Market wrap: Bitcoin slips as crypto tax bill heads home

Bitcoin retreated on Tuesday after rising nearly 20% over the past week. The cryptocurrency was trading at around $ 45,000 at the time of publication and has fallen 2% in the past 24 hours, compared to a loss of almost 1% in ether over the same period.

Analysts remain bullish on bitcoin despite regulatory uncertainty in the United States over crypto tax rules.

“The crypto industry itself is new, and relying on an emerging tech industry for taxes could hinder its growth,” wrote Lucia della Ventura, a researcher at Trinity College Dublin and head of legal compliance at the financial software company Ledgermatic, in an email to CoinDesk.

“It is necessary to wait for the final vote, given the fact that several amendments have been tabled as they can potentially change the impact of the bill for businesses,” Ventura wrote.

“Cryptocurrency traders are not so focused on the expected passage of President Biden’s infrastructure bill, which as it stands will include new, very negative tax reporting rules for the space, ”Edward Moya, analyst at online brokerage Oanda, wrote in an email to CoinDesk.

In the meantime, “Wall Street is also closely watching bitcoin outperforming the dollar and gold,” Moya wrote.

Additionally, the decentralized finance platform (DeFi) Poly Network came under attack on Tuesday, with the alleged hacker draining around $ 600 million in crypto. The cyber attack contributed to a bad mood in the crypto market.

Bullish sentiment is increasing in the options market for bitcoin and ether. “There has been an increase in demand for short-term options as BTC and ETH erased their multi-month price ranges,” Delphi Digital tweeted. “Both assets appear to be in a strong bullish trend, and speculators have bought short-term options.”

The chart below shows the downward delta asymmetry of 25 for one-week BTC and ETH options contracts, which means there is more call demand than put options.

Some traders see an opportunity to sell BTC and ETH volatility given recent activity in the options market. The chart below shows the recent increase in BTC’s three- and six-month currency volatility.

“We maintain our short vision of volatility. In fact, vega (older puts and calls) seems like a good sell at these high levels, ”QCP Capital wrote in a Telegram conversation.

QCP said the frenzied buying of both BTC and ETH calls on the volatility curve led to the rally in the near term. “We believe this flow is coming from funds and large speculators making big, high-level bets, buying BTC strikes up to $ 80,000 to $ 100,000 and ETH strikes up to $ 8,000 to $ 10,000 from September 2021 to June 2022, “QCP wrote. .

Bitcoin’s blockchain transaction volume with values ​​of at least $ 1 million has increased by 10% since early August and represents almost 70% of the total value transferred.

These big investors, represented by high-value dollar transactions, have fueled bitcoin’s nearly 20% price gains since last week, Glassnode said.

A number of analysts say the trend shows these institutions are focusing more on the benefits of cryptocurrency than the potential hurdles, wrote CoinDesk’s Muyao Shen.

The “spent output profit ratio” or SOPR, which is calculated by dividing the realized value of a spent output by the value at creation of the original unspent transaction output, has risen above 1, 0, peaked locally and then reset to 1.0, after months of trading below 1.0, according to Glassnode. The move indicates “a classic bullish reversal,” Glassnode said.

An SOPR value greater than 1 “implies that the parts moved on that day are selling, on average, at a profit (the price sold is higher than the price paid)” and vice versa.

“The most important thing to watch out for is whether SOPR holds above 1.0,” Glassnode wrote. “If SOPR continues to trade higher, this reflects a bullish scenario in which the market adequately absorbs profits made on coins spent. If, on the other hand, SOPR drops and trades below 1.0 on a sustained basis, that would suggest general market weakness and potentially a false rally.

Most digital assets on CoinDesk 20 increased on Tuesday.

Notable 9:00 p.m. UTC (4:00 p.m. ET) winners: