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Following the 5.19 crash, the crypto market continued to fluctuate and fall on the 23rd. Senior traders analyzed the possible reasons for the decline.
Author: Chain News
Since mid-2019, the “increasing or falling volume” of the crypto market is largely due to the liquidation of derivatives. Benson Sun, FTX Taiwan Community Partner, said that the biggest difference in this decline is that this decline was not driven by “clearing derivatives.”
” In the past six months, most of the momentum of the Bitcoin market’s rise or fall was driven by liquidation of derivatives. After the fall on May 19, the market has liquidated nearly 20 billion U.S. dollars, and the futures market has open positions. The amount is about 20 billion U.S. dollars left.
The remaining positions should be mostly hedging or extremely low-leverage contracts, so in the absence of liquidation capacity, the decline on Sunday actually puzzled experienced crypto traders. ”
In response to market doubts, Sam Bankman-Fried (SBF), founder and CEO of FTX Exchange, compiled some data on Twitter.
SBF said that during the plunge last week, approximately US$20 billion of contracts were liquidated, and the current open interest (OI) in the market is about US$20 billion. He believes that these open positions are unlikely to be liquidated, but there are still “other types” of liquidation in the market, including spot margin trading, over-the-counter loans, and rumors on the Huobi/OKEx exchange.
SBF further explained that the current spot margin collateralization of FTX is about US$1 billion and is still stable, while Bitfinex has about US$2 billion. Other exchanges may have larger liquidation volumes, perhaps this is a decline in liquidation. One of the sources.
In addition, market rumors that the Huobi/OKEx exchange will be banned by the Chinese government to reduce its business (now confirmed) may also be one of the reasons. The combined open interest of the two exchanges may be about 3 billion US dollars. . Finally, SBF also mentioned that Chinese miners are selling Bitcoin and Ether, but the exact number sold is still unknown.
Despite sorting out some data, SBF is still unable to determine the price trend.
“Even if you know this, you cannot predict the future trend of prices, because anyone can trade at any time.
But I haven’t seen so many “forced” sales so far. There may be some, but not so many. ”
Deleveraging in the spot market
Benson analyzed that from the compiled data, it can be speculated that this decline should not be driven by derivatives, but more likely to be related to China’s regulatory policies. On Friday, the State Council of China set a tone to crack down on Bitcoin mining and trading. News As soon as it was released, the price of USDT against RMB in Huobi and OKEX plunged instantly (see picture).
He explained that in the past, most of the supervision in China was to restrict financial capital from intervening in digital currency transactions and curb the hype of capital market, but this time it clearly mentioned that the mining and trading of Bitcoin should be cracked down. The level is much higher than before. Liu He is currently the highest-level official that China has publicly ordered to crack down on Bitcoin. His influence is so great that he cannot be generalized with the previous regulatory news.
He believes that this may also explain why Bitcoin will fall indefinitely during the holidays. Since the news from the State Council was released at 10 pm last Friday, the relevant policy details will be released this week. There may be some mine owners and traders. Worrying that the implementation details will contain major bad news, I rushed to sell coins on holidays to cash out, causing the OTC price of USDT on major exchanges in mainland China to change from a premium of 1-2% to a discount. “There is a special force in the weekend market that has been selling coins, and holidays are less liquid than usual, which may be the cause of Bitcoin’s continuous decline and small coins’ diving.” Benson added.
Benson’s speculation also coincides with the Twitter released by Danhua Capital’s managing director Wan Hui. On the day the State Council released the news, Wan Hui mentioned on Twitter that some big miners in China were mercilessly selling coins to cash out:
On the other hand, the warnings of the three major financial associations in China on bitcoin transactions are likely to be the main reason for the decline.
Not only for the encrypted trading market, the Chinese government has actually implemented a “credit crunch.” People have acted to strengthen risk control, have started to reduce epidemic-related economic stimulus measures ahead of time, and established market discipline for the most vulnerable economic activities, and the encrypted market is one of the “physical fragile” economic activities.
“The deleveraging of the spot market is likely to be the reason for the weak rebound and the fall again, and the credit crunch of the Chinese government has exacerbated this phenomenon. Perhaps this can explain why miners or traders need to pay attention to liquidity and liquidation. When it’s so low, sell your position.”
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