By the CoinDesk Markets Team Edited by Bradley Keoun
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TODAY:Bitcoin (BTC) -1.5% $10,587 | Ether (ETH) -2.5% $340 (@11:01 UTC)Price Point:Market Moves: As the Ethereum blockchain suffers congestion, rival Tron looks to capture a share of the fast-growing trade in tokenized bitcoin. Bitcoin Watch: The drop in expected volatility implied by the options market may actually be signaling violent price action ahead. What's Hot: Chinese TV touts cryptocurrencies' 2020 returns, U.S. and Europe moves forward on digital-asset regulation, Russia warns citizens to report crypto-wallet details, new exchange launches in Middle East.
PRICE POINT
Bitcoin was lower, as prices failed to follow through after a 5% jump on Thursday. For most of the month, the largest cryptocurrency has stayed in a range between about $10,000 and $11,000. "Of the factors that drove the markets to the brink of insanity during the last few months, by far the strongest two were a) the copious amounts of stimulus used by governments and central banks and b) a rush of new retail traders," Mati Greenspan, founder of the cryptocurrency and foreign-exchange analysis firm Quantum Economics, told subscribers in an email. "Both of these factors are now pretty much gone." In traditional markets, European stocks declined and U.S. stock futures pointed to a lower open. The dollar strengthened in foreign exchange markets and gold slid 0.5% to $1,858 an ounce.
MARKET MOVES
Compared with the traditional financial system, the cryptocurrency industry is evolving fast. Technologists are experimenting with the vast-reaching potential of blockchain. And regulation is typically immature, inconsistent and unevenly applied across international borders, allowing entrepreneurs to move fast and break things, as it were. But there's also no shortage of competition. The latest example comes from CoinDesk's Ian Allison, who reported Thursday that Tron, the three-year-old blockchain headed by Justin Sun (the crypto executive who paid $4.5 million to have a meal with Warren Buffett), has entered into a strategic alliance with custody specialist BitGo to accommodate wrapped bitcoin ( WBTC) tokens. Wrapped bitcoin is a tokenized version of the largest cryptocurrency, reformatted so it can move easily on a non-Bitcoin blockchain. It's become popular among users of the Ethereum blockchain partly because traders can deposit the tokens in various decentralized finance or "DeFi" applications to receive juicy interest rates. Bitcoin doesn't pay interest or dividends, a fact that sometimes draws comparisons to a "pet rock." So DeFi is one of the main places that holders of bitcoin can go to make money off their holdings, aside from the usual speculative price gains. As documented recently by CoinDesk's Will Foxley and Zack Voell, tokenized versions of bitcoin, including WBTC, now total more than $1.1 billion. Just Thursday, the cryptocurrency fund Three Arrows minted some 2,316 WBTC tokens, the largest-ever single issuance, for use on the Ethereum blockchain, Voell reported. Later in the day, Sam Bankman-Fried, CEO of the crypto fund Alameda, tweeted an Ethererum blockchain data scan suggesting that a new transaction had occurred to break that record. The past few months' explosion in DeFi, with the debut of automated trading platforms like Uniswap and copycat SushiSwap, has jammed the Ethereum network with congestion, driving up transaction fee rates and prompting rival blockchains to offer competing venues for developing new applications. Now Tron apparently wants a piece of the thriving DeFi business. “Our new strategic alliance with Tron creates even greater opportunities for users to expand to other chains and tokenize their BTC," BitGo CEO Mike Belshe said in a statement. That means "transacting at a lower cost and faster speed.” There is so much more development and activity taking place on Ethereum that DeFi traders are unlikely to decamp en masse to Tron. But it's good for the industry that they have the option. Supply of bitcoins tokenized on Ethereum has exploded since January to more than $1 billion. (Dune Analytics)
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BITCOIN WATCH
Bitcoin implied volatility. (Skew) Bitcoin's 5% gain on Thursday confirmed its biggest single-day percentage gain since July 27. While the recovery from weekly lows near $10,200 has been impressive, the immediate bias remains neutral. That's because the cryptocurrency has yet to violate the three-week trading range of $10,000 to $11,000. A big move could happen soon, since the one-month implied volatility has declined to 44%, the lowest level in nearly two years, according to data source Skew. In the past, an implied volatility of 50% or below has consistently paved the way for violent price action. The gauge is now closing on the record low of 35% seen just ahead of the big crash from $6,000 to $4,500 seen in the second half of November 2018. - Omkar Godbole
TOKEN WATCH
Ether (ETH): Traders might be using options market to hedge price risks of ether locked in DeFi liquidity pools. Bitcoin (BTC): Options open interest hits record $2.1B with notional value of $1B set to expire Friday, potentially triggering volatility. Wrapped Bitcoin (WBTC): Three Arrows Capital mints 2,316 of the Ethereum-ready tokens, single largest issuance. Avalanche (AVAX): Tokens in smart-contract platform (and Ethereum competitor) shoot up to $4 each, providing fast paper profit for investors who bought in just two months ago at 85 cents each in a $42M fundraise, Messari says. Uniswap (UNI): Users claim 78% of existing UNI supply in first week, though Glassnode Insights op-ed argues that transition toward token-based governance via the UNI token falls far short of true decentralization.
CoinDesk Research continues its webinar series on Bitcoin's fundamental metrics with two episodes on UTXO-based analyses.
UTXOs, or unspent transaction outputs, are fundamental components of Bitcoin's distributed ledger that can shed startling light on investors' behavior and positions.
On Sept. 29 at 10:30 a.m. ET, Lucas Nuzzi from Coin Metrics will present charts and insights on the market-value-to-realized-value (MVRV) ratio and the spent output profit ratio (SOPR).
Disclaimer: The information presented in this message is intended as a news item that provides a brief summary of various events and developments that affect, or that might in the future affect, the value of one or more of the cryptocurrencies described above. The information contained in this message, and any information liked through the items contained herein, is not intended to provide sufficient information to form the basis for an investment decision. The information presented herein is accurate only as of its date, and it was not prepared by a research analyst or other investment professional. You should seek additional information regarding the merits and risks of investing in any cryptocurrency before deciding to purchase or sell any such instruments.
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