By It has been a relatively quiet week for the crypto market, with bitcoin’s price showing little movement between $28,500 and $30,000. In contrast, U.S. stocks experienced some turbulence after reaching new highs. This stability in bitcoin’s price is a departure from its usual reputation for high volatility. So, what exactly is causing this apparent stagnation? We spoke to industry experts to shed some light on the matter.
Unprecedented Low Volatility
Luuk Strijers, the chief commercial officer at Deribit, a leading crypto derivatives exchange, pointed out that their volatility indexes for bitcoin and ether are currently trading at “unprecedentedly low levels.” This low volatility could be attributed to a lack of investor conviction or a shortage of leverage in the system. According to Adam Guren, the chief investment officer at Hunting Hill Global Capital, the prevalence of leverage in the crypto space had reached excessive levels in the past.
Guren stated that in 2020 and 2021, leverage was easily accessible, contributing to both high volatility and significant price increases for bitcoin. However, the collapse of several major crypto companies in 2022 and early 2023, including FTX, Alameda Research, BlockFi, Celsius, Voyager, and Genesis, resulted in many highly leveraged players exiting the industry.
Now, Guren believes we are witnessing a swing in the opposite direction. Obtaining loans or leverage in the current market has become incredibly challenging and costly due to high interest rates and stringent collateral terms. Nevertheless, Guren anticipates a resurgence of leverage in the crypto space when the Federal Reserve decides to cut interest rates once again. He also expects innovative solutions to emerge, providing more efficient leverage options for the industry.
Looking to the Future
Despite the current stability, it seems likely that bitcoin’s price will experience fluctuations once leverage makes a comeback. The market dynamics are ever-changing, and with the Federal Reserve’s potential interest rate cuts on the horizon, we may see a shift in the crypto landscape. As always, it is essential to monitor these developments closely to navigate the crypto market effectively.
Crypto Founder and a Black Diamond
The U.S. Securities and Exchange Commission charged Richard Heart, the founder of crypto projects Hex and PulseChain, with unregistered sale of over $1 billion in crypto asset securities and the theft of $12 million of those funds to buy luxury goods.
Misappropriation of Funds
Between August 2021 and September 2022, Heart allegedly “misappropriated at least $12.1 million” from PulseChain investor assets to fund his luxury purchases, including cars and watches.
Luxury Goods Purchases
Heart spent $534,916 on a McLaren sports car, $314,125 on a “white Ferrari Roma,” and a total of over $1 million on three Rolex watches.
The Enigma: World’s Largest Black Diamond
Misappropriating PulseChain investor assets, Heart also purchased a 555-carat black diamond known as “The Enigma.” Claiming to be the largest black diamond globally, this purchase cost him $4.28 million.
Bitcoin and Ether Performance
In the past week, Bitcoin experienced a 0.6% loss and was trading around $29,166 on Thursday. Ether, on the other hand, dropped 1.9% during the same period, reaching approximately $1,835.
Conclusion
Investors should prepare for increased volatility in the coming months, potentially influenced by BlackRock’s spot bitcoin ETF application and the upcoming bitcoin halving event expected in April or May 2024. Bitcoin halving reduces the block reward given to crypto miners by half every 210,000 blocks mined, which historically results in price appreciation. Strijers highlighted the steep volatility term structure for bitcoin and the current call skew in the market.
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