Weekly Crypto Market Wrap, 6th March 2023

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Week in Review

• Australian Central Bank RBA to launch live pilot of its CBDC in the coming months, with Zerocap named as one of the companies to assist in testing and optimising the digital currency (Project 1, Project 2), advocating for interoperability with the existing crypto space.
• Forbes publishes an article comparing Binance’s “shuffling of funds” to FTX prior to its collapse – “They don’t know how an exchange works,” said Binance CEO CZ. 
• Silvergate Capital shares plummet after bank delays its annual report.
• Third top FTX executive pleads guilty in fraud investigation – US Department of Justice seeks to narrow Sam Bankman-Fried’s bail terms following malpractices.
• Coinbase announces suspension of BUSD trading starting on March 13th – company states that Binance’s stablecoin no longer met “listing standards.”
• Ethereum testnet forks successfully ahead of Shanghai upgrade.
• Solana network set to focus on stability upgrades following repeated outages. 
• Coinbase survey shows 20% of adult Americans own crypto, 80% frustrated with the current financial system.
• Celsius customers begin withdrawals, 263 days after platform freeze.
• Visa and Mastercard decide to halt crypto partnerships until market scenario improves.
• Twitter founder Jack Dorsey’s decentralised platform Bluesky launches on App Store.
• US consumer confidence retreats, while house price inflation continues to cool down.

Winners & Losers

Macro Environment

• Last week, several of the world’s major economies released their GDP figures for the final quarter of the previous year, providing a snapshot of their economic performance amid the fading COVID-19 pandemic. India, Italy, Canada, and Australia all published their data, revealing how their respective economies fared in the face of ongoing challenges such as supply chain disruptions, tight labour force, and rising inflation. India reported a YoY GDP growth rate of 4.4% in Q4, significantly less than Q3’s 6.3% and below estimates for a 4.6% gain. The reduction in pace came as a result of elevated borrowing costs and a stalling of closely related private sector spending (+2.1% vs. +8.8% in Q3). Notably, according to the Government of India’s Ministry of Statistics and Programme Implementation: private spending accounted for 61.6% of YoY GDP growth in Q4. Italy reported a yearly GDP growth rate of +3.7% in 2022, almost halving 2021’s +7% figure. Coinciding with the release were Italy’s Budget figures, unveiling a deficit of -€153.5 billion. Ongoing government spending and fiscal support packages place a hefty burden on government expenditure. Despite this, the country’s Debt: GDP ratio narrowed to 144.7% (-5.2%) from the pandemic year prior. Canada and Australia came out with similarly disappointing figures. The Canadian economy reported 0% GDP growth in Q4, largely weighed down by a reduction in housing investment, which decreased -2.3% QoQ. The Australian economy was not far behind, managing to scrape by with a slight +0.5% expansion in Q4 2022.
• Investors looking for a brief inflationary reprieve continued to be disappointed, with continual upside inflation surprises from core European nations. February’s overall Euro Area inflation print came in hot at 8.5% vs. the expected 8.2%. More concerningly, core inflation rose to a new record high of 5.6% in February. While overall disappointing, data from EUROSTAT highlighted that “Energy inflation had slowed to 13.7% vs. 18.9% in Jan,” signalling easing supply chain constraints attributed to the war in Ukraine.
• Data released out of the US indicated tanking durable goods orders in February, down -4.5% MoM. The US Census Bureau elaborated on the move, attributing the fall to a reduction in orders for “transportation equipment” (-13.3%) and “non-military aircrafts/parts (-54.6%).” Other notable data released from the US included the ISM Manufacturing PMI, rebounding off January’s low of 47.4 to 47.7 in February.
• Markets continued to digest the mixed macroeconomic results throughout the week. Rebounding off Wednesday lows, the S&P 500 gained +1.08%, along with the ASX S&P 200 (+0.67%) WoW. Commodities showed relative strength, rallying hot on the heels of China’s decade-high growth in PMI numbers (52.6 vs. 50.1 in January) – the S&P GSCI appreciated +2.89% WoW as a result.

Market Analysis

BTC/USD

• BTC spent the majority of the week seesawing between forming light topside resistance placed at 23,900 and the 23,250 support, with a small number of moves toward 23,000 being strongly bid. However, during Friday’s session, strong de-risking prompted significant selling, acting to push prices downward. While BTC’s descent halted at the 22,000 level, the pair struggled to find grounds above 22,500 into the week’s close. BTC closed -4.80% WoW and we can expect short-term action to remain range bound as Fed Chair Powell’s Testimony and US NFP data looms.

ETH/USD

• Early on, ETH struggled to make notable grounds higher, finding continued resistance above 1,660 during the week. The 1,620-level acted as midweek support with a break lower during Wednesday’s session being bid at ETH’s 50d MA. In line with broader market moves, ETH sold off aggressively during Friday’s session. ETH formed a newly traded range with prices being held above 1,550 while finding resistance at the 1,580 level. ETH closed -4.70% WoW, a relative outperformance when compared with BTC.
• Until late in the week, price action played in line with shifts in macroeconomic expectations. Early in the week, prices benefited from core capital goods orders data out of the U.S. only to sell off shortly after as participants reconsidered the possibility of harsher rate hikes in the presence of continued strong economic prints. Later, alongside Hong Kong’s Hang Seng index, risk assets benefited from better-than-expected Chinese Manufacturing PMI during Wednesday’s session.
• However, late-week action was tarnished following Silvergate Bank delaying the filing of its 10-K report. Fears regarding the financial health of Silvergate Bank, a key player within the digital asset space, showed in price action with BTC moving 6% lower in under an hour.

ETH/BTC

• Early in the week, the ETH/BTC pair edged lower while respecting the 20-day SMA as downside support. Until Wednesday, moves higher struggled to exceed the 0.0700 level. However, strong relative outperformance by ETH saw the pair move higher during Wednesday’s session, touching the 50d SMA before price tapered downward with the 0.0697 level showing signs of support during the late week. The pair now rests above the flipped resistance level of 0.0697, which now acts as support. Despite a strong de-risking during Friday’s session, we saw ETH outperform BTC this week, behaviour atypical during periods of risk-off. A continued breakdown in the asset’s historical relationship may become more apparent as Ethereum’s Shanghai approaches. 
• Since the start of 2023, BTC’s hash rate has continued to climb higher. While BTC’s hash rate diminished into its most recent difficulty adjustment, which encapsulated a +9.95% change in difficulty on February 25th, its trend continues to push higher. The consistency of this trend paints a positive picture of the health of the BTC ecosystem and re-affirms the notion that miner capitulation has passed, behaviour suggestive of a positive cyclical shift for BTC. 

• We’re continuing to see the availability of ETH on exchanges diminish. This comes in tandem with the persistent increase of ETH locked on the beacon chain. This week, Ethereum’s developers agreed upon a target date (14th March) to perform a simulated Shanghai upgrade on the Goerli test network. As clarity surrounding the highly anticipated upgrade grows, we may see a continuation of ETH being moved off exchanges and into the staking contract. Correspondingly, this dynamic may be prone to a shift upon the implementation of withdrawals from ETH’s staking contract. 

Derivatives

• The realised volatility in all crypto-assets is continuing to soften. As we noted last week, the absence of significant risk events appears to have caused the implied volatility curve to flatten in the short-term expiries and steepen in longer-dated terms. This behaviour is persisting, and the term structure steepening positions the curve in full contango. It is noteworthy that there is no apparent increase in Implied Volatility related to the Shanghai fork, which has been postponed to mid-April. This lack of concern is evident in the term structure, with the market seemingly not anticipating any significant risk event associated with the upgrade. 

Ecosystem Highlights

• Advocating for customer protection as well as to promote regulation within the cryptocurrency space, the Tel Aviv Stock Exchange (TASE) has pushed forward a proposition to authorise Non-Banking Members (NBMs) to trade in cryptocurrencies. On behalf of customers looking to purchase cryptocurrencies, NBMs will facilitate execution through licensed providers of cryptocurrency trading and custodial services. Presently, international regulation of the web3 sector is in progress. However, Israel is looking to impose the same regulations applied to non-digital assets to digital assets. In line with international standards, the TASE exchange is specifically looking to pursue regulation within the cryptocurrency sector as a means to advance the sector and promote effective participation.
• Robinhood, a US-based financial services company, was subpoenaed by the SEC in December to investigate the platform’s supported cryptocurrencies, custody of cryptocurrencies, and general operations. Simultaneously, Robinhood is cooperating with the California Attorney General after receiving several similar subpoena requests from their office. This investigation follows the SEC’s crackdown on the cryptocurrency industry in the wake of FTX’s collapse. SEC chairman Gary Gensler is leading this charge, aiming to crack down on digital assets which he perceives as unregistered securities.
• Yuga Labs, the company behind Bored Ape Yacht Club, is looking to expand onto the Bitcoin network. This coincides with the launch of TwelveFold, an NFT collection of 300 generative art pieces, each inscribed to the Bitcoin blockchain via Ordinals. Departed from Yuga’s previous projects based on the Ethereum network, TwelveFold will combine 3D graphics and hand-drawn features. In the wake of OpenSea’s cessation of certain royalties on the platform, Yuga’s decision to launch TwelveFold onto Ordinals appears to be advantageous from the perspective of the NFT community. Yuga Labs will announce auction details for TwelveFold later this week, and the information will come 24 hours in advance of the actual sale.
• Beginning in 2021, Visa and Mastercard have been making numerous forays into the web3 sector. However, recent market drawdowns and regulatory ambiguity has resulted in the companies reconsidering partnerships as well as suspending the launch of crypto-related services. While Visa does not plan to change its positive stance on crypto, a spokesperson for the company believes that crypto has a long way to go before becoming a part of mainstream payment systems. However, Mastercard is planning to wait for a clear regulatory framework before forging new partnerships with crypto firms.
• Uniswap has launched a self-custodial, open-source mobile wallet app. The app will allow users to store and swap tokens as well as bridge digital assets between the Ethereum, Polygon, Arbitrum and Optimism networks. Using the wallet, users will be able to connect to web3 applications on any of the supported networks. Although the app is compliant with App Store specifications, Apple is failing to authorise its launch. Therefore, the Uniswap team has launched it onto their internal TestFlight app, giving access to a maximum of 10,000 users before its launch onto the App Store.  
• Silvergate Capital Corp has discontinued its crypto payments network, Silvergate Exchange Network, due to certain risks. The network enabled round-the-clock transfers between investors and crypto exchanges. Nevertheless, while deposit-related services remain operational a recent filing by Silvegate warned that it was evaluating its ability to operate as a going concern. Consequently, several cryptocurrency firms dropped Silvergate as their banking partner, including Coinbase Global Inc and Galaxy Digital.

What to Watch 

• FED chair Jerome Powell testifies on the semi-annual monetary policy report – Tuesday and Wednesday.
• Bank of Canada’s interest rate statement and US Jolts Job Openings report, on Wednesday.
• Japan’s monetary policy statement, UK’s monthly GDP report and US unemployment rate, on Friday.

Insights

• Head of Trading Toby Chapple on Ausbiz:

The latest Zerocap interview with Ausbiz is live. Listen to what Zerocap Head of Trading Toby Chapple has to say about crypto market volatility.

Research Lab

• The Internal Workings of Ethereum’s Infrastructure:

Learn in-depth details of Ethereum’s infrastructure – EVM, hashing, Merkle trees, memory pools and more – in this expertly crafted breakdown by Innovation Analyst Finn Judell.

• Diving into the Future of Ethereum:

Ethereum is more than a household name for crypto; it completely changed the ecosystem following its release. But what comes next for the network? Innovation Lead Nathan Lenga as he dives deep into the potential implications of Ethereum’s upcoming updates and explore the various use cases for the game-changing blockchain.

* Index used:

Bitcoin	Ethereum	Gold	Equities	High Yield Corporate Bonds	Commodities	TreasuryYields
BTC	ETH	PAXG	S&P 500, ASX 200, VT	HYG	SPGSCI	U.S. 10Y

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FAQs

What were the major events in the crypto market for the week?

The Australian Central Bank RBA announced the launch of a live pilot of its CBDC in the coming months, with Zerocap named as one of the companies to assist in testing and optimising the digital currency.
Forbes published an article comparing Binance’s “shuffling of funds” to FTX prior to its collapse.
Silvergate Capital shares plummeted after the bank delayed its annual report.
Coinbase announced the suspension of BUSD trading starting on March 13th.
Ethereum testnet successfully forked ahead of the Shanghai upgrade.
Solana network set to focus on stability upgrades following repeated outages.

What was the macro environment like?

Several of the world’s major economies released their GDP figures for the final quarter of the previous year, providing a snapshot of their economic performance amid the fading COVID-19 pandemic.
Investors looking for a brief inflationary reprieve continued to be disappointed, with continual upside inflation surprises from core European nations.

What was the market analysis for BTC/USD and ETH/USD?

BTC spent the majority of the week seesawing between forming light topside resistance placed at 23,900 and the 23,250 support.
Early on, ETH struggled to make notable grounds higher, finding continued resistance above 1,660 during the week.

What were the ecosystem highlights?

The Tel Aviv Stock Exchange (TASE) has pushed forward a proposition to authorise Non-Banking Members (NBMs) to trade in cryptocurrencies.
Robinhood, a US-based financial services company, was subpoenaed by the SEC in December to investigate the platform’s supported cryptocurrencies, custody of cryptocurrencies, and general operations.
Yuga Labs, the company behind Bored Ape Yacht Club, is looking to expand onto the Bitcoin network.
Visa and Mastercard decide to halt crypto partnerships until market scenario improves.
Uniswap has launched a self-custodial, open-source mobile wallet app.
Silvergate Capital Corp has discontinued its crypto payments network, Silvergate Exchange Network, due to certain risks.