Weekly Crypto Market Wrap, 4th September 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

Week in Review

• Grayscale wins lawsuit against the SEC towards a Bitcoin ETF.
• USDT stablecoin issuer, Tether’s market cap declines for the first time in nine months.
• Binance CEO believes DeFi will surpass traditional finance volume in the next crypto bull run.
• China court declares virtual assets as legal properties protected by law.
• Hong Kong retail investors finally gaining access to local crypto exchanges.
• Binance excludes Venezuelan national bank from P2P payments.
• SEC issues first NFT-related enforcement action, labens NFTs as unregistered securities.
• SEC delays decisions on 7 Bitcoin Spot ETFs – Bloomberg analysts put Bitcoin ETFs at 75% chance of approval this year.
• Indian Prime Minister Modi calls for global crypto framework in G20 meeting.
• Adidas announces launch of resident Web3 art studio for exclusive content.
• Soccer player Ronaldinho fails to testify in crypto scam probe, faces possible arrest in Brazil.
• Over 76% of Vietnamese crypto holders make investment decisions based on close friends’ referrals; VC Kyros report.
• US labor market loses steam as job openings, resignations decline – Revised GDP down to 2.1% in Q2 2023.
• Canada’s economy unexpectedly shrinks, central bank likely to hold rates.

Winners & Losers

Data source: TradingView

Market Highlights

• Bitcoin opened the week in a consolidative phase, fluctuating between the $25,500 and $26,800 range. Mid-week, a surge in volatility was triggered by Grayscale’s legal win against the SEC. The cryptocurrency briefly surged above $28,000 but swiftly retraced its gains in response to news of the SEC’s delay in deciding on six spot Bitcoin exchange-traded fund (ETF) applications. The SEC prolonged its evaluation period by an additional 45 days, postponing the final decision until October. Shortly after, the SEC also placed BlackRock, the world’s largest asset manager, in the same category of delayed decisions. Within two hourly trading candles, Bitcoin (BTC) witnessed a sharp $1,000 decline. This sequence of events underscores the crypto market’s continued sensitivity to regulatory developments. 
• Once more, Bitcoin (BTC) demonstrated strong buying interest below the $26,000 mark, reaffirming its significance as a short-term support level. In the immediate future, it’s reasonable to anticipate a period of short-term consolidation, with traders closely monitoring the release of next week’s U.S. inflation data for potential market direction cues. Potential price movements may include a retest of the $25,000 support level if the market trends lower, or encountering resistance around the $30,000 mark if it moves higher.

Data Source: TradingView

• In late August, we delved into the significant long liquidations that amounted to a staggering $1 billion across all major derivatives exchanges. While we saw this revert higher temporarily, its general trend remains dampened. Moreover, much of the leverage that has built since mid-2023 has effectively been wiped out which may paint a more bullish picture as the BTC has held strong above 25,000 since March despite the intensity of such events.

Data Source: Velo Data

• Over the past week, we’ve observed a noticeable shift in Bitcoin’s 25-day implied volatility (IV) skew, with puts becoming cheaper in back-month expiries relative to calls. This is largely due to the SEC delaying its decision on the Bitcoin ETF – a narrative that has influenced calls to be more favoured over puts for most of the year, at least for longer-dated expiries. With the odds of ETF approval seeming to wane in the near term and sentiment shifting, the change in skew appears to reflect the market’s evolving expectations about the ETF getting approved within those timeframes. In the short term, however, 7-day and 30-day puts are priced notably higher than calls. Upside risk reversals could be an interesting way to play this differential for those with a short-term bullish outlook.

Data Source: Velo Data

• Digital Currency Group (DCG), the parent company of Genesis Global Holdco, has reached a preliminary agreement with Genesis creditors to settle outstanding debts, following its bankruptcy filing in January 2023. DCG’s new plan aims to resolve its liabilities and establish new debt facilities, targeting a recovery range of 65% to 90% for unsecured creditors, depending on the type of asset. Genesis initially filed for bankruptcy due to financial losses stemming from the collapse of crypto hedge funds Three Arrows Capital and FTX. Currently, Genesis owes roughly $3.6 billion to its top 50 creditors, which includes the crypto exchange Gemini.
• In a recent joint experiment, the global interbank messaging system Swift and Web3 protocol Chainlink successfully transferred tokenized assets across multiple blockchains, indicating a significant advancement towards scalable, frictionless tokenized asset markets. The collaboration involved major financial institutions like BNP Paribas, BNY Mellon, and Lloyds Banking Group. While underscoring the potential for improved efficiency and transparency in bond markets through tokenization, the summary report provided by Swift also highlighted the need for regulatory clarity and a greater focus on data privacy in future initiatives.

What to Watch 

• Australia’s quarter GDP, on Tuesday.
• Bank of Canada’s rate statement and US’ ISM Services PMI, on Wednesday.
• US unemployment claims, on Thursday.

Research Lab

• What is Eclipse Fi?:

Innovation Analyst Beau Chaseling offers a meticulous examination of Eclipse Fi, a pivotal entity within the Cosmos universe. Learn about its role as a decentralized launchpad, its unique approach to token launches, and the transformative potential of ECLIP tokens – with Eclipse Fi’s vision to reshape token launches and its commitment to transparency as project standouts.

* 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

1. What was the outcome of Grayscale’s lawsuit against the SEC?
   • Grayscale triumphed in its lawsuit against the SEC, moving a step closer to launching a Bitcoin ETF.
2. How has Tether’s market position changed in recent months?
   • Tether, the issuer of the USDT stablecoin, saw its market cap decline for the first time in nine months, indicating potential shifts in the stablecoin market dynamics.
3. What are the SEC’s recent actions concerning Bitcoin ETFs and NFTs?
   • The SEC has delayed its decisions on several Bitcoin Spot ETF applications, pushing the final verdict to October. Additionally, the SEC has taken its first enforcement action related to NFTs, classifying them as unregistered securities.
4. How is Binance’s position evolving in the global crypto market?
   • Binance’s CEO predicts that DeFi platforms will surpass traditional finance volumes in the upcoming crypto bull run. However, Binance has also excluded the Venezuelan national bank from its P2P payment system, reflecting its dynamic approach to global markets and regulations.
5. What significant steps have been taken in Asia regarding cryptocurrency?
   • China’s court has declared virtual assets as legal properties protected by law, strengthening the legal position of cryptocurrencies in the country. Meanwhile, Hong Kong is opening its doors to retail investors, allowing them access to local crypto exchanges, marking a significant shift in the region’s crypto accessibility.

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.