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XRP’s ‘Bearish Skew’ Persists After 10% Price Slide Amid SEC Appeal and ETF Filing

Just as optimism was about to surge, clouds rolled in, pushing prices lower.

XRP’s (XRP) options market shows a greater risk of an extended price decline than renewed gains as renewed regulatory uncertainty overshadows Bitwise’s ETF filing and weighs over the cryptocurrency’s price.

On Monday, asset manager Bitwise submitted an S-1 form to the U.S. Securities and Exchange Commission (SEC), filing for an exchange-traded fund (ETF) that would invest in XRP. Bitcoin and ether spot ETFs, which debuted in the U.S. early this year, have pulled in billions of dollars in investor money.

However, to the dismay of XRP bulls, Bitwise’s action was quickly followed by the SEC filing a notice of appeal to the Second Circuit Court of Appeals, pushing back against Judge Analisa Torres’s two-month-old ruling that fintech company Ripple Labs did not violate programmatic sales to retail exchanges did not violate securities rules.

Four years ago, the SEC charged Ripple with selling unregistered securities after the platform sold $1.3 billion worth of XRP. While Ripple is a fintech company dedicated to building a global payments network, XRP is an independent digital asset for online payments and currency swaps.

Being categorized as security is widely seen as a bearish development in the crypto market, as securities are more tightly regulated than commodities and demand greater reporting and transparency by companies.

As such, XRP has declined by 11% to 53.7 cents in the past 24 hours, taking the week-to-date loss to over 16%, according to data sources CoinDesk and Coingecko. It’s the third worst-performing cryptocurrency among the top 100 coins by market value. Market leaders bitcoin and ether are down 0.5% and 3.7%, respectively.

Bearish options skew

Options traders on Deribit seem relatively more bearish on XRP than bitcoin and ether, according to the seven-day call-put skew, which measures the difference between call and put volatility (demand).

At press time, XRP’s seven-day skew was -3.2%, a sign of bias for puts offering protection against price slides. BTC and ETH’s seven-day skews were 0% or neutral and 2.8%, according to data source Amberdata.

Meanwhile, funding rates in the XRP perpetual futures market have turned positive, reversing the brief overnight negative flip, which represented a bearish bias.

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SEC’s Gensler Won’t Reveal his View on Trump’s Bitcoin Reserve, Reiterates Bitcoin Isn’t a Security

Gensler was responding to CNBC’s question on whether the SEC chair was “warming up to top-tier crypto?”

U.S. Securities and Exchange Commission (SEC) Chair Gary Gensler reiterated his stance that bitcoin (BTC) is “not a security” but doubled down on his stated position that regulatory clarity exists for the crypto space in an interview with CNBC on Thursday.

“As it relates to bitcoin, my predecessor and I have said, that’s not a security,” Gensler said. “You now have a way that you can actually express that view — buy into that through exchange-traded products.” Such products were approved by the SEC in January, marking a monumental shift in the agency’s approach to the crypto space.

Gensler was responding to CNBC’s Joe Kernen asking whether the SEC chair was “warming up to top-tier crypto?”

“Where are you on what’s called altcoins, there’s 15 or 20 thousand of them. Where are you Joe?” Gensler asked.

Gensler refused to reveal a position on what he thought about Donald Trump’s idea “to keep the current government holdings “as the core of the strategic national bitcoin stockpile.”

“I have a view but given my role and also we are in election season so for the listening public I will stick to my chalk lines which are securities markets and chairman Powell and others can speak to that.”

Apart from bitcoin, Gensler has maintained that the vast majority of other tokens fit the legal definition of securities that are rightfully under the SEC’s jurisdiction. This position remains despite industry push back, lawsuits against the SEC and a recent hammering the SEC got for two hours during a congressional hearing titled “Dazed and Confused: Breaking Down the SEC’s Politicized Approach to Digital Asset.”

Asked by CNBC if the SEC had been regulating by litigation, Gensler once again argued that current laws give his agency the power to oversee the crypto space.

“Not liking the rules is not the same as that there aren’t rules.”

Gensler also said that he didn’t know where bitcoin will be in 20 years but that that he felt “the field is going to have a challenge building trust” which it is “already” when “there’s so many fraudsters, scammers.”

“Look at the leading lights in this field, in the crypto field just two years ago. A number of them are in jail right now, and I’m not just talking about SBF… there’s been tens of billions of dollars of losses and bankruptcies and so forth,” Gensler said on Thursday. “What innovative field in America survives without having building trust in that field and protecting investors or consumers?”

Binance founder Chang Peng “CZ” Zhao, who is currently serving a four-month prison sentence, will be a free man by the end of this week.

Celestia’s TIA Posts Biggest Monthly Gain This Year Even as Impending $1.13B Token Unlock Spurs Hedging

TIA has outperformed the CoinDesk 20 Index by a wide margin.

TIA, the token of data-availability blockchain network Celestia, posted its best monthly gain this year, outperforming the broader market by a significant margin and confounding traders who’d positioned for a drop in the price as the result of a $1.13 billion token unlock due next month.

The market-beating 40% surge, the biggest since December 2023, contrasts with a 13% gain in the CoinDesk 20 Index, a measure of the largest, most liquid cryptocurrencies. It takes place against a background of some market participants seeking downside hedges due to concerns the massive token unlock due Oct. 31 will flood the market and depress prices.

Next month’s unlock will release 175.74 million TIA. That’s 16% of the cryptocurrency’s total supply and worth $1.13 billion, or 82% of the market capitalization, according to data source CryptoRank. Such large unlocks often create bearish pressures in the market.

“There has been an uptick in TIA hedging demand ahead of the Oct. 31 unlock – both via exchange-traded perpetuals, alongside OTC forward agreements with market makers/trading desks,” Jake Ostovskis, an over-the-counter trader at Wintermute, told CoinDesk in a Telegram chat.

Short squeeze

The bias for shorts, likely stemming from the hedging activity, might have led to a “short squeeze,” contributing to the TIA rally. A short squeeze happens when the asset price remains resilient, contrary to expectations, forcing bears to close their positions, which are bets that an asset will drop. That, in turn, puts upward pressure on prices.

“Traders tried to sell ahead of the [unlock] event from Julyish. I’d argue the squeeze has already happened,” Ostovskis said.

That’s evident from the recovery in funding rates tied to TIA perpetuals, which have rebounded to nearly zero, or neutral, having been in negative territory since July. As suggested by Ostovskis, rates below zero are a sign of traders taking bearish bets to protect against the downside price risk posed by the influx of so many tokens.

The recovery to neutral alongside the TIA price rally suggests shorts have been crowded out and might have inadvertently squeezed the price higher.

The $100 million fundraise

A $100 million fundraise announced this week likely gave bears another solid reason to exit shorts, adding upward momentum. The fresh round raised the foundation’s cash stash to $155 million, although the team did not detail how it plans to use the funds.

Some pseudonymous observers have suggested the fundraising was an OTC deal at a $3.4 billion valuation directly with the foundation, with the token sale priced at $3 and one-third of the same to be unlocked on Oct. 31.

According to Ostovskis, the impending unlock may have been priced in.

“Some commentators have seen their OTC sale sales as controversial, however, the result that a large cliff has been removed and enabling the pre-hedging unlocks has overall been positive, allowing the market to price in this event in advance,” Ostovskis noted.

Binance Founder Changpeng ‘CZ’ Zhao Could be Released on Friday

A Federal Bureau of Prisons rule states that an inmate whose release date falls on a Saturday, Sunday, or legal holiday, may be released on the last preceding weekday.

Binance founder Changpeng “CZ” Zhao, could be released on Friday, two days ahead of his scheduled release date of September 29th (Sunday), according to an interpretation of the law.

The U.S. Department of Justice’s Federal Bureau of Prisons rule states that “The Bureau of Prisons may release an inmate whose release date falls on a Saturday, Sunday, or legal holiday, on the last preceding weekday unless it is necessary to detain the inmate for another jurisdiction seeking custody under a detainer, or for any other reason which might indicate that the inmate should not be released until the inmate’s scheduled release date.”

The decision may depend on the discretionary authority given to Wardens. The Bureau of Prisons did not immediately respond to a request for clarification and comment sent outside of office hours from CoinDesk.

CZ was sentenced to four months in prison in April after pleading guilty to violating the Bank Secrecy Act by failing to set up an adequate know-your-customer (KYC) program at Binance.

If released on Friday, CZ would have spent 116 days in prison. He spent three months at a low-security prison, Lompoc II, on California’s central coast before being moved to a halfway house in San Pedro, California in late August.

“We are delighted that CZ will be home with his family. While he is not managing or operating Binance, we are excited to see what he does next,” a Binance spokesperson said. “Since last year, Binance has continued to thrive under the leadership of our current team, surpassing 230 million users globally.”

Bitcoin’s ‘Outside Day’ Sets Stage for $70K, Altcoins Break Out: Technical Analysis

Thursday’s bullish trading range marks an end of the recent consolidation and a resumption of the rebound from lows under $53,000.

Earlier this week, analysts at the Bitfinex crypto exchange said August’s $65,200 high is the level to beat for bitcoin (BTC) bulls.

The breakout happened Thursday and how. Bitcoin jumped over 3%, the most in nine days, to the highest since July 31 with a wider trading range than Tuesday, according to charting platform TradingView.

In other words, the cryptocurrency formed a bullish “outside day” pattern, signaling an end of the recent consolidation below $65,000 and a resumption of the rally from lows under $53,000.

“The outside day can form midway in a price trend, just like flags and pennants. Since outside days act as continuation patterns, expect the breakout to be in the same direction as the inbound price trend,” investor and technical analysis expert Thomas N. Bulkowski wrote in his book “Encyclopedia of Chart Patterns.”

The breakout flipped the August high into a support level, shifting focus to the next resistance closer to $70,000. The resistance is identified by the trendline connecting highs registered in March and June.

Bitcoin has gained almost 1% so far on Friday, close to $66,000, validating the bullish breakout. The positive bias would be invalidated if prices fell below Thursday’s low of $62,805.

Altcoin breakout

While bitcoin is still stuck in a broad descending channel, the cumulative market capitalization of alternative cryptocurrencies (altcoins), or tokens other than market leaders bitcoin and ether, has broken out of a six-month corrective trend.

The breakout points to a potential “alt season” ahead, a period characterized by smaller tokens outperforming BTC and ETH.

BlackRock Highlights Bitcoin’s Unique Properties, Believes BTC is Risk-Off in the Long Term

BlackRock’s latest report shows that bitcoin has a very low correlation to U.S. equities on a trailing six-month basis.

BlackRock released a report last week, titled “bitcoin as a unique diversifier.”

The investment giant identified four key points from the report. First, how to analyze bitcoin (BTC) in relation to traditional financial assets due to its fundamental properties, such as not having a quarterly earnings report or a CEO.

Second, bitcoin’s high volatility can be perceived as a “risky” asset, which contributes to the discussion that whether it is a “risk-on” or “risk-off” asset. The token could be considered a flight-to-safety option because it is scarce, non-sovereign, and decentralized. Lastly, BlackRock pointed out that the long-term adoption of bitcoin may come from global instability.

Bitcoin’s realized volatility trends downwards

Bitcoin’s realized volatility continues to trend downwards over time, indicating increased stability. In the early years of bitcoin, its realized volatility used to trade over 200%; however, as the asset matured, so did the volatility.

Since 2018, realized volatility has not exceeded 100% and is currently at 50%. As realized volatility decreases and liquidity increases through financial instruments such as the spot and futures market, this may bring in more sophisticated investors such as options traders. This seems to be on the horizon with the U.S Securities and Exchange Commission’s (SEC) approval of physically settled options tied to BlackRock’s spot bitcoin ETF.

Risk-on or risk-off?

BlackRock also asked the question: Is bitcoin risk-on or risk-off? While short-term trading may suggest that bitcoin behaves like a risk-on asset, the data reveals a different narrative over a longer time horizon.

According to data from bitcoin custody service Unchained, “almost all holders (99%+) are in profit if they held for just three years. All bitcoin holders in this class are in profit if they held for at least 5 years”.

We can see this type of mentality on-chain among investors, where over 65% of the circulating bitcoin supply has remained unmoved for more than one year, according to Glassnode. This trend suggests that many investors tend to hold bitcoin because they believe in its store-of-value narrative and view it as a risk-off asset, even though bitcoin has faced multiple 20% corrections in 2024.

Low historical correlation with U.S equities

BlackRock also showed that bitcoin has a very low correlation to U.S. equities. A graph shows the trailing 6-month S&P 500 correlation with bitcoin; the average correlation is 0.2 since 2015. Sometimes, assets will trade near one-to-one with one another due to external macro factors, most likely in risk-off or liquidity events.

The report notes, “These episodes have been short-term in nature and have failed to produce a clear long-term statistically significant correlation relationship.”

Bitcoin outperforms other risk-on assets after major events

Continuing with the theme of having a long-term time preference, BlackRock noted that bitcoin tends to outperform other risk-on assets after 60 days following a major geopolitical event.

The U.S.- Iran escalation in 2020 saw bitcoin return 20% after 60 days, outperforming gold and S&P 500. This was also the case for Covid-19, the 2020 U.S. election challenges, the Russian Invasion of Ukraine, the U.S. regional banking crisis, and most recently, the Yen Carry trade unwind on Aug. 5.

During the recent Yen carry trade unwind on Aug. 5, which was now 53 days ago, major assets experienced declines on the day. However, bitcoin has risen by 22% since then, with gold and the S&P 500 up roughly 11%.

GraFun, Supported by Floki and DWF Labs, Brings Memecoin Frenzy to BNB Chain

FLOKI tokens could see a price jump as the project’s closeness to GraFun boosts fundamentals.

The memecoin issuing and trading frenzy that gripped Solana and Tron blockchains in the past few months could soon see a repeat on the BNB Chain ecosystem, thanks to a protocol that says it is making the process easier and better for users.

GraFun, a memecoin launchpad and trading platform exclusive to the BNB Chain network, will be released on September 27 at 11:00 UTC.

It uses a unique bonding curve mechanism that allows anyone to fairly launch a memecoin for next to nothing. This is similar to Solana’s runaway hit Pump Fun, but GraFun’s developers say they have made certain key improvements.

“It’s all about promoting long-term investment and real growth,” GraFun developers explained in an X post. “Unlike the traditional bonding curve, the Fair Curve is community-first. And built to benefit everyone who participates. It gives you the power to be part of a DAO — where decisions are made by you and your fellow token holders.”

The project has bagged support from crypto ecosystem project Floki and other industry heavyweights including BNB Chain, DeXe Protocol, and HOT Protocol. DWF Labs is also a strategic partner.

“Floki is the biggest memecoin brand on the BNB chain by far, and our role in helping with its recent launch and ensuring its success has shown the kind of sway Floki holds within the BNB ecosystem and in this space as a whole,” Floki developer B told CoinDesk in a message.

“With Floki’s backing, GraFun will send a strong message to the industry that it is the de facto platform for creating fair launch memecoins in the space,” B added.

Floki will receive 40% ownership of GraFun and get 40% of the revenue generated from the launchpad. Floki’s ownership of GraFun will lead to key benefits for FLOKI and its sister project TokenFi (TOKEN), developers told CoinDesk in a release.

What is bonding curve model?

With the bonding curve model, anyone can deploy a memecoin or a launchpad that supports this model for next to nothing (e.g., anyone can create a memecoin with GraFun with a few dollars or less), with zero developer experience and without having to make any form of commitment (liquidity, expensive token deployment costs, etc).

The memecoin launchpad then allows the market to determine the value of the memecoin: if there is enough demand to push the memecoin to a certain market cap (e.g., $100,000 market cap), it hits a “bonding curve,” and liquidity is automatically added to a decentralized exchange (DEX) and burned or locked – making it possible for anyone to buy the memecoin on DEXs.

If a memecoin does not hit the bonding curve, it simply does not get “launched” on a DEX. The memecoin launchpad makes money regardless.

The most popular examples of memecoin launchpads that use this kind of model are Pump on Solana – which pioneered such a model – and Tron’s Sun Pump.

Pump.fun has made over $110 million in fees in the last 6 months alone and is currently projected to generate $136.5 million in annual fees. SunPump has made $5.2 million in fees since launching a little over a month ago and is currently projected to generate $51.8 million in annual fees.

However, the massive amount of tokens launched on Pump and Sun means most tokens fail to reach a bonding curve and end up in losses – leaving a majority of users unhappy in the past months. As CoinDesk previously reported, Pump’s quick token creation services mean tens of thousands of tokens have likely been issued since its March launch. However, only a few have reached more than $10 million in market capitalization.

GraFun’s USP is the “Fair Curve” model, which developers say minimizes rug-pull risks, reduces price manipulation, and ensures fairer token issuances that result in fewer users losing money.

First Mover Americas: Bitcoin Nears $66K After Monster ETF Day

The latest price moves in crypto markets in context for Sept. 27, 2024.

This article originally appeared in First Mover, CoinDesk’s daily newsletter, putting the latest moves in crypto markets in context. Subscribe to get it in your inbox every day.

Latest Prices

CoinDesk 20 Index: 2,090.20 +1.76%
Bitcoin (BTC): $65,567.06 +1.8%
Ether (ETH): $2,649.73 +0.83%
S&P 500: 5,745.37 +0.4%
Gold: $2,666.73 -0.22%
Nikkei 225: 39,829.56 +2.32%

Top Stories

Bitcoin closed in on a return to $66,000, climbing to its highest point since the start of August. BTC rose to over $65,900 during mid-morning in Europe, an increase of over 3% in the previous 24 hours. Bitcoin then retreated to trade just above $65,500. Spot bitcoin ETFs in the U.S. enjoyed a monster day on Thursday, registering inflows of $365 million and bringing the weekly total to over $600 million. The broader digital asset market, as measured by the CoinDesk 20 Index, is also higher by around 1.8%, with dogecoin leading the gains. DOGE jumped around 9% to nearly $0.125 amid a surge in memecoin prices.

China’s plans for a huge stimulus package lit a fire under memecoins, with both SHIB and FLOKI registering double-digit gains. Memecoin prices tend to respond positively to liquidity injections because the increased availability of cash nurtures a greater appetite for risk among traders. Memecoins are community-driven and jump when the market displays risk-on behavior. “Leading the gains are the SOL and BTC ecosystems, indicating a strong focus on meme coins as overall liquidity grows. While not nearly as explosive as meme coins on the aforementioned chains, meme coins on Ethereum, such as $PEPE and $SHIB, are also experiencing heightened interest from the market,” HashKey OTC CEO Li Liang said.

TIA, the token of data-availability network Celestia, posted its best monthly gain this year, confounding traders who’d positioned for a drop in the price as the result of a $1.13 billion token unlock due next month. September’s market-beating 40% surge takes place against a background of some market participants seeking downside hedges due to concerns the token unlock due Oct. 31, equivalent to 16% of its total supply, will flood the market and depress prices. However, the bias for shorts, likely stemming from the hedging activity, might have led to a short squeeze, contributing to the TIA rally. “Traders tried to sell ahead of the [unlock] event from Julyish. I’d argue the squeeze has already happened,” Jake Ostovskis, an over-the-counter trader at Wintermute, told CoinDesk.

Chart of the Day

– Omkar Godbole

Bitcoin Prices Show Positive 30-Day Correlation With China’s Central Bank Balance Sheet

“The new inflow of cash could indirectly push up the price of bitcoin, particularly in the long term perspective,” one analyst said.

Bitcoin (BTC) prices seem to have tracked the growth in the Chinese central bank’s balance sheet over the past eight years, maintaining a notable positive 30-day correlation.

The People’s Bank of China (PBOC), holds roughly $6.22 trillion worth of U.S. dollars on its balance sheet. At press time, the 30-day correlation coefficient between bitcoin’s price and the PBOC’s balance sheet size was 0.66, according to data source TradingView. Its always been positive except 2016 and from late 2022 to 2023. On the other hand, as of writing, bitcoin had a -0.88 correlation over 30 days with the Federal Reserve’s balance sheet, the lowest on record since 2016.

A strong correlation means a co-efficient of 0.6-0.9, and 0.8-1 is considered a very strong correlation. Correlations are a statistical measure of how two variables are related and can be used in financial markets to predict or track asset prices.

The positive correlation is noteworthy as early this week, the PBOC said it was considering injecting up to 1 trillion yuan ($142 billion) of capital into its biggest state banks to increase their capacity to support the struggling economy.

The central bank also cut the reserve requirement ratio for mainland banks by 50 basis points (bps) while lowering the seven-day reverse repo rate – the interest rate at which a central bank borrows funds from commercial banks – by 20 bps to 1.5%.

BTC has gained nearly 3% this week and is up over 10% for the month, according to CoinDesk data. Asian stocks led by China have also surged in the wake of PBOC’s stimulus bazooka. The CSI 300 Index of large-cap shares soared 4.5% on Friday, bringing this week’s gain to 16% in the biggest run since 2008.

Like the U.S., China’s stimulus aims to lower unemployment and spur business growth. The new inflow of cash could indirectly push up the price of Bitcoin, particularly from a long-term perspective, market analyst Nick Ruck told CoinDesk in a Telegram message on Friday.

“The stimulus could lead to increased investment in blockchain companies that may include mining technology and startups,” Ruck said. “Select funds may also be able to increase exposure to crypto-related investments offshore, such as in stock-listed firms and ETFs in Hong Kong.”

The bump won’t be limited to bitcoin, some say, as all riskier assets are expected to get a boost in the coming months.

“It’s all the green light for global risk markets as U.S. equities hit new ATHs for the 3rd time this week, helped by a rapid-fire of furious stimulus to resuscitate the long-struggling Chinese economy,” Augustine Fan, head of insights at SOFA, told CoinDesk. “This has led macro observers to turn explicitly bullish on all risk assets in the interim, with a seemingly globally synchronized easing move that was reminiscent of the easy-money days from the QE era.”

“Naturally, crypto prices are still highly correlated to equity performance. However, investor sentiment seems to have flipped to a ‘buy the dip’ mode, and risk-reward favors a continued rally with no or little downside catalysts in sight,” Fan added.

Fantasy Sports Company Sorare Charged With Providing Unlicensed Gambling Facilities in U.K.

Sorare was charged with violating the Gambling Act 2005 in the regulator’s first move against a blockchain-based platform.

Sorare, a fantasy sports company, was charged with providing unlicensed gambling facilities in the U.K. in the Gambling Commission’s first action against a blockchain-based platform.

The company, based in Saint-Mande, France, operates fantasy soccer, basketball and baseball games that allow participants to buy and sell collectible cards using non-fungible tokens (NFTs). It has inked deals with the English Premier League and Germany’s Bundesliga, among other national sporting associations. NFTs are unique digital tokens used to represent assets.

“Sorare is charged with providing facilities for gambling without holding an operating licence,” the commission said on its website. The company will have to appear on Oct. 4 in Birmingham Magistrates’ Court.

The charges follow an almost three-year inquiry by the regulator. In 2021 the commission said it was looking into whether Sorare needed a gambling license. The case is the first time it has clamped down on the use of a blockchain-based platform and the outcome could set a precedent for how regulators handle Web3 firms in the future.

It is also another sign suggesting U.K. regulators are taking more enforcement action against suspected illicit activity in the crypto space following a swoop on unregulated crypto ATM’s.

“We firmly deny any claims that Sorare is a gambling product under U.K. laws,” a Sorare spokesperson said. “The Commission has misunderstood our business and wrongly determined that gambling laws apply to Sorare.”