The crypto market has been experiencing steep decline since November 2018. Popular cryptocurrencies such as Bitcoin, Ether, Ripple etc. sank to its lowest in over a year & the same is true about altcoins. Bitcoin was up by 1,400 percent touching the impressive mark of $18,672 in December 2017. According to CoinDesk’s Crypto-Economics Explorer (CEX), Bitcoin’s market price has dropped by 80 percent from its peak and collective market cap went down below the $100 billion levels for the first time in the recent crypto market crash.
The continuing blood bath of the crypto market has emulated a panic-stricken atmosphere, driving the crypto investors and miners toward traditional methods raising cash. cryptocurrency diehards are now moving towards selling derivatives linked to digital tokens to squeeze something out of their depreciating assets and to survive the collapse of their market.
Sam Bankman-Fried, chief executive officer of Alameda Research, said that:
“Anyone sitting on a stockpile of tokens saw in the bear market of 2018 that their business is at the mercy of crypto prices. it can be crucial for those players’ survival to have some cash if digital asset prices go down.”
Miners, who create new coins by validating the transactions and the companies that had raised quick cash in ICO boom of 2017, are now having a hard time to keep the business running. In fact, they are the main sellers of derivatives. The large chunk of traders who had quit traditional assets for crypto are now coming back to Options trading, a trade popular among stock investors. QCP Capital and Akuna Capital, firms staffed by former employees of hedge funds are among the key sellers of derivatives similar to covered call options.
Miners are swimming with the sharks
Talking about Miners, Dovey Wan, founding partner of crypto-asset investment fund Primitive Ventures, said that Miners have made themselves vulnerable by overinvesting in mining hardware and infrastructure. According to JPMorgan Chase & Co., the miners are swimming with the sharks. They further explained that the average cost to create one Bitcoin was $4,060 in the fourth quarter which was $460 higher compared the current market price of Bitcoin which stands at about $3,600.
Targeting these miners, Sath Ganesarajah, a former Citigroup Inc. credit derivatives trader said that “But they’d better be on their guard against being duped by the clued-in derivatives houses. The trading professionals will try to take the miners for a ride by getting them to sell options too cheaply.”