Weekly Crypto Market Wrap, 20th March 2023

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Week in Review

• Zerocap partners with Marex Solutions to launch credit rated crypto structured products – Marex Solutions is a division of Marex, specialising in the manufacture and distribution of customised OTC derivatives and structured products.
• UBS announces Credit Suisse acquisition in historic banking rescue deal – Credit Suisse previously borrowed $54 billion from Swiss central bank after shares plummeted 30%.
• Ethereum’s Shanghai upgrade date is officially set for 12th April. 
• CME Group goes live with event contracts for Bitcoin futures.
• Silicon Valley Bank’s Financial Group files for Chapter 11 bankruptcy to preserve value – SVB’s UK arm acquired by HSBC for one British pound. 
• BlackRock CEO Larry Fink praises digital asset tokenisation, claims US lacks innovation.
• Meta pulls the plug on all NFT projects for Instagram and Facebook.
• FTX filings show Sam Bankman-Fried’s inner circle received $3.2 billion from Alameda – FTX influencers face a $1 billion lawsuit over alleged crypto fraud promotion.
• Recent paper published by Columbia, Stanford economists following an SVB closure analysis claims 186 US banks are facing imminent risk of collapse.  
• US banks inject $30 billion to rescue First Republic Bank.
• European Central Bank increases interest rates again, claims local banks are “resilient.”
• FED’s emergency lending reached $300 billion last week – US inflation slows down to 6% as banking crisis looms.

Winners & Losers

Market Highlights

Bitcoin’s Outperformance

• As the global financial sector strained over the week, BTC posted an astounding 27.17%, eclipsing every major asset WoW. With the Fed stuck between a rock (systemic collapse) and a hard place (hyperinflation), they made the decision to unwind a significant portion of their QT by increasing the size of their balance sheet to ~$300 billion. With the failure of much larger institutions like Credit Suisse and turbulent headlines for others (BNP Paribas), the potential for additional global inflationary pressures has increased, further deteriorating market sentiment. Through all the turmoil, BTC has stood out from the crowd, breaking correlation to equities in a meaningful way and tracking as a flight to safety assets much like gold.

• Perhaps the most telling depiction of the crypto derivatives market over the past week is the spike in open interest for BTC options and the relatively unchanged amount of open interest for ETH ($USD notional). Notional OI for BTC climbed to a multi-year high of over $10b while ETH OI was comparatively unchanged, sitting at around $6b. Given the Shanghai/Capella fork scheduled for next month, this dynamic reaffirms the notion of BTC being used as a hedge against the aforementioned banking crisis.

• The buying pressure in BTC has seen a consistently aggressive spot bid across Binance and Coinbase as the market accumulates. In recent times, market rallies across the sector have seen balanced demand across derivatives and spot. The skew towards spot hints that buyer intention is more aligned with capital preservation and accumulation versus trend speculation.

• For many, awaiting confirmation of the 25,000 break was a necessary trigger to begin more aggressive asset accumulation.

• With the price coming into key resistance ahead of one of the most critical FOMC meetings in the last twelve months, it’s likely the asset sees heightened volatility. Markets will hang onto every word that comes out of the press conference. With the market pricing a 25 bps rate hike as the most likely outcome, any deviation in expectations is likely to spook. 
• While BTC has clearly broken out of a multi-month range, even if we see a 13% drawdown, we would still be in a technical bullish market structure. Given the statistically significant performance of late, buyers in this region should be cautious in timing their bidding – 28,500 is the key resistance level above, and any reversion into the range would be reasonable above 25,000. If we see a convincing break of 28,000 – a retest of 28,000 support would be a valid entry point. As for sellers, now at 28,100 would be a rational spot to de-risk, with additional key distribution zones ahead between 28k – 32k. Stops above 28,000 could see a nice rally into the range, allowing exits before 29,000.

Arbitrum announces $ARB

• Arbitrum, the largest Ethereum rollup by TVL, has announced the airdrop of its own token ‘ARB’. Planned for March 23rd, Arbitrum’s ARB will be airdropped to community members that meet specific criteria, marking Arbitrum’s transition into a DAO. $ARB is initially intended to serve as a governance token.
• Following 2022’s broader market contraction, various Layer 1’s such as Solana and Fantom lost relevance in terms of TVL while Layer 2’s built on Ethereum ascended to prominence. More specifically, Arbitrum’s presence has fostered alongside the rise of protocols built on Arbitrum, such as GMX, which have grown in popularity. Now, Arbitrum’s airdrop is poised to potentially shift market dynamics amongst existing Layer 2’s. 

• $ARB’s total circulation will be 10B. 56% will be controlled by the Arbitrum community and while the remaining 44% will be directed to investors and employees of Offchain Labs. Moreover, we’ve depicted pessimistic to optimistic scenarios for Arbitrum’s potential token value based on comparative analysis to existing Layer 2’s built on Ethereum as well as competing Layer 1’s. Given community members, who are entitled to the airdrop, can capture anywhere between 500 – 10,200 tokens, this drop encapsulates a significant influx of capital to the space and is an event any trader should keep a keen eye on.

What to Watch 

• US Consumer Sentiment report and Australian CPI, on Tuesday.
• Germany’s preliminary CPI and US’ unemployment claims, on Thursday.
• Canada’s GDP and US’ Core PCE Price Index, on Friday.

Insights

• Zerocap partners with Marex to launch Credit-rated Crypto Structured Products:

Zerocap is building a bridge between digital assets and TradFi by providing solutions with strong governance, digital asset custody, security, administration and counterparty risk management. The Zerocap/Marex partnership bolsters our vision by providing a range of structured investment tools to generate defined investment payoff structures – with the extra assurance of S&P Global investment grade credit ratings. 

Research Lab

• What is the Solana Virtual Machine?

The Solana Virtual Machine (SVM) is bringing liveness and game-changing complex executions to the Solana Labs network.

Learn about the lightning-fast runtime environment that’s transforming smart contracts and dApps on the Solana blockchain in the latest Zerocap Research Lab article, written by Innovation Analyst Beau Chaseling.

• Sei Network: Solving the Exchange Trilemma:

Explore the intricacies of Sei Network as Zerocap’s Innovation Lead, Nathan Lenga, unravels the innovative strategies proposed that harmonize decentralization, security, and scalability in the crypto and blockchain sphere.

* 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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Past performance is not indicative of future performance.

FAQs

What significant events occurred in the crypto market during the week of 20th March 2023?

The week saw several significant events in the crypto market. Zerocap partnered with Marex Solutions to launch credit-rated crypto structured products. Ethereum’s Shanghai upgrade date was officially set for 12th April. CME Group went live with event contracts for Bitcoin futures. Arbitrum announced the airdrop of its own token ‘ARB’.

What was Bitcoin’s performance during the week of 20th March 2023?

Bitcoin posted an astounding 27.17% increase during the week, breaking correlation to equities and tracking as a flight to safety assets much like gold. The buying pressure in Bitcoin has seen a consistently aggressive spot bid across Binance and Coinbase as the market accumulates.

What is the significance of Arbitrum’s announcement of $ARB?

Arbitrum, the largest Ethereum rollup by Total Value Locked (TVL), announced the airdrop of its own token ‘ARB’, marking Arbitrum’s transition into a Decentralized Autonomous Organization (DAO). The airdrop is poised to potentially shift market dynamics amongst existing Layer 2’s.

What were the market highlights for the week of 20th March 2023?

The market highlights for the week included Bitcoin’s outperformance, the announcement of Arbitrum’s $ARB, and the anticipation of the Federal Open Market Committee (FOMC) meeting. Bitcoin broke out of a multi-month range, and Arbitrum’s airdrop is expected to shift market dynamics amongst existing Layer 2’s.

What are the upcoming events to watch in the crypto market?

Some of the events to watch include the US Consumer Sentiment report and Australian Consumer Price Index (CPI) on Tuesday, Germany’s preliminary CPI and US’ unemployment claims on Thursday, and Canada’s GDP and US’ Core PCE Price Index on Friday.