XRP Nearly Halved, But on The Whole, Peace and Joy. Weekly Market Review by TokenInsight

The theme of this week’s market is ‘stable’. Because of the Christmas vacation, there are no waves in the crypto market. After Bitcoin‘s price broke through the $20,000 last week, it stabilized at around $23,000 this week, and the price of Ethereum was also stabilized around $600.

On the whole, the end of the market this year is relatively successful, except for XRP. On Tuesday, the United States Securities and Exchange Commission claimed that it was suing Ripple, for Ripple’s XRP is regarded as a securities asset that has not been registered in SEC, and Ripple faced a fine of $1.3B. Whereafter, several exchanges announced the temporary suspension of XRP trading, which brought some uncertainties to the market.

But in any case, 2020 is a memorable year for the crypto market. Enjoy the holiday, and also come to understand our review and outlook on the current and future of the crypto market.

Ripple Nearly Halved

On Tuesday, Ripple was sued by the Securities and Exchange Commission, SEC for illegally selling unlicensed securities. The SEC claims that the sale and issuance of XRP was an unregistered security offering that gave Ripple co-founders Brad Garlinghouse and Chris Larson “the most control” over XRP.

Ripple, as one of the most important companies in the digital assets and cryptocurrency industry, controls the third-largest market cap of cryptocurrencies. Though it is not the first time Ripple and its XRP encountered the crisis, the impact from the U.S. government crashes XRP to plunge nearly 50%. 

The impact plunges XRP’s prices seriously and fearfully. The price of XRP dropped from around $0.6 to around $0.35 before the press release. The lowest price is about $0.3, nearly half shrunk. The trading volume surges with the fear sentiment in the market, reaching a high of $4billion on 24 Dec 2020, Thursday. Compared to last week, the trading volume increases about 52.58%, to $12.9B. 

XRP Price
XRP price in the last 30 days, chart from 9pm EST, Dec. 24. Source: tokeninsight.com

Digital assets funds like Bitwise liquidated all XRP they are holding. Exchanges including Coinbase, CrossTower, OSL, and Beaxy ceased transactions of XRP. 

The former SEC chairman Joseph Grundfest expressed “no pressing reason compels immediate enforcement action”. However, upon learning of the proceeding, intermediaries will cease transacting in XRP because of the associated legal risk. The resulting reduction in liquidity will cause XRP’s value to decline.

XRP Trading Volume
XRP trading volume in the last 30 days, chart from 9pm EST, Dec. 24. Source: tokeninsight.com

From the perspective of derivatives markets, few investors give positive feedback for the future of XRP. Some traders turn to a short trend to XRP. According to OKEx’s market data, the short and long ratio of XRP’s perpetual contracts shows that the short holders surpass the long holders. This means investors lose confidence in XRP at least in a short term. 

XRP perpetual long/short ratio
XRP perpetual long/short ratio in the last 7 days, chart from 9pm EST, Dec. 24. Source: okex.com
XRP top trader average margin used
XRP top trader average margin used in the last 48 hours, chart from 9pm EST, Dec. 24. Source: okex.com

‘A good finish’: Mainstream Coins keep steady performance, with the positive expectation from the market

This week, the Bitcoin market stabilized after the $20,000 carnival. But obviously, the old era is gone forever. Bitcoin’s price successfully stands above the $22,000 line and stabilizes at around $23,000. Besides, compared with last week, this week’s total trading volume of Bitcoin spot and perpetual contract rise steadily, which reach $32.77B and $276B respectively. Regardless of price or trading volume, Bitcoin has successfully stepped forward to another high level, marking a wonderful end to 2020.

BTC Price
BTC price in the last 30 days, chart from 9pm EST, Dec. 24. Source: tokeninsight.com
BTC historical trading volume
BTC historical trading volume in the last 30 days, chart from 9pm EST, Dec. 24. Source: tokeninsight.com
Mainstream cryptos’ trading volume info - TokenInsight
Mainstream cryptos’ trading volume info of this week, chart from 9pm EST, Dec. 24. Source: tokeninsight.com

The Ethereum market is relatively calm. Compared with last week, the growth of Ethereum spot and perpetual contract trading volume has slowed down. Ethereum spot trading volume is about $11B this week,  while perpetual contract trading volume is $50.8B. From the perspective of price, after one month’s fluctuation,  the price of Ethereum returned to around $600 at last. For Ethereum, apart from the launch of Ethereum 2.0, there is no news at the end of the year, but for the market and investors, sometimes, “no news is the best news”.

ETH Price - TokenInsight
ETH price in the last 30 days, chart from 9pm EST, Dec. 24. Source: tokeninsight.com

The derivatives market reveals some signals about the future. Looking back to the whole year, as a result of dozens of good news, options and futures markets maintain a relatively high transaction level in 2020Q4, and both of the markets’ scales have achieved substantial growth in 2020. The trading volume of BTC options exceeded $10B for the 2 last months of 2020 consecutively, indicating that the crypto market will develop well in 2021.

Bitcoin futures and options’ trading volume

Bitcoin futures and options’ trading volume

From the perspective of open interest, At the present of Bitcoin’s price stabilizing above $22,000, the open interest of futures and options has also reached a new high. Moreover, the steeper option slope indicates that the hot spot and futures markets are also supported by the options market’s performance. In addition, the short-term fluctuations of Bitcoin have not had a significant impact on the options and futures markets, which means that investors are still optimistic about Bitcoin and have reached a phased consensus on the current value of Bitcoin.

Bitcoin futures and options’ open interest
Bitcoin futures and options’ open interest info of 2020, chart from 6am EST, Dec. 24. Source: skew.com

Bitcoin futures and options’ open interest

The next indicator is from implied volatility (reference of concept:Phoney Silence? Weekly Market Review by TokenInsight). At the end of this year, a large number of Bitcoin options are about to maturity. To some extent, option prices will be influenced by spot prices in short-term, which will lead to temporary decrease of implied volatility and short-term implied volatility falls below 70. But from the perspective of the implied volatility term structure, the forward implied volatility remains around 80-85.

Taking into account the relationship between implied volatility and options pricing (generally, implied volatility is positively correlated with the popularity of the underlying asset and the price of forward options in a bull market), it can be found that whether the historical breakthrough of Bitcoin in December or XRP’s emergencies, neither of them have a significant impact on the forward price of Bitcoin, which further proves that the market’s consensus on the future value of Bitcoin is becoming stronger.

Bitcoin’s ATM volatility
Bitcoin’s ATM volatility term structure and Options OI by expiry, chart from 7am EST, Dec. 24. Source: skew.com

Bitcoin’s ATM volatility

Finally, from the surface of implied volatility, we can get a glimpse of investors’ attitudes towards the future market.  For options contracts that expire in the short term, the implied volatility surface is approximately unbiased, indicating that investors are more rational in the short term. However, forward implied volatility surface still shows a right deviation, which means that investors are still inclined to call options for Bitcoin forward transactions. 

To sum up, investors keep a solid positive attitude for the future of Bitcoin and look forward to next year’s digital asset market.

Tokeninsight BTC options
Tokeninsight BTC options
Implied volatility surface of BTC options, chart from 7am EST, Dec. 24, Source: gvol.io

Highlights Picked by TokenInsight

Binance Stops Operating South Korea Branch 

On Thursday (Dec. 24, 2020), Binance announced that it would close its South Korea branch, which has only been operated for eight months. Binance said that the reason was the lack of users in South Korea, which gradually led to a shortage of liquidity so that they had to close this branch down. Binance also stated that it will re-make a new strategic layout for the South Korean market.

Jean Claton retired officially, Elad Roisman takes over as SEC chairman

On Thursday (Dec. 24, 2020), Jay Claton formally retired from the chairman position of the SEC. Elad Roisman, who had worked in the NYSE Euronext and was nominated by President Trump two years ago, took over this position the next day. Roisman, who has always been regarded as very friendly to digital assets and emerging financial technology, said that the SEC needs to re-examine the original rules when facing technological changes.

Huobi’s DeFi Labs established an ecological chain, and the mainnet will be launched soon

On Monday (Dec. 21, 2020), Huobi DeFi Labs announced the establishment of the Huobi Ecological Fund (Heco Fund) with a capital scale of $200M to promote the prosperity of the Huobi ecosystem. The Heco Fund will focus on high-quality projects about DEX, lending, oracles, cross-chain solutions, stable currency, and insurance on the Huobi Ecological Chain.

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