Market Overview
The Bitcoin market in July has been unusually calm and quiet for some time. Volatility continues to move lower and prices continue to squeeze into a narrow range of consolidation. Activity in spot, derivatives, and on-chain indicators all took on a low profile, making many people feel that this was the calm before the storm. Fittingly, the bitcoin market experienced a strong breakout, rising from a consolidation low of $29,479 to a high of $35,423 on Sunday. While this will be the next event to analyze in terms of timing, at the time of writing, the price of bitcoin has risen sharply against the backdrop of what appears to be a short roll, reaching a high of $38,677 on Monday morning. By reviewing derivatives and on-chain market data we can assess this short-rolling cue and establish a basis for market profitability.
Higher Short Rolling
As derivatives markets develop and mature, the interplay between spot and leveraged markets provides new dynamics to this market cycle that were not present in the past. Open positions in the options market give signals of market volatility. The open interest at strike price for the August 27th expiration (August 27th contract) shows a clear market preference for strike prices well outside of the current consolidation range. The most frequent strike prices on Deribit for the August 27th open interest are: $25,000 puts with 1,388 bitcoin open interest; $80,000 calls with 1,513 open positions in bitcoin.
Open interest in the perpetual futures market has remained largely flat over the past two months, with volumes ranging from roughly $10 billion to $12 billion since May. Over the past week however, open interest in perpetual futures climbed by an impressive $1.4 billion as prices rallied. Typically, an increase in open interest increases the probability of a volatile leverage tie-up.
Signs of Miner Recovery
A rapid recovery in hash rate may indicate that miners have successfully relocated offline miners or reconfigured their hardware, restoring costs and likely reducing the risk of miners’ vaults being liquidated and sold off.
A slow recovery in computing power could mean the opposite, that costs and outages continue to cause financial losses for miners, thus increasing the risk of miners selling off equipment.
As it stands now, hashrate has recovered from a peak drop of 55% to a drop of about 39%. If this level holds and is representative, this equates to about 29% of the affected computational power having come back online. This could either be Chinese miners that have repositioned mining hardware somewhere or miners deciding to reuse hardware that was previously obsolete.
On-chain Activity Remains Subdued
In direct contrast to the volatility in the spot and derivatives markets, trading volumes and on-chain activity remains subdued. Entity-adjusted bitcoin trading volume is at around $5 billion per day, according to 14-day median statistics. This is still a significant drop from the $16 billion a day seen prior to the May sell-off.
Despite this, volumes have not yet collapsed to the same extent as the 2017 crash. In 2017 there was a full retracement in network volumes, followed by an extended bear market and ultimately a prolonged capitulation. It remains to be seen if on-chain volumes start to pick up in response to the recent price volatility.
TITAN Delivery
TitanSwap focused on optimizing and sculpting the product for ease of use this month, including efforts on the C-side interaction of the third-party wallet. With hard work and continuous development over the last two months, the overall breadth and inclusiveness of the Titan project has improved significantly at a strategic level especially with the support of the BSC network. As connections between the BSC network and ETH platforms grow closer, so will links at the technical level. The deployment of swap logic strategy will be the core of Titan’s tasks in the next phase.
