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The price of Bitcoin (BTC) dropped sharply from $37,800 to $35,000 overnight, liquidating $572 million worth of cryptocurrency futures positions.
There are three major reasons why the price of Bitcoin declined steeply in the past 12 hours. The reasons are an overheated derivatives market, growing doubt in the market, and the lack of upside volatility.
Derivatives market was overheated before the correction
Before the pullback occurred, the Bitcoin derivatives market was extremely overheated. The futures funding rate was hovering at around 0.1%, which is 10 times higher than the average 0.01%.
Growing market uncertainty
According to researchers at Santiment, there is “trader doubt” in the market on whether BTC would hit $40,00 again. They wrote:
“Thinking face There is an increasing amount of trader doubt that #Bitcoin will revisit $40,000. But according to address activity and trade volume, the long-term trend still looks plenty healthy. Keep a close eye on whether $BTC’s usage rate stays propped up.”
Lack of upside volatility
Bitcoin has been seeing weak reactions from buyers throughout the past several days, compared to the initial rally to $42,000 in early January.
During the early phase of the rally, whenever Bitcoin dipped to key support levels, like $35,000, there was often a big reaction from buyers.
iFinex Inc — the parent company of crypto exchange Bitfinex and stablecoin issuer Tether (USDT) — has written to the New York Supreme Court requesting that its upcoming trial date be pushed back even further.
According to a filing submitted to the New York court system on Jan. 19, the legal counsel for iFinex Inc requested another 30 days to produce the documents demanded by the Office of the Attorney General (OAG).
The document production process was supposed to be completed by Jan. 15 — a date which itself was an extension on the original deadline of Dec. 16. Legal counsel for the defendant, Charles Michael, said in Tuesday’s court filing that a “substantial volume” of material had already been handed over to the OAG, but that there remained “supplemental agreed-upon items” that still had to be sourced.
The filing noted that, in addition to the time it will take to produce the documents in question, extra time will also have to be set aside for the OAG to analyze their importance. The filing states:
“The parties will need a few more weeks to produce the supplemental information, for OAG to review the production, and to discuss further among themselves what if any further proceedings may be necessary.”
Chief technology officer of Bitfinex, Paulo Ardoini, recently took to his Twitter account to remind observers that Tether was registered and regulated under the Financial Crimes Enforcement Network, and that any suggestion that USDT represented a security was just an example of fear, doubt and uncertainty, or FUD.
- A report released today by Messari says that China is still the leader in cryptocurrency activity worldwide.
- The country controls 65% of Bitcoin’s hashrate.
- Some countries in Asia, such as Vietnam, still have strict regulations.
China is still the undisputed king of the Bitcoin market, according to a new report by cryptocurrency data provider Messari.
The report, “Asia’s Crypto Landscape” by analyst Mira Christanto, was released today and looks at the funds, exchanges and trading habits of the world’s biggest crypto market: Asia. And the country with the most influence in the region, China, is still going strong—despite a regulatory crackdown.
The country controls 65% of Bitcoin’s hashrate (a measure of how much computing power is used to mine Bitcoin). For a country whose government is hardly “Bitcoin friendly,” its combined hashrate dwarfs big market players such as the US (7.24%), Russia (6.9%) and Venezuela (0.43%).
In fact, the biggest cryptocurrency in China is stablecoin Tether—which drives the East Asian market.
Messari’s report also says that more than any other country in Asia, Hong Kong has more institutional investors who know how traditional investment instruments work.
While South Korea has the highest penetration of crypto investors, with a third of workers saying they invest in crypto.
On Jan. 10, leading pro-EOS YouTuber Colin Talks Crypto announced he had sold all his holdings following the revelation earlier that day that Dan Larimer had resigned his position as CTO of Block.one, the company that made the software powering the EOS blockchain.
In fact, Larimer has been gone since the end of the year.
To be fair, Block.one never really promised to do more than provide the underlying software for EOS, and it has continued to do so.
In fact, as EOS has become clogged in recent years, Block.one has released a new way for users to pay for transactions as they go (rather than the original approach of staking EOS for a percentage of network resources), which sounds a lot like Ethereum’s approach with gas.
Winding back the clock, Block.one launched EOS in a unique way, probably the most hands-off approach of any significant blockchain since Bitcoin. It wrote the code for the software that runs EOS and then it just published it, so that anyone who wanted to kick it off could do so.
As it had given supporters considerable warning around doing this, though, by the time the code was released there was already a global coalition in place running hours-long calls over Google Hangouts to plot the launch of the chain so that one and only one would be viewed as the EOS blockchain.
This separation between the software’s originator and its administration may help explain why Block.one got off with a light settlement from the U.S. Securities and Exchange Commission. Once through that regulatory gauntlet, Block.one has been free to pursue its own ideas about the best use of its considerable capital.
Early EOS backers have always believed that ICO funds entrusted to Block.one would be used to drive value back to the blockchain in order to make EOS tokens more valuable. That has never really happened, however, which has driven frustration by longtime EOS backers.
Many, like Colin Talks Crypto, have moved on.
While Larimer has been plotting his move away from Block.one, its CEO, Brendan Blumer, has been talking more and more about bitcoin alongside a pro-regulatory vision for blockchain technology.
In October, Blumer gave an interview to a Forbes contributor, in which he said, “Block.one is a holding company, and see different business emerging but technology projects take a long time.”
🗞 Daily Crypto Calendar, January, 20th💰
- Firo (FIRO)
“Binance Will Update the Ticker of XZC to FIRO… At 2021/01/20 00:00 AM (UTC), Binance will suspend XZC staking purchases. All XZC…”
- Linear (LINA)
“… Rewards have been distributed, please claim these rewards via buildr.linear.finance at your earliest convivence.”
- Wabi (WABI)
Wabi founders answering your questions and sharing news, announcements in Wabi Telegram group.
- Efforce (WOZX)
“We will start collecting some of the topics our community wants us to talk about during the first streaming event on the 20th of Jan.”
- Blockstack (STX)
“China: Stacks 2.0 Launch Event,” from 2 PM to 3 PM.
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