Sebastian Sinclair

Bitcoin’s (<a href="https://blockworks.co/price/btc">BTC</a>) market moves this week pushed the asset into fresh local highs as the world’s largest digital asset further cemented its lead against other major blue-chip cryptos.



The asset rose above $30,000 early Monday morning before driving higher, blowing past several resistance levels not seen since the collapse of <a href="https://blockworks.co/tag/terra">Terra</a> in May of last year.



Bitcoin is now trading around $34,100, down slightly, after climbing more than 14% and reaching a peak of just over $35,100 in early Tuesday trading. The activity has sent the asset’s dominance, or total share of the market, to a two-and-a-half-year high, of around 54%.



Aditya Jalan, trading manager for APAC at FalconX told Blockworks BTC’s dominance was lining up with trading activity from institutional investors who have been “strongly skewed” toward buying BTC over ETH in the last week.



“Without a new and compelling narrative for ETH, we see no reason for this BTC dominance to dissipate in the near future,” Jalan said.&nbsp;



“We are also seeing institutions being constructive in BTC options markets with an increased appetite for upside structures in the $32,000-$36,000 strikes with one-month expiry.”



Bitcoin trading has witnessed heavy volatility, with roughly $1 billion in open interest evaporated over a 24-hour period. Total short liquidations for the bellwether asset have also risen to more than $216 million — the largest to date this year, <a href="https://twitter.com/coinglass_com/status/1716598271194665190?s=20">CoinGlass data</a> shows.



Le Shi, head of trading at Auros told Blockworks “several interplaying factors” are contributing to the heady price action, including last week’s false ETF news which flushed an initial <a href="https://blockworks.co/news/bitcoin-etf-report-price-jump">$100 million</a> worth of shorts.



“Despite being inaccurate, the tweet <a href="https://blockworks.co/news/blackrock-ishares-bitcoin-etf">re-invigorated interest in the ETF approval narrative</a>, which together with the price action as mentioned earlier, helped propel bullish bets towards $30,000.”



Shi said he also believed the market received an “indirect boost” later in the week when the SEC <a href="https://blockworks.co/news/sec-drops-dismisses-garlinghouse-case">moved to drop its lawsuit</a> against Ripple founders, further stoking speculation that the floodgates might soon open for regulated listings.



The bullish uplift followed a formalized win in the DC Circuit Court of Appeals for Grayscale Investments in its bid against the SEC to convert its bitcoin trust (GBTC) to an ETF on Monday.



While just a formality — in which the SEC will now have to mediate with Grayscale on a potential path forward — industry participants are growing increasingly optimistic about that outcome, Blockworks <a href="https://blockworks.co/news/grayscale-sec-gbtc-etf">previously reported</a>.



<hr class="wp-block-separator has-alpha-channel-opacity"/>



Get the news in your inbox. Explore Blockworks newsletters:



<ul class="wp-block-list">
<li><a href="https://blockworks.co/newsletter/the-breakdown">The Breakdown</a>: Decoding crypto and the markets. Daily.</li>



<li><a href="https://blockworks.co/newsletter/0xresearch">0xResearch</a>: Alpha in your inbox. Think like an analyst. </li>
</ul>

Bitcoin

Bitcoin dominance rises to 2.5-year high as price pierces $35K

The value of all crypto in circulation has been consolidating following Friday&#8217;s nudge higher to levels not seen since around the time failed algorithmic stablecoin project Terra collapsed in May 2022.



Total market capitalization reached a peak of $1.26 trillion, retracing slightly to $1.23 trillion as of Monday. That’s the highest point since last June, in the aftermath of a harrowing month for the crypto market which witnessed <a href="https://blockworks.co/tag/terra">the fall of Terra’s digital assets ecosystem</a>.



<figure class="wp-block-embed is-type-wp-embed is-provider-flourish wp-block-embed-flourish"><div class="wp-block-embed__wrapper">
<iframe loading="lazy" class="wp-embedded-content" sandbox="allow-scripts" security="restricted" title="Interactive or visual content" src="https://flo.uri.sh/visualisation/13439833/embed#?secret=pIloHPSGft" data-secret="pIloHPSGft" frameborder="0" scrolling="no" height="575" width="700"></iframe>
</div></figure>



“Although the sector is currently not large enough to cause systemic risks, we must not forget about the collapse of Terra Luna, Celsius and FTX,” Keith Choy, Interim Head of the Intermediaries at Hong Kong’s SFC said in a keynote address during a Web3 conference last week. “Such failures underscore how critical it is to regulate this industry.”



The Terra crisis, brought about by a severe de-pegging of its <a href="https://blockworks.co/tag/terrausd">algorithmic stablecoin UST</a>, led to investor losses totaling more than $40 billion. It ended any aspirations for a quick market recovery following a 40% drawdown from the November 2021 peak when the price of bitcoin (<a href="https://blockworks.co/price/btc">BTC</a>) hit $69,000 and the total crypto market capitalization topped $2.9 trillion.



Terra&#8217;s fall precipitated a market cap breakdown from about $1.6 trillion to $800 billion over the course of a month. The collapse of other major firms later in 2022, culminating in the demise of FTX in November, forced the market to its lowest point in two years at $730 billion.



While a timeline for regulatory certainty remains hazy, at least in the US, other jurisdictions such as Hong Kong are attempting inroads to ensure the specter of 2022’s failings don’t cause investors further harm.



US investors in the bitcoin futures market are also demonstrating consistently positive bias, according to a report last week by investment management firm NYDIG.&nbsp;



The annualized rolling 1-month futures basis, which measures the difference between futures trading on the CME and spot bitcoin, has remained positive for US investors. It suggests US investors are more bullish on bitcoin compared to their international peers, the firm said.



The uplift in digital assets has also attracted larger allocations of capital to bitcoin, as its dominance — or total share of the crypto market — is now at its highest point since June of last year at 47%, but at a level which has been rejected on five prior occasions over the past 2 years.



<hr class="wp-block-separator has-alpha-channel-opacity"/>



Get the news in your inbox. Explore Blockworks newsletters:



<ul class="wp-block-list">
<li><a href="https://blockworks.co/newsletter/the-breakdown">The Breakdown</a>: Decoding crypto and the markets. Daily.</li>



<li><a href="https://blockworks.co/newsletter/0xresearch">0xResearch</a>: Alpha in your inbox. Think like an analyst. </li>
</ul>

bitcoin dominance

Crypto Market Has Returned to Post-Terra-Collapse Levels

David Canellis

<div id="highlights-block_62a1c10bb98e8" class="highlights">
 <ul>
 <li>Terra’s UST’s fate hasn’t deterred traders from experimenting with TRON-powered algorithmic stablecoin USDD</li>
 <li>Bitcoin dominance has risen 15% to almost half of the entire crypto market</li>
 </ul>
 
</div>



It’s been a month since Terra’s algorithmic stablecoin UST <a href="https://cms.blockworks.co/?s=Terra" target="_blank" rel="noreferrer noopener">de-pegged</a> from the US dollar. At the time, Terra’s native token LUNA and UST were the ninth and 10th largest cryptocurrencies by market capitalization — together valued at $42 billion. Both tokens have since evaporated almost entirely, begetting a major market shakeup.



Bitcoin dominance is on the rise and most cryptoassets are in decline, yet one exchange token has bucked the downtrend. While algorithmic stablecoins may not be completely dead, UST’s demise has changed the stablecoin landscape dramatically.



Tether (USDT) is still the largest stablecoin ($72.5 billion versus USD Coin’s $53.9 billion), but the past month was its most significant dollar-denominated reduction across its seven-year history. USDT’s supply is down 13% over the past month, the equivalent of nearly $11 billion, after big money traders flocked to redeem their tokens throughout May’s market chaos.



“The drop in USDT since the UST collapse is a reflection of the relative market confidence in its issuer Tether (based in the British Virgin Islands) compared to that of USDC (issued by the US-based Centre Consortium, founded by Circle and Coinbase),” Genesis Trading wrote in its May <a href="https://info.genesistrading.com/hubfs/monthly-reviews/2022/May-2022-Monthly-Report.pdf" target="_blank" rel="noreferrer noopener">report</a>.



Algorithmic stablecoins such as Magic Internet Money (MIM) and Frax are also significantly smaller. MIM’s total supply has shrunk 87% while Frax’s has fallen 43% — with $3.6 billion altogether leaving those two protocols.&nbsp;



MakerDAO’s DAI, while not strictly algorithmic, has given up 18% of its supply since UST de-pegged — even though it is <a href="https://daistats.com/#/" target="_blank" rel="noreferrer noopener">overcollateralized</a> on-chain by more than half. In fact, Circle’s USDC and Binance’s BUSD (issued by Paxos) are the only top 12 stablecoins not to lose market share following UST’s demise.&nbsp;



Clearly, market participants now favor asset-backed tokens — just not Tether (USDT). USDC has seen its circulating supply surge $5.4 billion, an 11% boost. BUSD grew by $555 million, about 3%.&nbsp;



But it seems some still trust algorithmic stablecoins. TRON’s Decentralized USD (USDD), launched by blockchain founder Justin Sun just days before UST crumbled, has attracted $491 million over the past month — a 230% increase in supply.



USDD holders have been able to lock their tokens inside lending platform JustLend for double-digit yield all month, a prospect which has been a <a href="https://cms.blockworks.co/every-top-cryptocurrency-is-down-except-justin-suns-tron/" target="_blank" rel="noreferrer noopener">boon</a> to TRX’s price. USDD’s market value is now $703 million, ranking it the 10th biggest stablecoin behind Waves’ Neutrino USD and ahead of Paxos’ gold-backed asset PAXG.



According to Genesis: “The jury is out on whether the UST collapse will turn out to be proof that algorithmic stablecoins are a flawed concept, or whether different design choices could be successful in the future.”



<blockquote class="wp-block-quote is-layout-flow wp-block-quote-is-layout-flow">“The event has highlighted the importance of understanding nuances in this space and that not all stablecoins are created equal.”</blockquote>



Still, the collective supply of the top 12 stablecoins at the time of UST’s de-pegging — not counting UST itself — is down by $9 billion.



<h3 class="wp-block-heading">Bitfinex’s LEO most resilient cryptoasset</h3>



According to price data reviewed by Blockworks, Bitfinex’s Unus Sud Leo (LEO) token was the best performing top 100 token (excluding stablecoins and wrapped tokens) by market value — the only token to increase in value over the month, albeit by half a percent.



Bitfinex raised $1 billion of USDT in 10 days with LEO’s private token sale in May 2019. The idea was to replace $850 million lost when the exchange’s embattled third-party payment processor Crypto Capital Corp was raided by authorities.



Bitfinex rebuys and burns LEO to reimburse investors who contributed to the sale, while regular Bitfinex users receive discounts on fees when holding LEO in their accounts. The company committed to eventually burning all one billion LEO tokens, of which it has already destroyed around 6.5% of the supply.



Crypto exchange tokens <a href="https://cms.blockworks.co/native-crypto-exchange-tokens-hint-at-first-sign-of-broader-market-recovery/">outperformed</a> much of the market in May. Many have burn mechanisms similar to LEO’s as a way to reward holders. KuCoin’s native token KCS has been the third-best top 100 crypto asset post-Terra, falling only 3.5%. But FTX’s FTT and Binance’s BNB weren’t so hot — both tanked 20%.



LEO’s price doubled earlier this year when US authorities revealed they <a href="https://cms.blockworks.co/couple-arrested-as-government-recovers-3-6b-in-stolen-bitcoin/" target="_blank" rel="noreferrer noopener">seized $3.5 billion in bitcoin</a> stolen from the exchange back in 2016. Bitfinex has said it will commit at least 80% of the recovered net funds to repurchase and burn LEO tokens within 18 months of the date of recovery.



A Bitfinex spokesperson told Blockworks LEO’s performance should be viewed as a measure of its customers’ confidence and trust in the platform.



<blockquote class="wp-block-quote is-layout-flow wp-block-quote-is-layout-flow">“We have also begun to see what may be a correlation between the performance of LEO, and the prospects of Bitfinex receiving the stolen bitcoin that was seized by the US authorities earlier this year,” they said.</blockquote>



Other top-100 tokens performing relatively well in Terra’s wake include TRX (down 3.5%) and monero (down 9%). Bitcoin came in at number five, falling 14% from nearly $35,500 to $30,400. BTC is currently range bound with no clear momentum.



Ether, on the other hand, sank 30% over the month — about average for the top 100. Bitcoin dominance rose almost 15% to now represent nearly half of the digital asset market, while ether dominance fell almost 9% to just under 18%.



On Wednesday, the second largest cryptoasset by market cap took an important step toward its planned Merge, as the Ethereum Ropsten testnet <a href="https://cms.blockworks.co/ethereum-ropsten-testnet-successfully-merged-to-proof-of-stake/" target="_blank" rel="noreferrer noopener">successfully transitioned</a> to proof-of-stake.



As for the losers: LUNA aside, the native digital asset for Terra-powered lending protocol Anchor was the worst hit, down 91%. Tokens for lending platform Convex Finance and privacy blockchain Secret Network collapsed 66% and 62% respectively, while move-to-earn project StepN fell 60%.&nbsp;



Alternative networks Oasis and Avalanche both drained by 55%, decentralized finance governance token Yearn lost 54% of its value, while metaverse project ApeCoin and layer-11 assets NEAR, MINA and solana all halved in price.



While crypto markets fell throughout April in the lead up to UST’s de-pegging, all digital assets are worth 20% less since the stablecoin went kaput, representing $336.6 billion in value lost.



<hr class="wp-block-separator has-alpha-channel-opacity"/>



Get the news in your inbox. Explore Blockworks newsletters:



<ul class="wp-block-list">
<li><a href="https://blockworks.co/newsletter/the-breakdown">The Breakdown</a>: Decoding crypto and the markets. Daily.</li>



<li><a href="https://blockworks.co/newsletter/0xresearch">0xResearch</a>: Alpha in your inbox. Think like an analyst. </li>
</ul>

algorithmic stablecoin

How Cryptoasset Markets Have Changed Since Terra Crash

Macauley Peterson

<div id="highlights-block_618916cd91000" class="highlights">
 <ul>
 <li>Bitcoin closed the week at a new weekly high, and is trading within $1,000 of its all-time intraday high</li>
 <li>Ether jumped above $4,700 for the first time in its history; ether burned since August upgrade exceeds 800,000 ETH</li>
 </ul>
 
</div>



The top two cryptocurrencies, bitcoin and ether, both registered strong gains early Monday, following bitcoin’s Sunday price close of $63,312 — a new record. Following the weekly close, BTC shot up 2.7% over the next hour, and continued as high as $66,426 before entering a consolidation. Ether followed suit, registering an all-time high of $4,735 six hours later, leading to a sharp jump in the total market cap of all digital assets — also at all-time highs. 



Market data site <a href="https://www.coingecko.com/en/global_charts" target="_blank" rel="noreferrer noopener">CoinGecko</a> currently registers the cryptoasset market cap at $3.01 trillion, although the stats provided by Binance&#8217;s <a href="https://coinmarketcap.com/" target="_blank" rel="noreferrer noopener">CoinMarketCap,</a> as well as <a href="https://www.tradingview.com/markets/cryptocurrencies/global-charts/" target="_blank" rel="noreferrer noopener">TradingView</a>, put the total market cap in the $2.84 to 2.87 trillion range.



Bitcoin’s dominance relative to the total digital asset universe spiked over 3% to just shy of 44%, and has set in a new daily higher-low, reversing a two-week-long downtrend which began the last time bitcoin’s price neared $67,000 on October 20.



<figure class="wp-block-image size-large"><img loading="lazy" decoding="async" width="1024" height="396" src="https://blockworks-co.imgix.net/wp-content/uploads/2021/11/Screenshot-2021-11-08-at-12.33.54-1024x396.png" alt="" class="wp-image-10691" srcset="https://blockworks-co.imgix.net/wp-content/uploads/2021/11/Screenshot-2021-11-08-at-12.33.54-1024x396.png?w=1024 1024w, https://blockworks-co.imgix.net/wp-content/uploads/2021/11/Screenshot-2021-11-08-at-12.33.54-1024x396.png?w=300 300w, https://blockworks-co.imgix.net/wp-content/uploads/2021/11/Screenshot-2021-11-08-at-12.33.54-1024x396.png?w=768 768w, https://blockworks-co.imgix.net/wp-content/uploads/2021/11/Screenshot-2021-11-08-at-12.33.54-1024x396.png?w=1536 1536w, https://blockworks-co.imgix.net/wp-content/uploads/2021/11/Screenshot-2021-11-08-at-12.33.54-1024x396.png?w=428 428w, https://blockworks-co.imgix.net/wp-content/uploads/2021/11/Screenshot-2021-11-08-at-12.33.54-1024x396.png?w=470 470w, https://blockworks-co.imgix.net/wp-content/uploads/2021/11/Screenshot-2021-11-08-at-12.33.54-1024x396.png?w=389 389w, https://blockworks-co.imgix.net/wp-content/uploads/2021/11/Screenshot-2021-11-08-at-12.33.54-1024x396.png?w=80 80w, https://blockworks-co.imgix.net/wp-content/uploads/2021/11/Screenshot-2021-11-08-at-12.33.54-1024x396.png?w=1830 1830w" sizes="auto, (max-width: 1024px) 100vw, 1024px" /><figcaption>Bitcoin dominance is far from its local peak even as price regains the $66,000 level; Source: TradingView BTC.D</figcaption></figure>



In the interim, open interest on exchanges has continued to rise while exchanges’ BTC reserves have been on a prolonged downtrend. That combination yields a record rise in the global leverage ratio — a measure of how much leverage traders are taking on — which often precedes an increase in market volatility. While volatility can come in either direction, global perpetual futures funding rates have remained relatively muted, therefore there is little sign the leverage is heavily weighted to the long-side. That’s generally bullish, as <a href="https://cms.blockworks.co/bitcoin-and-ether-lead-market-lower-in-washout-of-leverage/" target="_blank" rel="noreferrer noopener">we have seen</a> several sharp corrections induced by the over-exuberant use of leverage among bitcoin boosters.



<figure class="wp-block-image"><img decoding="async" src="https://lh5.googleusercontent.com/sbWTjYhaXOGxR3C0toDf8peyvcTpgZh42wklOlsu4Le6ryFUeKCAoiwh-4_hlNzjD0Mpgbaij5qXT-3uPH_cWODNfI9q9l7nH0Tq9UfzX3nF5M85w9QYuf7aLE-CXb23oimji1CC" alt=""/><figcaption>Source: krowntrading.net</figcaption></figure>



Other healthy fundamental metrics are the bitcoin balance on exchanges, which has fallen to 2.3 million BTC — a multi-month low. Trending exchange outflows is historically indicative of long-term accumulation, as traders moving bitcoin off exchanges do not intend to sell. In the same timeframe, the Bitcoin network hashrate has been on a steady rise since the <a href="https://cms.blockworks.co/china-mining-exodus-seen-as-positive-for-bitcoin/">China mining shakeup</a> earlier this year.



<figure class="wp-block-image"><img decoding="async" src="https://lh6.googleusercontent.com/FsoW55unX4pOfVIuvcl2RQgRtwZfWBkTStoKvTITIkZDPfn-F05leRopTpY8cju7SddSUKeCrd2a3_6qTprk2yV86LMjF29CuRFpYfn2ov31pUtILyTwi90i2vb5nPK4oouUj1M4" alt=""/><figcaption>Source: krowntrading.net</figcaption></figure>



<h3 class="wp-block-heading">Ether trend continuing</h3>



Since finding a local bottom at about $2,750 at the end of September, ether has been on a tear, up over 70% with only modest healthy corrections to its daily 21-period moving average.



According to <a href="https://watchtheburn.com/">WatchTheBurn.com</a>, which tracks ether burned as a result of transaction activity on the network, today Ethereum surpassed 800,000 ETH burned — almost $3.8 billion at today’s prices — since its <a href="https://cms.blockworks.co/eip-1559-is-live-thanks-to-ethereums-london-hard-fork/">‘London’ upgrade in August</a>. That has significantly reduced the net issuance of ether and is widely seen as a major catalyst for the commodity’s move higher.



Ethereum 2.0, the proof-of-stake version of Ethereum known as the Beacon Chain, completed its <a href="https://ethereum.org/cs/history/">first major upgrade</a>, dubbed Altair, on October 27, which sets the stage for a historic merge with the Ethereum mainnet, slated for the second quarter of 2022.



<h3 class="wp-block-heading">US Markets</h3>



US stock market futures point to a flat open in New York, with both the S&amp;P and Nasdaq futures near their Friday closing prices. Market-watchers are eagerly anticipating the open of S&amp;P component Tesla (TSLA) following Elon Musk’s latest Twitter antics, in which he launched a public poll over whether he should sell 10% of his Tesla holdings. A majority of 3.5 million voters told the world’s richest person — who&#8217;s currently calling himself &#8220;Lorde Edge&#8221; on Twitter — to jettison the stake.



<figure class="wp-block-embed is-type-rich is-provider-twitter wp-block-embed-twitter"><div class="wp-block-embed__wrapper">
<blockquote class="twitter-tweet" data-width="550" data-dnt="true">Much is made lately of unrealized gains being a means of tax avoidance, so I propose selling 10% of my Tesla stock. Do you support this?&mdash; Elon Musk (@elonmusk) <a href="https://twitter.com/elonmusk/status/1457064697782489088?ref_src=twsrc%5Etfw">November 6, 2021</a></blockquote><script async src="https://platform.twitter.com/widgets.js" charset="utf-8"></script>
</div></figure>

bitcoin dominance

Newsletter

Blockworks Research