Bitcoin Makes a Positive Difficulty Adjustment Hat-Trick Ensuring its Co-Integration with S2F


  • Bitcoin moves above the S2F model value
  • Bitcoin options market seeing “explosion in interest,” from both retail traders and institutional players
  • Open interest in global bitcoin futures increase of 60% in 2020 & BitMEX’s crosses $1 billion
  • “Network is getting stronger,” and next adjustment just like the past three will also be positive

Bitcoin price remains strong as it stays above $9,000 with volume also hovering around $1 billion.

With just 3 months left in the bitcoin reward halving, the market is excited about what this event will bring in for BTC in terms of price. While some remain skeptical about a potential move up, Google search for the term “Bitcoin halving” has been gaining traction since the start of this year.

Already, Bitcoin is above the S2F model value, which sees the price somewhere between $50k to $100k by 2021 end.

Options Market Seeing Lots of Action

In the meantime, Bitcoin options market seeing “explosion in interest,” from both retail traders and institutional players. In the past year, options market volume increased steadily with Deribit continuing to rule the market.

On Jan. 13, 2020, CME launched bitcoin options contracts to rival the products at Bakkt and LedgerX but outpaced its competitors.

Bitcoin options trading volume

Open interest on BitMEX Jumps above $1 Billion

Open interest in global bitcoin futures is also registering a similar explosion, recording an increase of 60% since the start of the year and surpassing $4 billion.

OI, in margin trading, is the total sum of long and short contracts open in the market. Whenever OI reached $1 billion on the popular crypto derivatives platform, BitMEX, the market tends to see extreme volatility.

For the past several days, it has been over $1 billion, which typically happens after an extended rally. However, it also leads to a drop.

“Current Bitmex Open Interest is $1.03B & 111k BTC. $1B OI has always been the barrier. I expect fireworks to start soon (cascading margin calls). I wouldn't buy here unless we get a clean break above the previous resistance. Stay safe,” said trader CryptoSqueeze.

BitMEX has also recorded $2 trillion since its launch shared BitMEX CEO Arthur Hayes on Twitter.

“The XBTUSD swap just crossed $2 Trillion in total volume traded since it launched in 2016. I’ll drink to that!,” he wrote.

Meanwhile, Network Getting Stronger

Moving onto the fundamentals, the USD volumes processed on the Bitcoin blockchain recorded its highest level since the 2017 bull run at $3.5 billion.

However, about half of these volumes were because of a single exchange. Bitfinex was responsible for $1.7 billion of it, which was done in parts to reorganize their finances as Paulo Ardoino, CTO of the crypto exchange Bitfinex and Tether shared with the community.

Another positive development has been in difficulty adjustment. Popular analyst PlanB notes that the last difficulty adjustment on Jan. 29 of 4.7% was the third positive adjustment of the year after +6.6% on Jan. 2 and +4.7% on Jan. 16.

Difficulty adjustments are made in relation to the hash rate. They are trying to keep with a lot of hash power being added by miners to the network as seen in the regular all-time highs (ATH) made by hash rate.

“Network is getting stronger,” said PlanB adding, “Next adjustment will also be positive.”

“Without this level of security bitcoin price would not be cointegrated with stock to flow. This level of security is needed to protect bitcoin against state level attacks, which is needed because states will destroy our money (Zimbabwe, Venezuela, US/EUR/JPN: QE & NIRP),” explained PlanB about Bitcoin needing this extra security.

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