What a day…
Let’s gather a few facts together about what happened yesterday:
– Total amount of liquidations: $9bio
– Term structure: we quickly moved from contango to backwardation and back to contango again
– Downtime: this applied to most of the largest exchanges and some OTC desks
– Chain overload: mainly ETH
News:
– Reuters posted a rather conflicting report saying that China is banning its citizen from holding /trading /transferring cryptocurrencies.
https://www.reuters.com/technology/chinese-financial-payment-bodies-barred-cryptocurrency-business-2021-05-18/
https://www.reuters.com/world/china/what-beijings-new-crackdown-means-crypto-china-2021-05-19/
I must admit that I, along with many others, was in the wrong camp, and thought that the leverage before the crash was “normal”. Obviously, this was not the case given the nearly $9bio of liquidations over a span of only 24 hours. You can read a good thread from Sam Trabucco (trader at Alameda) here:
https://twitter.com/alamedatrabucco/status/1395211697930047489?s=24
The bottom line: we can call this a proper reset.
And the most important thing over the coming weeks will be to observe the market and analyse on what (new) ground (or basis) we will be moving forward on.