News updates May 05, 2022

1. Bitcoin pushes to $40K, but are bulls strong enough to win Friday’s $735M options expiry?

$735 million in BTC options expire on May 6 and data suggests that the current macroeconomic conditions will continue to favor bears.

Bitcoin (BTC) price has been stuck in a falling wedge pattern for the past two months and during this time it has tested the $37,600 support on multiple instances. 

Adding to this “bearish” price action, BTC is down 16% year-to-date, which is in line with the Russell 2000s performance.

The real driver of Bitcoin’s current price action is investors’ concerns about worsening macroeconomic conditions. Professional investors are worried about the impact of the U.S. Federal Reserve’s tightening economic policies and on May 3, billionaire hedge fund manager Paul Tudor Jones said that the environment for investors is worse than ever because the monetary authority is raising interest rates when financial conditions are already worsening.

On May 4, CNBC reported that the European Union implemented new sanctions to phase out Russian crude oil imports within six months and European Commission President Ursula von der Leyen said, "This will be a complete import ban on all Russian oil, seaborne and pipeline, crude and refined."

For these reasons, traders are increasingly concerned about the potential impact of a global macroeconomic crisis on cryptocurrency markets. If global economies enter a recession, investors will seek protection by moving away from risk-on asset classes like Bitcoin.

 *Bulls did not expect prices below $40,000*

The open interest for the May 6 options expiry in Bitcoin is $735 million, but the actual figure will be lower since bulls were caught by surprise as BTC moved below $40,000.

The 1.22 call-to-put ratio reflects the $405 million call (buy) open interest against the $330 million put (sell) options. Nevertheless, as Bitcoin stands near $39,000, 89% of the bullish bets will likely become worthless.

Meanwhile, if Bitcoin's price remains below $39,000 on May 6, bears will have $100 million worth of these put (sell) options available. This difference happens because there is no use in a right to sell Bitcoin at $36,000 if it trades above that level on expiry

 *BTC price gains 4% pre-Fed as MicroStrategy vows to protect Bitcoin from $21K crash* 

 *Bears can secure a $145 million profit on Friday*

Below are the four most likely scenarios based on the current price action. The number of options contracts available on May 6 for call (buy) and put (sell) instruments varies, depending on the expiry price. The imbalance favoring each side constitutes the theoretical profit:

* Between $37,000 and $39,000: 500 calls (buy) vs. 4,300 puts (sell). The net result favors bears by $145 million.

* Between $39,000 and $40,000: 1,200 calls (buy) vs. 2,500 puts (sell). Bears have a $50 million advantage.

* Between $40,000 and $41,000: 3,800 calls (buy) vs. 1,100 puts (sell). The net result favors bulls by $105 million.

* Between $41,000 and $42,000: 5,300 calls (buy) vs. 700 puts (sell). Bulls boost their gains to $190 million.

This crude estimate considers the call options used in bullish bets and the put options exclusively in neutral-to-bearish trades. Even so, this oversimplification disregards more complex investment strategies.

For example, a trader could have sold a call option, effectively gaining negative exposure to Bitcoin above a specific price, but unfortunately, there's no easy way to estimate this effect.

Bitcoin bears need to sustain the price below $39,000 on May 6 to secure a $145 million profit. On the other hand, bulls can avoid a loss by pushing BTC above $40,000, enough to net them $100 million in gains. Considering the bearish macroeconomic conditions, bears seem better positioned for May 6's expiry.

The views and opinions expressed here are solely those of the author and do not necessarily reflect the views of Cointelegraph. Every investment and trading move involves risk. You should conduct your own research when making a decision.

2. Bitcoin Could See 10% Jump, As Volatility Drops To 18-Month Low:

After its third-largest weekly fall in over a year, the Bitcoin (BTC) price has finally began to rise. BTC’s price has effectively rebounded from the important support level of $37,500, despite an impending Federal Reserve rate hike.

 *Bitcoin Poised For 10% Jump*

Various analysts, like The Wolf of All Streets, Michael van de Poppe, and PlanB, are bullish on the bullish trend, with the Bitcoin price currently holding above $39,000.

In a tweet on May 4, on-chain data provider Santiment published historical data showing a 20% rally as a result of BTC transactions is negative at the same levels between February 16 and 22. The week’s Bitcoin Ratio of On-Chain Transactions Volume in Profit/Loss statistic is the third largest capitulation in a year.

As technicals improve, several analysts and traders forecast a price increase in the following days.

Michaal van de Poppe predicts that the price of Bitcoin (BTC) will rise from current levels. He stated,

According to PlanB, the original $55K S2F model, which was released in March 2019, appears to be tracking the Bitcoin price trend. He also expects Bitcoin to rise in value.

The price of Bitcoin (BTC) has regained over 5% in the previous 24 hours, stabilising near $39,000. Whales continue to accumulate at dips, resulting in a huge increase in trading volume. Furthermore, the BTC has avoided a drop below the critical support level. It suggests that a rally could happen in the next several days.

 *BTC Trades Sideways*

BTC has been trading sideways over the past few days, with the price dropping below $40,000 on April 26. Although, after reaching the swing highs near $48,000, the price has already begun to drop. BTC retreated and lost 45 percent of its value. BTC sellers, on the other hand, are weary as the price trades sideways in a narrow range since April 25.

A daily close below the session’s low, on the other hand, would disprove the bullish price assumption. In that situation, $36,000 would be the lowest point on the downside.

BTC/USD is currently trading at $39,874, up 5.63 percent for the day as of publishing time. According to CoinMarketCap, the first cryptocurrency by market capitalization has a 24-hour trading volume of $35,528,442,016.

 *Volatility Drops*

Bitcoin’s historical volatility is at 18-month lows, according to statistics released by the Buy Bitcoin Worldwide webpage. Its anticipated 60-day average value fell to 2.62%.

Bitcoin (BTC) volatility was last this low in November 2020, when the orange coin broke through $10,000 for the first time in this bullish cycle.

On April 27, 2022, thirty-day volatility reached a local low, but it is already showing signs of recovery.

The Bitcoin Volatility Index (BVOL), similar to the stock market’s VIX, shows how much Bitcoin’s price changes on a given day in relation to its previous price.

The most recent increase in Bitcoin (BTC) volatility occurred in July 2021, when the flagship cryptocurrency was twice as volatile over a 30-day period as it is now.

3. Marathon Digital May Start to Sell Some of Its Bitcoins:

The miner said any sale would not be imminent, but that it might need about a half-billion dollars in investments to reach its growth objectives this year.

Marathon Digital (MARA), one of the largest publicly traded bitcoin miners and “hodlers” of the coins it mines, said that it may consider selling some of the bitcoins it holds, but won’t likely do it in the near-term.

“We may purchase or sell bitcoin in future periods as needed for treasury management or general corporate purposes,” Marathon CFO Hugh Gallagher said during an earnings conference call, although he added that any sale is not imminent.

“I'll say we don't really have an intention to do that [sell bitcoins] in the near-term,” he said, noting that the company is also looking at several other options for financing, including term-loans, revolver loans, equipment financing and an at-the-market equity offering.

The Las-Vegas based miner last sold its bitcoin in October 2020 and has been accumulating and holding onto its mined bitcoin since then, according to a statement. Most recently, Marathon said it holds 9,673 bitcoins, with a fair market value of $365.5 million.

If Marathon sells some of its bitcoins, it would be in-line with its peer, Riot Blockchain (RIOT), which was also a hodler, until recently. Riot sold around $10 million worth of bitcoins in April, after selling about $9.4 million in March. The company said that it is evaluating the level of coins it retains from its monthly bitcoin mining for its operational and expansion cash requirements.

Selling a few bitcoins to backstop expenses would likely be positive news for Marathon shareholders, because it would be a less expensive means of financing. Recently, equipment financing and bitcoin-backed loans have become an emerging trend among miners, as shareholders have been punishing miners that are raising capital by issuing shares.

 *Battered Bitcoin Miners Increasingly Turn to Debt Financing*

Marathon didn’t dissect its capital needs, but in the conference call, Gallagher indicated that the miner may need about a half-billion dollars in investments for the remainder of the year for the mining computers it needs to grow, for both orders that have been made and planned.

The miner said on Wednesday, during its earnings results, that its cash on hand was $118.5 million as of March 31, while total liquidity, defined as cash on hand plus available revolving credit facilities, was $218.5 million. The miner plans to reach 23.3 exahashes per second (EH/s) in mining power by early 2023. At the close of Wednesday trading, Marathon’s stock fell about 1% to $17.76 per share.

4. Gucci to Begin Accepting Bitcoin in Some Stores:

Gucci is the latest luxury brand to begin accepting crypto payments.

Iconic fashion brand Gucci will begin accepting cryptocurrency in some of its U.S. locations later this month, with plans to roll out the program to other North American stores this summer.

According to Vogue Business, in-store payments will be made using a QR code that customers can scan with their crypto wallet, sent by Gucci via email. The stores will accept various digital currencies, including Bitcoin, Bitcoin Cash, Ethereum, Litecoin, Dogecoin, and Shiba Inu.

The first locations to accept crypto are Wooster Street in New York, Rodeo Drive in Los Angeles, Miami Design District, Phipps Plaza in Atlanta, and The Shops at Crystals in Las Vegas. 

Other high-end brands—most recently, Off-White—have already begun accepting crypto.

Offering in-store crypto payments is the latest in Gucci's move into Web3. Earlier this year, Gucci entered the metaverse by purchasing virtual land in the decentralized blockchain game The Sandbox for an undisclosed amount; it's building a virtual "Gucci Vault" for Gucci-themed NFTs.

Gucci is just one of the big names in fashion and apparel entering Web3 looking to stake a claim in the digital world. Joining Gucci in this new reality are clothing lines Dolce & Gabbana, Adidas, Nike, Vans, and Balenciaga. These brands will also be competing against crypto-native fashion houses like Digitalax, Blanksoles, DRESSX, and Red DAO, which have a head start building online communities around their brands.

To prepare for this new venture, Gucci says it will provide cryptocurrency and NFT education and training to its staff before the program's launch.

"Gucci is always looking to embrace new technologies when they can provide an enhanced experience for our customers," Marco Bizzarri, Gucci's president and CEO, tells Vogue Business. "Now that we are able to integrate cryptocurrencies within our payment system, it is a natural evolution for those customers who would like to have this option available to them."

5. New crypto litigation tracker highlights 300 cases from SafeMoon to Pepe the Frog:

The SEC, CFTC and DOJ have seven cases either resolved or ongoing this year, with the litigation against husband-wife duo Ilya Lichtenstein and Heather Morgan being the most high profile.

A new crypto litigation tracker from commercial law firm Morrison Cohen LLP shows details of more than 300 active and settled court cases since 2013.

Morrison Cohen is a New York-based firm that caters to large financial institutions, entrepreneurs and early-growth stage companies and specializes in capital markets, business litigation, real estate and bankruptcy, to name a few. The company also has a cryptocurrency litigation team.

The Morrison Cohen Cryptocurrency Litigation Tracker was published on Tuesday and contains any case development related to the United States Securities and Exchange Commission (SEC), Commodity Futures Trading Commission (CFTC), the Department of Justice (DOJ) and class action/private litigation.

The firm stated that it will regularly update the tracker “to include the key rulings in these litigations,” and it also contains a host of “articles, webinars, and podcasts” and regulatory crypto announcements from various government agencies.

According to the tracker — which is essentially a lengthy PDF document — there have been roughly 17 crypto cases that were either brought before the court or resolved in 2022 so far.

The SEC, CFTC and DOJ combined account for seven of those, with some high profile cases being the SEC v. the Barksdale siblings, who allegedly conducted a fraudulent initial coin offering (ICO) worth $124 million, and the SEC v. digital asset platform BlockFi, who agreed to pay a $100 million penalty for failing to register its crypto lending product.

The most notable of all, however, is the ongoing DOJ v.Ilya Lichtenstein and Heather Morgan case. The husband-wife duo is charged with an alleged conspiracy to launder funds relating to the 119,756 Bitcoin (BTC) Bitfinex hack in 2016. DOJ special agents were able to seize 94,000 BTC around the time of arrests in February.

This year, there may also be plenty more in the works, considering the SEC announced that it will be upping the headcount of its enforcement-focused “Crypto Assets & Cyber Unit” to 50 dedicated positions.

6. Dubai's virtual asset regulator plans to open HQ in metaverse

The Dubai Virtual Asset Regulatory Authority, or VARA, has purchased land in the virtual reality world The Sandbox (SAND) as part of its plans to set up a metaverse headquarters.

In a Tuesday announcement from Emirates news agency WAM, VARA said the metaverse entry was aimed at facilitating “collaborative engagement” between virtual asset service providers, international regulatory authorities, and industry leaders. In addition, the Dubai regulator said establishing its “MetaHQ” office could help reach “younger licensees” entering the virtual world.

7. Fed hikes interest rates by 50 basis points in effort to combat inflation

The United States Federal Open Market Committee (FOMC) concluded two days of meetings Wednesday with a widely anticipated announcement of an interest rate hike of 50 base points, or 0.5%. It is the second of an expected seven rate adjustments this year. In March, the Federal Reserve raised its benchmark rate by 25 basis points, or 0.25%, marking the first upward adjustment since 2018. 

Markets were braced for Wednesday’s hike, which was the steepest since 2000, so the immediate reaction was expected to be moderate given that Fed chair Jerome Powell had already hinted at a 50 basis-point adjustment earlier in April. However, risk assets such as stocks and even crypto rallied in the immediate aftermath of the Fed announcement.

8. Head Of The EU Financial Services Commission Calls For Global Consensus On Crypto Regulations

Since Bank of England’s Jon Cunliffe’s warning in November of the impending risk to financial stability from the developing market, global regulators have been working individually to figure out comprehensive regulations for the nascent market. However, Mairead McGuinness, the European Financial Services Commissioner, has called for a global approach to regulations.

9. World’s Largest Family-Owned Private Bank Now Offers Crypto Investments via SEBA Bank

On Wednesday, the world’s largest family-owned banking institution, LGT Bank, announced that it has selected SEBA Bank in order to provide cryptocurrency custody and brokerage services to clients. LGT will start by offering investments in bitcoin and ethereum and the bank’s customers can incorporate the digital assets into their existing LGT Bank-managed portfolios.