Welcome to the Data Debrief! Bitcoin's price whipsawed following a disappointing US jobs data on Friday. In other news, Uniswap Labs settled charges from the CFTC over allegedly illegal leveraged and margined commodity trading, VanEck announced it will liquidate its ETH futures ETF, and the Fed issued a cease-and-desist order against crypto-friendly United Texas Bank. This week, we explore:
How will this year's 'September effect' play out?
Robust stablecoin trade volume
The increasingly concentrated US crypto market
Join us on September 17th for a breakdown of this summer's sell-off. With major macroeconomic events happening and the approval and launch of ETH ETFs, we'll discuss how the market reacted and recovered from these events, and what to expect next.
Historically, risk assets struggle in August and September, with September being particularly challenging—a trend known as the 'September effect.' Bitcoin has declined in seven of the last twelve Septembers, as shown in the chart below.
This year follows the same pattern, with Bitcoin down 7.5% in August and 6.3% in September. Rate cuts could boost risk assets like Bitcoin, and the US Federal Reserve is primed to make its first cut in four years next week. However, the key question remains: Will this reverse the crypto market's downtrend?
One thing is certain: September is shaping up to be volatile. BTC's 30-day volatility has spiked to 70%, nearly double last year's levels and close to March's peak when BTC hit its all-time high. ETH's volatility has surpassed both March's levels and BTC's this September, driven by ETH-centric events such as Jump's liquidations and the ETH ETF launches. This is notable because September volatility has historically been much lower than Q1.
Forward-looking indicators, like implied volatility (IV), which reflects market expectations for future price moves based on current options trading, have also increased for BTC since the start of September after a retreat in late August.
In particular, short-term options expiries have seen the sharpest rise, with the September 13 expiry jumping from 52% to 61% and surpassing the end-September contracts. Typically, when short-term implied volatility is greater than longer-term gauges, this signals increased stress in the market and is known as an inverted structure. This inverted structure would mark a good time for a risk manager to reduce their market exposure and de-risk positions.
These market expectations align with last week's US jobs report, which dampened hopes for a 50bps decrease, but upcoming US CPI data could still sway the odds.
Additionally, the upcoming US presidential election in November is contributing to market uncertainty. Volatility in US equities often peaks one to three months before Election Day, particularly if the incumbent party is perceived as likely to lose, as markets brace for potential policy changes.
On a brighter note, the rise in crypto volatility has been accompanied by increased market participation, at least in the Bitcoin market. Bitcoin's cumulative trade volume for the first eight months of 2024 is up nearly 20% from the previous peak in 2021, approaching a record of $3 trillion.
Data Points
Coinbase loses market share in Q3.
The summer slump has eroded Coinbase's market share. The leading U.S. exchange, which held over half of the U.S. crypto market from late February to early July, has seen its share fall to 41% in early September, down from 53% in June. Bullish has been the primary beneficiary, with its market share nearly doubling from 17% to 33% during the same period.
Since 2021, large US exchanges have significantly increased their market share. The top three exchanges by volume now hold nearly 90% of the market, up from 66% previously.
Meanwhile, smaller exchanges have seen their market share drop from 34% to 11%. This shift is driven by stricter regulations, lower earnings from decreased trading activity during the 2022/23 bear market, and the dominance of large exchanges like Coinbase and Kraken in institutional crypto trading, affecting smaller exchanges such as LMAX.
This trend is not limited to US exchanges, our recent Exchange Ranking Report shows that more than 87% of the trade volume in Q3 2024 is concentrated on just five centralized exchanges.
Kaiko is pleased to announce the Exchange Ranking Results for Q2 2024. For a comprehensive breakdown of this quarter's scores and in-depth highlights, download our detailed report.
Telegram founder Pavel Durov was arrested upon his arrival in Paris last month and placed under official investigation on 12 charges. While Bitcoin saw little movement following the arrest, the market impact on Telegram-linked TON was significant.
TON's trading volume surged from around $10 million to $156 million immediately after Durov's arrest on August 24th, before retreating to the $15-20 million range. It then reached an all-time high of $169 million on August 28th, when French authorities placed Durov under official investigation. Prices also dropped by more than 20% within three hours between 7 PM and 10 PM UTC on August 24th and continued to decline over the following weeks.
TON's cumulative volume delta (CVD) flipped sharply negative at the end of August. The CVD shows the difference between hourly buy and sell volumes, reflecting the balance between buying and selling pressure. When the CVD dips below zero, it indicates net selling.
Following the arrest, selling was primarily driven by the TON-USDT and TON-USDC trading pairs on OKX and Bybit. Conversely, the TON-FDUSD pair on Binance registered net buying, similar to trends observed with other crypto assets, such as Bitcoin, during the August selloff.
Overall, selling pressure eased in early September despite funding rates turning negative. Interestingly, selling continues in TRY (Turkish Lira) markets, suggesting ongoing de-risking by some traders.
The share of stablecoin volume hits record high.
Despite the decline in crypto prices over the past few months, stablecoins have continued to gain market share over fiat currencies, indicating sustained demand. Currently, top USD and EUR-pegged stablecoins account for a record 86% of all crypto trades, while fiat currencies hold just 13% of the market.
Weekly stablecoin trading volumes have surpassed $200 billion for most of the year, a level not seen since the 2021-2022 crypto bull market. Interestingly, while Tether’s USDT remains the dominant stablecoin by volume, its market share has been mostly stagnat this year at around 73%. In contrast, more regulatory-compliant alternatives, such as Circle’s USDC have gained traction.
Uniswap/CFTC settlement sees muted market reaction.
Last week, Uniswap Labs, the parent company behind one of the most popular decentralized exchanges (DEX), agreed to pay $175 million in fines to settle charges from the Commodity Futures Trading Commission (CFTC) for illegal "margined or leveraged retail transactions."
According to the CFTC, the exchange facilitated the trading of tokens that allowed leveraged exposure to BTC and ETH by users in the United States via its frontend without being registered as a contract market. Uniswap has already delisted the tokens and has agreed to prevent derivatives tokens from trading on its platform.
Overall, leveraged tokens represent only a small fraction of Uniswap's trading volumes and the immediate market reaction was relatively muted. Uniswap's governance token, UNI, initially dipped, but quickly recovered, closing the week up 6.6%. Hourly trade volume on Uniswap across Ethereum, Base, Polygon, Avalanche, and BSC spiked to $94 million after the CFTC announcement, before retreating. However, this increase was moderate compared to previous market events this year.
Despite its limited market impact so far, the ongoing regulatory scrutiny of the fast-growing on-chain derivatives industry could have a longer-term impact.
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Kaiko's research newsletter is written by the Kaiko research team: Dessislava Aubert, Adam McCarthy, and Anastasia Melachrinos.This content is the property of Kaiko, its affiliates and licensors. Any use, reproduction or distribution is permitted only if ownership and source are expressly attributed to Kaiko. This content is for informational purposes only, does not constitute investment advice, and is not intended as an offer or solicitation for the purchase or sale of any financial instrument. For any questions, please email research@kaiko.com.
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