Market update — Nov 4, 2019

Bitcoin has been exceptionally volatile since our last report from Mid September. We have seen moves from 10200 to 7500 to 9400 making a total of $4600 move over a month and a half. Quite a reversal in volatility from September when we highlighted volatility compression. Daily moves are averaging 4%+ from 2.5% in Sep

We had mentioned Bakkt or other extraneous headlines (Libra for example) could return us to a higher volatility state and that is what transpired. Sep 23rd BTC made a large down move and spent most of October working and consolidating that move

In this move the ratio of top 100 wallets to total has declined which points to greater dispersion amongst wallets i.e a more systematic accumulation rather than just whale accumulation. This is usually bullish.

NVT signal has successfully climbed back up and the last time it showed this form of trajectory, BTC roared higher. We would be optimistic once again of this happening as the large up move from Oct 25th has been similar to blow-off bottoms and happened on high volume. We expect to see a move past $10k again within a week or two.

Moving on to the derivatives markets, the perpetual swap fundings as well as futures markets premiums have expanded. The Dec premium of futures to spot is nearly 8% annualized. This had fallen to negative in the move below $8000 and served as a great indicator of stretched pricing in the downside. The presence of such a premium indicates bullishness amongst the mkt participants.

Derivative market volume as mentioned before hit record numbers in the move up to nearly $20B on that day and has declined back to under $5B a day currently. Liquidity though has gotten tighter with Bitmex now at 46 bps width for $10M worth of BTC. During the rally predictably liquidity measures fell to nearly double of these numbers (i.e almost 1% wide for $10M USD size). This indicates liquidations via stop losses on Bitmex itself and could have been a driver for the violent move ($7500-$10200 over two days)

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