In recent days, in the cryptocurrency market, Ethereum (ETH) has sprung up and has performed even better for other cryptocurrencies. According to CoinGecko data at the time of writing, the price of ETH has reached $2,917, a 24-hour increase of 2.5%. The daily increase reached 31.9%, more than twice the 7-day increase (13.2%) of Bitcoin. When there is explosive growth in the decentralized financial market in 2020, the price of Ethereum does not seem to have risen much, and Bitcoin still has a dominant position in the cryptocurrency market. If this trend does not change, decentralized financial contracts. The total value of locked positions in China may slow down in recent months. But just after the Bitcoin and Ethereum markets experienced a certain degree of liquidity shock in early April, the microstructure of these two significant markets was more or less affected. The market depth has been compared to the average level of a few weeks ago. There has been a decline, both in total trading volume and on every significant spot cryptocurrency exchange. As always, the microstructure performance of the cryptocurrency market is instructive, and it also allows us to understand the medium-term risks better and make a better balance. The latest data analysis shows that the liquidity shocks in the Ethereum and Bitcoin spot markets mainly originated in the derivatives market and led to the emergence of large-scale liquidation. We have reason to believe that the liquidity balance of Ethereum and Bitcoin is the same: hedge funds and other speculative investors lend to small institutions and retail participants through cash/futures basic positions. However, analyze CME Group's futures positions according to the type of investors. You will find that the analysis results are consistent with the conclusion that Ethereum's liquidity can recover more quickly because leveraged funds are mainly short positions. In contrast, retail investors and small and medium-sized institutional investors choose long. After the Bitcoin and Ethereum derivatives market began to deleverage, compared with Bitcoin, the recovery of the spot price of Ethereum is better and more elastic. The market depth seems to have a faster recovery speed, and some exchanges The liquidity situation is even better than at the beginning of the month. What is the reason for this? The first thing to understand is that the overall size of each futures market is consistent with the relative changes in net liquidation: for Bitcoin, compared to the ex-ante level, open positions have dropped by 26%, and net liquidation has dropped. For Ethereum, the liquidation position has fallen by less than 4%, and the net liquidation has fallen by 17% compared to the previous level. In addition, some cryptocurrency exchanges' Ethereum futures holdings are higher than the level before the liquidity shock at the beginning of this month. However, Bitcoin futures holdings are still falling across the board. This shows that the Ethereum futures market can better find the liquidation demand side, reducing the impact on the spot price and recovering liquidity more quickly. Second, the "foundations" of the two public chains of Ethereum and Bitcoin are also different, and the clearing mechanism is therefore different. Compared with Bitcoin, the Ethereum network pays more attention to "transactions." This is because Ethereum provides support for decentralization and other transaction types. The number of these transactions is also increasing, resulting in the flow of ETH tokens. The liquidity is higher than that of BTC. In this case, Ethereum is less affected by the decrease in open positions in futures. Its performance is even better than those of crypto tokens that are often in circulation. In addition, Bitcoin seems to be more susceptible to futures trading. For example, a week ago, the total net long liquidation of Bitcoin accounted for 23% of the ex-ante open interest (ex-ante open interest). The total long liquidation accounted for 17% of the prior open positions. The high-frequency cash/future base price shows that the Ethereum market has not been significantly affected, although the net liquidation amount is almost the same. Through the open position data, it is also found that Ethereum futures trading is easier to find market demand. In this context, the dramatic recovery of the Ethereum market depth has attracted more attention. Most importantly, there are fundamental differences in the narratives of the two cryptocurrencies, Ethereum and Bitcoin. Bitcoin is more like an encrypted commodity, which competes with gold and is a store of value. At the same time, Ethereum is the backbone of the encrypted native economy and is more regarded as a medium of exchange. Therefore, in a sense, the potential value of Ethereum is more excellent. In the long run, it should surpass Bitcoin, and there will be more room for development. to sum up When the most severe stress, the cash/future prices of these two mainstream cryptocurrencies both fell sharply, the current price level of the ETH/BTC trading pair is still lower than the peak value in 2017/2018, which is roughly equivalent to the "peak price" About 30% of ETH. Still, this decline has a much smaller impact on ETH. Moreover, the current transaction volume on the Ethereum blockchain is getting higher and higher. The significantly higher part of the ETH token transaction volume can be considered highly liquid, which further weakens the influence of futures settlement on ETH. In addition, the price difference of similar contracts between significant cryptocurrency exchanges has also decreased. It has maintained a certain degree of convergence for most of the past week, which indicates that arbitrage opportunities have decreased. Conversely, it also shows that after the initial market price shock, Ethereum's overall market performance is also better (the recovery status of Ethereum's network computing power is also better). There is now at least evidence that ETH is more flexible in liquidity, less dependent on transfer risks and "storage" risks in the derivatives market, and can better respond to changes in market demand. In other words, compared to Bitcoin, the valuation of Ethereum is less dependent on the demand for leverage. Following further breakthroughs in blockchain technology and the continued growth of decentralized finance and other components of the Ethereum ecological economy, Ethereum should have more room for development relative to Bitcoin.
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