Weekly Crypto Market Wrap, 3rd April 2023

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Over the Easter holiday break, our OTC and Structured Products teams will be operating on a best-efforts basis between 7th April and 10th April.

Week in Review

• Binance is sued by CFTC for market manipulation – Binance CEO rejects allegations as investors pull out $1.6 billion from the exchange following the lawsuit.
• Documents show Binance executives hid extensive links to China.
• Binance, CEO and influencers also face $1 billion lawsuit for allegedly promoting unregistered securities.
• With a “killer use case”, tokenisation market set to up to $4 trillion by 2030; Citi report.
• First Citizens buys Sillicon Valley Bank, taking over all its assets, deposits and loans.
• Decentralised Autonomous Organisations’ (DAOs) treasuries hit a record $25 billion.
• Australian Senator Andrew Bragg introduces private bill to expedite crypto regulation. 
• Sam Bankman-Fried charged with bribing Chinese officials, pleads not guilty – FTX Europe launches withdrawals website to pay back European users.
• Elon Musk and other execs call for a pause in AI development, citing social risks.
• MicroStrategy repays its $205 million Silvergate loan, buys another 6,500 Bitcoin – total BTC holdings now at 138,955.
• US’ last quarter GDP sees boost, despite reduced consumer spending.
• BoE governor Bailey dismisses the chance of a financial crisis in the UK due to recent banking collapses – states inflation is still a much bigger concern.
• Australian inflation falls to 8-month lows, fuels case for pause in rate hikes.

Winners & Losers

Market Highlights

• BTC’s price action remains strong despite continued recent consolidation. Fear following the bank runs, triggered by SVB, has seemingly calmed down. This in tandem with the ongoing potential for monetary loosening could lead to continued bids on risk assets. Nonetheless, this week’s NFP release out of the U.S. forms an important turning point for risk and growth. Any sign of job softening backs the Fed’s ongoing fight against inflation coming, and we’re seeing this impact in the options market. 
• Technically we are seeing BTC at a critical juncture, tapping at 29,000 as key resistance. A break here on diminishing inflation expectations coupled with hedging against banking credit risk could see a strong move into the 35,000 region. There is some chop, but significant stops and order flow at these mid-30s levels.

Options Flows

• In the options space, Bitcoin’s implied volatility has risen to historical long-term levels above 60%, maintaining its high positive correlation with price. Given this dynamic, there is potential for further rallies in IV if BTC can break above resistance at 29,000. The next fortnight is shaping up to be massive for risk assets and cryptocurrency, with particular risk events likely to impact the curve. There are kinks evident for both NFP on Friday, and again on Apr-12, coinciding with the CPI data release. Both of these events also form the perfect storm for further volatility, with Ethereum’s Shapella upgrade due on 12th April as well.

• When we look at Ethereum, we notice a more disjointed implied volatility term structure. The impact of both Shapella and macroeconomic events, along with bearish flows late on Friday, has created a different picture compared to BTC’s implied volatility. Interestingly, the flows we have observed have affected ETH skew in such a way that puts are now priced firmly higher than calls in the near-term expiries, whereas calls are priced higher than puts as we look into the later months. There is a clear sentiment shown in the options market that the risk for Shapella, given the uncertainty on potential selling pressure, is to the downside.

Alts

• In the past few weeks, we’ve touched on the Arbitrum Foundation’s recent airdrop of the $ARB governance token. Having been airdropped to 533,429 eligible addresses, the airdrop represented a key moment in the development of Arbitrum’s community. However, last week, the Arbitrum foundation sold ARB tokens prior to the conclusion of a Governance Improvement Proposal, known as AIP-1. The Foundation’s decision has brought the Ethereum Layer 2’s decentralised structure into question and its impact has shown in $ARB’s recent price action having sold off approximately 17% between Friday and last week’s close.

• However, analysing the behaviour of Arbitrum’s firmer hands, several whales are retaining their holdings despite the debacle. Nonetheless, if the situation is to worsen, we may see some selling from large hands of the currently topical $ARB token.

What to Watch 

• US Jolts Job Openings, on Tuesday.
• US unemployment claims, on Thursday.
• Final stages of preparation for Ethereum’s Shanghai Upgrade, on the 12th April.
  

Research Lab

• What is Kujira? Decentralisation meets Sustainable Fintech: 

Explore the intricacies of Kujira, an innovative blockchain project built on the Cosmos network, as discussed in this expertly researched article by Zerocap Innovation Analyst Beau Chaseling. Designed to provide a diverse array of DeFi infrastructure and sustainable financial technology, Kujira aims to support web3 users above all else.

• DAOs and Governance – Managing Tokenised Product Development: 

Dive into meticulously researched information on DAO governance in this in-depth piece written by QuantBlock. Gain insights into the history, present landscape, and future potential of DAOs, while examining hybrid governance, the delegation of voting power, anti-spam measures and much, much more.

* 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 of 3rd April 2023?

The week saw several significant events in the crypto market. Binance faced a lawsuit from the CFTC for market manipulation, leading to investors pulling out $1.6 billion from the exchange. The tokenisation market is set to rise to $4 trillion by 2030, according to a Citi report. Decentralised Autonomous Organisations’ (DAOs) treasuries hit a record $25 billion. Australian Senator Andrew Bragg introduced a private bill to expedite crypto regulation.

What is the impact of the lawsuit against Binance?

The lawsuit against Binance by the CFTC for market manipulation led to a significant impact on the exchange. Investors pulled out $1.6 billion from the exchange following the lawsuit. Binance, its CEO, and influencers also face a $1 billion lawsuit for allegedly promoting unregistered securities.

What is the potential of the tokenisation market?

According to a Citi report, the tokenisation market is set to rise to $4 trillion by 2030. This growth is driven by the “killer use case” of tokenisation, which allows for the creation of digital assets that represent real-world assets on the blockchain.

What is the significance of Decentralised Autonomous Organisations’ (DAOs) treasuries hitting a record $25 billion?

The fact that DAOs’ treasuries hit a record $25 billion indicates the growing influence and financial power of these decentralised organisations. DAOs are organisations that are run by smart contracts on the blockchain, allowing for a level of transparency and decentralisation not possible in traditional organisations.

What is the impact of Australian Senator Andrew Bragg’s private bill to expedite crypto regulation?

The introduction of a private bill by Australian Senator Andrew Bragg to expedite crypto regulation indicates a growing recognition of the importance of the crypto sector in Australia. The bill could potentially lead to a more regulated and secure environment for crypto investors and businesses in the country.