The Good News On Cryptocurrency

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Good morning my readers. How was your night?

I will like to share light to the latest good news that is happening in the cryptocurrency market just resent.

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Now let me go to the latest trend in the market.

News that the CME will be launching a Micro Ether Futures on December 6 led the price of ETH higher to carve out a new ATH of $4,640, while rumors that the SEC could approve Grayscale Bitcoin Trust’s (GBTC) conversion into a physically-backed BTC ETF kept the price of BTC above $60,000. Even when the FED announced its tapering program on Wednesday, BTC very quickly rebounded to above $62,000 when it flashed dipped to $60,000. This shows that there is strong buying at the $60,000 level for BTC. 

With a continued rise in the price of BTC and with ETH breaking out from ATH, the trading volume of both top coins has been increasing since bottoming out in July. The key point to note is that this volume is a 7-fold increase from barely just a year ago, and is a 10-fold increase from 2 years ago. Should the trend of rising volume continue, cryptocurrency trading could one day eclipse trading on the stock market. 

This Time Is Different For BTC

This time when BTC is above $60,000 is different from the last time BTC visited this level. In April when BTC first inched above $60,000, funding rates were markedly higher. This time, even though the funding rate is positive, it is sharply lower than that witnessed in April. Hence, this shows that leverage level is far lower now compared with April. This could mean BTC has a lot more room to move higher now compared with the April-May interim peak. 

The average margin ratio back in April was 70%, while that now is only around 46%, a large reduction. In fact, the margin ratio currently is at the lowest level for the year, even lower than when BTC was wallowing at $30,000 in June. This shows the leverage level is at the lowest point of the year, which means that the doubling of BTC price from June to current is led by spot buyers, which have a higher propensity to hold than leveraged traders. 

Despite price rising above $60,000 this time around, the amount of BTC transferred out of exchanges has been increasing and even saw a big spike in early November, showing that spot buyers have been buying BTC and moving them out of exchanges into storage. 

The number of transactions on the BTC blockchain is also increasing with the upswing in exchange outflows, suggesting that OTC transactions could be heating up. The first 5 days of November saw over 1 million active addresses moving BTC around. An increasing number of active addresses usually foretells a higher price ahead as the blockchain is very active, a sign of adoption. 

As more BTC is being moved into cold storage, the illiquid supply of BTC continues to climb, with the number of illiquid BTC supply at the highest level ever, exceeding 14.52 million units. This means that we could be getting closer to the day the market realizes the BTC supply shock. 

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