Weekly Crypto Market Wrap, 23rd October 2023

Download the PDF

Zerocap provides digital asset liquidity 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

We are trialling a new format for our weekly, to bring punchier and more insight-driven content to your precious inbox. Any feedback is much appreciated ([email protected])!

Week in Review

• US government among largest Bitcoin holders, worth over $5 billion in BTC.
• New York Attorney General sues Gemini, Genesis and DCG for allegedly defrauding investors.
• Coinbase’s Layer 2 network Base becomes open source.
• Hong Kong securities regulator announces crypto policies updates – certain assets will only be available to wholesale investors.
• California governor Newson signs crypto regulation bill, effective 1st July 2025.
• SEC drops lawsuits against two Ripple Labs (XRP) executives.
• FTX estate stakes $122 million worth of Solana, seen in detected transaction – customers could get up to $9 billion payout by mid-2024.
• Chamber of Digital Commerce opposes “SEC’s overreach” in Binance lawsuit.
• Binance restores Euro services after new fiat partners arrive.
• UK inflation holds steady following BoE’s pause on further hikes.
• Australia’s central bank sees challenging economy and inflation risks ahead, meeting minutes show.
• US retail sales bring stronger-than-expected results FED Chair Powell states strong economy may need more restraint, but bond markets are helping.

Winners & Losers

Data source: TradingView

Market Highlights

Geopolitics

Our hearts go out to everyone affected by the unrest in the Middle East. There is systemic risk in neighbouring countries, and unfortunately, tensions and aggression are heading toward a boiling point in local communities far from the war zones. This has far-reaching implications for stability across the world. Some of the key issues we are following are relations between the US, Israel and the UAE/Saudi Arabia and China’s evolving response to the conflict.

Inflation

30-year fixed mortgage rates hit 8% for the first time since 2000, while 30-year UST hit 5%. We are entering territory where the Fed could drag other CBs into more hikes, and higher for longer. The oil price looks like an extended topside move with geopolitical risks in the Middle East intensifying, and OPEC still constraining supply. Any Central Bank behind the curve may need to catch up in a short few meetings, which could bring volatility.

BTC 

While last week’s ETF news last week proved to be fake, there has been a clear shift in underlying sentiment with participants asking when, rather than if, the SEC will approve applications in the coming months. BTC is up 11% WoW, outperforming most major cryptocurrencies. Altcoins with high betas to BTC, like STX, BCH, and BSV, also thrived. 

Technically, the move is looking strong, gunning for the prior highs below 32,000. There is critical resistance sitting at 33,000 (dating back to Jan 2022) that looks to be the topside barrier. I wouldn’t be surprised to see a false break of the 32,000 level to wash out some of the leverage in this move before making a run at 33,000.

Data Source: TradingView

Alts

LINK stood out with a remarkable 36% surge, while SOL rose by 32% with SOL’s ascension being exaggerated by short squeezes in the futures market. SOL is now up over 200% for the year.

MATIC gained from hints about its Polygon 2.0 migration, and XRP benefited from the SEC dropping charges against Ripple executives. However, Uniswap’s frontend fee announcement cast a bearish shadow on its token, limiting its gains WoW.

Ultimately, the macro environment is on a precipice – whether we are heading toward higher inflation for longer, a recession, or both; it does not bode well for risk assets. And altcoins are a supercharged version thereof.

Derivatives

With broader market volatility increasing, BTC 3m IV has reached its highest level since July earlier this year. 

The shift in sentiment from “if” to “when” from the SEC was evident in last week’s spot moves — the 25 Delta skew has tilted bullish, reaching levels last seen during January’s rally. If the front-end IV persists in its ascent, long calendar spreads start to look appealing.

Data Source: Deribit

Furthermore, TradFi speculators on the CME are repositioning against the ETF expectations, with Futures and Options OI skyrocketing over the past week. The futures basis between Spot and the 2-month CME futures contract is trading at 11%.

Industry

Secondary market claims on FTX have been trading above 50¢ in the dollar, indicating market anticipation of a substantial recovery for FTX creditors. A claim exceeding $20 million was auctioned off at approximately 52¢ on the dollar last Friday. 

All in all, the next few weeks will be mired with speculation around the BTC ETF, stagflation, geopolitical unrest, and hopefully, some anticipation of peace into the end of 2023.

What to Watch 

• French, German, UK and US flash manufacturing reports, on Tuesday.
• Bank of Canada’s monetary policy and rate statement, on Wednesday.
• ECB monetary policy statement and US’ advanced quarter GDP, on Thursday.
• US treasury currency report, on Friday.

* Index used:

Bitcoin	Ethereum	Gold	Equities	High Yield Corporate Bonds	Commodities	Treasury Yields
BTC	ETH	PAXG	S&P 500, ASX 200, VT	HYG	SPGSCI	U.S. 10Y

FAQs

What significant legal actions have been taken in the crypto space recently?

The New York Attorney General has sued Gemini, Genesis, and DCG for allegedly defrauding investors. Additionally, the SEC has dropped lawsuits against two Ripple Labs executives.

How has Coinbase contributed to the crypto ecosystem this week?

Coinbase has made its Layer 2 network, Base, open source, which could potentially lead to more innovations and developments in the crypto space.

What are the geopolitical concerns affecting the crypto market?

The ongoing unrest in the Middle East poses systemic risks in neighbouring countries. The tensions and aggression are escalating in local communities, which could have broader implications for global stability. Relations between the US, Israel, the UAE/Saudi Arabia, and China’s response to the conflict are being closely monitored.

How has Bitcoin’s performance been highlighted in the report?

Despite last week’s false ETF news, there has been a positive shift in sentiment regarding Bitcoin. BTC has seen an 11% week-on-week increase, outperforming most major cryptocurrencies.

Which altcoins have shown remarkable performance this week?

LINK surged by an impressive 36%, while SOL rose by 32%. MATIC also gained traction due to hints about its Polygon 2.0 migration, and XRP saw benefits from the SEC dropping charges against Ripple executives.

DISCLAIMER

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.