HomeTrading$4 Billion in Fresh Capital Flows into Crypto; Leverage Markets and OI...

$4 Billion in Fresh Capital Flows into Crypto; Leverage Markets and OI “Completely Reset”


The cryptocurrency market is experiencing a drawdown, which started in November when the overall market cap surpassed $3 trillion for the first time.

Since then, the sell-off in the market has wiped out billions of dollars from the market as the capitalization now fell under $2.3 trillion.

Amidst this brutal price action, Bitcoin plummeted to under $42,500 and Ether just below $3,600 on Saturday. A downtrend move on weekends is usually more heightened because there is less liquidity, and no demand is coming from institutions as they do not trade during these days.

Fundstrat head of digital-asset research Sean Farrell cited the market’s reaction to three events, news on the omicron variant, reaction to the potential for an expedited Federal Reserve taper, and action in the derivatives market.

The initial sell-off has been in tandem with the stock market, which led to more than $1 billion in liquidations in crypto, leading to even more losses, aggressively wiping out open interest, and plunging the funding rates into negative across the board.

“Our expectation is the rest of Q4 will be a hard month; we aren’t seeing the strength in bitcoin that we generally see after one of these crushing days,” said Matt Dibb at Stackfunds, a Singapore-based crypto fund distributor, adding leverage markets and open interest have “completely reset.”

According to some, the latest sell-off could have been triggered by institutional investors, who reacted to the shakiness in the stock market based on a faltering macro environment, where inflation and the latest job report have investors expecting the Federal Reserve to accelerate its tapering and even increase the interest rates.

Amidst all this, however, money is still slowing in the crypto market. In November, $4 billion of fresh capital was pumped into 120 cryptocurrency projects.

“Across our desk, we are seeing a lot of OTC with primarily buyers coming in to take long exposure,” Aya Kantorovich, an executive at crypto firm FalconX said in an interview.

Meanwhile, Starwood Capital Group chairman Barry Sternlicht, who has about 2-3% of his net worth in crypto, has been advising people to invest in bitcoin as an inflation hedge.

“So having a little investment in Bitcoin I think might be a smart little hedge in your life because your paper will be worthless, unfortunately,” he told Bloomberg’s “The Future of Global Financial Centers” in Miami.

Having just 2% of net worth in crypto means if “it goes to zero,” it won’t hurt him and but “if it goes to a million a coin, you’re going to look at the TV and get very upset,” he added.

During last week’s J.P. Morgan’s inaugural Crypto Economy Forum, the diverse set of investors and crypto ecosystem companies that participated, such as FTX exchange CEO Sam Bankman-Fried, Coinbase CEO Brian Armstrong, and Ava Labs founder Emin Gün Sirer, were very bullish for the outlook for crypto markets.

“The consensus of the Forum was that while the institutional adoption that has taken place already has been big enough to establish crypto as an asset class, this institutional adoption looks far from being exhausted.”

The banking giant also gave 69 NFTs to attendees of the first Crypto Forum for TradFi Investors.

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