Week of Jan 18, 2022

USDC Flips Tether on Ethereum

Bitcoin-friendly U.S. banks report earnings today. GBTC discount to NAV reaches lowest level ever.

💬 Market Commentary




Bitcoin’s price action was mixed last week - finding support later in the week after making a new low on Monday. While we are not scheduled to hear news from the Fed, or inflation data this week, several indicators point to potential volatility ahead for bitcoin markets.

For one, spot trading volumes for bitcoin remain low - much lower than they were when Bitcoin was trading at similar price levels just months ago.

Second, the open interest levels of Bitcoin Futures contracts remain very elevated. 

As we’ve covered here in the past, bitcoin futures are used by many investors to access leverage. A high level of open interest could cause volatility if prices move suddenly, as many investors can get liquidated out of their long positions - this is referred to as a long squeeze. 

It can also work the other way around, with short investors getting liquidated if the price of bitcoin rallies - this is referred to as a short squeeze.

To get a sense of whether leveraged investors are positioning themselves short or long, we can take a look at the short interest for bitcoin in the Bitfinex exchange.


Here we can see that shorts have been building since the start of the year, and have continued to build throughout the last week. As we can see from the chart, short interest on Bitfinex surged ahead of the big price drop we saw in December.

If we look at the curve structure for bitcoin futures contracts, we see that the curves have flattened relative to last week. 

All venues are currently pricing Bitcoin for delivery in July below $50k.

Lastly, the options flow for Monday has seen a lot of put buying (buying downside protection) and call selling (selling upside participation).  

More put contracts bought than sold and more call contracts sold than bought can be considered as defensive positioning for a portfolio. This behaviour is consistent with what we are seeing in the futures markets and short interest. 

Not all of the indicators are gloomy, however. If we look at  the on-chain behaviour of hodlers, we see some interesting data.

The above metric, courtesy of Glassnode, measures the Net Change in the position of hodlers. When the indicator is green, it means that coins are maturing at faster rate than they are being spent (meaning the days after the coin was last transacted are growing). When the indicator is red, it means high levels of spending - coins are being spent faster than they are being accumulated. 

As we can see, recent behaviour suggests that hodlers are accumulating at these levels.   

As for the next catalyst that we can expect for bitcoin - the SEC is scheduled to issue a decision on the Greyscale Bitcoin Fund ETF application on February 6th. 

Looking at the GBTC, it’s discount to net asset value reached its lowest level ever last week. This suggests that investors are not too optimistic about getting an approval in the next 2 weeks.

S&P 500


The S&P 500 had a pretty volatile week last week but managed to finish essentially flat, after Wednesday’s 7.0% inflation reading provided no surprises. 

U.S. treasury yields have continued to soar, and the yield on the 10-year note is already north of the important 1.75% level that we highlighted last week. 

While the S&P 500 looks unbothered for the time being, the VIX - which tracks the volatility of S&P 500 options contracts, rose by more than 8.95% last week, and is up another ~3% so far into the week after spiking higher by almost +23%. This means investors are likely buying downside protection and paying a higher premium for it.

Despite the spike in volatility, many investors remain bullish on U.S. equities as we head into the Q4 2021 earnings season - which kicked off last week and goes into high gear this week. 

According to Credit Suisse chief U.S. Equities Strategist Jonathan Golub, the market is pricing in a 20% year-over-year growth in earnings, and “companies will likely beat that”. He also added that “Everyone is expected to do better than tech” this time around. 

This week will see earnings reports from the likes of Goldman Sachs, Bank of America, Netflix, and Procter & Gamble. Details on the reports in our What’s Ahead section.

Other macro investors like Dan Tapeiro,  highlight that when real interest rates have been negative, asset returns have been historic.

It is also interesting to note that previous times that real interest rates have been negative, they have remained negative for a multi-year environment. The real yield on the 10-year note first went into negative territory in mid 2019. Meaning we could have a few years of negative real rates left.  

Time, and earnings - will tell. 

It will be a quiet week for the Fed as officials are on a quiet period ahead of their 2-day meeting on January 25th. 

As a parting note, we wanted to highlight the correlation between the S&P 500 and Bitcoin prices. 

While the 1-year price correlation between Bitcoin and the S&P 500 has been historically low (between 0-20%), the 1-month price correlation between the 2 has recently surpassed 50%.

A good reason to stay tuned to earnings reports and Fed updates in the months ahead.



The U.S. dollar index took a beating last week - finishing down -0.60% BPS, helping lift gold prices higher by +1.20%. 

While the yield on the 10-year note rose by 17% last week, it is still sitting at a mere 1.77% - far, far away from December’s 7% rate of inflation. 

Gold has continued to benefit from rising U.S. inflation - and it could continue to do so as long as real-rates remain negative. As real rates become more positive, this puts pressure on gold. 

With the price action being so driven by Fed activity, gold could remain trading range-bound until the Fed meeting next week.



The DeFi index found some footing last week but has since given the gains right back this week. 

A very interesting development occurred last week when USDC supply on Ethereum surpassed that of Tether. 

This is a strong signal to the market that investors are finding comfort in a more transparent stablecoin operation. And it also speaks to the type of investor that has been getting more active on Ethereum. 

The recent transaction fees on the chain, north of $30/transaction on average, have priced out many smaller users. Larger investors and institutions tend to place a lot more emphasis on the type of stablecoin that they are using for their transactions. This has led to a surge in popularity in USDC, as it is one of the most transparent stablecoin operators.

In other DeFi news, The Economist, a publication that does not dedicate much attention to crypto assets, wrote an entire piece on “The race to dominate the DeFi ecosystem” and went on to talk about “why Ethereum is losing market share”. 

As we’ve mentioned in the past, high transaction fees on the Ethereum chain and massive incentive packages for competing Layer 1 blockchains have led to a proliferation of DeFi activity on other chains. 

Who will win still remains to be seen. While the competing chains look attractive now, if and when they become popular and reach scale, they will very likely face a future of congested transactions and limited bandwidth. Exactly what Ethereum is having to deal with now.



The next difficulty adjustment will happen sometime on Wednesday and is expected to bring difficulty to a fresh all-time high of 26.4 THs. 

As expected, it did not take long into the new year for hashrate to keep growing. We have now regained all of the hashing power (yellow line below) that was lost after the Chinese mining ban and have resumed the climb higher.

The mempool remains clear with transaction costs and speeds at optimal levels.

Another positive development for the mining industry this week was that Bitmain announced its first Bitcoin miner of 2022. The Antminer S19 Pro+ Hyd.

Their first product that provides out-of-the-box liquid-cooling tech. It surpasses its predecessor by 41%, with a hashrate of Hashrate: 198TH/s. 

For one, mining-hardware production continues to grow. The efficiency and duration of Bitcoin ASIC miners has never been this good. 

What's Ahead

It’s a quiet week for the Fed as they prepare for the FOMC meeting next week. 

The market focus will be on U.S. corporate earnings - with a slew of companies reporting their Q4 2021 results this week. 

Interestingly, the 2 most prominent U.S. banks that service crypto companies, Silvergate and Signature, both report earnings today. Given the recent amount of VC capital that has been pouring into the space, it would not be surprising for these banks to surprise investors with their results.

A list of relevant earnings for the week is below:


9.00 AM EST - Goldman Sachs reports Q4 2021 earnings

9.00 AM EST - Signature Bank reports Q4 2021 earnings

9.00 AM EST - Silvergate reports Q4 2021 earnings


9.00 AM EST -Morgan Stanley reports Q4 2021 earnings


Netflix reports Q4 2021 earnings (timing TBD)

Thank you for reading and as always, we'll keep you posted on any relevant news throughout the week right here and from our Twitter account.

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About the author

Mauricio Di Bartolomeo

Mauricio is the co-founder and Chief Strategy Officer of Ledn.io. He grew up in Venezuela where he and his family learned about Bitcoin. Now based in Canada, Mauricio holds HBA and MBA degrees from the Richard Ivey School of Business in London, Ontario in Canada.