  The latest moves in crypto markets, in context Edited by Omkar Godbole December 17, 2021 Sponsored by  Bitcoin (BTC) See the latest price here Ether (ETH) See the latest price here If you were forwarded this newsletter and would like to receive it, sign up here.
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Market Moves by Shaurya Malwa and Omkar Godbole Crypto markets took a tumble in early Friday as financial regulators in the U.S. and U.K. took measures to curb growing inflation concerns earlier this week.
Tokens of Elrond, Mina, and XDC network were the biggest losers among all coins with a market capitalization of above $1 billion, data from CoinMarketCap showed.
A stand out among altcoins was YFI, the governance token of the Ethereum-based DeFi project Yearn Finance. YFI jumped 18% on after its developers announced the completion of a $7.5 million buyback, for 282.4 tokens, from the open market.
“Cryptocurrencies and the traditional market are trading down today in an initial response to various Central Banks around the world cutting back on bond purchases and other stimuli introduced at the onset of the COVID-19 pandemic,” said Bod Reid, founder of crypto payments tool Everest, in a Telegram message.
Traders front-running bitcoin ETF?
According to Bank for International Settlements, the predictable rebalancing behavior of the ETF may also give rise to ‘front-running’ incentives, motivating investors to purchase longer-dated bitcoin futures in anticipation of the ETF rolling into those contracts.
The futures-based exchange-traded funds (ETFs), which went live in October and November, gain exposure to bitcoin through regulated futures contracts trading on the Chicago Mercantile Exchange (CME) rather than owning the cryptocurrency. So, unlike ETFs that invest in stocks and gold, these futures-based ETFs must keep moving long positions from one expiry to another in a bid to mimic the cryptocurrency’s price performance.
That leaves the door open for traders to buy the next month’s contract and sell the expiring contract ahead of orders from ETFs. The funds end up paying more to buy the next month’s contract and receive less for selling the current month, leading to a bigger rollover loss.
However, there are no signs of traders exploiting the known rebalancing. “We haven’t noticed any front-running specifically related to rolling the BTF futures,” Bill Cannon, head of ETF portfolio management at Valkyrie Investments, told CoinDesk. “Liquidity has been healthy and there haven’t been any issues with execution.”
“To successfully front-run, you need to be able to predict the short-term price moves of the underlying [asset] with relative confidence; the volatility of bitcoin and the crypto asset-class makes that a particularly difficult task, fraught with risk,” Sui Chung, CEO of CF Benchmarks said in a Telegram chat. “What makes crypto products unique, therefore, is that the volatility of the underlying essentially makes front running unviable.” Read the full story here: Valkyrie Counters BIS, Says Concern on Bitcoin ETF Front-Running Is Misplaced
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Disclaimer: The information presented in this message is intended as a news item that provides a brief summary of various events and developments that affect, or that might in the future affect, the value of one or more of the cryptocurrencies described above. The information contained in this message, and any information liked through the items contained herein, is not intended to provide sufficient information to form the basis for an investment decision. The information presented herein is accurate only as of its date, and it was not prepared by a research analyst or other investment professional. You should seek additional information regarding the merits and risks of investing in any cryptocurrency before deciding to purchase or sell any such instruments.
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