Bitcoin's Market Structure, Correlation to Gold, and Miner Revenue Mix
JUN 17, 2021 • 3 Min Read
Disclosure: Members of our team may own positions in assets mentioned in this report. This statement is intended to disclose any conflict of interest and should not be misconstrued as a recommendation to purchase any token. This content is for informational purposes only and you should not make decisions based solely on it. This is not investment advice.
Metus vulputate eu scelerisque felis. Nulla facilisi cras fermentum odio eu. Scelerisque fermentum dui
faucibus in ornare quam viverra orci sagittis. A iaculis at erat pellentesque adipiscing commodo elit. In
fermentum et sollicitudin ac orci. Ultrices sagittis orci a scelerisque purus. Faucibus ornare
suspendisse sed nisi lacus sed viverra tellus in. Mauris cursus mattis molestie a iaculis at erat
pellentesque adipiscing. Volutpat diam ut venenatis tellus in metus vulputate. Eu consequat ac felis
donec et odio pellentesque. Eu mi bibendum neque egestas congue quisque egestas diam. Quam
lacus suspendisse faucibus interdum posuere lorem. Quam id leo in vitae. Ut faucibus pulvinar
elementum integer enim neque. Id ornare arcu odio ut sem nulla pharetra diam sit. Molestie ac feugiat
sed lectus vestibulum mattis. Ipsum nunc aliquet bibendum enim facilisis. Euismod nisi porta lorem
mollis aliquam ut porttitor.
Iaculis nunc sed augue lacus viverra vitae congue eu consequat. Gravida neque convallis a cras.
Nunc scelerisque viverra mauris in aliquam sem. Non odio euismod lacinia at quis risus sed vulputate
odio. Purus faucibus ornare suspendisse sed. Turpis egestas maecenas pharetra convallis posuere
morbi. Nec feugiat nisl pretium fusce id velit ut. Nunc congue nisi vitae suscipit tellus mauris a diam.
Posuere sollicitudin aliquam ultrices sagittis orci. Urna nec tincidunt praesent semper. Turpis nunc
eget lorem dolor sed viverra.
suspendisse sed nisi lacus sed viverra tellus in. Mauris cursus mattis molestie a iaculis at erat
pellentesque adipiscing. Volutpat diam ut venenatis tellus in metus vulputate. Eu consequat ac felis
donec et odio pellentesque. Eu mi bibendum neque egestas congue quisque egestas diam. Quam
lacus suspendisse faucibus interdum posuere lorem. Quam id leo in vitae. Ut faucibus pulvinar
elementum integer enim neque. Id ornare arcu odio ut sem nulla pharetra diam sit. Molestie ac feugiat
sed lectus vestibulum mattis. Ipsum nunc aliquet bibendum enim facilisis. Euismod nisi porta lorem
mollis aliquam ut porttitor.
Iaculis nunc sed augue lacus viverra vitae congue eu consequat. Gravida neque convallis a cras.
Nunc scelerisque viverra mauris in aliquam sem. Non odio euismod lacinia at quis risus sed vulputate
odio. Purus faucibus ornare suspendisse sed. Turpis egestas maecenas pharetra convallis posuere
morbi. Nec feugiat nisl pretium fusce id velit ut. Nunc congue nisi vitae suscipit tellus mauris a diam.
Posuere sollicitudin aliquam ultrices sagittis orci. Urna nec tincidunt praesent semper. Turpis nunc
eget lorem dolor sed viverra.
lacus suspendisse faucibus interdum posuere lorem. Quam id leo in vitae. Ut faucibus pulvinar
elementum integer enim neque. Id ornare arcu odio ut sem nulla pharetra diam sit. Molestie ac feugiat
sed lectus vestibulum mattis. Ipsum nunc aliquet bibendum enim facilisis. Euismod nisi porta lorem
mollis aliquam ut porttitor.
Market Update
Crypto markets haven’t done anything notable today, with BTC and ETH up 1.5% each. Today’s edition looks into Bitcoin market structure, investor sentiment, and the network usage.
BTC and Gold’s Relationship
- Back in 2019, BTC’s correlation to gold propelled the narrative that BTC is evolving into a safe haven asset. However, that relationship inverted in the second half of 2020 and it hasn’t recovered since.
- Fed Chairman Jerome Powell insisted that current inflationary pressure is transitory, but the Fed also did raise its expectation of inflation for the year.
- If BTC isn’t considered an inflation hedge — as gold is — by investors, then rising inflation could negatively impact BTC sentiment.
BTC Options OI Recovers; ETH OI Muted
- Open interest for BTC and ETH options have been in decline since mid May. But, as noted yesterday, BTC options OI is starting to increase.
- However, ETH open interest remains stagnant, indicating traders are trying to position themselves for a BTC move instead.
- Given ETH/BTC’s decline in the last week and long-term holders starting to buy up BTC, the rotation from ETH and altcoins to BTC could be on.
The Options Market is Still Cautious
- The 25% delta skew measures the implied volatility of an out-of-the-money call with a delta of 25% (or .25) against the implied volatility of an out-of-the-money put with a delta of 25%.
- Implied volatility is a proxy for how cheap/expensive an option, so this metric measures the relationship between call and put pricing.
- Over the past month, the skew has been in decline, which means puts are getting expensive (due to higher demand) relative to calls.
- Watching whether this continues declining into negative territory (traders buying up puts in anticipation of downside) or flips back into positive territory (traders buying calls to speculate on upside) will serve as a strong indicator of sentiment.
Fees for Major Networks Plummet
- Alongside price, usage of the top two blockchains also took a big hit as evidenced by miner revenue data.
- The percentage of miner revenue contributed via transaction fees for Bitcoin and Ethereum have fallen sharply in the past month, as have active address and the daily transaction count.
- Lower fees imply lower demand for block space, which is indicative of stalled user appetite. If this persists, it could signal a decline in these networks’ fundamentals.
Notable Tweets
Alchemix explains yesterday’s bug with alETH.
Here is the full instant analysis of what happened to the Alchemix alETH contracts yesterday, along with our plan to make it right.https://t.co/4lL1xgyGDG
summary in this thread /1
— Alchemix (@AlchemixFi) June 17, 2021
When the playing field is level, billionaires get rug pulled too.
I got hit like everyone else. Crazy part is I got out, thought they were increasing their TVL enough. Than Bam.
— Mark Cuban (@mcuban) June 16, 2021
All paths for yield eventually lead to DeFi.
The 10 yr US Treasury rose 8 bps today to 1.57%, which means the price fell -0.75 pts.
So roughly half of the full year’s expected return was wiped out in 1 day.
So yes, bond investors will eventually find #DeFi
(Hint, I had 4 conversations myself with debt funds today)
— Jeff Dorman, CFA (@jdorman81) June 16, 2021
