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CoinDesk 20 Bitcoin Price Index
Derivative exchange BitMEX’s legal issues with U.S. regulators took a toll on bitcoin’s price while DeFi gave Ethereum miners more fee revenue than ever.
Bitcoin trading on Coinbase since Sept. 29.
Source: TradingView
Bitcoin’s price was as high as $10,932 on spot exchanges such as Coinbase before quickly plunging 4% within two hours to as low as $10,427. It subsequently rebounded a bit to $10,582 as of press time.
The drop coincided with the announcement crypto derivatives venue BitMEX was formally being charged by U.S. regulators for unregistered trading, among other transgressions.
“The news of BitMEX being served with a lawsuit by the [Commodity Futures Trading Commission] was met with broad-based selling pressure,” said Denis Vinokourov, head of research for crypto brokerage Bequant.
Read More: BitMEX ‘Attempted to Evade’ US Regulations, CFTC, DOJ Charge
“This is big,” said Vishal Shah, an options trader and founder of derivatives exchange Alpha5, on the CFTC’s announcement. However, Shah noted the declining influence of BitMEX on the market since March, when over $700 million in liquidations helped cause the price of bitcoin to dump as low as $3,854 on spot exchanges.
BitMEX open interest the past year.
Source: Skew
“BitMEX has slowly and consistently bled open interest since March,” Shah said. “This news may accelerate that narrative, but I do not see it being a systemic risk at this point if there is an orderly resolution.”
A number of new derivatives venues, most of which do not provide access to anyone in the United States, is one of the reasons for BitMEX’s decline in the market, said Bequant’s Vinokourov. “BitMEX’s overall importance to the broader ecosystem is not as critical as was the case a few years ago,” Vinokourov added. “Not only have many other exchanges been catching up with BitMEX liquidity and order book depth, but also a widely publicized tech issue earlier this year put a big dent into venue’s reputation amongst the larger crypto trading desks.”
BitMEX open interest (blue) versus other major crypto derivatives platforms.
Source: Skew
Nonetheless, liquidations on BitMEX helped push bitcoin’s price down Thursday, as $15 million in sell liquidations in the past 24 hours wiped out long-oriented traders on the derivatives platform, similar to a margin call in traditional markets.
Liquidations on BitMEX the past 24 hours.
Source: Skew
Outside of BitMEX, macro economic events could lead to selling pressure as October opens, according to Andrew Tu, an executive at crypto quant trading firm Efficient Frontier.
Bitcoin trading on Coinbase the past month.
Source: TradingView
“Bitcoin has been stuck in the $10,000-$11,000 range since the drop in the beginning of September,” noted Tu. “The elephant in the room at this point is pretty much the macro climate, with [U.S.] elections coming up and the inability to compromise on a fiscal stimulus between the House [of Representatives] and Senate,” he added.
Bequant’s Vinokourov was more bullish on the crypto market’s future, particularly with progress in Ethereum’s long and winding upgrade. “The underlying fundamentals are positive, especially for ETH given the very recent launch of ‘Spadina’ – the final testnet ahead of the Ethereum blockchain’s upgraded mainnet release,” added Vinokourov.
The second-largest cryptocurrency by market capitalization, ether (ETH), was down Thursday trading around $353 and slipping 0.83% in 24 hours as of 20:00 UTC (4:00 p.m. ET).
As increasing numbers of users adopt decentralized finance, or DeFI, on Ethereum, miners are reaping more revenue from the network than ever. Miner revenue from fees charged to use Ethereum averaged 38% in August, which was then a record high. It was surpassed in September, when miner revenue from fees hit another record, at 48.5%.
Percent of Ethereum miner revenue from fees the past two years.
Source: Glassnode
Tellurian Capital’s Jean-Marc Bonnefous, who has been investing in the crypto ecosystem since 2014, said some of the outrageous returns within DeFi are enticing users despite high transactional fees the miners are pocketing.
“Even with high gas costs on Ethereum, some of the net returns available on DeFi are still quite attractive compared to alternatives,” said Bonnefous. ”The basic problem, though, is that these returns are not sustainable in the long run, whatever the Ethereum costs and issues are.”
