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  -  Weekly Wrap   -  Weekly Crypto Market Wrap, 12th July 2021

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Week in Review

  • Markets plummet between 1.2% and 1.5% on Thursday amid fears of the Delta variant spreading and higher-than-expected jobless claims. This saw a quick recovery, with the S&P 500, Nasdaq and Dow Jones’ Index maintaining an ascending trendline towards new highs.
  • Addresses holding over 100k Bitcoin each reach two-year high
  • Visa reports crypto-linked card usage of over $1 billion during the first half of 2021.
  • Nickel survey shows 82% of institutional investors intend to increase crypto exposure.
  • Bank of America creates a crypto research team
  • Ethereum’s deflationary London update locked in for August 4th.
  • Goldman Sachs’ analysts predict Ethereum will overtake Bitcoin in the upcoming years.
  • Marshal Wace raising a new fund to invest in digital assets.
  • Peter Thiel-backed Bullish plans NYSE listing through $9 billion SPAC merger.
  • USDC-backer Circle to go public with SPAC deal valued at $4.5 billion. 
  • China orders software maker to shut down over suspected involvement with crypto. 
  • Wyoming legally recognises first Decentralised Autonomous Organisation in the US.
  • Barclays and Santander ban payments to Binance following UK crackdown. 
  • Reserve Bank of New Zealand announces plans to explore CBDCs. 

Winners & Losers

  • Bitcoin had a predominantly sideways week as traditional markets faced a midweek dip. Newsflow for the asset stayed relatively quiet in comparison to previous weeks. Speculators remain indecisive with many still on the sidelines, waiting for a definitive move out of the existing range. Overall, the asset returned -2.83%, closing at $34,250.
  • Ethereum endured a mild sell-off this week alongside traditional and crypto markets but struggled to bounce back like its counterparts, despite the upcoming London hard fork. While the general sentiment is positive amongst investors, many are still waiting for more definitive signals to enter or add to existing positions. Overall, ETH recorded a -7.88% loss this week.
  • The US10Y continued its downtrend this week as investors piled into the fixed income market. This was further amplified by an increase in the value of gold as US jobless claims returned higher than expected numbers and the Delta variant of Covid-19 fueled infection numbers across the US. The US10Y returned -4.84%.
  • Gold had a strong week as investors retreated to the safe-haven asset due to the macroeconomic factors above. Overall, the asset recorded its best week in seven, gaining 1.08%.
  • Despite a midweek dip, equities markets posted gains across the board with growth stocks outperforming value stocks. The S&P 500 gained 0.3%, the Dow Jones 0.19% and the NASDAQ 0.26%.

Macro, Technicals & Order Flow

Bitcoin

  • The Bitcoin price continues to trade sideways, chopping up the early traders and generally showing little signs of life. One could argue that there is a wedge forming, but combine this with stagnant Open Interest, limited newsflow and divergent on-chain data – it’s unlikely that we’d see a clean break with any momentum this coming week.
  • Aggregated liquidations flipped to the longs this week. I hand it to the active/leveraged traders trying to make a move in these spot and futures market conditions. The options volatility traders, on the other hand, may have some opportunity to buy some volatility soon given declining implied volatility.

BTC Aggregated Liquidations

BTC ATM Implied Volatility

  • We are definitely in a wait and see mode – markets are focused on the delta-variant strain of Covid-19 that has the potential for policy responses. Although you wouldn’t think it looking at the VIX Index.
  • In general, we are seeing lower aggregated spot volume WoW. Perpetual funding rates were negative for shorts most of the week, showing marginal short interest on the weighted balance. The futures basis remains compressed.

BTC Aggregated Daily Volumes

BTC Perpetual Swaps Funding

BTC Futures Annualised Rolling 1 Mth Basis

BTC Futures Annualised Basis – Current

BTC Futures – Aggregated Open Interest

Total BTC Options Open Interest

Number of Active Bitcoin Addresses


Bitcoin Net Transfer Volume from/to Exchanges

  • The Bitcoin Hash rate saw a continued retracement this week, but is still in bearish territory.

Bitcoin Hash Rate

Probability of BTC being above x$ per maturity

Grayscale Bitcoin Trust (GBTC) Premium

  • In summary, the delta-variant reach, and any policy responses, will be a key trigger for intermarket flows in the coming weeks. Right now, it’s low volatility, ranging / choppy trading – best left to the volatility buyers.

Ethereum

  • Ethereum has also hit a low volatility period, despite the upcoming fork and some great things happening across DeFi. Aave’s institutional move to bring DeFi to larger traditional market participants is a potential lens into the future. The tug of war between total decentralisation and AML laws persist – and Aave’s move could be the first of many to sate both sides of the fence.
  • Key support still sits at 2,000, the prior range breaking point. The topside levels are the 3,000 resistance and confluent rising ascending trendline from May and June. 
  • Like BTC, we’ll need some macro factors to play out first – what happens with the latest delta-variant, and whether any policy responses follow.
  • The DeFi Index (FTX) is still holding up well, further advocating DeFi’s value in ranging, bear market scenarios.
  • The Perpetual Funding rates are less one-sided than BTC, indicating a mixture of short-term views. Similarly, the futures basis has oscillated between negative and positive all week – and has been divergent across liquidity venues, providing some solid arbitrage opportunities for traders who can margin across multiple venues.

ETH Perpetual Swaps Funding

ETH Futures Annualised Rolling 1 Mth Basis

  • Open Interest is slowly rising, showing some activity. Nothing to write home about yet, but could be signs of early positioning.

ETH Futures Aggregated Open Interest

  • On-chain data is painting an increasingly bullish picture. Outflows are growing, indicating less selling pressure.

Ethereum Net Transfer Volume from/to Exchanges

Ethereum Exchange Net Position Change

  • Although conversely, we are seeing drops in active ETH addresses.

Ethereum Number of Active Addresses

Probability of ETH being above x$ per maturity

  • The amount of ETH in the ETH 2.0 staking contract currently sits at 6,085,820. This represents 5.22% of the total supply estimated to remain locked for ~ one year, continuing to slowly constrict supply.
  • In summary,  drops in volatility and activity levels don’t give us much direction yet. However, there are some early indications that the ETH market has more bias to the topside on early positioning indicators ahead of the upcoming hard fork.

DeFi & Innovation

What to Watch 

  • The surge of the Delta variant across the world and its potential resistance to current vaccines bring flashbacks to the uncertainty of 2020. Further lockdown measures could once again halt economies, as fears of transitory growth already loom investors. The Fed Reserve’s June CPI releases on July 13th, with Chair Jerome Powell set to deliver the semiannual Monetary Policy report in Congress the day after. These events should provide some insight into inflation and growth pressures, and keeping up with such reports along with Delta variant updates will offer a glimpse of where the economy might be heading. 
  • Addresses with over 100k BTC reach a two-year high, while exchange volume decreases and institutional investors seek to increase their crypto holdings. Investors’ interest in Bitcoin as a hedge against inflation and economic turmoil is once again in question. Could we see a trend reversal in crypto markets, as the world economy prepares for new challenges with the Delta variant?

Insights

  • In this Financial Times piece regarding crypto lending risks for newcomers seeking high returns, our CEO Ryan McCall is quoted on the lack of transparency by most lending platforms.
Disclaimer

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 5 Jul. 2021 0:00 UTC to 11 Jul. 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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