Although it might technically be true that a sufficiently large market sell order on a particular trading pair could temporarily crash that pair’s bitcoin price, this bearish rhetoric is often overreaching. In reality, bitcoin has the deepest depth of market for any crypto asset in the world. Moreover, traders update bids across markets within fractions of a second thanks to arbitrage and multi-exchange software.

Take, for example, a fear-mongering claim that a $4 million market sell order on Curve Finance’s BTC/USDT trading pair would “crash” the price of bitcoin 20%.

While this claim was technically true, in practical terms, it is in fact meaningless. For a fraction of a second, the final fill of a $4 million market sell order on that particular pair would have printed at a “flash crash” price.

However, that price would have been anomalous and isolated. Bitcoin trades across thousands of spot and derivative trading pairs on hundreds of centralized and decentralized exchanges and flukes occur when traders make mistakes. For example, the price of bitcoin briefly traded above $56,000 on a Bitfinex trading pair on May 2, 2023, only to revert back to the global average seconds later.

Flash rallies and crashes are often the results of inadvertent, so-called ‘fat finger’ trades when an absent-minded customer hits the wrong button on a keyboard.

Moreover, the price of bitcoin — the multi-hundred billion dollar asset itself — isn’t meaningfully measured by its last trade on any particular pair. Instead, sophisticated index providers like Bloomberg, CME Group, Galaxy Digital, Brave New Coin, CF Benchmarks, or Refinitiv convene sophisticated committees to tweak index methodologies to quote a clean average from the world’s exchange data.

For example, consider an Amazon customer asking Alexa, “What’s the price of bitcoin?” Alexa cites a dollar figure using the Bitcoin Liquid Index, an institutional reference rate served to partners like Amazon and NASDAQ. This price is far closer to the real price of bitcoin than any particular trading pair’s last print.

Looking at bitcoin market sell orders on DEXs

Nevertheless, it might be instructive for the average reader to see the impact of a market sell order on the price of individual bitcoin trading pairs. 

To that end, below are a few examples of the slippage that a trader could have expected to incur on three DEXs — Curve, Uniswap, and Balancer — as of midnight in Chicago on the morning of June 2, 2023.

Market selling $10 million of wrapped bitcoin (WBTC) for Tether on Curve would have flash crashed that particular pair by -12%. On Uniswap, the same sale would have flash crashed that particular pair by -2%, and on Balancer it would have flash crashed it by -1%.

Adding a zero to those sale orders would nearly exhaust the depth of market on either exchange. Market selling $100 million of WBTC for Tether on either Curve or Uniswap would have flash crashed by -59%. Balancer had more depth of market and would have suffered only -10% slippage.

Other venues are much smaller. Liquidity on SushiSwap, for example, was minimal. A $10 million order would have flash crashed that price of bitcoin by -47%, and a $100 million order would have incurred -90% slippage.

Read more: Bitcoin suddenly becomes second-biggest NFT blockchain

Bitcoin absorbs billions of dollars in market sell orders every day

These are just a few examples of the types of orders that would affect the price of a single trading pair. Even if a flash crash occurred on any of these pairs, it might not necessarily have a material impact on the pricing of other markets for bitcoin.

Moreover, digital asset traders are moving bids faster every day. Sophisticated liquidity providers, multi-exchange software, and cross-exchange arbitrageurs allow traders to place new bids for bitcoin within fractions of a second.

In total, the daily trading volume of bitcoin is enormous. Exchange-reported estimates sum over $14 billion. Stated another way, global demand for bitcoin absorbs billions of dollars worth of market sell orders, every single day. Obviously, a $4 million order that might flash crash the price of one trading pair won’t pull down bitcoin’s global depth of market with billions of dollars in deep liquidity.

The bearish rhetoric of claiming that a $4 million market sell order could crash the price of bitcoin by 20% is simply wordplay. Such a fill might print an anomalous price on one pair on one exchange, but bitcoin trades $14 billion every day across thousands of venues that aren’t so easily swayed.

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The post Explained: How bitcoin market sell orders cause flash crashes appeared first on Protos.

Bitcoin is currently rallying after a brutal 2022 that saw 65% slashed from its price. But how long can the upturn last? Is it even a real rally? And why do bitcoin’s ups and downs over the past 12 months appear to be so closely tied to the fortunes of traditional stocks?

Here, Protos takes a look at bitcoin’s price history and some current activity to try and understand what’s going on in both markets.

The last bitcoin bear market was in 2018 when the coin’s price fell by 70% during the course of the year. However, things soon picked up and in 2019 it rallied by 200%, closing the year 90% higher than the previous 12 months.

2018 was also a bad year for the S&P500 as it closed 6.24% down but it also rallied during the following year, picking up by almost 30%.

So, are we back on our way to the moon?

Stocks and crypto are currently on an upward curve ahead of the CPI and Initial Jobless Claims figures, due to be released on January 12.

Previous CPI readings have come out lower than expected, indicating that inflation eased significantly in the last quarter of last year. Jobs reports are showing a strong labor market and an unemployment rate of only 3.5%.

Meanwhile, treasury markets look to be predicting a recession which, along with a falling inflation rate, may be interpreted by investors as a signal that the Federal Reserve could finally pivot and announce its plan to decrease its interest rate.

A low-interest rate environment with eased financial conditions may well help both bitcoin and traditional stocks to rise. However, copper, which is also a popular recession indicator, is showing signs of strength as it hovers about the $4 mark. The Federal Reserve’s target is to bring inflation to 2%, a figure that it believes is appropriate for employment levels.

Bitcoin could outpace the S&P500 if big players don’t sell

However, if bitcoin rises along with stocks, this could also imply that the currency’s market risks are much lower than they were previously. These risks include potential fallout from the troubles of Digital Currency Group, the bitcoin miners’ crisis, and the Microstrategy overleveraged mega-bet.

Indeed, unless Grayscale, MicroStrategy, or any other big player is forced to sell their holdings, bitcoin may well outpace gains by the stock market once again.

The bearish case is that inflation may rise again sooner rather than later with higher demand and eased financial conditions as the Fed begins to cut interest rates. This could eventually force the Fed to raise interest rates again.

Last December, Powell discarded such a scenario by arguing that the Fed has taken a max pain for a max gain strategy and is erring on the side of caution by deciding to keep interest rates relatively high. This will continue as long as sustained and consistent data shows that inflation is subsiding.

Read more: What does the Fed’s latest interest rate hike mean for bitcoin?

The Fed’s next meeting is next February, at which it will give an update on its direction. A hawkish Fed may once again put a stop to the rally as it did last December, once again dashing hopes that it would pivot before 2024.

If the Fed takes the decision to remain cautious and stay on its path to increase interest rates to 5%, markets may backtrack on this rally and restart last year’s carnage all over again.

For more informed news, follow us on Twitter and Google News or listen to our investigative podcast Innovated: Blockchain City.

The post What’s moving bitcoin’s price right now? appeared first on Protos.

It’s been a brutal year for cryptocurrencies, with the industry shedding trillions since hitting all-time highs last year. But the crypto market isn’t alone. Stocks, bonds, and many commodities were also riding high just a year ago. So, what we want to know is, is cryptocurrency underperforming or outperforming the market?

Benchmarks

It’s hard to deny the picture we get when comparing benchmark indices and “blue chip” cryptocurrencies.

Bitcoin is down ~70% year-on-year (YoY), and Ethereum ~67%. Meanwhile, the S&P 500 is down ~15% and the Dow Jones is down only ~9%. Not an inviting outlook.

And the further down the cryptocurrency totem pole you go, the worse the performance. XRP is down 85%+, Dogecoin 80%+, and Solana ~85%+. And these are three of the top 10 cryptocurrencies.

Other benchmarks in the traditional finance world include NASDAQ, down ~30%, the Russell 2000, down 22%, and the FTSE 100, off ~3%.

Comparisons

Sectors with comparable plummets in stock price — tech, for example — are also worth noting. For example, Meta, the largest social media platform in the world, is down 70% YoY.

Others include Google’s parent company, Alphabet, down ~33%, and Amazon dropping nearly ~38%.

But others, such as Apple have done more than okay. The Cupertino-based firm is the only stock mentioned in this article that’s actually up from a year ago.

Commodities

Commodities, such as gold, silver, uranium, or copper have likewise seen a depreciation in their prices, albeit none close to the extent of the fall endured by cryptocurrencies.

Read more: Bitcoin miners could threaten Paraguay’s power stability

Publicly-listed cryptocurrency companies versus the market

The most well-known crypto companies have certainly underperformed the market, with MicroStrategy — which is now more or less a bitcoin ETF — off ~64%, Coinbase down nearly 80%, and GBTC — the trust that’s failed to turn into a proper ETF — collapsing over 75%.

Even banks specializing in crypto, such as Silvergate and Signature, have seen their stock prices tank more than traditional banking corporations, down ~70% and ~50%, respectively. This is compared to their non-crypto-specific rivals like JP Morgan Chase or Bank of America, only dipping 25% each.

If we get more specific, cryptocurrency mining companies have faired particularly poorly. Here’s a list and their performances since their respective highs last year:

• RIOT: -75%
• BitFarms: -82%
• Hive: -81%
• SOS: -96%
• Canaan: -65%
• BTCM: -97%

Deep Cuts

All in all, the crypto industry is drastically underperforming other markets. The question that’s still yet to be answered is: Is this a sign of more pain to come for the industry or will cryptocurrencies be blessed with an upswing as economies fall into intense recessions?

For more informed news, follow us on Twitter and Google News or listen to our investigative podcast Innovated: Blockchain City.

The post Is crypto outperforming the market? appeared first on Protos.