The price of bitcoin headed towards bearish territory Sunday before bouncing. Ether’s average fees have dropped over the past seven days, creating a potential trading advantage for some.
- Bitcoin (BTC) trading around $54,076 as of 21:00 UTC (4 p.m. ET). Gaining 9.2% over the previous 24 hours.
- Bitcoin’s 24-hour range: $47,272-$54,340 (CoinDesk 20)
- BTC above the 10-hour but and 50-hour moving average on the hourly chart, a bullish signal for market technicians.
Bitcoin jumped Monday, reaching as high as $54,340. It was a powerful reversal after prices fell as low as $47,272 around 23:00 GMT (6 PM ET) Sunday.
The largest cryptocurrency was changing hands around $54,076 as of press time.
Bitcoin’s recovery may spark momentum, according to technical analyst Katie Stockton of the Fairlead Strategies consulting firm.
“The bounce should persist this week,” Stockton wrote in her “Cryptocurrency Compass” report on Monday. “But the recent loss of intermediate-term momentum suggests bitcoin will meet resistance below $62,000.”
Based on CoinDesk 20 data, bitcoin has only been able to close above $60,000 on seven days in the entirety of its 12-year existence. All of those have occurred in the past three months.
With the $60,000 price point being a level of “resistance” where some traders might start selling, Stockton sees $40,000 as the price level where investors will start scooping up what they perceive as cheap BTC.
“Support is near $42,000 as a gauge of downside risk within the long-term uptrend,” Stockton noted.
The news cycle is heavily dictating some of the price action in the crypto market, according to Michael Gord, chief executive officer of quantitative firm Global Digital Assets.
“I think we are seeing more regulations around digital assets implemented globally,” Gord said. “This might cause investors to take a more conservative wait-and-see approach and perhaps exit some positions to hedge the risk.”
There are a lot more eyeballs now on crypto. This may make some bitcoin traders more trigger-happy when it comes to the sell button.
In the derivatives market, funding rates had turned negative, generally seen as sign that traders aren’t hungry for long leverage. They are still near zero, according to data aggregator Skew.
Jason Lau, chief operating office of San Francisco-based exchange OKCoin, sees a lasting market recovery and further upside.“With leverage and derivative activity still coming off all-time highs – bitcoin futures open interest has declined over 30% from the peaks – a spot-led recovery might be setting up bitcoin for another leg up,” Lau told CoinDesk.
Ether fees drop, but at what cost?
Ether (ETH), the second-largest cryptocurrency by market capitalization, was up Monday, trading around $2,489 and climbing 9.7% in 24 hours as of 21:00 UTC (4:00 p.m. ET).
Over the past three months, the average fee paid on the Ethereum network to conduct transactions was approximately 0.0097 ETH. However, in the past week that average has dropped to 0.0079 ETH. It works out to an 18% reduction in the average cost of using the network, the primary ecosystem for decentralized finance (DeFi), consisting of programmable blockchain applications for trading, lending and derivatives.
Many might welcome this news, as often Ethereum network fees have been so expensive that DeFi applications are unusable and more expensive than centralized or traditional financial platforms.
However, Peter Chan, lead trader at quantitative firm OneBit Quant, says the fee improvement is a result of some traders building “bots,” or automatic systems, working directly with Ethereum miners. They have built a tool called MEV-geth that floods the network with transactions in the amount of 0 ETH in order to spot a preferential transaction sequence.
The dynamic appears to be resulting in an advantage for the traders.
“Basically, some of the bots decided to work with miners and there are immense amounts of zero-gas transactions mined,” Chan told CoinDesk. “The problem is that only whitelisted miners will be able to see these transactions, unlike where everyone can see in mempool.”
The mempool is the list of network transactions waiting to be processed and confirmed by the Ethereum miners.
“This black box creates asymmetric information tilted towards the miners,” Chan added. He suggested that people need to be cautious some more-advanced traders are getting information faster than others as a result of this cooperation with Ethereum miners. The bot uses a proof-of-work consensus mechanism similar to the Bitcoin blockchain’s.
The Ethereum 2.0 network upgrade on the horizon plans to switch from proof-of-work mining, which relies on solving cryptographic puzzles by computers to run, to proof-of-stake, which requires cryptocurrency balances to run.
“The best way to deal with this is to set a tighter slippage to protect your trade, especially if you are trading a niche token,” Chan said.
Digital assets on the CoinDesk 20 are all in the green Monday. Notable winners as of 21:00 UTC (4:00 p.m. ET):
- In Asia the Nikkei 225 index ended the day in the green 0.36% as travel stocks rose after airliner All Nippon Airways reported a better-than-expected forecast for 2021.
- The FTSE 100 in Europe closed up 0.35% as investors anticipate positive corporate earnings reports this week from the first quarter of 2021.
- In the United States, the S&P 500 index gained 0.20% as traders were optimistic about corporate earnings despite concerns about inflation and high commodity prices.
- Oil was down 0.34%. Price per barrel of West Texas Intermediate crude: $61.89.
- Gold was in the green 0.20% and at $1,780 as of press time.
- Silver is gaining, up 0.71% and changing hands at $26.17.
- The 10-year U.S. Treasury bond yield climbedMonday to 1.568 and in the green 0.35%.
Author: Daniel Cawrey