The moment of The Merge is getting closer and, in the market, prices are experiencing significant volatility, Therefore, in its weekly On-Chain analysis, Bitfinex Alpha focused on monitoring the behavior of wallets in the face of this cryptocurrency volatility.
As shown by the graph published by Delphi Digital and taken by Bitfinex Alpha, last week, the total open interest (IO) of the futures market for Ethereum saw a risereaching over USD 9 million, positioning itself in this way, over USD 9,220 million.
Which shows a leveling with respect to the figures achieved in the month of April of the current year, in which the cryptocurrency exceeded USD 3,500. Since then the price had experienced a decrease of 73%.
According to the analysis, “The current price of Ether is also trading at a 53% discount from the April highs.”
In the analysis he also explains that, in August, the Ether IO managed to surpass the Bitcoin IO for the first time and from there, the same behavior was recorded on different occasions, which according to those familiar with the subject and placing the market in a bearish situation, this overcoming is due to the fact that the expected merger is approaching.
However, Bitfinex Alpha also justifies this behavior by pointing out that “On the one hand, the Fusion represents the change of the Ethereum network to PoS (Proof of Stake). On the other hand, the new asset on the horizon is an ETH PoW (Proof of Work) hard fork. If successful, miners still mining ETH after the merger could send ETH PoW tokens to ETH holders. The incentive for the launch of this new asset could also be a main factor for the increase in the price of Ether”
Likewise, coping with this situation also implies an analysis of Ether metrics showing that ETH flows prior to 9/11 and excluding addresses to exchanges were 538,880 ETH; amount that represents a maximum in the last 56 days.
This would have the consequence that “several staking protocols that have offered services dedicated to the narrative of the Fusion and ETH 2.0 could develop a demand shock in the face of the Fusion with a complete lack of liquidity, since the majority of the asset, instead, is held in liquid positions in private or exchange wallets” explained Bitfinex Alpha in its weekly analysis.
Equally, It must be taken into account that the inflows of ETH to the exchanges as a precaution due to the “Merger” have been exceeded by the number of outflows of the asset. For a sample of this, on September 4, exits from the exchanges of 476,000 ETH were registered. Amount that ranks third with respect to the largest outflows that the cryptoactive has experienced since March of the current year.
Coinbase Staked ETH Quote
Coinbase Staked ETH (cbETH) is a “liquid derivative” symbolizing ETH on Coinbase and is an ERC-20 token that users can transfer or trade to Ethereum in a staked way. Which it should be remembered that it is blocked until an Ethereum update emerges.
On September 7, the token was quoted at 0.91 ETH, which means that it was discounted by 10% compared to the time of its launch on August 25.where the token was priced at 0.97 ETH.
This discount according to Bitfinex Alpha can represent two things, the first “that users are taking into account the risks that arise from staking ETH with a centralized entity” that would bring with it “the potential risk of being cut if Coinbase begins to censor transactions at the protocol level”and the second ” that users are selling liquid staking derivatives to accumulate spot ETH, and maximize the amount of any airdropped token, from a potential proof-of-work hard fork as discussed above.”
The discounts that arise between two assets can persevere despite low liquidity, in the case of cbETH/ETH on the Curve exchange, it has a liquidity of USD 1.5 million with a split of half between both tokens. Which shows that despite being close to a liquidity crisis, at the moment, none is yet evident.
On-chain movement of Bitcoin
For Bitfinex Alpha, an unusual and therefore significant On-chain movement of the Bitcoin asset is due to three reasons: the first, taking profits from the whales. The second is Retail Euphoria and the third is Capitulation (whale, retailer and miner alike).
In the case of capitulation; this occurs, becauseit is the result of stronger hands being put under extreme stress and some of them giving way. The only users left beyond this phase are extremely strong hands. This traditionally, in turn, indicates a bottom.Bitfinex Alpha explained.
In relation to the data used in the analysis, more than 15% of the offers are made by companies that do not have a tour of more than three months. Which then demonstrates a sign of hoarding behavior; Although it cannot be fully accounted for, due to the lack of data to demonstrate whether or not this accumulation would resist, “lto the test of time and the active supply of whales, should that occur.”
In a bearish macro context, as highlighted by Bitfinex Alpha Report, the accumulation patterns of the digital asset Bitcoin find similarity with gold. This is due to the fact that both gold and silver as raw materials have been taken by institutions such as TradFi, mostly in bearish macro conditions in the form of protection against a short own exposure or also if the opposite case of a long exposure occurs in the Stock market.
To affirm this, Bitfinex Alpha is based on two key points: 1- Medium of exchange: Both gold and bitcoin are means of exchange, because we can exchange them for goods and services. And 2- Reserve of value: It is an asset that is used during economic turmoil because it has an intrinsic value.
Although, in the same way Bitfinex ensures that, the storage of value is debatable, since Bitcoin has been correlated with the stock markets. He also considers that on-chain activity, especially the behavior of whales in the current economic downturn, resembles institutional behavior around previous recessions/crises.
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