Nice Monday. Bitcoin starts the Asian business day up 1.7%, just below $28,000 at $27,966. Ether slightly outperforms Bitcoin to start the day up 1.8% at $1,777.
Speaking to CoinDesk TV on Friday, Edward Moya, senior market analyst at Oanda, said Coinbase’s success dictates much of crypto’s future price action.
“Crypto traders track everything closely with Coinbase. Coinbase CEO [Brian] Armstrong noted that they weren’t entirely surprised by the SEC’s announcement. No one knows how regulators will decide if all tokens are securities,” he said. “Coinbase’s success is critical to longer-term crypto growth. In the US, Coinbase is a crucial option for entering crypto.”
Moya pointed out that while Bitcoin has not yet been able to test the $30,000 level, it looks like it is poised for a period of consolidation.
Joe DiPasquale, CEO of crypto asset manager BitBull Capital, told CoinDesk in an email that the market remained broadly bullish after the Federal Open Market Committee (FOMC) pushed through a relatively tame rate hike.
“While we expected a correction to $25,000 which did not materialize, we believe it is still in play. For now, bulls will want to see Bitcoin respect $25,000 and consolidate above that level,” he told CoinDesk in a note. “After some time with price action like this, we might see altcoins picking up again. On the other hand, a collapse of $25,000 could shut down this rally.”
Meanwhile, ether traders are breathing a puff of relief — and driving the price higher — after the recent decentralized finance (DeFi) crisis, this time involving the Euler Finance protocol, appears to be nearing an end.
Layer 1 companies like Solana and Eos took the news positively and started the Asian business day in the green.
Liquidity problem of decentralized derivatives exchanges
Liquidity is a major issue in today’s crypto market. Without market depth, large orders lead to price slides and extreme price fluctuations cause traders to capsize.
The liquidity crisis has often been discussed in connection with Bitcoin. Kaiko’s research team has pointed out that a lack of fiat payment lanes following the closure of Silvergate and Signature banks has pushed Bitcoin’s liquidity to a 10-month low. But decentralized finance (DeFi) is also facing its own liquidity crisis.
One of the most interesting developments in DeFi has been decentralized derivatives exchanges. For centralized exchanges, derivatives are a much larger – and more lucrative – market than spot, but this has come with increased interest from regulators. At the same time, DEXs are far more efficient than their centralized counterparts, making them worth the regulatory risk for investors.
Perpetual Futures DEX dYdX was the first in the decentralized derivatives industry and appears to have done very well. But it is not purely decentralized and combines a mix of a centralized order book with decentralized custody.
FTX’s collapse was a booster of interest; On-chain transparency is the best antidote to dishonesty, and it’s impossible to hide things like funds mingling on the blockchain’s open book.
But dYdX’s competitors are running out of liquidity, leading to questions about the scalability of the whole concept.
As of Friday, Kwenta had just $1.27 million of open interest available for long positions on Bitcoin Perpetuals and $450,000 of open interest available for the short side. Things weren’t much better for Ether, with only $1.64 million of open interest available for longs.
GMX was in better shape but has limited liquidity for shorts, which can range from just over $1,000 to around $700,000.
But that didn’t affect everyone equally. Perpetual Protocol, another perpetual futures DEX, is still watching its open interest grow.
“I think the challenge is that after the FTX fallout, not many new crypto traders came to DEXs,” its co-founder Yenwen Coindesk said in an email. “But I remain optimistic and believe derivatives DEXs will become the key players in the next bull run.”
Federal prosecutors in New York are charging Terraform Labs founder Do Kwon with fraud after he was arrested by police in Montenegro. Former SEC Enforcement Director and Bragança Attorney Lisa Bragança shared her reaction. Also, crypto exchange Binance has suspended spot trading due to an issue on the world’s most widely used cryptocurrency trading platform. Innovating Capital’s general partner, Anthony Georgiades, intervened.