31 May, 21

Weekly Crypto Market Wrap, 31st May 2021

weekly crypto market wrap


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Week in Review

Winners & Losers

  • Bitcoin began the week rebounding from the most recent low at US$31,000, confirming support in the 30,000-34,000 area. By Wednesday, the asset had poked above the US$40,000 mark before retreating to end the week at US$35,700 following another bounce from the aforementioned support region. The relief rally above US$40,000 was predominantly fueled by bullish newsflow and unleveraged investors ‘buying the dip’. Although, this has had little impact on general sentiment, with many still cautiously sidelined. 
  • Ethereum followed suit this week, rallying from last week’s low and regaining support around the US$2,250 region. Sentiment is more positive for Ethereum, a result of the expected developments in the DeFi space over the coming months. Overall, BTC recorded a 2.71% gain and ETH recorded a 13.72% gain WoW.
  • The US10Y saw back and forth this week as strong US economic data and inflation news drove two-sided flows. Overall, the US10Y continued to drop before retracing and settling for a -2.32% loss this week. 
  • Gold continues to rally on the back of inflation forecasts, further fueled by dropping bond yields. Gold recorded a 1.08% WoW gain while PAXG is yet to return to its peg, returning 0.48% this week. 
  • Due to the strong US economic data released this week, equity markets rallied, with the S&P closing the week just shy of its ATH returning 0.81% WoW. The VIX continued last week’s downtrend as equity markets were bid. Overall, the VIX dropped -18.2% this week.
  • We believe that the Federal Reserve’s position that inflationary concerns will only be transitory may form some cracks in the armour of leveraged equities if we continue to get spikes to CPI and associated inflation figures.

Macro, Technicals & Order Flow


  • We’ve seen a quieter week after the past few, suggesting that the leveraged players have been sidelined for now. 34,000 to 42,000 are the new key support and resistance levels. If 34,000 breaks, we’ll likely see a retest of 30,000 – the recent lows of the downturn. If we range higher, we could be in for another week of consolidation between key support and resistance.
  • Short-term on-chain data is showing inflows into exchanges this week indicating suppressed prices for the coming week. Futures basis remains compressed in congruence with on-chain data.
  • On-chain intelligence from the recent sell-off continues to bring insights into the state of affairs. Some are pointing to the negative Grayscale premium as an indicator of slowing institutional demand. We are looking at this metric in a different way – as an indicator of newer, more secure and less expensive access points for institutional investors. The ETFs in Canada and Germany, and rumours around SEC (US) and ASIC (AU) approvals on ETFs have had significant impact. From a structural perspective, the negative premium is not only demand-driven, but also supply-driven. One of the most popular hedge fund trades over the past few years has been entering Grayscale at NAV using bitcoin, and then selling shares after the lockup for the premium. The advent of ETFs and other vehicles (better liquidity on futures, other bitcoin trusts) to express long bitcoin exposure has led to more hedge funds selling GBTC shares, and less rolling of their positions.
  • The Canadian ETF did show signs of slowing inflows from early May, indicating short-term slowing demand. Nothing notable enough to indicate the kind of liquidity cascade that we saw. Inflows into this ETF are back again above all-time highs, coinciding with the predominant OTC buying across our business at these current levels. 

Purpose BTC ETF Holdings

  • More telling about the recent downturn has been exchange liquidity levels. The recent spike of inflows to exchanges is above the recent mean, and provided some warning of a potential turn. Whilst the flows were not as notable as in March 2020, the rate of the spike after such a bullish period is worth noting.

Total BTC Transfer Volume to All Exchanges

  • Bitcoin dominance is holding above its lows. Our view is that dominance will mean revert, but this will be largely guided by inflation expectations (more inflation = more BTC dominance) and DeFi traction (more DeFi traction = less BTC dominance). On balance, inflation has more potential to move BTC given the continuing institutional interest. However, this is a tough one to call in the short-term, given uncertainty around upcoming inflation data.

Bitcoin Dominance vs Whole Crypto Market

Grayscale Bitcoin Trust (GBTC) Premium

Bitcoin Percent Balance on Exchanges – All Exchanges

BTC Futures Annualised Basis – Current

BTC Futures Annualised Rolling – 1 Mth Basis

Probability of BTC being x$ per maturity

BTC Futures – Aggregated Open Interest

Total BTC Options Open Interest


  • ETH holding above its recent lows. Key levels are 2,000 to 2,550, with an ascending trendline forming resistance. 
  • The DeFi infrastructure has held up particularly well over this period. Stablecoins maintained their pegs, although USDT hit a high of 1.02, and a low of 0.99. On balance, the arbitrage mechanism of the pegs worked as designed with VWAP holding at 1.00 for most of the time. There was huge volume across the ecosystem – Derivatives were used as hedging tools whilst DEXs reached all-time highs in volume.
  • Many, including some major banks, are viewing this as a great stress test of the ecosystem. There was little systemic risk. No lending protocols went under. Everything remained intact. Perhaps this is the kind of test that some of the bigger players needed?
  • If anything, it was centralised exchanges that struggled. Some going down for hours at a time dealing with the increased activity.
  • Gas fees peaked at about $300 USD per transfer on Ethereum, sparking more debate around scaling solutions. We are getting close to some real solutions with ETH 2.0, and a host of layer 1 and 2 scaling solutions coming to the fold. Expect this narrative to fire up in the coming months as competitive protocols, users and funds all determine how best to move forward in DeFi.
  • ETH on exchanges continues to fall this week, indicating relatively buoyed prices. Although any metrics at the moment should be taken as potential noise as the whole ecosystem redefines orderflow levels after the liquidations.
  • The total value locked in DeFi projects saw a 21% increase this week to $60.89 billion, signalling a potential bottom for the DeFi sector. 
  • The amount of ETH in the ETH 2.0 staking contract currently sits at 5,202,050, an increase of 7.46% from last week. This represents 4.48% of the total supply estimated to remain locked for ~ one year, continuing to constrict supply.

Ether Percent Balance on Exchanges – All Exchanges

ETH Futures Annualised Rolling 1 Mth Basis

Probability of ETH being above x$ per maturity

DeFi & Innovation

  • SEC’s Gary Gensler suggests the DeFi market presents new regulatory challenges, and proposes dedicated regulations. 
  • Mark Cuban invests in Ethereum’s layer 2 solution Polygon.
  • Alpha Finance’s Homora V2 reaches a 29% interest rate on wrapped bitcoin lending. 
  • THORChain announces fixed yield earnings and fixed-interest lending on any asset.
  • Chief economist of Facebook’s Diem says the asset will work as an intermediary stablecoin until the US releases its digital dollar. 
  • Dapper Labs’ NBA Top Shot crosses one million users mark, $700M in sales. 
  • Redbull’s Formula One racing team signs deal on NFTs with Tezos.  

What to Watch 

  • Biden’s $6 trillion budget counts on America facing a rise in debt while inflation rates become progressively lower. Despite that prediction, inflation continues to maintain record highs, a sign that the White House may be underestimating risks. With federal spending now at its highest levels since World War II, will the economic plan further push inflation into new heights?
  • Beijing’s crackdown on crypto continues, raising concerns as the market follows a cautious sideline trend. Bitcoin retreated to previous support at lower 30k’s, while total USD locked in DeFi had a 21% increase over the week. As bitcoin sentiment remains unstable and the SEC tackles DeFi challenges, could market inflows continue to lean towards DeFi protocols?

This document has been prepared by Zerocap Pty Ltd, its directors, employees and agents for information purposes only and by no means constitutes a solicitation to investment or disinvestment.  The views expressed in this update reflect the analysts’ personal opinions about the cryptocurrencies. These views may change without notice and are subject to market conditions. All data used in the update are between 24 May. 2021 0:00 UTC to 30 May. 2021 23:59 UTC from TradingView. Contents presented may be subject to errors. The updates are for personal use only and should not be republished or redistributed. Zerocap Pty Ltd reserves the right of final interpretation for the content herein above. 

* Index used:

  Bitcoin    EthereumGoldEquities        High Yield Corporate Bonds      CommoditiesTreasuryYields
BTCETHPAXG        S&P 500, ASX 200, VT      HYG  CRBQXU.S. 10Y

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