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Week in Review
- Dow Jones and S&P 500 maintained a moderate ascent over the week, with a brief dip on Thursday preceding the release of the US jobless claims report, which ended up printing a new low. Private sector employment growth also exceeded expectations.
- Secretary of Treasury Janet Yellen believes inflation could reach 3% this year, yet maintains her stance along with Fed Chair Jerome Powell that these spikes are temporary.
- Wall Street Bets’ pump of AMC stock results in 114% growth over the week as short-sellers lose $4.5 billion in 8 days.
- El Salvador set to become the first country to adopt bitcoin as legal tender.
- Google lifts ban on crypto exchange and wallet ads after three years of restrictions.
- Hundreds of US banks may allow bitcoin trading soon, according to NYDIG executives.
- China-based crypto brokerage firms plan to launch services offshore.
- Reserve Bank of India clarifies that crypto trading is not banned in the country.
- Guggenheim registers fund that may seek exposure to cryptocurrencies.
- Ron Paul, Jack Dorsey, Winklevoss twins, Miami’s mayor and more spoke on bitcoin’s future during Bitcoin Miami 2021 conference.
Winners & Losers
- Bitcoin had an uncertain start to the week, opening at US$35,675. By Thursday morning, price had broken higher but was not able to sustain price levels and retreated to US$34,800 over the weekend, before making a slight recovery to close the week at US$35,800 for a 0.37% gain. A slew of positive announcements from the Miami Bitcoin Conference had limited impact on price indicating that there is still uncertainty present in the market.
- Ethereum had a similar range-bound week, following an initial price climb on Monday. Technically the asset is looking more poised for a topside breakout than BTC, and upcoming fundamentals remain strong (Layer 2s, EIP 1559 upgrade, Staking). Overall, ETH recorded a 13.74% gain, closing the week at US$2,710.
- The US10Y saw back and forth this week before dropping on Friday due to a weaker than anticipated monthly Non-Farm Payrolls jobs report. Overall, the US10Y recorded a -1.83% loss this week.
- Gold started the week sideways before dropping on Thursday on a strong dollar and anticipation of Fed tapering. The weaker than anticipated report led to a strong recovery – measuring an overall -1.96% loss for the week.
- Equity markets had a predominantly sideways week as rumours of stimulus tapering circulated. Following the release of the monthly US jobs report, the S&P500 index price steadily increased, closing the week at US$4,230, a 0.32% gain.
- Janet Yellen expressed her view that Biden’s US$4 trillion spending plan will be good for the economy regardless of increased inflation concerns.
Macro, Technicals & Order Flow
- It’s very much a directionless market at the moment – whether looked at from a technical, fundamental or on-chain lens.
- Technically BTC continues to range between levels 34,000 and 40,000. A solid break of 34,000 to the downside could lead to a potential re-test of the 30/32 levels. A break below prior lows at 29,000 could lead to greater downside as we are then into the psychological 20’s levels. A topside move would need to see a firm break above 42,000 (coupled with other on-chain and fundamental indicators) to shift current market sentiment to the topside.
- Fundamentally we are still seeing significant unleveraged inflows into the Canadian ETF, and other institutional access points, although the Grayscale Trust still trades at a negative NAV to its holdings. The futures basis is compressed, but still moderately positive. Perpetual funding rates (a reasonable indicator of leveraged demand for longs vs shorts) keeps bouncing between slightly negative and positive. Open Interest in derivatives is down MoM, which is generally a reasonable indicator of leverage in the system, and thus the propensity for volatile (read violent) short term liquidations to the downside are currently less likely.
- On-chain data has been nondescript. BTC inflows/outflow volume to exchanges is down at the lows. The Stablecoin Supply Ratio is low, which indicates buying power, however this is not translating to actual buying (yet).
- In short – we could range, or bleed lower unless we get some positive news flow or on-chain indicators meaningfully showing some direction.
Bitcoin Dominance vs Whole Crypto Market
Grayscale Bitcoin Trust (GBTC) Premium
Bitcoin Percent Balance on Exchanges – All Exchanges
BTC Futures Annualised Basis – Current
BTC Futures Annualised Rolling – 1 Mth Basis
Probability of BTC being x$ per maturity
BTC Futures – Aggregated Open Interest
Total BTC Options Open Interest
- ETH is more bid than BTC at the moment, constructing higher lows. A clean break of 2,900 (recent highs), and then convergence zones of 3,100 and the ascending trendline resistance could bring us back into line with the orderflow zones on the last run. There is still uncertainty in all crypto-markets right now, so keep an eye on confirmation of price action – strong closes, congruent fundamentals and on-chain data supporting the moves.
- Fundamentally, ETH has a blockbuster second half of the year on the way. Layer 2 scaling solutions are launching left, right and centre. The EIP 1559 upgrade is due for launch in July, with staking and deflation poised for Q1 20212.
- The real question for a potential short to medium case market-wide downturn, is whether DeFi will play a role in hedging (yield gen. / stablecoins), and how this could drive inflows into ETH. Furthermore, with the futures basis compressing, hedge funds that may have traded traditional derivative vehicles may be driven further afield in the search of returns. All of this points to some interesting questions around divergent return profiles for different verticals within crypto markets if the downturn in BTC persists.
- The total value locked in DeFi projects saw a 10.1% increase this week to $67.05 billion, further cementing the likelihood of a recovery.
- The amount of ETH in the ETH 2.0 staking contract currently sits at 5,339,298, an increase of 2.64% from last week. This represents 4.60% of the total supply estimated to remain locked for ~ one year, continuing to constrict supply.
Ether Percent Balance on Exchanges – All Exchanges
ETH Futures Annualised Rolling 1 Mth Basis
Probability of ETH being above x$ per maturity
DeFi & Innovation
- AAVE reaches #1 DeFi spot in total value locked, soaring past $20 billion after layer 2 implementation.
- THORchain releases THORName, the first cross-chain service that converts usernames into several wallet addresses.
- First crypto exchange to become a bank in the US, Kraken launches its mobile app.
- UniSwap contributors propose a DeFi defense fund to address government action in the US.
- China is handing out $6.2 million in Digital Yuan to Beijing residents as part of trials.
- Crypto custody group Anchorage set to offer ethereum-backed loans through traditional Massachusetts bank.
- FTX exchange unveils the NFT Marketplace.
What to Watch
- Last market wrap, we speculated that the White House underpricing recent inflation prospects could push it to new heights. Janet Yellen and Jerome Powell then expressed views that inflation could hit 3% in 2021, while holding ground that the spike is temporary and doesn’t represent ongoing inflationary concerns. The next few CPI data prints will be crucial to measure economists’ expectations vs actual data.
- El Salvador is a small country, but one that’s breaking new ground by legalising bitcoin as tender. Commentary on this unprecedented decision will be important to observe, especially from Fed and the White House, as their view may lead the political sentiment for functional use of the digital asset.
- We released our Q1 market report for 2021, providing data insights on crypto performance and broader financial markets.
- Our CEO Ryan McCall was interviewed on CoinDesk TV regarding institutional inflow and current sentiment on bitcoin, ethereum and DeFi (34:44 mark).
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 31 May 2021 0:00 UTC to 6 Jun. 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||Ethereum||Gold||Equities||High Yield Corporate Bonds||Commodities||TreasuryYields|
|BTC||ETH||PAXG||S&P 500, ASX 200, VT||HYG||CRBQX||U.S. 10Y|