Data & Insights Recap - October 30, 2023

Un-spot-able

Source: The Block

• The 7-day moving average of daily spot volume across centralized exchanges climbed to $24.12 billion on October 26th, the highest it's been since March and more than double what the average was at the start of the month ($11.02 billion).
  • It is the first time we have seen such strong upward momentum in volumes, as 2023 has so far been marred by volumes falling off to the lowest they’ve been since 2020 (the average slipped below $10 billion a handful of times in September). 
  • The average has been rising for 12 days in a row, the longest period since August 2020.
  • A lot of this rise has been driven by bitcoin trading, as we see the 7-day moving average of spot volume for BTC pairs reaching $9.58 billion on October 26th, also the highest since March, consistent with the broader trend. ETH spot volume has only risen to $3.05 billion, the highest it's been since May. Compared to October 1st, bitcoin’s spot volumes are up 2.7 times higher compared to just 2 times higher for ether, which is still quite high. 
• It all falls in line with a general “we’re so back” sentiment that seems to have kicked off in the crypto market after a false report spread about BlackRock’s spot bitcoin ETF on October 16th. Between the rumor starting and eventually getting debunked, bitcoin’s price shot up by around 5% before falling back down. 
  • One thing that the incident proved was that the actual ETF approval was not priced in. While a spot bitcoin ETF seems all but certain these days, especially after the SEC did not appeal in the Grayscale case and the court confirmed the ruling last week, it seemed that the market still had a visceral reaction to an actual approval. 
  • If the market will behave like that again when an actual approval comes through (and not face the drawback from the rumor turning out to be false), then it does make sense that people would be trying to pile in ahead of that. 
  • We discussed last week how bitcoin’s dominance has been growing since it is reaping most of the benefits of its potential spot ETF debut, but many crypto tokens have seen value appreciation over the past two weeks as the bullish sentiment for bitcoin spills over into the broader crypto ecosystem. 

Loads of interest

Source: The Block

• And spot isn’t the only way to trade crypto that’s been basking in recent glory. Derivatives have also been drawing up some heat.
  • In particular, the open interest across bitcoin options jumped up to $15.37 billion on October 27th, the highest the total has ever been across exchanges. OKX, in particular, saw its open interest soar to a new high of over $1 billion.
  • Deribit, the largest options exchange, saw open interest on BTC options grow from $6.41 billion on September 30th (after the end-of-month contracts expired) to $13.76 billion on October 27th, more than doubling over the course of the month. Of course, this past Friday marked the expiration of the October contracts, so open interest dropped down a little again, but monthly contracts do not tend to accumulate as much OI as quarterly ones, so open interest only fell to $11.31 billion on the exchange.
• Part of the rapid rise in open interest is due to the price of bitcoin rising. When dealing with contracts denominated in bitcoin, when its price rises, so will the notional value of volumes and open interest. 
  • But part of the rise is just new market participation. The open interest on Deribit in terms of BTC reached 403.67k on October 27th, the second highest peak ever, falling just slightly behind a surge in open interest in March. The OI climbed by over 70,000 BTC in just three days from October 23rd to 27th. 
  • And for similar reasons to why we’ve seen the increase in spot volumes, it is not hard to believe we have also seen an increase in bitcoin options activity. 
  • Monthly bitcoin options volumes are also looking to be the highest ever across exchanges.   
  • Options, while also not requiring that traders custody any crypto assets, also have a maximum loss of the premium paid to buy the option since traders do not have to exercise them in the event of being in the red on the contract, whereas they can offer a lot of upside if the contract ends up profitable on expiration, which makes them an attractive option for trading. 

Safety net

Source: CryptoCompare, Yahoo Finance

• Another argument for bitcoin’s recent success is that it is gaining traction as a safe-haven asset. Recent macro conditions have many people looking to mitigate risk in their portfolios, which for a while seemed to be impacting bitcoin as well as many more traditional asset classes like stocks and bonds.
  • But with geopolitical tensions now ticking higher, adding to the already existing stressors of combating inflation and partisan politics almost causing the U.S. government to shut down, bitcoin seems to be shifting into something more valuable due to its lack of ties to any one nation. 
  • While, of course, the recent rally has been spurred in part by some spot ETF hopes, there does seem to be some merit to the fact that global uncertainty has allowed bitcoin to thrive in recent conditions. 
• And we can see this trend more evidently looking at the 30-day correlation between bitcoin and the S&P 500, Nasdaq Composite, and gold.
  • In late August, bitcoin was holding a strong positive correlation to all three assets as all markets seemed to face a steep sell-off, with China’s real estate market showing signs of trouble and the U.S. bracing for what seemed to be a highly probable shutdown. 
  • But now, bitcoin is showing a 0.65 30-day correlation to gold, indicating the two are seeing similar price movements. On the other hand, bitcoin’s correlation to the S&P 500 was -0.7 at close on Friday (and -0.65 for the Nasdaq Composite), showing that bitcoin is moving in opposition to equities. 
  • Bitcoin moving in line with gold while stocks slump is a sign of how bitcoin is being viewed on the world stage. Gold is the de facto safe haven asset in times of conflict due to its reliable store of value. So gold, along with bitcoin, has been rising in recent weeks. Stocks, which are more tied to the macro environments they exist in, have begun to look more risky and, in turn, are being sold off. 
  • There will likely come a time again when bitcoin is heavily correlated to equities; this doesn’t necessarily represent a massive shift in how bitcoin is being viewed (for many, it is still a speculative asset as opposed to a decentralized digital currency). But in times of crisis, bitcoin is looking like a better asset to speculate on than a stock index.

A little bit more inquisitive 

Source: Wikimedia

• There were 13,490 views of Bitcoin’s Wikipedia page on October 24th and a still sizable 11,420 views the next day. The number of pageviews to the Wikipedia page has not exceeded 10,000 since November 2022. The number of views on the 24th is the highest number since June 2022, over a year ago. 
  • The number is still relatively low to the broader interest in Bitcoin's Wikipedia page. The number of views peaked at 344,690 back in December 2017 and in the bull market of 2021, views reached 63,000 in May. It is worth noting that back in 2017, there were not as many resources about Bitcoin, which contributed to how many views the Wikipedia page was getting. Now, if you search for “bitcoin” there are a trove of websites to visit to learn about the world’s largest cryptocurrency. 
  • That being said, a surge in Wikipedia views is indicative of more interest coming from more casual investors. While it doesn’t mean that a slew of retail traders are ready to start jumping back into crypto again after the fallouts of 2022, it does seem like more people are at least thinking about it. 
  • Interestingly, Google search volumes for “bitcoin” are not really up, at a relative volume of 18 for October so far (the month with the highest volume was December 2017, as well). This is only a two point increase compared to September and is on par with volumes in August. 
  • Pageviews dropped back down to 8,000 on October 26th, so the newfound excitement was not really sustained, but 8,000 views is still almost double the 4,300 views on October 8th.
  • And as has been a common theme in this newsletter so far, it is not shocking to see a bit of an uptick in casual curiosity when bitcoin’s price is increasing.

No fun for non-fungible tokens

Source: The Block

• While volumes for both spot and derivatives have already surpassed their September levels, NFT marketplace volumes on Ethereum seem like they will fall right in line with the month prior. Broadly speaking, NFT marketplace volumes have been declining since February, when hype around Blur’s token launch spurred a lot of trading. NFT volumes did slightly increase from May to June, breaking the strictly decreasing trend for much of the past year.
  • NFT volumes for last month were the lowest they had been since June 2021, before the explosive NFT rally that took off that summer. A lot of the hype that was once there has dissipated and it was often highlighted as one of the most dried-out subsectors of crypto in the bear market. Another decline, despite a broader turnaround in the outlook, would have been a continued upset. 
  • Volumes for this month on Ethereum are still lower than in September ($278 million last month compared to $270 million so far in October) but have the potential to go higher before Tuesday. In the event that October outpaces September, the growth will be ever so slight since we are already essentially at the end of the month. The ever-so-slight change means that activity is likely actually lower since the recent price growth in ETH is helping volumes.
  • Floor prices of many NFT collections have held steady through the recent sentiment uptick, and the number of traders and NFT trades for October are still lower than the month prior, indicating that the rise in volumes does seem to be related to the rise in the notional value of crypto assets. 
  • There has not been much news coming out of the NFT space lately, either, despite all the excitement going on in the broader market.
• To be fair, though, on Ethereum, weekly volumes of art and collectibles NFTs has been rising since the first week of October, but ETH’s price rally didn’t really begin until late October, so some organic interest seems to be stirring.
  • But weekly volumes for the week of the 22nd came in at $50.16 million; it’s only the highest they’ve been since late August. 
  • This is all to say that the “we’re so back” energy that’s been moving the crypto ecosystem is only slightly spilling into NFTs. For the most part, NFTs are only benefiting from the asset they’re priced in rising in value.