13 Feb, 23
Weekly Crypto Market Wrap, 13th February 2023
Zerocap provides digital asset investment and digital asset custodial services to forward-thinking investors and institutions globally. For frictionless access to digital assets with industry-leading security, contact our team at [email protected] or visit our website www.zerocap.com
Week in Review
- US targets crypto staking by banning services from major exchange Kraken – exchange reaches $30 million settlement with US SEC, commissioner criticises agency move.
- Coinbase’s staking services debated in the US government following Kraken shutdown.
- US banking giant BNY Mellon states digital assets are “here to stay,” institutional investors are “absolutely interested” in the ecosystem – cites their 2022 crypto study.
- Ethereum “gas” transfer prices spike 29% in January as network user activity grows.
- PayPal’s EOY 2022 statements show the company with $604 million in crypto holdings.
- Tether (USDT) completes audits of reserves, with assets exceeding liabilities; BDO report.
- Brazil’s oldest bank, Banco do Brasil, now allows residents to pay taxes using crypto.
- FTX’s current management is requesting politicians and parties to return previous donations done by exchange through its founder Sam Bankman-Fried – Judge extends SBF’s ban from messaging apps, identities behind bail not revealed.
- MIssissippi passes bill to protect crypto miners against discriminatory electricity rates.
- Kazakhstan, one of the main crypto mining hubs, to mandate 75% mining revenue tax.
- Shopify launches “Shopify Blockchain,” a suite of blockchain tools for merchants.
- Bitzlato co-founder released from arrest and questioning in Moscow.
- UK’s Q4/2022 GDP shows 0% economic growth, narrowly avoids recession.
- US Consumer Sentiment climbs to 13-month high, while inflation concerns persist.
Winners & Losers
- Balance of Trade numbers from Australia (AUS) and the United States (US), released earlier in the week embodied shifting global cost pressures, and the effects of China’s resurgence as a major manufacturing and export powerhouse, following the abolition of its COVID Zero policy late last year. The seasonally adjusted balance on goods and services in/out of Australia fell $1.2 billion to $12.2 billion AUD in December, displacing expectations for a fall in surplus to $12.5 billion AUD. Australian imports rose by $445 million, whilst exports shrunk by $793 million – a move synonymous with a decreased global demand for Australian minerals, and easing supply chain bottlenecks.
- The US on a similar note, realised a widening of its trade deficit to – $67.4 billion in December. More notably, on an annualised basis the US trade deficit grew to -$948.1 billion in 2022 – a new record print. Analysts attributed the $425.7 billion annual surge in import expenditure to a cost associated with supply chain diversification, and rising costs of energy inputs. US Crude Oil Imports rose $65.1 billion alone in 2022. Also in the US, Initial Jobless Claims (released weekly) exhibited a jump in unemployment benefits claims (+196,000) for the week ending February 4 – rebounding off of the January 29th 9-month low of +183,000.
- The Reserve Bank of Australia (RBA) paired market forecasts with a rise in the cash rate of 25 bps to 3.35% in its February meeting. In its statement on monetary policy released on Friday, the RBA touched upon the state of the global economy, citing “Global inflation is still very high but looks to have peaked.” Both the RBA and FED are aligned in their views that the pricing of goods appears to be normalising and largely disinflationary; with a halt in energy price increases, easing supply chain issues and lesser “upstream cost pressures.” Despite this, services side inflation continues to be sticky, rising costs of rent amongst other core contributors have seen “the prices of market services 7% higher YoY.” Current RBA projections place inflation returning to the target band of 2-3%, in mid-2025 – with continued rate hikes imminent.
- Despite looming recession fears, US consumer optimism edged slightly higher in February – the preliminary results for the Michigan Consumer Sentiment index rising 1.5 points higher to 66.4. On the other hand, the release of more robust labour force data saw inflationary expectations climb higher to 4.2% vs 3.9% the month prior – amidst an uptick in short-term inflationary expectations.
- Rolling into the new week, BTC persisted sideways, remaining elevated above the 22,800 level yet failing to make notable grounds above 23,000. Volatility picked up late during Tuesday’s session and action seesawed with BTC marking weekly highs above 23,400 before retracing lower. Alongside negative momentum, BTC shifted lower, finding support at the 21,600 level and closing at a -5.03% WoW. An overarching propensity toward risk-off suggests price may favour the downside in the short term. The 20,500 level marks the next notable support, a break here and we may face consolidation at the 19,000 level before any notable moves higher are justified.
- In tandem with BTC, ETH remained confined until Tuesday’s session where the price ascended above the monthly resistance placed at 1,680 before quickly reverting lower. The 1,610 support showed signs of strength until growing sell volumes on Thursday sent the price toward 1,500. Price struggled to ascend higher into the weekend and ETH closed -6.99% WoW at 1,515. The 1,500 support now acts as key short-term support, with a lack of support until 1,300.
- The fallout from the prior Friday’s NFP data continued to impact markets last week. As participants continued to reevaluate the possibility of extended tightening of monetary conditions, equities and bonds moved lower early in the week with DXY moving higher. The topheavy effects of this readjustment was reflected in ETH and BTC’s inability to make notable gains early on.
- While markets ascended following Fed Chair Powell’s speech on Tuesday, hawkish undertones of numerous Fed speakers weighed in on risk assets as the week progressed. By Friday, the US 2Y Treasury note yield ascended to yearly highs as participants assigned a higher likelihood to continued hikes. Correspondingly, BTC and ETH moved lower into the weekend.
- Following on from a prior week of strength, ETH/BTC initially continued to move higher. ETH’s early relative outperformance pushed the pair beyond the 0.072 level. However, a flip in attitudes and strong de-risking across the board caused the pair to move below 0.070, a level that acted as key resistance in late January. While a weekly close below 0.070 may not fare well for sentiment, the pair was strongly bid down to 0.0690 and hence, we may see this support sustain relevance into the short term.
- Since the turn of the year, BTC’s hash rate has continued to climb higher. A recent production update from publicly listed miners shows that the number of BTC obtained from mining operations has generally increased for leading BTC mining entities. This includes CoreScentific and Riot as well as CleanSpark who increased production by 50% in January. While this increase suggests we’ve entered the early stages of a bull market, it is also suggestive that we may see firmer hands, such as miners, sell into strength.
- Contrastingly, since markets rolled into 2023, we’ve seen the number of Ethereum addresses with greater than 32 ETH diminish. As Shanghai creeps closer, we may see a continuation of this trend as participants unwind ETH positions into the event.
- With the recent cooling of short-term price action, the falling implied volatility (IV) of Bitcoin has led to a steeper contango term structure. The positive correlation between IV and Bitcoin’s spot price, which was evident in the early months of 2023, has started to weaken. As expected, the market is anticipating increased volatility for the CPI evident in the near-term strikes. Although, compared to previous CPI reporting dates and subsequent intra-day moves, the current volatility appears to be relatively low and cheap.
- The long open interest on the decentralised trading platform, GMX, has almost been reduced by half, from $165 million to $73 million, in the past week. With large long positions opened at the start of the year now being closed and realising profits, open interest is neutral for the first time since early December. The imbalance between longs and shorts can often reflect retail sentiment and positioning, and can often be paired well with other momentum-based indicators to gauge the strength of price movements.
- Last week, we saw moves heavily dictated by adjustments in expectations for January’s U.S. inflation print, scheduled for release on February 14. The prior Friday’s better-than-expected NFP data set the tone early for possible extended hikes, words to this effect following from various Fed speakers. Price is currently residing at an inflection point. Newsflow and macro pricing will play into the short and medium-term moves, and we expect some more downside volatility before the next leg up across all risk assets.
- Lido, a popular liquid staking platform, has plans to enhance its staking rewards and architecture with the launch of Lido V2. The upgrade will feature a new modular staking router, allowing a wider range of node operators to join and make the protocol more adaptable. The release of Lido V2 is planned for early 2023, with testing and a withdrawal credential rotation ceremony already in the works. Lido Finance, the leading decentralised finance protocol with over $8 billion in staked value, is paving the way for the DeFi industry as we move into 2023.
- The Sandbox, a metaverse gaming platform, entered into a confidential agreement with the Saudi Arabia Digital Government Authority. The partnership was announced by Sandbox’s COO and Co-Founder, Sebastien Borget, at the Leap Tech Conference held in Riyadh. Both Saudi Arabia and the United Arab Emirates have been focused on investments and policies related to cryptocurrency, web3, and the metaverse. The Sandbox raised a significant amount of capital, with a Series B funding round that brought in $93 million in 2021, and there have been rumours that the company is seeking additional funds, with a rumoured valuation of $4 billion.
- To resolve SEC allegations of providing unregistered securities to US customers through its staking platform, the cryptocurrency exchange Kraken has agreed to pay $30 million. As a result of the SEC filing a lawsuit in federal court, Kraken will be ending its staking services and programs for US customers immediately. The staking platform had previously offered yields of up to 20% per year, however, the SEC considered it a high-risk investment with limited protection for investors. Kraken will be unstaking all assets held by US clients, excluding staked Ether, which will remain staked until after the Ethereum Network’s Shanghai upgrade. This move is part of Kraken’s efforts to comply with the SEC’s requirements and resolve the allegations.
- Brian Armstrong, CEO of Coinbase, is concerned about potential SEC regulations on cryptocurrency staking for retail investors, which he believes would have a negative impact on the US. SEC Chairman, Gary Gensler, has stated that cryptocurrencies enabling staking could be considered securities, however, the CFTC has designated Ether as a commodity.
- Ethereum is preparing to implement the Shanghai + Capella (Shapella) mainnet upgrade to make full withdrawals available for exited validators, while partial withdrawals will be available for active validators with balances over 32 ETH. The public testnets are currently in the final stage. Tim Beiko, a member of the Ethereum Foundation, has stated that if all goes well, another testnet is expected to launch in mid-March, with a possible mainnet launch in late March or early April.
- The Uniswap DAO recently held a vote to determine the deployment of Uniswap v3 on the BNB Chain. The results showed that 66% of DAO delegates voted in favour of the deployment, with major players such as ConsenSys and Compound Finance founder Robert Leshner supporting the proposal. However, Andreessen Horowitz, a well-known venture capital firm, cast a vote against the proposal. The debate surrounding the vote has led to the creation of a bridge assessment committee for Uniswap, which will develop a framework for future cross-chain deployments. The deployment of Uniswap v3 on the BNB Chain is aimed at capturing PancakeSwap’s market share, which is the leading decentralised exchange on the BNB Chain and controls $2.4 billion in total value locked. The deployment is also urgent as Uniswap’s business licence for its v3 iteration expires on April 1, which prevents other platforms from launching forked protocols.
- The Ordinals protocol has enabled the integration of non-fungible tokens (NFTs) with the Bitcoin network. Launched in January, it allows data and images to be inscribed directly on the Bitcoin blockchain, leading to new NFTs being minted and fetching high prices. Bitcoin software upgrades Taproot and SegWit provided the necessary infrastructure for NFTs to be inscribed. Stacks, a Bitcoin sidechain, also has a growing NFT ecosystem of its own and has seen a surge in trading volume in recent days.
What to Watch
- US and UK’s CPI, on Tuesday and Wednesday respectively.
- US’ Core PPI, on Thursday.
Read a thorough breakdown of blockchain technology and its many frameworks with researchers Finn Judell and Nathan Lenga, inaugurating our brand new Research Lab!
An initiative created by our Innovation team, the Research Lab seeks to stand at the core of financial evolution – bringing readers masterly researched content and original insights at a level of expertise that can seldom be found elsewhere. In due course, the Research Lab will be one of many ventures associated with the upcoming Innovation Hub.
* 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|
Zerocap Pty Ltd carries out regulated and unregulated activities.
Spot crypto-asset services and products offered by Zerocap are not regulated by ASIC. Zerocap Pty Ltd is registered with AUSTRAC as a DCE (digital currency exchange) service provider (DCE100635539-001).
Regulated services and products include structured products (derivatives) and funds (managed investment schemes) are available to Wholesale Clients only as per Sections 761GA and 708(10) of the Corporations Act 2001 (Cth) (Sophisticated/Wholesale Client). To serve these products, Zerocap Pty Ltd is a Corporate Authorised Representative (CAR: 001289130) of AFSL 340799
This material is intended solely for the information of the particular person to whom it was provided by Zerocap and should not be relied upon by any other person. The information contained in this material is general in nature and does not constitute advice,take into account financial objectives or situation of an investor; nor a recommendation to deal. . Any recipients of this material acknowledge and agree that they must conduct and have conducted their own due diligence investigation and have not relied upon any representations of Zerocap, its officers, employees, representatives or associates. Zerocap has not independently verified the information contained in this material. Zerocap assumes no responsibility for updating any information, views or opinions contained in this material or for correcting any error or omission which may become apparent after the material has been issued. Zerocap does not give any warranty as to the accuracy, reliability or completeness of advice or information which is contained in this material. Except insofar as liability under any statute cannot be excluded, Zerocap and its officers, employees, representatives or associates do not accept any liability (whether arising in contract, in tort or negligence or otherwise) for any error or omission in this material or for any resulting loss or damage (whether direct, indirect, consequential or otherwise) suffered by the recipient of this material or any other person. This is a private communication and was not intended for public circulation or publication or for the use of any third party. This material must not be distributed or released in the United States. It may only be provided to persons who are outside the United States and are not acting for the account or benefit of, “US Persons” in connection with transactions that would be “offshore transactions” (as such terms are defined in Regulation S under the U.S. Securities Act of 1933, as amended (the “Securities Act”)). This material does not, and is not intended to, constitute an offer or invitation in the United States, or in any other place or jurisdiction in which, or to any person to whom, it would not be lawful to make such an offer or invitation. If you are not the intended recipient of this material, please notify Zerocap immediately and destroy all copies of this material, whether held in electronic or printed form or otherwise.
Disclosure of Interest: Zerocap, its officers, employees, representatives and associates within the meaning of Chapter 7 of the Corporations Act may receive commissions and management fees from transactions involving securities referred to in this material (which its representatives may directly share) and may from time to time hold interests in the assets referred to in this material. Investors should consider this material as only a single factor in making their investment decision.
Past performance is not indicative of future performance.
Like this article? Share
Weekly Crypto Market Wrap, 27th March 2023
Download the PDF Zerocap provides digital asset investment and digital asset custodial services to forward-thinking investors and institutions globally. For frictionless access to digital assets
Arbitrum: The Project and its Upcoming $ARB Token Release
The cryptocurrency landscape has been a rollercoaster ride, with innovations and challenges around every corner. As blockchain networks continue to evolve, scalability remains a crucial
Weekly Crypto Market Wrap, 20th March 2023
Zerocap provides digital asset investment and digital asset custodial services to forward-thinking investors and institutions globally. For frictionless access to digital assets with industry-leading security,
Receive Our Insights
Subscribe to receive our publications in newsletter format — the best way to stay informed about crypto asset market trends and topics.