Bitcoin (BTC) futures volume and open interest are declining rapidly. Data shows that since the September peak, BTC futures volume has dropped by 60% from over $25 billion to around $10 billion.

Bitcoin futures volume by exchange (September). Source: Digital Assets Data

While the decline in trading activity could ostensibly seem like a negative metric, it could also indicate that a bull cycle is emerging.

The Bitcoin futures market represents most of the overleveraged trades in the Bitcoin market and popular platforms like Binance, BitMEX, and ByBit enable leverage of up to 125x.

When traders are highly leveraged, they are vulnerable to liquidation. For instance, if a 10x long contract placed at $10,000 is liquidated at $9,000, it forces the buyer to market-sell the position.

Assuming there are a large number of traders in similar positions, this increases sell pressure and can catalyze a major sell-off in Bitcoin price.

If the futures market open interest and volume spike, it puts Bitcoin in a vulnerable position and raises the probability of cascading liquidations like those seen during the infamous Black Thursday when over $1 billion worth of futures contracts were liquidated as Bitcoin price plunged below $3,600.

The drop in futures volume can be perceived as a potentially bullish event as typically a small price movement could turn into a major price swing if mass liquidations are triggered at a certain price level.

As such, the declining volume and open interest of the futures market could set the stage for a stable and prolonged rally to take form.

Open interest and volume of Bitcoin during bull and bear markets. Source: amCharts

During bull markets, there are often multiple spikes in open interest but the market stays neutral for a prolonged period, allowing spot volume to pick up. As shown in the chart below, while the futures market volume has dropped, spot volume has slightly increased.

Spot exchange volumes. Source: Digital Assets Data

While not featured on the chart, LMAX Digital, a Bitcoin spot exchange that tailors to institutions, recently overtook Coinbase to become the largest spot exchange. Kyle Davies, the co-founder of Three Arrows Capital, explained:

Indications BTC is not a niche cottage industry: 1) BTC has strong correlation with equities and commodities but you only trade crypto 2) LMAX is the largest BTC USD spot exchange but you dont have an account there 3) Trad billion $ entrants whom you have never heard of.

Considering the increase in institutional demand, the rise in spot volume, and the declining futures open interest, the ongoing trend can be considered bullish.

In the near term, traders expect continued consolidation under the $11,000 resistance and this could extend the trend of decreasing volume in futures.

Edward Morra, a cryptocurrency trader, said liquidity shows Bitcoin would likely face more sideways trading. He said:

My current outlook, either local top is in or another spike to take out stops. A lot of liquidity left below price.

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Why reduced Bitcoin futures volume may signal the start of a new bull trend - Cointelegraph

The price of Bitcoin (BTC) has remained relatively flat for September and the strong decline in altcoin and DeFi token prices seems to be making the situation worse for many investors.

Despite this lack of bullish momentum, on-chain data reveals that new participants are joining the Bitcoin network at an alarming rate.

Although the price has failed to react to the sharp inflow of new participants, on-chain analyst Willy Woo believes that this is a strongly bullish sign. Sept. 30 Woo tweeted:

We're seeing a spike in activity by new participants coming into BTC not yet reflected in price, it doesn't happen often. This is what traders call a divergence, in this case it's obviously bullish

Bitcoin: Number of new entities vs price. Source: Glassnode

As shown by the chart above, the number of new entities joining the Bitcoin network has been rising steeply since last week and the metric clearly surpassed the numbers recorded in August. The metric measures the number of clusters (wallets) owned by a given person or group.

Some analysts believe that the surge in new entities could partially be attributed to the strong pullback in DeFi tokens and altcoins. In the past 30 days many have registered double-digit losses and this may have left investors looking for safer alternatives in the crypto market.

While the price of Bitcoin has repeatedly failed to break through the $11,000 level, it has remained stable above $10,000 for the past month.

Given the currenteconomic and political chaos sweeping through the U.S. and other countries impacted by the coronavirus pandemic, Bitcoins price stability strengthens the argument that Bitcoin is a solid store of value.

Although the U.S. dollar has remained the most sought after asset in the face of the recent financial crisis, its possible that a second wave of coronavirus infections may negatively impact the global economy. Such an event would likely prod investors to invest in assets like gold and Bitcoin, especially if the dollar loses strength.

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Spike in new participants buying Bitcoin is obviously bullish Analyst - Cointelegraph

Venezuela president Nicolas Maduro says the country is to start using cryptocurrency in both domestic and global trade, as part of efforts to neutralize crippling U.S. economic sanctions.

Speaking in the countrys parliament on Sept. 29, Maduro revealed that the move will give new strength to the use of petro and other cryptocurrencies, national and global, in domestic and foreign trade

The country has already been trying to use its national crypto, the petro, for this purpose but without much success.

Maduro was delivering an anti-sanctions law aimed at spurring economic and social development, both paralyzed by U.S. sanctions. The blockade has also throttled Venezuelas trade relations with much of the world, where the U.S. dollar still dominates.

Now, the oil-rich South American country has set its sights on virtual currency. Venezuela, the worlds sixth largest oil producer, is hoping to leverage cryptocurrencies to compensate for the squeeze in petrodollars arising from the economic sanctions. Bloomberg quoted Maduro as saying:

The finance minister and Venezuelas central bank have new instruments which we will activate very soon so that everyone can do banking transactions, as well as national and international payments through the central banks accounts. Venezuela is working within the cryptocurrency world.

Excoriated by the West, the leftist Venezuelan leader thundered: Donald Trump and his sanctions are blocking Venezuela from carrying out transactions in any of the worlds banks. Theres other formulas to pay, and its what were using, because our payment system works perfectly in China and Russia.

According to the Bloomberg report, the central bank of Venezuela is formally testing whether it can hold crypto in its reserves. The immediate targets include bitcoin (BTC) and ethereum (ETH).

Both assets have been requested by state-run Petroleos de Venezuela SA. The oil company wants to send BTC and ETH to the central bank and then have it pay the firms suppliers with the coins, says the report.

Venezuelas deepening economic crisis has led to a massive adoption of cryptocurrency, with more than $8 million worth of bitcoin traded peer-to-peer each week, Coindance data shows. The government recently signed a new tax agreement that enabled it to start collecting taxes and fees in the petro.

What do you think about Venezuela turning to crypto in international trade? Let us know in the comments section below.

Image Credits: Shutterstock, Pixabay, Wiki Commons

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Venezuela To Start Using Cryptocurrency in Global Trade in Efforts To Fend off US Sanctions | Emerging Markets - Bitcoin News

The Bitcoin network has achieved a few new milestones during the last week, as the price has remained above the $10k range for a record 66 consecutive days. Meanwhile, the network has surpassed 18.5 million bitcoin issued, as the global hashrate coasts along at an all-time high of 140 exahash per second (EH/s).

As of today, October 1, 2020, bitcoin (BTC) has closed above the $10,000 price range for 66 straight days. The last time BTC saw the price stay above $10k consecutively was on December 1, 2017, when the crypto asset posted a record 62-day streak.

Coin market capitalization web portals show there are over 7,000 digital assets in existence and BTCs overall market valuation represents 57% of the $350 billion aggregate total. Statistics show BTC is down over -8% during the last 30 days, but up +20% for the last 90 days and up +29.7% against the USD in 12 months.

The 66-day streak above $10k has also seen some higher prices as the top digital asset topped $12.5k within the timespan. The streak only counts the days closing prices, as BTC had dropped below the $10k region on September 3rd, 4th, 5th, 7th, and 8th to the $9,800 range.

Despite managing to drag the BTC price below $10k, all of these instances saw the crypto asset close the day above the psychological price point.

Meanwhile, BTC touched another milestone this week, as miners have minted over 88% of all the BTC that will ever circulate. Bitcoins current money supply or the number of coins in circulation today is 18,504,918 BTC at 9:30 a.m. EST on October 1st. Currently, the BTC issuance rate or inflation rate is around 2.9% after dropping from 3.6% measured at the end of February 2020.

In the midst of the 66-day streak and over 88% of the BTC supply being issued, the Bitcoin network hashrate has been higher than ever. At the time of publication, BTCs overall SHA256 hashrate is riding above the 140 exahash per second range (EH/s).

Today there are 18 publicly known mining operations hashing away at the BTC chain and the mining pool Btc.com captures over 16% of the network hashrate. This is followed by mining operation F2pool (14.15 %), Poolin (12.44 %), Huobi (10.24 %), Antpool (9.51 %), and Viabtc (6.83 %) respectively.

Today, BTC has been trading between $10,500 to $10,850 with an aggregate market cap of over $190 billion. Bitcoins price slid during the mid-afternoon (EST) trading sessions on Thursday by 4%. Bitcoin enthusiasts, traders, and speculators now wonder how long the current $10k streak will last.

What do you think about bitcoins 66-day $10k streak? Let us know what you think in the comments section below.

Image Credits: Shutterstock, Pixabay, Wiki Commons, Markets.Bitcoin.com, Charts.Bitcoin.com,

Disclaimer: This article is for informational purposes only. It is not a direct offer or solicitation of an offer to buy or sell, or a recommendation or endorsement of any products, services, or companies. Bitcoin.com does not provide investment, tax, legal, or accounting advice. Neither the company nor the author is responsible, directly or indirectly, for any damage or loss caused or alleged to be caused by or in connection with the use of or reliance on any content, goods or services mentioned in this article.

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Steve Shadders has been involved in Bitcoin infrastructure since 2011. He contributes his ecosystem-wide perspective to support building the mining and UX infrastructure needed to enable Satoshis Vision.(Photo Courtesy: Ed Pownall)

A purely peer-to-peer version of electronic cash would allow online payments to be sent directly from one party to another without going through a financial institution... - Satoshi Nakamoto

This is the very first sentence of the Bitcoin whitepaper.

When Bitcoin V0.1.0 was released in 2009, it contained a proof of concept feature that is perhaps the most overlooked in its history. It was called IP transactions and it demonstrated the type of peer interactions that is referenced in that sentence. When speaking about peers in a Bitcoin context, it is common to assume it is a reference to nodes. Nodes are in fact peers to each other. However, there is more than one type of peer in Bitcoin. We can see from the general definition of the word that a set of peers is defined by commonality.

This doesnt preclude there being more than one set of peers. The peers referenced in the first sentence of the whitepaper are the users of the Bitcoin network, not the nodes. What use is the Bitcoin network without users, preferably billions of them?

The IP Transaction feature demonstrated exactly that direct user to user interaction which, when coupled with SPV (Simplified Payment Verification - referenced in section 8 of the Bitcoin whitepaper) light clients, is precisely what allows Bitcoin to scale. It is a very simple scaling principle: Dont do work that isnt relevant to you. It is SPV that allows users to ignore every part of the Bitcoin transaction history that isnt relevant to them whilst still obtaining the security benefits of Bitcoin.

It was however a rudimentary implementation, a proof of concept if you will. And even Satoshi acknowledged that, in its original form, the IP Transactions implementation had some real problems:

How peers will find each otherInsecure connectionsNAT traversalSusceptibility to man-in-the-middle attacks

Additionally, it didnt complete the picture as is common for prototypes. It didnt have any facility for obtaining, verifying or passing on SPV Merkle proofs.

Today, the Bitcoin SV Infrastructure Team are releasing three beta products simultaneously that, along with several other services, provide all the tools required to reimplement the IP2IP vision and address all of these well-known problems in the process.

Bitcoin SV v1.0.6 (release code name Push)

New functions to provide and verify Merkle proofs

ZeroMQ notifications on double spend detection

(WIP) p2p broadcast of double spend detection to enable network wide awareness.

mAPI v1.2

Push based callback notifications for merkle proofs and double spends

SPV Channels v1.0.0

An end to end encrypted messaging nano-service with push capability that provides an always on point of presence for a Bitcoin user and provides a unified interface for handling both online and offline messaging.

As an always on service, it solves the NAT traversal problem by enabling any two parties to communicate in a private channel via a blind intermediary such that only outbound connections are required. This is similar in principle to how services like TeamViewer, Skype and Zoom work seamlessly even between users that are behind firewalls but with full e2e encryption.

SPV Channels is a new offering from the Bitcoin SV Infrastructure team. Think of Channels as something similar to an IMAP mail server. If youre offline, it collects messages for you, but when youre online it passes them straight through to you. If you and another party are both online the experience is similar to having a direct connection, but e2e encrypted by default and without any of the horrible mail header format requirements. It can integrate with Paymail but the server itself has no visibility of the content and is completely agnostic to it. Other than that, its not very Bitcoiny at all. But it does fill a critical gap in the workflow of a peer 2 peer Bitcoin interaction.

The uses of SPV Channels go beyond that - to almost any off-chain coordination problem in Bitcoin and even outside of Bitcoin, such as;

Coordinating multisig or threshold signature groups

Spend notifications for wallets

Generic notification for anything

A base layer for a new generation of self sovereign email and/or instant messaging.

A use case with mAPI

Early versions of mAPI (formerly known as Merchant API) solved a couple of key problems like fee discovery and direct-to-miner transaction submission. Getting responses from miners about acceptance is simple as it can come as a direct response to the submission request. But there are events that happen after that user-miner connection is closed, such as receiving an SPV proof when the transaction is mined into a block. We put in a rudimentary mechanism of getting updates by polling mAPI for transaction status. But this is inefficient and for a particular use case, learning about double spend attempts, it is time critical so a better mechanism was required.

Enter the push model. Registering for a callback on an event is a common programming paradigm. SPV Channels enables this for user-miner interaction. When registering for a callback, you typically need to provide an always-on URL for the callback to go to. This isnt something users on a mobile phone are likely to be able to provide.

Enter SPV channels. A hosted service (or self-hosted if you like) that acts as a channel for the user to receive messages. If the user is online, theyll receive the messages straight away. If they are offline, the messages will be stored and forwarded as soon as the user comes online. In fact, the first internal version of SPV Channels was unimaginatively named Store and Forward.

So the workflow goes something like this:

1.Customer and Merchant find each other via Paymail service discovery; and establish two way encrypted communications via SPV Channels.

2.Merchant finds a miners mAPI via MinerID.

3.Merchant requests a fee quote from miner via mAPI.

4.Merchant sends customer a transaction specification via BIP270 including the required fee, payment amount and any other requirements for the transaction.

5.Customer sends the transaction (possibly along with merkle proofs and other requested info) to the merchant.

6.Merchant submits the transaction to miner via mAPI and registers an SPV Channel URL for callbacks.

7.If a double spend is detected, the miner will send a message to the SPV Channel which the Merchant will receive immediately if online.

8.Once the transaction is mined into a block, the miner sends a merkle proof to the SPV Channel - which the merchant wallet can retrieve and store in its database.

9.Optionally, the merchant sends the merkle proof back to the customer via their SPV Channel.

Who pays for all these services?

In the early days, the costs of operating these services will likely be minimal so someone will probably offer them for free. But eventually, the cost of such hosted services will add up. Wallets, Miners and payment processors might absorb some of those costs as part of their service offering.

But there is another option. There are a number of new service offerings here, so its worth listing them:

1.Hosted Paymail

2.Hosted SPV Channels service (could be provided by paymail provider)

3.Merkle proof provision (not necessarily from the miner that mines the transaction)

4.Double spend notification (can be any or many miners monitoring for you)

It will be interesting to see how the Bitcoin SV ecosystem develop and what kinds of businesses decide to offer these services.

Assume for some reason that you request each of the 4 services from 4 different service providers, all of them are services provided in the context of a transaction. This is a perfect use case for adding nano-payment outputs to a transaction. One or ten satoshis to each service provider for a one off service with no implied lock-in to each which creates a strong incentive for them to provide the service well.

The future of SPV Channels

The initial implementation of SPV Channels released today provides the basic framework and is currently only optimized for desktop. Our near term priorities are to get mobile client libraries available that leverage the push capabilities of iOS and Android devices. Further integrations with Paymail are required and, of course, we need horizontally scalable implementations. We can definitely see the provision of a combined channels/paymail hosted service being in high demand and look forward to seeing who is the first to offer it.

The future of SPV workflows

In what we have presented today, we have offered solutions to the blocking issues for the complete SPV workflow. Many of these solutions can be improved upon and optimized, but the end to end use case is possible right now with these components. We expect this entire workflow to be the subject of much discussion by the business operators on Bitcoin SV and quite possibly changes or complete alternatives proposed and adopted. But for now, we have a base, a starting point that developers of consumer-targeted products can begin building upon right now.

Korea IT Times

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Satoshi Nakamoto's Peer-to-Peer vision for Bitcoin - Korea IT Times