Market Update 11/08/23

Bitcoin briefly breached its key $30k price point ahead of Thursday’s release of the much anticipated Consumer Price Index (CPI) data. The momentary spike comes after a two-week trading lull, with Bitcoin experiencing a boost following Moody's downgrade of the U.S. banking sector. Reaching an intraday high of $31,100, more than $80 million in liquidations were reported. Having traded within a tight range for the better part of the past month, BTC last dipped below the $30k threshold following the Fed’s July 24th interest rate hike. With investors confident that the Federal Reserve’s monetary tightening has ended, Bitcoin's open interest has seen a notable increase. Meanwhile, on-chain metrics depict a similar picture as rising dormant BTC wallets suggest a shift towards longer-term holding. According to data by Glassnode, close to 69% of BTC in circulation has been dormant for the past year.

Echoing this sentiment,  the widely popular NUPL indicator - reflecting the difference between relative unrealised profits and losses - suggests that investors have moved on to the optimistic stage, with 31% of supply in (unrealised) profit. This marks a stark change since BTC’s capitulation phase in November 2022, in which 31% of circulating coins stood in the (unrealised) loss territory following the contagion effect caused by the collapse of the now-defunct FTX exchange. Seemingly, investor sentiment continues to be swayed by developments in the spot Bitcoin ETF race, the results of which will undoubtedly shape much of the future regulatory landscape for digital assets. At the week’s close, BTC was trading at $29,438.55, up 0.53% (7D).

Ethereum’s Layer-2 war welcomed Coinbase to the mix following the successful mainnet launch of its Base network. After several months in testnet, the OP stack powered scaling solution launched with more than $142m bridged over to the network. Aimed at addressing Ethereum's scalability challenges and enhancing transaction efficiency, Base joins a host of other scaling solutions looking to capture their share of the market ahead of the blockchain’s EIP-4844 upgrade scheduled for later this year. Known as proto-danksharding, the Ethereum Improvement Proposal outlines a novel sharding architecture that will reduce the gas fees on L2 networks by an order of magnitude, Meanwhile, PayPal’s launch of its Ethereum-based PYUSD stablecoin signifies yet another milestone in institutional adoption, not least considering its seamless off-ramps integration. Alongside the growing number of Ethereum based ETF application filings, as well as Valkyrie's decision to convert their Bitcoin Trust Fund into a dual Bitcoin-Ethereum ETF, there is little doubt surrounding Ethereum’s staying power in the TradFi realm. Indeed, investors will take these developments, as well as the network’s on-chain metric of non-zero ETH balances surpassing the 100m count as signs of its ever-growing user base and utility. At the week’s close, ETH was trading $1,847.75, up 0.1% (7D).

Cardano reached a new all-time high in TVL with more than 600m ADA deployed across the network’s DeFi protocols. The milestone follows Messari’s deep dive into the state of the network, demonstrating continued advancement and growth within the digital asset ecosystem. For Q2 ‘23, average daily active addresses fell some 4%, whilst average daily transactions rose 1.9% to 68,765. Average daily dApp transactions were up 49% QoQ, arguably contributing towards the recent spike in total value locked. Total stake across the network reached 22.7bn ADA, with the network’s yield (nominal) maintaining its 3.3% level. Indeed, despite ADA’s (QoQ) decline in price, ADA is still up some 12% (YTD), with recent sluggish momentum attributed towards the SEC’s attempted security labelling of the asset. Notwithstanding the regulatory hurdle, investor sentiment remains upbeat, with Santiment reporting whale and shark holdings (balances between 100k-10m ADA) reaching their highest point since September 2022. Coupled with anetaBTC’s integration of Bitcoin liquidity on Cardano via its mainnet cBTC launch, the wrapped BTC will enable the use of Bitcoin-backed assets across the Cardano ecosystem, further contributing towards its overall growth. At the week’s close, ADA was trading at $0.295, down 0.01% (7D).

For Polkadot, Solana, Uniswap Avalanche, Cosmos and Enjin, no noteworthy news for this week.

BNB primed itself for the chain’s forthcoming hard forks which will see overall security improvements and increased compatibility with other EVM blockchains. The Plato hard fork - activated on August 10th - introduced BEP-126, a fast finality mechanism that aims to eliminate the prospect of chain reorganisation and stabilise block production. Presenting a more secure environment, the upgrade will benefit the BNB dApp ecosystem with faster transaction finality and improved responsiveness. Meanwhile, the Hertz upgrade (slated for August 30th) will ensure that the BNB Chain remains up to date with the latest EVM blockchain infrastructures, updated in line with Ethereum’s recent Berlin and London forks. These developments come as Binance announced the receival of operational approvals from both El Salvador’s central bank, as well as the nation’s domestic regulators. Enabling the exchange to expand its product and service offerings to the Bitcoin native country, the BSP and DASP licences signifies a great win for the exchange amidst mounting regulatory pressures from various jurisdictions. At the week's close, BNB was trading at $239.28, down 1.51% (7D).

Macro & Markets 🏦💱

The Week Behind: 🗓️⬅️

07/08: PayPal launches its PYUSD stablecoin
08/08: U.S. bank stocks fall following Moody’s rating downgrades
09/08: S&P and Nasdaq close lower ahead of inflation data

10/08: U.S. CPI rises a modest 0.2% (3.2% YoY) indicating an end to the Fed’s tightening

11/08: UK GDP beats expectations rising 0.2% in Q2

The Week Ahead: 🗓️➡️

15/08: U.S. Core Retail Sales (MoM) (Jul)
16/08: UK CPI (YoY) (Jul)
16/08: U.S. Building Permits (Jul)
16/08: U.S. FOMC Meeting Minutes
17/08: U.S. Initial Jobless Claims
18/08: EUR CPI (YoY) (Jul)

Fear & Greed Index 😨🤑

The multifactorial index looks at investor sentiment across Bitcoin and other large cap crypto markets, covering volatility, volume, momentum, dominance, and social trends. A score closer to 0 represents ‘Extreme Fear’ whilst a score closer to 100 is linked to ‘Extreme Greed’. Ending the week at 51, sentiment appears to remain in the neutral territory as markets were unsurprisingly unphased by July CPI data, given that volatility remains at historic lows (BTC 30D volatility = 0.8%). 

CBOE VIX Index 📉🦘

The CBOE VIX Index measures the implied volatility of S&P 500 Index options, traditionally following an inverse relationship. At time of writing, the VIX stood at 15.69 (pre-market), having made a slight recovery from the multi-year lows seen thus far. Stocks seem to have been on a steady decline since Fitch’s downgrade, worsened by Moody’s banking downgrade earlier this week, before cooling inflation data reduced the VIX’s gains to 4.1% (5D). 

BTC/DXY Correlation 💵📈

The DXY provides an indication of the value of USD relative to a basket of U.S. trade partner currencies. Despite a lacklustre performance earlier this week, the DXY began making moves towards the 103 mark after Thursday’s positive inflation data. Rising from Thursday’s low of 101.99, the DXY stood at 102.6 at time of writing, with the BTC/DXY correlation at 0.12 (6M).

Market Dominance 📊👑

Bitcoin dominance: 48.8% (+0.1%)
Ethereum dominance: 18.9% (+0.0%)

Bitcoin EU Crypto ETP dominance: 56.7% (+0.1%)
Ethereum EU Crypto ETP dominance: 26.0% (-0.1%) 

Risers & Fallers 📈🚀

⬆️ THORChain ($RUNE) surged 17.5% (7D), trading up at $1.09. The native token behind the cross-chain settlement layer has seen increased interest following a number of ecosystem developments. Following the introduction of streamed swaps, daily volume has seen a noticeable uptick. Offering users the choice between time-optimised and price-optimised swaps, streamed swaps is a newly introduced mechanism on THORChain that breaks large transactions into smaller sub-swaps executed over a specified timeframe. The new feature aims to enhance price execution for sizable swaps, thereby increasing capital efficiency. 

⬇️ XDC Network ($XDC) traced back on last week’s gains, falling some 24.9%. The enterprise grade EVM-compatible blockchain saw a pullback in its price following recent developments and integrations, including with the Infocomm Media Development Authority's (IMDA) TradeTrust. Despite this, $XDC is still up 16% for the month, with impressive YTD gains of 160%.

Upcoming Conferences

28/08/23 - 30/08/23: Stanford Blockchain Conference, California

30/08/23 - 03/09/23: Solana Hacker House, Berlin

That’s all for this week! 

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