after a self-described “whistleblower” website accused Ava Labs, the company behind the Avalanche blockchain, of paying lawyers to hurt competitors and keep regulators at bay. Since then, Avalanche’s founder, Emin G?n Sirer denied that his company has been involved in a behind-the-scenes smear campaign against competitors of Avalanche.

Cosmos’s ATOM was up 12% and the FLOW token surged 16%.

In other news, FTX CEO Sam Bankman-Fried said in a tweet Monday that the crypto exchange had no plans to acquire rival Huobi. Speculation had emerged that FTX, which has extended financial lifelines to several troubled crypto companies, might acquire Huobi.

Huobi’s native token, HT, declined about 6% following Bankman-Fried’s tweet.

Stablecoin issuer Tether (USDT) has refuted claims made in a Wall Street Journal report in relation to uncertainty over its balance sheet. The newspaper reported that Tether’s assets outweigh its liabilities by just $191 million, implying a relatively “thin cushion of equity.”

Ether, Bitcoin Could See Turbulence as Open Interest Leverage Ratio Soars to Record High

By Omkar Godbole

Traders love volatility and Ethereum’s ether (ETH) and bitcoin (BTC) could soon offer plenty of it. That’s the message from observers tracking the so-called open interest leverage ratio.

The metric is calculated by dividing the amount of dollars locked in open perpetual futures contracts by the market capitalization of the underlying cryptocurrency. The ratio represents the degree of leverage relative to the market size or sensitivity of the spot price to the derivative market activity.

Both ether and bitcoin’s perpetual futures open interest ratios stood at lifetime highs above 0.03 and 0.02 at press time, according to data sourced from Decentral Park Capital and blockchain analytics firm Glassnode.

“The rising ratio indicates open interest is outpacing market size and increases the risk of volatility due to future [long/short] squeezes,” Decentral’s researcher Lewis Harland said.

Perpetuals are futures with no expiry. A futures squeeze refers to a sudden and rapid move in an asset’s price caused by bears or bulls abandoning their positions. A short squeeze is a rally fueled by sellers dumping their bearish bets (shorts). A long squeeze is a decline caused by bulls closing their bullish bets (longs). The higher the leverage ratio, the bigger the impact of long/short squeeze on the asset’s price.

Crypto research firm Delphi Digital’s Andrew Krohn voiced a similar opinion in Monday’s client note, saying the ratio suggests that open interest is large relative to the market size and “implies a higher risk of market squeezes, liquidation cascades or deleveraging events.”

The futures market involves leverage, meaning a trader can take a large long/short position by depositing a relatively small amount of money, called a margin, while the exchange provides the rest of the trade value. That exposes futures traders to liquidations – forced closure of long/short positions due to margin shortages often caused by the market moving in the opposite direction of the trade.

These forced closures put upward/downward pressure on prices, leading to increased volatility. The greater the degree of leverage relative to the market size, the bigger the risk of liquidations injecting volatility into the market.

Read the full story here.

Dormant Bitcoins on the Move

By Omkar Godbole