All the news and analysis on the Fed's massive QE program
Given recent market turmoil, let's take a look at recent flows in and out of a few popular cryptocurrency exchanges. I asked CoinDesk Research to go fishing and the team brilliantly came up with three very different exchanges to examine.
Kraken is a decidedly "retail" exchange with ample banking relationships. Most traders on the platform are fervent cryptocurrency enthusiasts entering in with fiat to spare, looking to trade some crypto assets.
Binance only recently added its first local bank partner and fiat gateways, so it relies more on stablecoins instead of fiat – likely one of the reasons why inflows and outflows are larger on Binance than Kraken (lots of stablecoin trading).
Next, the MEX – BitMEX to be exact. The Bitcoin Mercantile Exchange that's incorporated in the Seychelles:
BitMEX's bread and butter is derivatives: perpetual swaps and the ability to go long or short with up to 100 times leverage. In addition, investors must have volatile crypto to deposit. No fiat. No stablecoins.
Let's take all three and combine them for our next chart:
What does this all mean? New investors must pump cash money into the crypto ecosystem via fiat onramps like Kraken. Fiat likely contributes to Kraken's smaller crypto flows – it doesn't need stablecoins. Binance needs them (for now), and BitMEX simply doesn't care about them.
Speaking of BitMEX, the gyrations on BitMEX inflows/outflows are for sure on steroids during ridiculous price swings.
This is because leverage on BitMEX results in more automatic liquidations during crypto price roller coaster rides – to the tune of $700m on March 12 when inflows and outflows were spiking in all of these charts. Of course, many traders already know price swings are exacerbated by BitMEX.
"The Federal Reserve will continue to purchase Treasury securities and agency mortgage-backed securities in the amounts needed to support smooth market functioning and effective transmission of monetary policy to broader financial conditions," the central bank said. Immediately after the 12:00 UTC announcement March 23, bitcoin jumped from $5,860 to $6,628 in an hour.
Investors Look to Gold, Crypto After Fed Goes on QE Spree
The S&P 500 is at 2016 levels, erasing nearly four years of gains. It remains to be seen how government measures will affect inflation rates going forward, but it could make investors look towards alternative asset classes such as cryptocurrencies or gold. Yet, these assets still might not be what people want since a shock to the system can cause people to sell assets for cash to stuff in a mattress.
Bearish ‘Death Cross’ Price Patterns Loom
The death cross is a long-term bear market signal, according to technical analysis theory. Despite the scary name, it's based on backward-looking moving average data and is the product of a recent notable price drop. For example, the impending bitcoin death cross is preceded by the decline from $10,500 to $4,000 in the four weeks to March 13.
Bitcoin: A Global Port in a Market Storm?
OPINION: "Bitcoin's high volatility makes it unsuitable for many investors. But those who think gold makes sense in this world gone mad are most likely going to take a closer look, especially after the perspective-changing storm we’ve just weathered (with probably more to come). Even those skeptical of gold’s place in a diversified portfolio are bound to be curious about a digital alternative.
Into the Unknown: No Limit on Fed Money Injections
With the new round of emergency-lending programs, the Fed has now undone nearly all of its efforts to “normalize” financing conditions following the unprecedented actions taken during the 2008 financial crisis. In that era, the Fed also cut rates close to zero and provided some $1.2 trillion of secret emergency financing to the world’s largest banks, on top of the $700 billion Troubled Asset Relief Program.
VC Tim Draper Eyes India as Nation Enters Crypto ‘Renaissance’
In April 2018, a Reserve Bank of India order barred domestic financial institutions from providing banking services to crypto exchanges. On March 22, Draper tweeted that the recent decision by the nation's Supreme Court to overturn the ban represented "a renaissance for India," underscoring a change in sentiment for investors who can now begin backing the local blockchain industry.
LISTEN: Indicators
Hosts Adam B. Levine and John Biggs talk about the morbid-sounding "death cross' looming for bitcoin as well as traditional markets, Tezos dumping BTC and the Fed's plan to flood the market with coronavirus-free bank notes.
LISTEN: Unlimited QE
OPINION: Doubling, tripling, ultimately even unlimited? We took a deep dive into the Federal Reserve's seemingly endless supply of tricks to make sure the economy heads in the right direction.
Tweet of the Day
The BitMEX insurance fund is meant to prevent automatic deleveraging of the positions of profitable traders (ranked by profit and leverage in contracts) against liquidated positions to thwart bankruptcy, according to the derivative exchange's blog post on the subject. Basically, if you go 100x long on XBTUSD at $6,000 you've got $30 leeway before liquidation, so don't complain.
Trend: Bitcoin carved out a bullish engulfing pattern on Monday, as the U.S. Federal Reserve announced its open-ended asset purchase program, lifting the market-based measures of inflation from decade lows and boosting demand for gold.
Monday's candle closed above resistance at $6,460 (Sunday's high) and opened the way for a re-test of the high of $7,139 clocked on March 20. The relative strength index has breached the descending trendline and the MACD histogram has crossed above zero in support of the immediate bullish case.
Even so, buyers should not be overambitious, as the recent price recovery is backed by a decline trading volume. A low volume price rise often traps buyers on the wrong side of the market.
The outlook, however, would only turn bearish if buyers fail to defend Monday's low of $5,686. That would open the doors for a slide to $5,000.
Bain Fund, BitMEX Owner Among Funders of India Crypto Bourse (Bloomberg) One of India’s largest cryptocurrency exchanges, CoinDCX, has raised $3 million from backers including Bain Capital Ventures, signaling that global investors are drawn to the space after a favorable Supreme Court decision.
Disclaimer: The information presented in this message is intended as a news item that provides a brief summary of various events and developments that affect, or that might in the future affect, the value of one or more of the cryptocurrencies described above. The information contained in this message, and any information liked through the items contained herein, is not intended to provide sufficient information to form the basis for an investment decision. The information presented herein is accurate only as of its date, and it was not prepared by a research analyst or other investment professional. You should seek additional information regarding the merits and risks of investing in any cryptocurrency before deciding to purchase or sell any such instruments.
What Can Cryptocurrency Exchange Inflows and Outflows Tell Us?