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Profit Taking Follows Bitcoin's New All Time High
March 15th, 2021

This week in cryptocurrency markets:
  • Price Movements: Bitcoin crossed $60k, a premium emerged on BTC-Euro markets, and NFT tokens are soaring. 
  • Trading Volume: Binance's market share of volume continues to grow versus the exchange's biggest competitors. 
  • Order Book Liquidity: Market depth for BTC-USD is heavily skewed towards the sell side, which suggests profit taking preceded this morning's crash. 
  • Volatility and Correlations: 180D volatility reached a 6-month high. 

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Price Movements

Bitcoin's short-lived all time high. While NFTs dominated headlines, Bitcoin made a steady climb above $60k for the first time ever. However, lackluster trading volumes and high sell-side market depth prevented further gains, resulting in a steep crash below $55k on Monday morning. Ethereum fell short of breaking its previous all time high reached in February.

Premium emerges on BTC-EUR markets. BTC-EUR and BTC-USD typically trade closely in line. Thus, it was notable when BTC-EUR began trading at a premium to BTC-USD starting March 4th. When comparing divergences from other reference dates (not pictured), we observed that this premium was larger and more prolonged than others over the past few months. Macro economic events have deeply influenced crypto markets over the past year, and the EU's recent ramping up of expansionary monetary and fiscal measures could have contributed to the temporary premium. However, it is difficult to assign a single underlying cause. The premium briefly turned into a discount as BTC-USD reached new all time highs over the weekend. 

Tokens affiliated with NFT marketplaces soar. The word "NFT" has officially entered the pop-cultural lexicon following digital artist Beeple's historic sale of a non-fungible token at Christies. “JPG File sells for $69 million”—how the New York Times phrased the event —was one of many mainstream takes on this budding sector of crypto. Our friends over at The Tie showed that NFT mentions in the media were up more than 100x since last year, and as most in crypto are aware, the more hype the better the returns. 

While NFTs themselves have sold at increasingly excessive rates, tokens affiliated with NFT marketplaces have tangentially benefitted from the mania. The token Flow, a product of Dapper Labs (partner of NFT marketplace NBA Top Shot), has appreciated 209% since February 1st. Decentraland, a virtual world where players can purchase NFTs, has seen its MANA token soar 682%. These tokens serve functions such as governance, utility, and rewards, but also serve as a gauge for sentiment surrounding the NFT industry. 
Stablecoins experience significant positive drift. Last week, we analyzed the frequency of average stablecoin prices, and found that DAI and Tether (USDT) experience positive drift from their 1-to-1 dollar peg. When looking at the USD exchange rate for six stablecoins over the past week, we can observe that most of them experience positive drift more so than negative drift. When the blue line is above the red line, this indicates that the exchange rate is greater than $1. We hypothesized that positive drift is a result of trading behavior during price volatility, but this doesn't fully explain the average hourly prices depicted above, which skew positive despite the presence of a price crash last week.  

In February, the compounding cycle of good news eventually proved unsustainable for prices, resulting in a double-digit crash across crypto markets which triggered the highest volume of forced liquidations ever recorded. In our monthly report, we analyze the price crash, growing demand for regulated investment products, exchange competition, soaring trade volume, order book liquidity, and much more.

Download our market report here or view it on Coindesk's Research Hub
Download Monthly Report
Trading Volume

Binance's market share continues to grow. This week, we take a look at the "Big Three" of loosely regulated crypto exchanges: Binance, Huobi, and Okex. Combined, these three exchanges boast some of the largest trade volumes in the industry, and are each other's closest competitors. Over the past year, Binance's market share of volume for the BTC-USDT trading pair has grown from 41% to 64%. The huge growth came as both Huobi and Okex faced a series of internal company issues. Last fall, Okex suspended withdrawals for more than a month and Huobi suffered from rumors of internal strife, which both resulted in a big dip in market share as traders transferred funds out. 

Trade volume couldn't support continued gains. Bitcoin reached a new all time high over the weekend, but this major market event hardly had an impact on trade volumes. Typically, new all time highs or price crashes both lead to extreme surges in volume. The lackluster reaction suggests that inflows were not strong enough to support the price, which promptly crashed on Monday morning. 
Order Book Liquidity
Bitcoin order books skew sell-side. The quantity of asks on BTC-USD order books has soared over the past week as Bitcoin topped new all time highs. At one point, the quantity of asks was nearly double the quantity of bids. Despite the sell wall, Bitcoin was able to break past $60k, which suggests strong buying pressure among price takers. Ask depth continued to increase following the new highs as traders prepared to take profit, which could have contributed to Bitcoin's early Monday crash. 

We can also observe that total market depth has increased over the past two weeks, but the long term trend shows a significant decline in depth, as depicted in last week's Research Factsheet. Onchain data confirms a possible shortage of Bitcoin. Last week, Chainalysis noted that inflows to exchanges are lower than average which suggests a shortage of the asset for market making activities. This shortage could be due to several factors, including overall increased demand, supply sinkholes such as Grayscale, and more retail buying from platforms such as PayPal. 

Analyzing market depth on the three biggest 'crypto-only' exchanges. Last week, we compared Binance and Coinbase's order book liquidity and found that Binance had deeper books and tighter spreads on average. This week, we compare Binance, Okex, and Huobi's order book liquidity. 

At the +/- .01% range, we can observe that Binance order books are the most liquid. This means that the quantity of bids and asks placed at +/- .01% from the mid price are higher than the exchange's competitors. The higher the market depth, the less likely large market orders will influence the price of an asset. Binance's liquidity at this range is more than double that of Okex's, which suggests they have strong market making activity and that traders will experience lower price slippage. 

Diving into the data: At Kaiko, we collect order book snapshots at regular intervals comprising all bids and asks placed within 10% of the mid price. However, some exchanges do not provide full access to order books through their public REST APIs. Binance, Huobi, and Okex all provide only limited access to market depth (Binance provides the 1,000 best price levels, Huobi the 150 best, and Okex the 200 best).

Thus, when analyzing depth on these exchanges we need to use a common denominator of depth in order to give a fair comparison. We found that comparing depth at +/- .01% of the mid price is sufficient for including the maximum amount of levels available across the three exchanges. At .05%, we start missing data for Huobi (which provides the least access to depth). When comparing depth for BTC-USD pairs (as opposed to BTC-USDT pairs), we will almost always use 10% depth because most fiat exchanges provide full access to order books.  

(The inconsistencies in data provision show why data standards are so important in cryptocurrency markets!)
Volatility and Correlations
180D volatility reaches six-month high. Bitcoin's intraday volatility has been extreme over the past few months, and when looking at long term trends, we can observe that180D volatility recently reached a 6-month high. 20D volatility peaked in early February following several sharp price crashes, but since then has declined. Overall, volatility traders are benefitting from the price action that picked up around November. 

Thanks for reading and see you next week!

-Clara Medalie,  (email me for any feedback or suggestions!)
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Kaiko is the premier cryptocurrency market data provider for professional traders, fund managers, researchers, exchanges, and custodians. Our data services enable seamless connectivity to historical and live data feeds from 100+ spot and derivatives exchanges

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Quick Kaiko Updates!
  • Kaiko's Head of Growth Elodie de Marchi will be hosting a webinar this Wednesday with crypto tax manager Waltio (in French). Register here, for an informative session on how companies can manage their crypto portfolios when tax season rolls around. 
  • Last week, Kaiko's Sacha Ghebali finished up the New York Department of Financial Service's first-of-a-kind tech sprint for crypto, building a regulatory monitoring product to identify fraud using market data.
This Factsheet was written by Clara Medalie, with help from Anastasia Melachrinos and the Kaiko team. This is not financial advice. Any redistribution of charts appearing in this Factsheet must cite Kaiko as the sole provider and creator.
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