While the main cryptocurrencies continue to trade virtually unchanged on yesterday, there are indications in the market that things may get more interesting, as open interest in BTC perpetuals – contracts that do not have expiry or settlement date – hits a record high.
The latest weekly report from Arcane Research states: “The ‘boring’ market over the last month seems to have attracted traders back to leverage. The aggregated BTC denominated open interest in the BTC perpetuals has climbed back above the November highs, with the BTC denominated open interest currently sitting at 258,000 BTC.”
“With the accumulated leverage recently, accompanied by the reduced volatility in the market and strong consolidation, the market seems ripe for a move. The neutral to slightly below neutral funding rates seen recently suggest that a short squeeze is a plausible scenario, but beware, longs may bleed if we see a push below the current tight consolidation range,” an Arcane analyst wrote.
Institutional adoption barriers
Last year marked a milestone for the adoption of BTC by institutional investors but there are still barriers. A survey conducted by Nickel Digital Asset Managment found that security issues remain the biggest concern for 79% of the institutional investors and wealth managers who took part. This was followed by price volatility (67%), market cap (56%) and regulatory environment (49%). Further, 12% of respondents cited the carbon footprint from bitcoin and other cryptocurrencies in their top three reasons for not investing.
Meanwhile, BTC’s market dominance dropped to 39.5% on Tuesday, the lowest level seen in almost three years.
Chart of the day: BTC dominance at three-year low
Following bitcoin’s recent underperformance, its dominance hit a three-year low – Credit: TradingView
Other crypto news:
- The Bank of Jamaica deemed its central bank digital currency pilot a success with plans for a rollout in the first quarter. “Bank of Jamaica is pleased to announce that it has successfully completed the CBDC pilot, the central bank said in a statement. “National Commercial Bank [NCB], the first wallet provider in the pilot, successfully onboarded 57 customers which included 4 small merchants and 53 consumers. These customers conducted person-to person, cash-in and cash-out transactions through 37 accounts and completed transactions with small merchants (local craft jewellers, footwear designers and fashion and garment boutiques) through an NCB-sponsored event.”
Quote of the day:
Former hedge fund manager Mike Novogratz has displayed a whole new level of conviction by having a tribute to LUNA coin tattooed on his arm. In September, when LUNA was trading at $33, Novogratz wrote on Twitter: “I will get a $LUNA Tattoo at $100.” LUNA is currently trading at $86.58.
Round-up of coins by market capitalisation
As of 11:00 GMT:
- Bitcoin (BTC) was flat, adding 0.3% to $46,734.44
- Ether (ETH) added 1.02% to $3,826.76
- Binance coin (BNB) was unchanged, climbing 0.26% to $514.41
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The difference between trading assets and CFDs
The main difference between CFD trading and trading assets, such as commodities and stocks, is that you don’t own the underlying asset when you trade on a CFD.
You can still benefit if the market moves in your favour, or make a loss if it moves against you. However, with traditional trading you enter a contract to exchange the legal ownership of the individual shares or the commodities for money, and you own this until you sell it again.
CFDs are leveraged products, which means that you only need to deposit a percentage of the full value of the CFD trade in order to open a position. But with traditional trading, you buy the assets for the full amount. In the UK, there is no stamp duty on CFD trading, but there is when you buy stocks, for example.
CFDs attract overnight costs to hold the trades (unless you use 1-1 leverage), which makes them more suited to short-term trading opportunities. Stocks and commodities are more normally bought and held for longer. You might also pay a broker commission or fees when buying and selling assets direct and you’d need somewhere to store them safely.
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