Bitcoin prices were down slightly early Monday but headed for a 2.3% gain on the month, the first time the cryptocurrency has gained in August since 2017.
Huobi is taking on OKEx in the business of bitcoin futures trading, opening a new front in the ongoing rivalry between the two Chinese-led exchanges.
Bitcoin trailed the Standard & Poor's 500 Index in August as prices got stuck in a range between $11,100 and $11,800.
Bitcoin was lower in early trading Monday after gaining over the weekend, as Japanese stocks rose and U.S. stock futures gained on bets that central banks will adhere to loose monetary policy for years to come.
As August draws to a close, bitcoin is up 2.3% on the month, decelerating after July's 24% gain. For the past two weeks, the largest cryptocurrency has been stuck in a range between roughly $11,100 and $11,800.
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Cryptocurrency exchange Huobi is taking aim at competitor OKEx in the business of trading bitcoin futures and other derivatives contracts, opening up a new front in a longstanding rivalry between the Chinese-led exchanges.
OKEx, which is led by Chinese executives and based in Malta, is the world’s biggest crypto derivatives exchange, with outstanding contracts valued at $1.26 billion, according to the data site CoinGecko. Huobi, also led by Chinese brass but based in Singapore, is close behind, tied for second place with another exchange, BitMEX, at $1.25 billion.
In a report this month, Huobi said it has “managed to push new boundaries against other well-established exchanges when it comes to futures trading volume.” Huobi is already beating OKEx in a few market segments, according to the report, including “ coin-margined futures” – where traders can post their initial down payment, known as margin, using cryptocurrencies. Huobi claims to also regularly beat OKEx in weekly and quarterly bitcoin futures contracts.
“Before Huobi launched its futures contract in December 2018, OKEx had the largest market share of the world,” Ciara Sun, vice president of Huobi Global Markets, told CoinDesk in a Telegram message. “Huobi Futures always looks up to the best of the market.”
Exchange BTC Futures Open Interest, billions of dollars. (Skew)
The battle for supremacy in cryptocurrency futures – and China – adds to the tension between the two exchanges, which have been at loggerheads at least since 2018, when then-OKEx CEO Chris Lee defected to Huobi to become vice president of global business development.
OKEx CEO Jay Hao, in a company update in March, called Huobi “our doppelgänger,” insisted “imitation was the sincerest form of flattery” and said he “would like to think that Huobi was able to withstand this market volatility by following our footsteps.”
Experts on China’s often-murky cryptocurrency markets say the rivalry between the two exchanges likely stems from the fight for customers in the world’s second-largest economy.
“There’s a natural friction between OKEx and Huobi,” Matthew Graham, chief executive officer of Beijing-based crypto consultancy Sino Global Capital, told CoinDesk in an email. “While they have both pushed to enlarge their international footprints, they still prioritize their Chinese user base.”
Trading volumes and open interest for Huobi versus OKEx. (CoinGecko/CoinDesk)
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Chart showing the S&P 500 outpacing bitcoin in August. (TradingView)
While bitcoin is eyeing an August gain for the first time in three years, the cryptocurrency is lagging U.S. stocks over the month.
Bitcoin is trading near $11,610 at press time, up 2.3% on the month, according to CoinDesk's Bitcoin Price Index.
It was the first time the cryptocurrency gained in August since 2017, when prices rallied by 66%.
As of Friday, the S&P 500, Wall Street's benchmark stocks index, was eyeing a 7.25% gain for August, as per data provided by TradingView.
Bitcoin faced rejection at highs above 12,400 on Aug. 17 and has been restricted largely to a range of $11,100 to $11,800 ever since.
The rally from July lows below $9,000 has stalled with the weakening of demand from institutions and macro traders, as indicated by the recent 30% decline in open positions in futures listed on the Chicago Mercantile Exchange.
Macro Assets Performance (Skew.com)
On Friday, CME-listed open interest was $653 million, down from the record high of $948 million reached on Aug. 17, according to data source Skew.
Bitcoin's rally from $9,000 to $12,400 observed in the four weeks to Aug. 17 was accompanied by a 150% surge in open interest.
It's possible investors have been rotating money out of bitcoin and into cryptocurrencies linked to the white-hot decentralized finance (DeFi) space.
The Lend token from decentralized lending platform Aave has gained 150% this month.
Other DeFi names like oracle provider Chainlink's LINK token and lending project Compound's COMP token have added 108% and 55%, respectively.
Ethereum's ether cryptocurrency is also outshining bitcoin on a monthly basis with over 20% gains.
Looking ahead, however, negative-yielding government bonds are expected to continue powering gains in both bitcoin and stocks.
And bitcoin, a perceived store of value, may draw stronger buying interest than stocks, with expectations for U.S. inflation beginning to accelerate in response to the Federal Reserve's recent decision to signal tolerance for higher prices.
Bitcoin is still down 40% from its record high of $20,000 and looks relatively undervalued compared to U.S. stocks, which are trading at record highs even amid the ongoing coronavirus epidemic.
A potential correction in stocks still poses downside risks to bitcoin, according to Joel Kruger, a currency strategist at LMAX Digital.
"Bitcoin is still an emerging asset and therefore still somewhat exposed in periods of risk-off," Kruger told CoinDesk in a Telegram chat.
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Five-year breakeven U.S. inflation rates, a proxy for the bond market's inflation expectations. (Federal Reserve Bank of St. Louis)
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First Mover: Huobi Takes on OKEx in Futures, Opening New Front in 'Chinese' Rivalry