Qume Market Mondays- 11 May 2020

Welcome to another edition of Qume Market Mondays!

Only a few hours left for the next bitcoin halving — With the bitcoin block reward slashed to 6.25, it will likely affect both the price and the bitcoin hash rate.
While the hash rate has continued to mark new highs these last few months with miners going all out to mine bitcoins before the halving, in the short run, the hash rate will go down, as low-level mining farms, running predated mining hardware will be forced to shut shop.
The impact of halving on price is highly uncertain, while the sell side pressure will surge up in the short term and is likely to bring down the price, the supply being reduced in half will drive the price up in the long term.

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In terms of pre-halving price movements, the last couple of months have been a roller coaster ride for traders. BTC/USD pair went from $10,000 in February to $3,600 in early March but even amid the COVID-19 outbreak and its disastrous impact on the world’s economy, BTC rebounded to $10,000 price levels quickly.

There was a slew of sell liquidations yesterday as the pre-halving hype backfired, bringing bitcoin’s price down by almost $2,000 — Hourly liquidations on BitMEX spiked up to $226M. With only a few hours left for the halving, we can see a major upward price movement if FOMO spreads.

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It is yet another opportunity to remind users that Qume’s fair index pricing prevents unnecessary liquidations in volatile markets.

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Volatility Indices

Bitcoin 30-volatility index is at around 3.1%.

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Derivatives Markets

Volume across major exchanges has been consistently high for the last two weeks as expected. It will be interesting to see the impact on derivatives trading volumes post-halving.

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Currently Huobi, Binance and OKEx are dominating the derivative markets with BitMEX lagging far behind — Huobi now accounts for 50% more daily trading volume than BitMEX. The liquidity on BitMEX for 10mln has almost halved and is now at 75 bps.

This further reinforces the argument that the derivatives space will not be a winner take all market.

With the halving coming up, open interest is increasing by the day across derivatives exchanges and business is good even with an ongoing global crisis.

Yesterday’s events had a major impact on liquidity across major exchanges, with some registering a spread as high as 14.08% up from the usual 3–4% levels.

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Open interest on Deribit options spiked up over this week, and were just short $1bn, registering $954M aggregated open interest on 8 May 2020.

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Long June 20 options seen to be winning as of now, as bullish expectations continue to mount.

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Data Sourced from www.skew.com

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