Cointelegraph By Marcel Pechman
After bouncing from the recent short-term low, Bitcoin (BTC) price posted a 15% gain over three days as it climbed from $32,400 to $37,200.
This was an impressive move given that BTC price had been trading in a sideways range for weeks and regardless of the reasons behind the surge, one would expect large traders and arbitrage desks to follow the trend.
Interestingly, this is not the case as many of the top traders opened short positions as BTC commenced its 15% move. Even if a trader lacks confidence in a potential retest of the $42,000 all-time high, opening shorts while Ether (ETH) blasts through $1,600 seems risky.
Take notice of how both leading cryptocurrencies tend to trade in tandem most of the time even though investors could be rotating from BTC to Ether due to its role in decentralized finance, explosive price appreciation, and the allure of Eth2 staking.
Data from TheTie, an alternative social analytics firm, also found that Google searches for “buy crypto” had recently hit an all-time high. According to the same source, there’s been a 135% surge in cryptocurrency social media activity over the past three months.
Adding to this bullish scenario, global payments giant, Visa announced that it is aggressively pursuing cryptocurrency partnerships, including debit cards and digital banks.
Lastly, a recent 15,200 BTC ($515 million) outflow at Coinbase was deemed a ‘bullish signal’ by analysts at CryptoQuant. According to CryptoQuant, the outflow indicates an “OTC deal from institutional investors” who are possibly accumulating BTC into cold wallets.
These bullish signals contrast with the exchange-provided traders’ long-to-short net positioning. This indicator is calculated by analyzing the client’s consolidated position on the spot, perpetual and futures contracts and it provides a clearer view of whether professional traders are leaning bullish or bearish.
With this in mind, there are occasional discrepancies in the methodologies between different exchanges, so viewers should monitor changes instead of absolute figures.
Over the past three days, top traders at every exchange analyzed have increased their shorts. Even though large traders, market makers, and arbitrage desks may hold positions in their cold wallets or Grayscale GBTC funds, the long-to-short ratio shows that there is a lack of confidence on whether BTC will push through $38,000 and pursue the $40,000 level in the short term.
Moreover, the recent outperformance by Ether could have been fueled by top traders reducing BTC exposure. This makes even more sense considering the upcoming CME ETH listing is on Feb. 8. It’s only natural that there would be a surge in appetite among institutional investors.
Top traders could have also moved their BTC off exchange in search of better yield opportunities, so assuming that they’ve all entered short positions is a hasty conclusion.
If these top traders did enter BTC short positions, there would be signs on derivatives markets. To disprove this theory, Friday’s $1 billion options expiry still favors bulls, who at the moment have many incentives to push the price above $40,000.
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.
Price analysis 3/5: BTC, ETH, ADA, BNB, DOT, XRP, UNI, LTC, LINK, BCH
Cryptocurrency exchange Bybit shuts up shop in UK in compliance with FCA ban
Cointelegraph By Greg Thomson
Singapore-based cryptocurrency derivatives exchange Bybit announced on Friday that it would be suspending services for its customers n the United Kingdom. Bybit offers a range of high-end trading products for cryptocurrencies such as Bitcoin (BTC), Ether (ETH), Bitcoin Cash (BCH), Litecoin (LTC) and more.
The move follows a blanket ban on all retail cryptocurrency derivatives trading by the Financial Conduct Authority, and U.K. customers will be given until March 31 to close out positions and withdraw their funds from the platform, a company announcement stated.
The post also affirmed the company’s intention to continue dialogue with regulators in the hope of opening up shop in the U.K. once more.
“We request your immediate cooperation in this matter. We regret this situation, and will seek dialogue with regulators to explore options. We hope to be able to earn the privilege to serve you again in the future,” stated the announcement.
Going forward, new sign-ups to the exchange using U.K.-based mobile phone numbers or IP addresses will be rejected automatically.
In October 2020, the FCA issued an announcement declaring that all retail cryptocurrency derivatives trading, encompassing products such as options, futures and exchange-traded notes, would be banned. The ban went into effect in early January 2021.
Remarkably, the FCA’s decision to ban these products flew in the face of feedback received from industry consultants. The FCA canvassed the opinions of trade bodies, national authorities, exchanges and legal representatives, with 97% of respondents arguing against the prospect of a ban.
A dark horse in the Ethereum scaling wars? Chainlink’s oracles find fertile ground on xDai
Cointelegraph By Andrey Shevchenko
Chainlink (LINK) oracles have made their way to xDai, an Ethereum sidechain that has seen growing adoption among DApp developers who cannot afford to stay on the Ethereum mainnet.
As announced by Chainlink on Thursday, its price feeds are live on the xDai mainnet, offering price data for an initial set of trading pairs including LINK/USD, AAVE/USD, DOT/USD and SUSHI/USD. More pairs can be quickly added if there is demand, the company said.
The integration was completed by Protofire, a development workshop and xDai validator. The team received a Chainlink Community Grant to port native Chainlink oracles on xDai, including a token bridge adapter that enables native LINK payments for the oracle’s functionality.
The integration of Chainlink price feeds is the latest in a series of positive adoption news for the xDai project. The chain was already hosting major Ethereum-based DApps like Perpetual Protocol, a derivatives platform, and Omen, a prediction market developed by Gnosis. The inclusion of native Chainlink oracles removes a major barrier for projects relying on them, potentially opening up xDai for more DApps who wish to escape from the congested Ethereum mainnet.
Decentralization is good, but it won’t pay for gas
xDai is a relatively centralized sidechain secured by an independent set of validators. Sidechains are a type of chain where a standalone blockchain uses another’s token as a native currency for paying transaction fees — in xDai’s case, that token is MakerDAO’s Dai. The architecture binds the economies of the two environments, but the sidechain is otherwise a completely independent entity with its own security rules.
In the Ethereum community, xDai is commonly known as a centralized layer two solution. It was launched by PoA Network, a project whose name directly hints to centralization — Proof of Authority is the somewhat euphemistic name of a consensus model where the validators are chosen by the project’s insiders, instead of a community.
The xDai chain has since its launch transitioned to a Proof-of-Stake model very similar to that used by EOS or Binance Smart Chain. The total number of validators can never exceed 19, compared to the tens of thousands of validators in Ethereum’s Beacon Chain. The benefit this architecture provides is faster scalability, with xDai offering an advertised 70 transactions per second for simple token transfers.
In a conversation with Cointelegraph, Friederike Ernst, chief operating officer at Gnosis, agreed that xDai is somewhat centralized:
“It is not as decentralized as mainnet, this goes without saying. Obviously these are for very different use cases: you don’t want to do things on xDai where you need the economic consensus guarantees of layer one. But for many things, you don’t actually need them.”
The allure of xDai comes in part from its almost plug-and-play compatibility with Ethereum. Its OmniBridge allows moving any token to xDai and back, while its blockchain architecture is almost identical to Ethereum. This makes porting DApps or infrastructure elements like oracles very easy.
The centralization concerns seem to be not enough to stop adoption. Chainlink sees itself following developer demand, with Johann Eid, head of integrations at Chainlink Labs, telling Cointelegraph that “smart contract developers should have the option to work with whichever chain is the best fit for their use case.”
For Omen, the decision to set up shop on xDai was a matter of immediate necessity, Ernst explained:
“For most things, the gas costs outweigh the downsides of being on a PoA chain. And the fact of the matter is, while people are betting on a lot of layer two solutions, very few of them are in production.
The growing adoption of xDai or Binance Smart Chain is seemingly at odds with the crypto community’s preference of decentralization. Ethereum fans often believe that the prevalence of DeFi on the blockchain is the result of its more decentralized architecture and community spirit. Indeed, the rise in usage of blockchains like Tron or BSC occurred after it became clear Ethereum could not cope with its load.
At the same time, decentralization appears to be not enough by itself. For example, the most Ethereum-like blockchain in existence is Ethereum Classic, which was formed by a community who believed that Ethereum was not decentralized enough. It has failed to attract almost any interest from DApp developers.
More centralized solutions have a major benefit going for them — they work, right now. Rollup-based layer two solutions are still in development, with Optimistic Rollups being closest to release. Ernst was not particularly enthusiastic about its one week withdrawal waiting period, though. “I’m a huge fan of zkRollups. There you don’t have the withdrawal limitations, but the technology is not developed enough.”
While some developers continue waiting for rollup-based solutions, platforms like xDai can advance unimpeded. “Ultimately, it’s a tradeoff between the higher security guarantees offered by Ethereum and the usability, innovation, speed and cost savings right now on L2 sidechains,” an xDai spokesperson told Cointelegraph. As long as gas fees on Ethereum remain high, DApps may bforced to choose practicality over ideology.
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