Crypto Market Deleverages, El Salvador Buys 420 BTC on Latest Dip, & Fiat Currencies Waiting on Central Banks’ Direction

Since hitting a new all-time high at $67,000 last week, Bitcoin has been taking a breather.

The leading cryptocurrency’s recent peak came as the first Bitcoin exchange-traded fund made its debut. Valkyrie Funds, which launched the second bitcoin futures ETF, also filed for a leveraged ETF that is not getting approved, according to a WSJ report.

The US Securities and Exchange Commission (SEC) has reportedly asked at least one asset manager to scrap plans for such a product, signaling its intention to limit new Bitcoin-related products.

And this week, Bitcoin’s price dropped as low as $58,000, but today, it went back to spiking, already above $61,100.

During this recent dip, El Salvador bought even more bitcoin, with President Nayib Buekle tweeting,

“It was a long wait, but worth it. We just bought the dip! 420 new Bitcoin.”

The latest Bitcoin purchase by the Central American country was worth nearly $25 million, adding to the government’s 150 BTC stash. Overall, El Salvador’s treasury holds 1,120 BTC, worth more than $68 million.

“Hahaha we’re already making a profit off the bitcoin we just bought,” quipped Bukele, who further shared that they have a trust fund account in USD but is funded by both USD and BTC.

“When the BTC part revalues in comparison to the accounting currency (USD), we are able to withdraw some USD and leave the trust with the same total.”

Proper Deleveraging

During this whirlwind of a week, the drop in prices resulted in just under $1 billion getting liquidated. Binance’s API no longer reports all liquidations, so this number is likely to be much higher.

The vast majority of these liquidations occurred within a 40 minute time period.

“While unfortunate for the poor souls who were liquidated, the market was in need of a proper deleveraging,” noted Delphi Digital, according to which the majority of the momentum built up from $60K onwards was almost entirely caused by leveraged traders.

“With not much demand to push BTC and ETH beyond their recent ATHs, it seemed the only way up was to drawdown first.”

Now that overleveraged late traders have been liquidated, the funding rate has also come down from its recent high a few days ago. Currently, the highest Bitcoin funding rate is on Bybit at 0.0445%, with the lowest on OKEx at -0.0031%.

During the latest sell-off, open interest on Binance and Huobi experienced a massive wipeout. OI on bitcoin futures is currently just under $24 bln, down from $26.47 bln on Oct. 20. On CME, OI has gone down to $4.69 bln, from $5.75 bln earlier this week, now sitting at second place.

Besides Bitcoin, the base layer token took the biggest hit, with SHIB being the outlier, which went to hit a new ATH at $0.00008616. DeFi token 1Inch also recorded overwhelming returns, followed by its listing on South Korea’s biggest exchange, Upbit, along with AAVE. SHIB -5.22% Shiba Inu / USD SHIBUSD $ 0.00
Volume 143.87 m Change $0.00 Open $0.00 Circulating 10 t Market Cap 5.12 b
11 mon ETHBTC Hits New 2021 High, Dogecoin and Ethereum Price Leading Google Trends in 2021 1 y Terra Stablecoin Supply Surges by $5B In Under A Month, Bitcoin in Macro’s Clutches, SHIB Added to Balance Sheet 1 y Twitter CEO & Bitcoiner Jack Dorsey is Out, Ethereum Is In
1INCH -4.29% 1inch Network / USD 1INCHUSD $ 0.48
Volume 31.23 m Change -$0.02 Open $0.48 Circulating 704.32 m Market Cap 337.57 m
11 mon BitMart to Compensate Victims of the $150 Million Hack Caused By A Stolen Private Key 1 y Twitter CEO & Bitcoiner Jack Dorsey is Out, Ethereum Is In 1 y Grayscale Adds Avalanche (AVAX) and Terra (LUNA) to its Investment Product Consideration List
AAVE -3.75% Aave / USD AAVEUSD $ 63.64
Volume 51.8 m Change -$2.39 Open $63.64 Circulating 14.09 m Market Cap 896.94 m
1 y Coinbase Enables its Over A Million Wallet Users to Use DeFi — DEXs, NFTs, & More 1 y Software Provider Temenos Enables Crypto Trading for Banks 1 y Aave Is Testing Private Pools for Institutions to Ape into DeFi, Reveals CEO Stani Kulechov

Monetary Policies

While digital currencies are having a wild week, in fiat currencies, the yen was also hampered by expectations that the Bank of Japan (BOJ) will signal a strong commitment to maintaining its easy monetary policy this week.

Meanwhile, the Australian dollar held firm on the back of a solid commodity market and a risk-on sentiment from upbeat U.S. economic data and upbeat corporate earnings.

“After the pandemic, the dollar became the ultimate safe-haven currency, but recently the yen's beta (sensitivity) to stock prices is becoming stronger than the dollar's,” said Shinichiro Kadota, senior FX strategist at Barclays.

The BOJ is widely expected to downgrade its economic assessment today. The European Central Bank will also be holding its policy meeting on Thursday. The ECB is expected to keep its policy unchanged and be slow in tightening it.

The Bank of Canada meanwhile said it would end quantitative easing and could raise its benchmark overnight interest rate sooner than it previously anticipated as policymakers try to ward off concerns about high inflation.

Amidst this, the USD Index has slightly dipped to 93.85, though up from 93.48 earlier in the week, it is down from a one-year high of 94.56 at the beginning of the month.

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