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Bitcoin's sharp downturn linked to futures liquidations: Bitfinex

Bitcoin's sharp downturn linked to futures liquidations: Bitfinex

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Bitcoin’s price has been heavily influenced by futures contract liquidations, leading to over $1.8 billion in liquidations amid geopolitical tensions. According to a report from Bitfinex, the market’s response may be more subdued this time, with the neutralization of funding rates and a decrease in open interest pointing towards a healthier market correction and potentially reduced volatility ahead.

As the Bitcoin halving approaches, miners are grappling with the potential need to shut down less efficient mining rigs due to reduced block rewards. While some believe that larger mining outfits will adapt and thrive, others predict a wave of consolidation and defaults across the space. Blockwork’s analysis revisits the financial history that has troubled Bitcoin miners and the current state of public mining companies, highlighting strategies to help them survive the halving.

Meanwhile, the Hong Kong Securities and Futures Commission (SFC) has approved Bitcoin and Ethereum spot exchange-traded funds (ETFs) for several prominent asset management companies. The approval marks a critical point for adoption, signaling the growing acceptance and legitimization of crypto as an asset class.

Today’s Newsletter

  • Bitcoin’s sharp downturn linked to futures liquidations: Bitfinex
  • Financial trouble for bitcoin miners: A look back, and ahead as the halving looms
  • Hong Kong SFC approves Bitcoin and Ethereum spot ETFs

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BITCOIN

Bitcoin’s sharp downturn linked to futures liquidations: Bitfinex

Bitcoin’s recent price crash, which saw the alpha crypto oscillate between $71,300 and $63,500, has been significantly influenced by futures contract liquidations, according to the “Bitfinex Alpha” report.

The market witnessed over $1.8 billion in liquidations amid geopolitical tensions, with a single day seeing liquidations comparable to those on March 5th, which brought significant volatility and a 14.5% intra-day price swing for Bitcoin. The concept of “time capitulation” is at play, where leveraged traders face capital erosion through stop-losses and liquidations, while large holders potentially engage in distribution or accumulation.

The introduction of new supply to the market is a critical factor, and if absorbed, it could propel Bitcoin out of its current range. The neutralization of funding rates, which are crucial in aligning the price of perpetual futures contracts with the actual spot market price, suggests a healthier market correction and potentially reduced volatility ahead.

In line with the reduction of leveraged positions, the overall market saw a significant decrease in open interest, with approximately $12.5 billion vanishing over three days, bringing the total cryptocurrency market’s open interest down to $35.4 billion from a peak of $48 billion just days prior. [cryptobriefing]

BITCOIN MINING

Financial trouble for bitcoin miners: A look back, and ahead as the halving looms

As the Bitcoin halving approaches, miners are expressing concerns about the potential need to shut down less efficient mining rigs due to reduced block rewards. The impending reduction in per-block mining rewards from 6.25 BTC to 3.125 BTC has led to worries about increased cost inefficiencies that may render smaller contributors unprofitable.

While some observers believe these fears are generally overblown, with larger mining outfits historically adapting and thriving amidst market fluctuations, others predict that the 2024 halving may lead to a wave of consolidation and defaults across the matured space.

Blockwork’s analysis examines the past financial troubles of miners, noting that the hardship across the mining sector during the 2022 crypto winter was primarily due to aggressive growth initiatives funded by substantial debt accumulation.

The current state of public mining companies is assessed, highlighting their hash cost, debt levels, and strategies to survive the halving. Despite the challenges, several companies remain confident in their ability to thrive post-halving due to their low-cost power contracts, energy efficiency strategies, and diversification efforts. [blockworks]

MARKETS

Hong Kong SFC approves Bitcoin and Ethereum spot ETFs

The Hong Kong Securities and Futures Commission (SFC) has approved Bitcoin and Ethereum spot exchange-traded funds (ETFs) for several prominent asset management companies, including China Asset Management (Hong Kong), Bosera Capital, and HashKey Capital Limited. This approval allows investors to directly use Bitcoin and Ethereum to subscribe for corresponding ETF shares, marking a significant milestone in the integration of traditional finance and the digital asset space.

China Asset Management (Hong Kong), an overseas subsidiary of China Asset Management, has received approval from the SFC to provide virtual asset management services to investors. The company has partnered with OSL Digital Securities Co., Ltd., a leading player in the virtual asset industry, and BOC International Prudential Trusteeship Ltd., a prominent custodian, to research and deploy strategies for offering these innovative investment products to their clients.

China Asset Management (Hong Kong) has a strong presence in the Hong Kong market, with a diversified range of products and a commitment to providing investment advisory services to individual and institutional investors across various regions. The approval of these spot ETFs demonstrates the increasing acceptance and legitimization of cryptocurrencies as an investable asset class and is expected to attract more institutional and retail investors to the market. [cryptobriefing]

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