Crypto market starts to recover as options traders hedge, while network activity slumps
DATA from CryptoCompare shows that the price of Bitcoin kept on dropping over the past week to a low below the $53,000 mark, but then recovered to now trade around $55,000, having lost over 3.6% of its value.
Ethereum’s Ether, the second-largest cryptocurrency by market capitalisation, lost around 4.3% of its value over seven days to now trade at $2,320 after hitting a low at around $2,280 before it started recovering.
Headlines in the cryptocurrency space this week revealed that Bitcoin’s sharp decline from more than $64,000 late last month to its current levels over potential economic slowdowns in both the United States and China have led to growing Bitcoin hedges in the options market.
In reports, Sean McNulty - director of trading at liquidity provider Arbelos Markets - has noted a surge in demand for hedges against Bitcoin, while interest in options contracts expiring on November 29 at a strike price of $35,000 has surged.
The specific timeframe and strike price suggest some investors are hedging against the possibility of pro-crypto presidential candidate Donald Trump losing the race for the White House. These hedges are also coming during a historically weak month for Bitcoin’s price performance.
According to CCData, Bitcoin’s September performance from 2010 to 2023 averaged -4.51%, making it the cryptocurrency’s worst-performing month on record, seemingly mimicking the stock market’s 'September Effect'.
CCData has, through its latest Exchange Review report, also revealed that the combined spot and derivatives trading volume on centralised exchanges rose 5.38% in August to $5.22 trillion, marking the second consecutive month of increased trading on these exchanges.
The surge in volume came as a result of growing volatility in the market, partly over the unwinding of the Japanese Yen carry trade, which sees traders borrow yen at low interest rates to then invest in higher-yielding assets.
On centralised exchanges, spot cryptocurrency trading volumes rose 7.06% last month to $1.54 trillion, while derivatives rose 4.7% to $3.68 trillion per the same report.
SEC challenges FTX bankruptcy plan over stablecoin distributions
The US Securities and Exchange Commission (SEC) has challenged FTX’s bankruptcy plan that would see 98% of creditors receive 118% of their claims in cash within 60 days of court approval, signalling its intention to challenge any distributions involving digital assets to creditors.
FTX’s estate defined cash to include US dollar-pegged stablecoins, writing cash would be the “legal tender of the United States of America or the equivalents thereof” including stablecoins pegged to the greenback, bank deposits, checks, and “other similar items”.
In a filing the regulator said it’s not “opining as to the legality, under the federal securities laws, of the transactions outlined in the Plan and reserves its rights to challenge transactions involving crypto assets”.
Over the week, the SEC also charged cryptocurrency investment firm Galois Capital Management for failing to property custody clients’ assets, including holding them in accounts with the now-collapsed exchange FTX.
This week also saw leading decentralised finance protocol Uniswap settle with the US Commodity Futures Trading Commission (CFTC), which alleged the platform offered illegal leveraged and margined commodities transactions, for $175,000.
Robinhood Markets’ cryptocurrency arm, Robinhood Crypto, also settled with the California Department of Justice over its crypto withdrawal halt between 2018 and 2022 for $3.9 million over the week.
Bitcoin network’s active addresses slump
The number of daily active addresses on the Bitcoin network has dropped to its lowest level in three years, plunging from around 1.2 million from a March peak to now stand around 838,000, according to blockchain data shared by CryptoQuant.
The figure marks the network’s lowest daily activity tally since 2021, when the price of Bitcoin was hovering around the $45,000 mark. The decline “indicates less overall activity on the Bitcoin network, i.e. fewer transactions are taking place”, according to CryptoQuant contributor Gaah.
Notably, non-fungible token (NFT) sales have also been declining and hit a $374 million low in August, marking the first time these dropped below the $400 million mark. August’s sales volume represents a 76% decrease from the highest monthly record of $1.6 billion achieved in March 2024.
Francisco Memoria is a content creator at CryptoCompare who’s in love with technology and focuses on helping people see the value digital currencies have. His work has been published in numerous reputable industry publications. Francisco holds various cryptocurrencies.
