Sam Reynolds

<div id="highlights-block_61c32fef5e313" class="highlights">
        <ul>
                <li>The unspent miner supply of crypto is closing in at all-time highs, which suggests that miners are holding on to their bitcoin in anticipation of an upcoming bull market</li>
                <li>Singapore-based QCP capital wrote in a recent note that it expects a squeeze to take place over the holidays and into 2022 as liquidity thins out</li>
            </ul>
    
</div>



<p>Bitcoin has been range bound for most of December, stuck in a rut after the crash earlier this month that sent its price dropping from $57,000 to just above $48,000. But this might change over the course of the holiday period, according to two notes that came out today.</p>



<p>London-based GlobalBlock argues that some on-chain metrics are beginning to look bullish for bitcoin, after altcoins had some dramatic upwards moves earlier this week. The firm argues that the number of coins going unspent by miners is indicative of a belief by miners that upwards price action is on the horizon.</p>



<p>“On-chain metrics continue to be bullish as the unspent miner supply closes in on all-time-highs. These are the coins that are issued to miners as a reward for solving a block but have never been spent on-chain,” GlobalBlock’s Marcus Sotiriou wrote.</p>



<blockquote class="wp-block-quote is-layout-flow wp-block-quote-is-layout-flow"><p><strong>“This shows the sentiment of miners and, by holding their mined Bitcoin, this suggests that they anticipate significant price rise in the short to mid-term.”</strong></p></blockquote>



<p><img loading="lazy" decoding="async" width="624" height="359" src="https://lh5.googleusercontent.com/euvtIMFH-dVYUZ3eQyDDwT-cfqk7hOWybgs5EAxaEVEykF1SOzuELoh-Q8LeWIgywM4p7XCvhkttN8heohN7YwiA634F05L9VpwUJdvzI9WLJWCo3TWhkP4PvcP1uA4FENiNauPH"><br></p>



<p>Sotiriou added that he believes that <a href="https://cms.blockworks.co/visa-launches-crypto-advisory-unit/" target="_blank" rel="noreferrer noopener">Visa’s recent announcement</a> that it was doubling-down on crypto adoption via its new crypto advisory division is also quite bullish for asset prices.</p>



<p>“Crypto being incorporated into the network effects of giants like Visa is how I think the crypto industry will on board billions of users over the next decade and hence avoid a multiyear bear market as seen in previous cycles,” he wrote.</p>



<p>In a note published Wednesday, Singapore’s QCP capital wrote that it was “surprised at the massive volume of option selling across the board.”</p>



<p>The firm said it believes that liquidity will thin out into the holidays and into 2022, and there will likely be a topside squeeze during that time.</p>



<p>Bitcoin started the Wednesday trading session in the US at about $49,200, up 0.3%, according to <a href="https://www.coingecko.com/en/coins/bitcoin" target="_blank" rel="noreferrer noopener">CoinGecko</a>.</p>




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Is There a Holiday Bitcoin Rally in the Works?

<div id="highlights-block_615f57b16445b" class="highlights">
        <ul>
                <li>Singapore’s QCP Capital says there are many reasons to be bullish about bitcoin’s future price prospects as the price cruises past $55,000</li>
                <li>But at the same time, QCP Capital points out that the market of 2021 is different from that in 2020 and some caution is to be exercised before expecting a moonshot</li>
            </ul>
    
</div>



<p>Bitcoin breached the $55,000 mark this week on strong fundamentals and is closing in on its all-time high of $64,000 set earlier this year. But the question is, will the fourth quarter of 2021 be like the bull market of 2020, where bitcoin posted a nearly 180% rally? Maybe, says Singapore’s QCP Capital.&nbsp;</p>



<p>In a note posted on its Telegram Thursday afternoon, QCP Capital said that the market is “hopeful” a similar rally will occur during the fourth quarter, as bitcoin is up 16% since the start of the week. QCP says that the “speed and size of the move has been surprising” and was likely accelerated by short squeezes on positions that were short bitcoin.</p>



<p>In addition, QCP noted that the stabilization of the <a href="https://cms.blockworks.co/evergrande-sells-more-assets-shares-halted-in-hong-kong/" target="_blank" rel="noreferrer noopener">Evergrande</a> situation, and warm signals that bitcoin ETFs might soon be approved in the US are reasons for market optimism. </p>



<p>The fund also points out that institutional interest in bitcoin is once again driving price velocity, pointing to significant increases in open interest on CME Bitcoin Futures, an institutional focused exchange.&nbsp;</p>



<p>“The premium versus spot of the CME futures has been the highest among the major exchanges This is noteworthy as the CME futures premiums are typically compressed due to the cash-and-carry spread trades that institutional players like to put on. The unusually large premium indicates an overwhelming amount of outright buying,” QCP wrote.&nbsp;</p>



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<blockquote class="twitter-tweet" data-width="550" data-dnt="true"><p lang="en" dir="ltr">this is the real flippening that everyone should be focusing on <a href="https://t.co/mSGCyPZwuE">pic.twitter.com/mSGCyPZwuE</a></p>&mdash; Joshua Lim (@joshua_j_lim) <a href="https://twitter.com/joshua_j_lim/status/1445750543465418752?ref_src=twsrc%5Etfw">October 6, 2021</a></blockquote><script async src="https://platform.twitter.com/widgets.js" charset="utf-8"></script>
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<h3 class="wp-block-heading"><strong>2020 bull market flashback</strong></h3>



<p>Rewind to the fourth quarter of 2020, and institutional interest in bitcoin, buoyed partially by the Office of the <a href="https://www.occ.gov/news-issuances/news-releases/2020/nr-occ-2020-98.html" target="_blank" rel="noreferrer noopener">Comptroller of the Currency’s green-light</a> on custodianship of crypto was one of the large driving forces behind the rally that closed off the year. So, in 2021, can the same be repeated?</p>



<p>Perhaps, believes QCP, but there are a few things to be cautious about.&nbsp;</p>



<p>First, the market is much more leveraged than last year even though the most <a href="https://cms.blockworks.co/token-metrics-parallels-with-ftx-and-binance-leverage-downgrade-uniswap-delistings/" target="_blank" rel="noreferrer noopener">extreme leverage tools</a> are unavailable to many retail traders. Open interest is more than triple than it was last year, QCP notes, and bitcoin open interest is “reaching levels that tend to precede market sell-offs.”</p>



<p>The fund also noted that the options market continues to point to a nervous market. Bitcoin has only recently recovered from a persistent downside skew to neutral, they wrote.&nbsp;</p>



<p>QCP noted that they are seeing large demand for Algorand calls this week. While QCP said that it&#8217;s been a “laggard” layer-1 protocol in terms of price, the team behind it is working hard on the ecosystem and it&#8217;s worth keeping an eye on during the next quarter. </p>



<p>The price of Bitcoin is currently $54,290, according to <a href="https://www.coingecko.com/en/coins/bitcoin" target="_blank" rel="noreferrer noopener">CoinGecko</a>, down 1% on-day.</p>


QCP Capital: Will Bitcoin’s Q4 Rally Repeat the Bull Market of 2020

<div id="highlights-block_61538e171fd7a" class="highlights">
        <ul>
                <li>The market might be preparing for negative price movements as Ethereum gears up for a challenge amidst mining pool shut downs and aggressive competition from Layer-1s</li>
                <li>Has the ‘magic’ left the platform as Layer-1s begin to eclipse Ethereum in active users?</li>
            </ul>
    
</div>



<p>The price of ether might be heading for a drop come mid-month, QCP Capital wrote in a recent note on their Telegram channel.<br><br>QCP, based in Singapore, noted during the Tuesday trading day in Asia the market aggressively paid for over 13,000x contracts of puts on ether pricing with an expiry date of October 8. The majority of pricing for these options is clustered around the $2,500 to $2,800 mark. Ether is currently priced at $2,873, down 3% on-week, according to <a href="https://www.coingecko.com/en/coins/ethereum" target="_blank" rel="noreferrer noopener">CoinGecko.</a>&nbsp;&nbsp;&nbsp;</p>



<h3 class="wp-block-heading"><strong>Miners leaving China without a destination</strong></h3>



<p>Even though use cases for Ethereum, the protocol, like DeFi and NFTs, continue to reach all-time highs, a cloud seems to be looming over ether pricing given the structural challenges surrounding the network.&nbsp;</p>



<p>With China’s <a href="https://cms.blockworks.co/china-mining-exodus-seen-as-positive-for-bitcoin/" target="_blank" rel="noreferrer noopener">recent crackdown</a> on mining, some of the largest ether mining pools have announced that they are shutting their doors. Sparkpool, which contributes around 15% of the network’s hashrate, according to <a href="https://www.poolwatch.io/coin/ethereum" target="_blank" rel="noreferrer noopener">Poolwatch.io</a>, will be shutting down at the end of the month according to a <a href="https://mp.weixin.qq.com/s/pXaQfaFmT1ngzWJBgRdTDw" target="_blank" rel="noreferrer noopener">post on its WeChat page</a>. BeePool, the fourth-largest miner in China, also is shutting its doors, announcing on Twitter that it was ceasing operations in “compliance with local laws.” </p>



<div class="wp-block-image"><figure class="aligncenter size-full"><img loading="lazy" decoding="async" width="512" height="341" src="https://blockworks-co.imgix.net/wp-content/uploads/2021/09/ETH-miners.jpeg" alt="" class="wp-image-8708" srcset="https://blockworks-co.imgix.net/wp-content/uploads/2021/09/ETH-miners.jpeg?w=512 512w, https://blockworks-co.imgix.net/wp-content/uploads/2021/09/ETH-miners.jpeg?w=300 300w, https://blockworks-co.imgix.net/wp-content/uploads/2021/09/ETH-miners.jpeg?w=386 386w, https://blockworks-co.imgix.net/wp-content/uploads/2021/09/ETH-miners.jpeg?w=392 392w, https://blockworks-co.imgix.net/wp-content/uploads/2021/09/ETH-miners.jpeg?w=329 329w, https://blockworks-co.imgix.net/wp-content/uploads/2021/09/ETH-miners.jpeg?w=80 80w" sizes="(max-width: 512px) 100vw, 512px" /></figure></div>



<p>At the same time, some Ethereum mining pools, like their counterparts in the Bitcoin space, are packing up and moving to North America.&nbsp;</p>



<p>However, there’s not the same rapid evacuation from China of Ethereum miners as there are Bitcoin miners, given the finite utility of the industry. With the coming shift to ETH 2 and its proof-of-stake structure, miners as stakeholders have declining relevance. Even before the London Hard Fork was <a href="https://cms.blockworks.co/eip-1559-is-live-thanks-to-ethereums-london-hard-fork/">rolled</a> out via EIP-1559 in the summer, some stakeholders were already anticipating mining being made irrelevant by the end of the year.</p>



<p>“If I was a miner, I would plan to break even by end of year 2021,” <a href="https://twitter.com/trent_vanepps/status/1387837123756240898?ref_src=twsrc%5Etfw%7Ctwcamp%5Etweetembed%7Ctwterm%5E1387837123756240898%7Ctwgr%5E%7Ctwcon%5Es1_&amp;ref_url=https%3A%2F%2Fdecrypt.co%2F74262%2Fwhat-happens-ethereum-miners-after-eth-2" target="_blank" rel="noreferrer noopener">wrote</a> Tim Beiko, a Community Manager and developer at the Ethereum Foundation on a mining Discord channel in April. Beiko couldn’t give an exact date when the main Ethereum chain would <a href="https://ethereum.org/en/eth2/merge/" target="_blank" rel="noreferrer noopener">merge</a> with the ETH 2 “beacon” chain and transition to proof-of-stake, but Beiko believes that this would be a safe guess. </p>



<h3 class="wp-block-heading"><strong>Where did the magic go? Blame the layer-1s</strong></h3>



<p>Given Ethereum’s high gas fees, many retail traders have moved on to other <a href="https://cms.blockworks.co/das-2021-are-layer-1s-better-than-layer-2s/" target="_blank" rel="noreferrer noopener">layer-1 protocols</a>.</p>



<p>Digital assets research house Santiment <a href="https://insights.santiment.net/read/eth---where-has-all-the-magic-gone%3F-6699" target="_blank" rel="noreferrer noopener">posted a note</a> earlier this week wondering where the “magic” of Ethereum had gone, noting the influx of ether on exchanges indicating a sell-off was in process.&nbsp;</p>



<p>“Network growth has been stagnant for the past few months even after the price bottomed out. Price continued to grow but Network Participants continue to just range, this deviation is generally not a healthy sign,” Santiment wrote. “Much of this behavior is likely attributed to the growth in L-1s (AVAX, FTM, ATOM) during this period and the gradual decline in NFT speculation.”</p>



<p>Indeed, according to on-chain data, the Polygon network, with its zero fee structure, has surpassed Ethereum in daily active users. </p>



<figure class="wp-block-embed is-type-rich is-provider-twitter wp-block-embed-twitter"><div class="wp-block-embed__wrapper">
<blockquote class="twitter-tweet" data-width="550" data-dnt="true"><p lang="en" dir="ltr">Yesterday <a href="https://twitter.com/search?q=%24MATIC&amp;src=ctag&amp;ref_src=twsrc%5Etfw">$MATIC</a> eclipsed <a href="https://twitter.com/search?q=%24ETH&amp;src=ctag&amp;ref_src=twsrc%5Etfw">$ETH</a> in daily active users for the first time.<a href="https://twitter.com/0xPolygon?ref_src=twsrc%5Etfw">@0xPolygon</a>: 351k DAU<a href="https://twitter.com/ethereum?ref_src=twsrc%5Etfw">@ethereum</a>: 326k DAU <a href="https://t.co/iJQERDzAmR">pic.twitter.com/iJQERDzAmR</a></p>&mdash; Raphael (@RaphaelSignal) <a href="https://twitter.com/RaphaelSignal/status/1442938048463790083?ref_src=twsrc%5Etfw">September 28, 2021</a></blockquote><script async src="https://platform.twitter.com/widgets.js" charset="utf-8"></script>
</div></figure>



<p>“Ethereum continues to struggle as most speculators have moved on to other L-1s for better ROI, eventually leaving it with stagnant Network Growth,” Santiment concluded. The real rally is unlikely until we get closer to the next major speculative event: the transition to Proof-of-Stake (PoS) in 2022.”</p>



<hr class="wp-block-separator"/>



<p><strong>Are you a UK or EU reader that can’t get enough investor-focused content on digital assets?&nbsp;<a target="_blank" href="https://cms.blockworks.co/events/das-london/" rel="noreferrer noopener">Join us</a>&nbsp;in London on November 15th and 16th for the Digital Asset Summit (DAS) London. Use code ARTICLE for £75 off your ticket.&nbsp;<a target="_blank" href="https://cms.blockworks.co/events/das-london/" rel="noreferrer noopener">Buy it now</a>.</strong></p>



<hr class="wp-block-separator"/>


QCP Capital Wary of Ether Downside as China Mining Pools Shut

<div id="highlights-block_613918faa5801" class="highlights">
        <ul>
                <li>Singapore’s QCP Capital points to the SEC’s ‘negative comments’ on the idea of a bitcoin ETF, and the SEC’s harsh words about Coinbase’s lending products as cause for concern</li>
                <li>The price of bitcoin has stabilized, but is down from $53,000 earlier this week to around $46,500</li>
            </ul>
    
</div>



<p>Dark regulatory clouds hanging over the US in the form of the SEC’s delays in approving a bitcoin ETF, and their <a href="https://cms.blockworks.co/sec-dont-hold-your-breath-for-a-bitcoin-etf/">harsh words</a> for the concept itself, as well as <a href="https://cms.blockworks.co/the-sec-will-sue-coinbase-if-it-launches-lend/">threats to sue Coinbase</a> should it launch its lending suite have “taken the steam out of the ‘frenzied’ crypto rally” according to a Wednesday note published by QCP Capital.&nbsp;</p>



<p>The Singapore-based crypto fund called the recent rally, which brought the price of bitcoin past the psychological $50,000 mark, “frenzied” because “retail was going leveraged all-in on the alts, pushing some of the major alts’ perp funding levels through the roof.” QCP also said that there was a sense that this rally was too big to fail “evidenced by the pushback that we received on our short call views from last week.”</p>



<p>Despite numerous successful bitcoin ETFs in Ontario, the SEC continues to push back against approving a US-based bitcoin ETF. The <a href="https://www.cnbc.com/2021/09/07/bitcoin-etf-grayscale-ceo-calls-sec-short-sighted-after-regulators-comments.html">most recent comments</a> from SEC chair Gary Gensler have pointed toward the commission preferring a futures-based bitcoin ETF over a spot ETF.</p>



<p>All this, according to QCP Capital, shows how much the market had been pricing in an approval with some believing that it would be approved in October.&nbsp;&nbsp;</p>



<p>“Going forward it is clear that news around the ETF will continue to play a large part in the overall sentiment,” QCP wrote.&nbsp;</p>



<p>With regards to the SEC’s threat to sue Coinbase should it launch a lending product, QCP said that should the SEC take action on the market “a lot of the free yield generation in the US would dry up, which then means a lot of other directional long trades put on top of that would have to be unwound too.”</p>



<p>“Lending and Yield products are a mainstay of many crypto institutions. The high base yields in crypto mean most institutional alpha strategies also comprise some form of leveraged market-neutral lending,” QCP wrote.&nbsp;</p>



<h3 class="wp-block-heading"><strong>Licenses no longer made from gold</strong></h3>



<p>Aside from the issue of yield generation, QCP points to a broader, structural problem that is emerging in the industry now: a potential devaluation of US crypto licenses.<br><br>US crypto regulatory licenses have historically always commanded a sizable premium, QCP argued, pointing to the <a href="https://cms.blockworks.co/ftx-us-brings-crypto-derivatives-to-users-with-ledgerx-acquisition/">price tag paid by FTX</a> for LedgerX’s regulated crypto derivatives business, or the premium Coinbase commands over its peers despite its unregulated peers like Binance having much higher volume. But, should things go one way, this premium might be fundamentally challenged.&nbsp;</p>



<p>“That premium has been on the pretext that it would give them a free pass while governmental agencies took their war on crypto to other platforms and exchanges instead like Binance,” QCP wrote. “If now a regulated US entity, who is offering a product that is already being offered in the US, going through the proper legal route, can face such harsh action then nobody is assured to be safe anymore.”</p>



<p><br>Shares of Coinbase are currently trading at $259, down 7% in the last month falling alongside the price of bitcoin. <a href="https://twitter.com/dcanellis/status/1435492137374732290">On Twitter</a>, many have noted the volume of <a href="https://www.insider-monitor.com/trading/cik1679788.html">insider sales</a> of Coinbase stock that have occurred during the last month.</p>



<p><strong>Are you a UK or EU reader that cant get enough investor-focused content on digital assets?<a target="_blank" href="https://cms.blockworks.co/events/das-london/" rel="noreferrer noopener">Join us</a> in London on November 15th and 16th for the Digital Asset Summit (DAS) London. Use code ARTICLE for £75 off your ticket. <a target="_blank" href="https://cms.blockworks.co/events/das-london/" rel="noreferrer noopener">Buy it now</a>.</strong></p>
