Weekly Crypto Market Wrap, 19th June 2023

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Week in Review

• BlackRock files for Bitcoin ETF in push into crypto market.
• Hong Kong government pressures banking giants HSBC and Standard Chartered to accept crypto clients and support licensed crypto exchanges.
• Binance announces departure from Dutch market after failing to obtain license – currently under investigation in France for money laundering.
• US lawmakers file “SEC Stabilization Act” to fire Chair Gary Gensler quoting “abuse of power” since taking office – Act follows recent SEC lawsuits against Binance.US and Coinbase.
• Binance launches Bitcoin cloud mining services amid SEC lawsuit crackdown – exchange starts negotiations with Commission.
• US judge signs off on Binance x SEC agreement for exchange to move all US customer funds and wallet keys back onshore.
• Coinbase announces repurchase of $65 million in convertible notes at a 29% discount – 0.5% of senior notes due for 2026.
• Tether (USDT) CTO clarifies that recent $1B in USDT mint on Ethereum is for chain swaps.
• In unprecedented use of crypto for the country, Bank of China issues $28M in digital structured notes on Ethereum blockchain.
• US inflation rises steadily to lowest level in the last 4 years.
• FED’s FOMC: Reserve leaves rates unchanged at 5 – 5.25% while expecting two smaller rate hikes by the end of 2023.
• European Central Bank boosts interest rates to 22-year high.
• Bank of Japan leaves rates unchanged at ultra-low levels, markets unsure.

Winners & Losers

Data source: TradingView

Market Highlights

• This week surpassed its predecessor with a series of captivating headlines, resulting in fluctuating market activity. On Tuesday, the release of U.S. inflation data created anticipation for ongoing interest rate hikes, despite expectations of a pause in June. This prevented BTC from surpassing the 26,000 mark. Additionally, the Fed’s anticipated pause on Wednesday reinforced the belief that pauses would be short-lived, causing BTC to decline even further.
• An intriguing turn of events occurred during Thursday’s session when BTC’s trajectory reversed, coinciding with a temporary de-pegging of USDT. Concerns rippled through the market due to news surrounding Curve’s 3 Pool, a liquidity pool composed of USDT, USDC, and DAI. Notably, USDT’s concentration surpassed 50% for the first time since November 2022, fueling anxieties. The growing dominance of USDT compared to USDC and DAI suggests that traders were offloading USDT. Consequently, USDT plummeted to as low as 0.99580 on platforms like Coinbase, while BTC gradually climbed back above 25,500. This indicates that USDT sellers sought refuge in BTC, considering it a safe-haven asset—a characteristic that has persistently defined BTC throughout 2023.

Data source: Tradingview

• The SEC’s intervention in Binance and Coinbase, along with the recent de-pegging of USDT, are part of a series of events that have consistently prevented upward momentum for cryptocurrencies. Although BTC has gained nearly 60% this year, it has also experienced a 13% decline in the past two months. Analyzing ETH/BTC, we can observe some factors that have contributed to a risk-off sentiment, as the pair has continued its downward trend since the beginning of the year. While Shapella has favoured ETH, BTC’s safe-haven attributes have led to overall outperformance year-to-date.

Data source: TradingView

• Notably, although BTC has experienced a sell-off in the past two months, this week marked the first pause in interest rate hikes since the Fed’s initial hike in March 2022. Shifting sentiment is evident in equities, with the Nasdaq experiencing an 18% increase in the same 2 months. Objectively, crypto prices have been weighed down and have yet to catch up with equities. It is often observed that BTC and ETH tend to follow risk assets such as equities, taking the path of least resistance. News of BlackRock’s ($10 trillion AUM) application for a Bitcoin ETF amidst ongoing regulatory pressure may be interpreted as a sign that regulatory pressure could potentially ease. Nevertheless, BlackRock’s involvement is undoubtedly positive for long-term price action, and we can anticipate a decrease in negative crypto-specific headlines will pave the way for upward movement, with ETH and BTC leading the charge.

Blackrock’s Spot Bitcoin ETF Application

• This week, Blackrock’s iShares Bitcoin Trust submitted a spot Bitcoin ETF application to the SEC that may have a better chance than previous efforts from previous applications. This heightened optimism stems from a proposed “surveillance-sharing agreement” among trading platforms, designed to curb market manipulation – a concern explicitly identified by the SEC as the main reason for denying earlier spot ETF applications. With Nasdaq poised to participate in this agreement by operating a Bitcoin (BTC) spot trading platform, the latest submission appears better positioned than any before it to secure approval. Blackrock’s formidable record, with 575 out of 576 ETF applications approved by the SEC, bolsters the likelihood of a positive outcome, although we may still need to see more regulatory oversight on existing crypto exchanges before any progress is made. 
• The potential impact of a Blackrock ETF approval is underscored by the company’s own experience with its iShares Gold ETF, which received approval in 2004 and subsequently catalysed remarkable growth in that asset class. Blackrock effectively promoted the narrative that gold deserved a more prominent role in diversified portfolios, and we’re seeing similar dynamics with Bitcoin and its SOV narrative forming now. Should it gain approval, it may validate Bitcoin in much the same way. 
• The selection of Coinbase Custody as the custodian bodes well for their custodial business and was met positively by the market with a 5% rise in $COIN on Friday. Grayscale’s GBTC also surged over 15% since the news, sparking fresh hope that its own SEC entanglements could potentially be resolved in the future, depending on the outcome of Blackrock’s submission. The trust has traded at a sizable discount to Bitcoin’s price, and even considering Friday’s move still remains at a 42.8% discount. 

Data source: TradingView

What to Watch 

• UK’s CPI and FED Chair Jerome Powell testifies about Semi-annual Monetary Policy Report, on Tuesday.
• UK’s Monetary Policy Summary and the second day of FED Chair’s semi-annual testimony, on Thursday.
• France, Germany, UK and US’ Flash Services and Manufacturing PMI results, on Friday.

Insights

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Research Lab

• The Role of Central Banks in the Age of Digital Currencies:

Here is a thought-provoking analysis of the evolving role of central banks in the age of digital currencies, where Beau Chaseling covers the historical evolution of central banking, the potential impact of blockchain technology on central banks, and the emergence of central bank digital currencies (CBDCs).

• The Operation of MEV in Cosmos’ Interconnected Ecosystem:

Learn all about the rise of MEV with layer 0 protocols, various methods of MEV extraction, the role of the Inter-Blockchain Communication Protocol (IBC), interchain MEV and more in this Research Lab article by Innovation Analyst Beau Chaseling.

* 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 19th June 2023?

Major events included BlackRock filing for a Bitcoin ETF, Hong Kong government pressuring banking giants HSBC and Standard Chartered to accept crypto clients, Binance announcing its departure from the Dutch market, and US lawmakers filing the “SEC Stabilization Act” against SEC Chair Gary Gensler. Other notable events were Binance launching Bitcoin cloud mining services, Coinbase announcing the repurchase of $65 million in convertible notes, and the Bank of China issuing $28M in digital structured notes on the Ethereum blockchain.

What was the significance of BlackRock filing for a Bitcoin ETF?

BlackRock’s filing for a Bitcoin ETF is a significant development in the crypto market, indicating a growing acceptance of crypto-related financial products by major financial institutions. If approved, this could potentially lead to increased institutional involvement in the crypto market.

What was the impact of the Hong Kong government pressuring banking giants to accept crypto clients?

The Hong Kong government pressuring banking giants like HSBC and Standard Chartered to accept crypto clients and support licensed crypto exchanges indicates a shift towards greater acceptance and integration of cryptocurrencies in the traditional financial system. This could potentially lead to increased adoption and use of cryptocurrencies in Hong Kong and other regions.

What was the significance of Binance’s departure from the Dutch market?

Binance’s departure from the Dutch market after failing to obtain a license highlights the ongoing regulatory challenges faced by crypto exchanges. This event underscores the importance of regulatory compliance for crypto companies and the potential impact of regulatory actions on the operations of crypto exchanges.

What was the impact of the “SEC Stabilization Act” filed by US lawmakers against SEC Chair Gary Gensler?

The “SEC Stabilization Act” filed by US lawmakers against SEC Chair Gary Gensler indicates growing tensions between the crypto industry and regulatory authorities. The Act, which accuses Gensler of “abuse of power”, highlights the ongoing debate over the need for clearer and more balanced regulatory guidelines in the crypto space.