30 Jan, 23
Weekly Crypto Market Wrap, 30th January 2023
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Week in Review
- Full FTX creditor list shows other crypto enterprises, VC firms, airlines, media outlets, hotels, tech firms and even government agencies caught in exchange collapse – US Senator Elizabeth Warren questions quality of auditors’ oversight following debacle.
- Australian exchange Digital Surge gets approval on five-year bailout plan to refund its 22,545 customers – Zerocap was appointed custodian for the assets by KordaMentha.
- New York State Assembly introduces crypto payments bill for fines and taxes.
- Recent Matrixport data shows American institutions account for 85% of Bitcoin buyers.
- Bitcoin miner Core Scientific raises $500 million from BlackRock, Apollo and more.
- Amazon allegedly developing blockchain-based gaming initiative with NFT integration.
- Bankrupt crypto lender BlockFi releases documents detailing $1.2 billion FTX exposure.
- European Central Bank board member presents Digital Euro research to EU parliament.
- South Korean Ministry of Justice will introduce novel cryptocurrency tracking system In H1 2023 to strengthen money laundering tracking.
- California’s Department of Motor Vehicles (DMV) tests digitization of car titles and and ownership transfers through Tezos’ blockchain.
- Coinbase fined $3.6 million in the Netherlands for lack of correct registration.
- Strong US quarter GDP data at 2.9% showing some robustness against recession fears.
- UK business confidence hits two-year low following manufacturing PMI report.
Winners & Losers
- The ABS release of hotter-than-expected Consumer Price Index (CPI) figures for Q4 2022 resulted in disappointment among Australian market participants. The +7.8% increase over the past 12 months missed analyst expectations of a +7.5% rise, causing further worries among investors over persistent inflation and future rate hikes by the RBA. The print represents the largest CPI gain since the 1990s, with a trimmed mean rate of +6.9% (annualised) also becoming the highest since ABS started publishing the series in 2003. The ABS cited that the main contributors to price increases were rises in “Domestic holiday travel and Accommodation (+13.3%), Electricity (+8.6%), and Accommodation (+7.6%).” The AUD rallied as a result, closing the week up +2% hovering around $0.71 AUD/USD. Despite the red-hot CPI print, the S&P/ASX 200 index was resilient with a weekly close of 7,493.8 (+0.6%). Markets are now pricing in around a 75% probability that the RBA hikes its cash rate by 25 basis points when it reconvenes next month.
- The NAB December Monthly Business survey provided insight into domestic market sentiment and showed a slight improvement in business confidence (+3 points) but a decline in business conditions (-8 points). All sub-components weakened, including profitability (+12 index points), trading conditions (+18 points), and employment (+8 points). NAB Chief Economist Alan Oster noted that “growth momentum has slowed significantly in late 2022 while price and purchase cost pressures have probably peaked”.
- Despite fears of a looming recession, US GDP results exceeded market projections, with a +2.9% annualised gain in Q4 2022. The deceleration in GDP from Q3’s 3.2% was accompanied by a reduction in exports, slowing consumer and local/state government spending and lesser nonresidential fixed investment. The notably decreased pace of consumer spending, gaining just +2.1% vs Q3’s 2.3% (Annualised), coincided with a falling pace of US personal income growth – up just +0.2% MoM – the smallest gain since April 2022. US consumers appear to be coming to terms with the current macroeconomic climate as well, tempering personal spending, and reporting a contraction of -0.2% MoM.
- Early this week, BTC favoured the topside. However, a lack of buyer conviction above 23,000 saw the forming resistance level reaffirm its strength. Notably, we saw the 22,300 support retested and successfully defended with a continued buyer appetite below 22,500. During Wednesday’s session, an influx of buyer volume shot the price above the 23,000 resistance level, taking out stops on a false break, before reverting 4% lower within 15 minutes. Into the latter part of the week, we witnessed an increase in momentum and the price continued to edge higher with the 24,000 level acting as resistance. BTC returned +4.57% WoW, its fourth week of positive returns. With February’s highly anticipated rate hike approaching out of the US, we may find some players crystallising some much-needed profits into the risk event.
- ETH entered the week at 1,628 and unlike BTC, experienced a lack of buyer appetite. We saw action play around the 1,610 level, a recently flipped weekly resistance that acted as support early. However, a break of the level saw prices descend lower until bids at 1,535 halted the action. Soon after, the price reverted higher and 1,610 acted as late-week resistance. Into the latter part of the week, bids were found below 1,565 and an eventual break of 1,610 saw ETH close the week +1.06%. A lack of buyer conviction does not fare well for ETH’s short-term action, especially within the context of de-risking into the US FOMC event.
- Bitcoin’s mid-week rally followed suit with equities, ascending higher in the presence of risk on sentiment. Later, BTC and risk assets faced mixed reactions following the release of GDP and Durable Goods Orders data out of the U.S. on Jan. 26. Coming in better than expected, markets reacted positively until the increasing likelihood of sustained hawkish monetary policy saw price revert lower.
- Bitcoin is once again leading the market in moves higher, reflecting growing market momentum. Historically, Bitcoin’s outperformance has often led to strong runs in alt-coins in similar market structures. This trend was evident in the past week as the alt-coins experienced significant gains as they followed BTC higher.
- Looking at the behaviour of various cohorts within BTC’s ecosystem, we can see that the supply held by short-term holders and miners has recently decreased. This behaviour is indicative of selling into the recent strength.
- While there is a lack of conviction among short-term holders and miners, the supply held by long-term holders continues to ascend. This trend suggests continued conviction among some of BTC’s firmer hands and is behaviour consistent with early-stage bull markets.
- Bitcoin’s Hash Ribbon depicts the 30d and 60d moving average of BTC’s hash rate. The metric is used as a cyclical measure and is helpful in understanding periods of miner distress. Traditionally, a cross-over of the 60d through the 30d MA from below is preceded by gains. However, the last crossover came just after FTX’s capitulation. While lagged, ensuite with historical trends, recent price action suggests this metric’s implications still hold true.
- The implied volatility curve for Bitcoin remains in backwardation as the FOMC meeting approaches on Wednesday. We’ve seen the market’s increased positive outlook impacting skew with calls priced higher than puts. Interestingly, this has eventuated on the back of increased correlation between IV and Bitcoin’s spot price, which had an inverse relationship for almost the entire previous quarter.
- Following an extended period of futures trading at a discount to spot, the ETH futures basis has ticked positive. This trend suggests a continued unwinding of short interest or increase in buyer interest into the new year. Moving forward, shifts in this metric lower may be suggestive of players capturing profits into Ethereum’s much anticipated Shanghai upgrade in March.
- While we’re seeing conviction from some of Bitcoin’s firmer hands, we saw a relative lack of buyer interest among ETH’s participants this week. BTC continues to outperform ETH and is a trend that is consistent with early bull markets. Nonetheless, we can expect short-term moves to be dictated by newsflow relating to this coming week’s rate hike out of the Fed.
- The Optimism (OP) token has reached a new high of over US$2.50 due to growing interest in layer 2 networks. The OP token, which was launched in May 2022, has increased by 140% this year, substantially exceeding the growth of ETH and BTC, which have respectively risen by 33% and 39% YoY. Despite the significant price surge, the number of transactions on the Optimism network has decreased recently. This is attributed to the recent completion of Optimism Quests, which onboarded many new users but simultaneously depicted that many transactions on layer 2 were tied to this initiative and the potential rewards users could obtain.
- Uniswap, the leading decentralised exchange by trading volume and total value locked (TVL), is set to be deployed on Binance’s blockchain platform, BNB Chain, following a vote by Uniswap’s governance token, UNI, holders. Nearly 80% of the 25 million UNI voters chose to launch Uniswap v3 on BNB Chain. 0xPlasma, the party that initiated the Uniswap governance vote, has predicted that the move will lead to an extra US$ 1 billion in total value locked for Uniswap. Presently, Uniswap is deployed on several other networks, including Ethereum, Polygon, and Optimism.
- Amazon is reportedly launching a digital assets enterprise, including an NFT initiative, expected to be made public in the spring of 2023. The focus of the initiative is on blockchain-based gaming and related NFT applications. Reports indicate that there have been internal hires for Web3 developers and engineers, although it is important to note that Amazon has not yet taken any meaningful steps into the blockchain industry. Accordingly, it is unclear if Amazon will compete with NFT marketplaces like OpenSea and Rarible, but a successful launch could be seen as a threat. Amazon CEO, Andy Jassy, has previously stated the company is open to selling NFTs and leveraging cryptocurrencies for payments.
- Aave Protocol V3 is now live on the Ethereum market. V3 is designed with flexibility in mind, which enables new risk mitigation features and improves capital efficiency & decentralised liquidity, reducing gas costs in the process. The deployment of V3 on Ethereum unlocks technical benefits, including High-Efficiency Mode, allowing users to maximise their capital efficiency when lending and borrowing correlated assets; Isolation Mode which enables more assets to be used as collateral whilst maintaining protocol security by reducing liquidity risks, and; gas optimization, reducing the transaction costs of utilising V3 by approximately 20-25%.
What to Watch
- US Jolts Job Openings, Federal Funds Rate and FED’s FOMC press conference – on Wednesday.
- Bank of England’s Monetary Policy report, summary, official bank rates and European Central Bank’s press conference – on Thursday.
- US average hourly earnings and unemployment rate – on Friday.
Expand your understanding of the crypto world with Nathan Lenga’s article on Crypto Seigniorage, where our Innovation Lead addresses the technology and how this crypto segment can eventually lead to decentralised monetary policies.
* 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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