THE WEEKLY UPDATE Week 5, 2022 - Free subscriber edition - Arcane Research
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THE WEEKLY
THE WEEKLY UPDATE
UPDATE
Free subscriber edition
Week 5, 2022
Feb 8, 2022
Sponsored by
THE NEWSROOM
KPMG Canada is Adding Bitcoin and Jump Trading Backstops Wormhole’s Texas Crypto Miners Shuttering
Ether to its Balance Sheet as Crypto $320M Exploit Loss Operations as Winter Storm
Moves Further Towards the Approaches
Mainstream
The miners, many of whom flocked to the state in
After one of the most devastating exploits in crypto recent months to take advantage of Texas’s low
The allocation of the two largest cryptos by history, the parent company for a popular cross-
valuation underscores the firm's view of how the energy costs, say they will reduce their energy
blockchain bridge has reportedly stepped in to consumption to help avoid a power failure similar
emerging technology and blockchain will backstop funds – a move that may have prevented
eventually become a regular part of the asset mix, to the one Texas experienced in 2021. That outage
widespread damage in the Solana decentralized left about 4.5 million homes and businesses without
Benjie Thomas, advisory services managing finance (DeFi) ecosystem.
partner at KPMG in Canada, said in a statement. power and led to nearly $200 billion in property
damage.
Feb 8, 2022 2
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Binance traders expecting downside?
The long/short ratio at Binance suggests that a majority of the Binance accounts Binance: BTCUSDT Perp vs Long/Short Ratio
are net short at the moment.
$70,000 BTCUSD Long Short Ratio BTCUSDT Binance 6
The long/short ratio illustrates the proportion of net long and net short accounts
to total accounts with positions. Each account is only counted once. A long
$65,000
account is defined as an account with net long exposure and vice versa.
5
The open interest in these markets is always net neutral. However, it is interesting $60,000
to understand the current consensus trade to reflect on its implications in the
leveraged market.
$55,000
Currently, the long-short ratio in the most popular bitcoin derivative, the 4
stablecoin collateralized perp on Binance, is sitting near all-time lows at 0.743,
meaning that a majority of the accounts with exposure in the perp is currently net $50,000
Long/Short Ratio
short.
BTCUSD
$45,000 3
Leverage in the market remains high. The open interest in the BTCUSDT perp on
Binance is sitting near all-time highs when denominated in BTC.
$40,000
Before last summer's short squeeze, the long/short ratio sat below 1. Sentiment
remained muted until the October rally, when the ratio began to surge towards 2
the long side. $35,000
Interestingly, as highlighted in the chart, before the April 18th, May 19th, $30,000
November 26th, December 4th, and January 5th sell-offs, the long-short ratio 1
surged above 4. By monitoring the long/short ratio, you may get opportunities to
de-risk ahead of turmoil. $25,000
The long/short ratio at Bybit also hints that a majority of the Bybit accounts are
net short. This, alongside the futures basis and funding rate, suggests that the $20,000 0
sentiment among derivatives traders remains bearish at the moment. The crowd Jan 21 Apr 21 Jul 21 Oct 21 Jan 22
at Binance and Bybit have been wrong numerous times before. Will this time be
different? Source: Coinalyze
Feb 8, 2022 3
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Bitcoin fell when FB released weak Q4 report. Why?
Last Wednesday, Meta Platforms (FB) released a weak Q4 report.
February 2nd – 5th: BTC vs NASDAQ
Disappointed traders sent the FB stock down 23%, making Nasdaq
decrease 1.9%. Why did the bitcoin price also fall?
BTC NASDAQ*
8%
Nasdaq primarily consists of tech and many growth companies that react poorly to
macro fears, mainly interest rate hikes. From a price action perspective, bitcoin has 7%
proven to fit in the same category, being inversely correlated to future interest rates
expectations (next slide). 6%
5%
During the latest years, we have seen a "macroization" of the markets, in which
most asset prices have become increasingly correlated to central banks' monetary 4%
policies. It also seems that the further out an asset is on the risk curve - the more
macro decisions will affect the asset's price. 3%
2% FB released weak Q4 report
Both bitcoin and Nasdaq are relatively far out on the risk curve, making them
vulnerable to macro fears. These assets should be correlated since the same macro 1%
mechanisms drive their prices. As we all know, correlation doesn't imply causation,
so bitcoin can be correlated with Nasdaq without Nasdaq causing its price 0%
movements. -1.9%
-1%
-2%
Naïvely believing bitcoin to follow the Nasdaq, some algo traders might have
programmed their algorithms to sell bitcoin in case of a significant Nasdaq decline. -3%
It seems that these trading decisions made the Nasdaq-Bitcoin cause-effect -2.1%
relationship a self-fulfilling prophecy on Wednesday. -4%
-5%
In the following days, the bitcoin price rallied, which might be caused by bitcoin
traders finally realizing that FB's poor performance shouldn't impact Bitcoin since -6%
nothing fundamentally changed in the macro picture, nor in Bitcoin.
-7%
2 Feb 3 Feb 4 Feb 5 Feb
After this incident, has the market finally learned that company-specific events
shouldn't impact bitcoin's price? Source: Tradingview, Coinbase, CME * CME’s NASDAQ Mini Futures (NQ1!)
Feb 8, 2022 4Sponsored by
Gold-backed tokens are growing faster than the overall crypto market
Gold-Backed Tokens: Market Cap
Commodity-backed tokens are growing in popularity. So far, primarily $800m
gold-backed tokens have attracted investment, but other commodities
may soon follow.
$700m
Just like stablecoins track the price of a currency, commodity-backed tokens follow
the price of a commodity. The physical commodity should fully back them to track
the price. $600m
So far, the only commodity-backed tokens gaining traction are the gold tokens
Tether Gold (XAUT) and PAX Gold (PAXG). XAUT has a market cap of $409M, while $500m
PAXG has a market cap of $358M.
Tokenized gold vastly improves gold's liquidity by enabling investors to own $400m
fractionalized parts of physical gold bars. Tokenized gold is different from gold ETFs
since, with tokenized gold, investors own specific parts of an allocated physical gold
bar. The tokens are also instantly redeemable for physical gold. $300m
Several projects have tried creating tokens backed by other commodities than gold,
such as silver or palladium, but have met various obstacles along the way. $200m
The Russian nickel and palladium giant Nornickel just got approval from the Central
Bank of Russia to issue commodity-backed tokens through its subsidiary Atomyze. $100m
It will be interesting to see how that plays out.
$0m
The gold-backed token market has increased by 360% since the beginning of 2021, Jan 21 Mar 21 May 21 Jul 21 Sep 21 Nov 21 Jan 22
while the overall crypto market has grown 150%. Will the gold-backed tokens' rapid
growth continue into 2022? Combined PAX Gold Tether Gold
Source: CoinGecko
Feb 8, 2022 5Sponsored by
Public capacity on the Lightning Network plateauing
Lightning Network: BTC Capacity (Public Channels)
₿ 3,500
After having seen massive growth throughout most of 2021, the BTC
capacity on the Lightning Network has plateaued at 3000 BTC, but a slight
growth has been seen in the last week.
₿ 3,000
The public capacity of the Lightning Network currently sits at 3418 BTC, up
from 1066 BTC one year ago.
However, the Lightning Network growth rate has plateaued in the last three
months, after having seen a very strong growth rate up until November. ₿ 2,500
This is not surprising. The Lightning growth rate coincided with the launch of
BTC as legal tender in El Salvador, as entities prepared for what was to come.
₿ 2,000
Later on, Twitter announced lightning integration for their tipping service,
further expanding the Lightning use case.
₿ 1,500
Since it has been relatively quiet in terms of Lightning-related news. However,
yesterday mobile payments platform CashApp announced Lightning
integrations, which could spark a new growth face for the 2nd layer Bitcoin
solution.
₿ 1,000
Feb 21 Mar 21 Apr 21 May 21 Jun 21 Jul 21 Aug 21 Sep 21 Oct 21 Nov 21 Dec 21 Jan 22 Feb 22
Source: BitcoinVisuals
Feb 8, 2022 6Sponsored by
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