/biz/ - Business & Finance

Crypto is now completely determined by macro factors and market microstructure concerns.

First, microstructure.

>Futures markets.

The week of Dec 19 2017 (ATH/subsequent crash), CME & CBOE started BTC futures trading.

This creates artificial supply as you can speculate w/o buying up limited BTC. Moreover, you can go short easily.

CBOE abandoned BTC futures in March, allowing BTC to go parabolic.

>Custodial services = biggest whales can now enter.

Big asset managers wouldn't trade in BTC until they had adequate services to hold the stuff. Why? There's a lot of operational risk when transactions can't be reversed. Your fuckstick trader can steal your whole position and you're SOL.

Big asset managers now have access to the BTC markets, creating an environment where macro concerns are the biggest drivers of BTC value.

Second, macro. Main concerns:

>Major currency/BTC pairs (CNYBTC, USDBTC, EURBTC, JPYBTC, KRWBTC).

Several of the major crosses [Korean won, Chinese yuan (CNY, the onshore variant)] are in countries with high capital controls.

It is hard to move money out of these currencies. Crypto is a way to launder it into a stronger currency. Hence China deval -> yesterday's pop.

There is a MAJOR arbitrage opportunity here as big moves often occur in one currency pair before they occur in another.

>Volatility and rates

Foreign exchange volatility is bullish for crypto, as I explained above.

Crypto has also thrived in extremely low vol market environments. 2017 was one of the least volatile years in history. Since March, market volatility has been near record lows. Watch the VIX term structure.

Why? Low vol = low yield (need big moves to make money). Thus, people crowd into more volatile markets e.g. crypto to take risk.

Low rate environment is good b.c. there is more money out there in search of yield to take risks. Big rate cuts = good for crypto.