Market Update 12/05/23
Bitcoin’s BRC-20 token market cap reached a near $1bn following the overwhelming success of widely popular memecoins, including the recent Ethereum-based $PEPE. Similar to Ethereum’s ERC-20 token standard, BRC-20 enables developers to create and send Bitcoin-based fungible tokens via the Ordinals protocol. With more than 14,450 tokens currently deployed, Bitcoin network fees surged to a 2Y high, resulting in a spike in Lightning Network (LN) activity, and prompted Binance to enable LN BTC withdrawals. Whilst fees have progressively increased, BTC retraced from the month’s earlier gains following news of Jane Street and Jump Crypto, two major institutional market makers, weighing in on the regulatory state of the U.S market. Given the continued SEC regulatory crackdown, both firms indicated that they would be retracing from the U.S markets to some degree. With Europe’s recent passing of its MiCA legislation, U.S firms have increasingly looked at moves away from the SEC’s crypto offensive, with Binance announcing a recent bid for UK oversight. This comes as public mining company Marathon Digital became the latest SEC target, with its Montana data centre subpoenaed for alleged securities law violations. The seemingly targeted campaign comes after the Fed and FDIC warned TradFi banks of the risks associated with crypto firms, with liquidity being squeezed out of markets after the closure of the main fiat onramps providers, Silvergate and Signature Bank. Not long after, BTC saw an influx of interest as 3 major US banking failures prompted widespread fears of an all-out banking crisis. Wednesday’s heightened uncertainty after PacWest’s surge in deposit outflows surprisingly left crypto assets unaffected, with investors held up by the previous day’s better-than-expected CPI results. Seemingly, the recent decline has resulted in long-term investors continuing to accumulate. Data by Glassnode suggests that the 30-day change in net BTC flows from static exchange wallets has surged over the last month, whilst the percent supply last active (1Y+) reached a monthly high of 68%.
Ethereum’s mainnet suffered a brief albeit significant outage late this week, as network blocks were unable to be finalised. Although the Beacon Chain had no issues with regards to validator block proposals, the lack of finality meant that transactions were at risk of being tampered with. Typically, if more than 33% of nodes in a consensus client are compromised, the security of the blockchain is at risk given the ability for transactions to be altered and manipulated. Although developers were quick to patch the outage, the exact cause is still unknown. Earlier this week, the Ethereum Foundation moved some 15,000 ETH to Kraken as prices swayed around the $2k mark. Considering the Foundation’s last major (20,000 ETH) sale back in November 2021 (ETH = $4,850), some were quick to call the top given that prices fell some 80% after the Foundation’s last sale. Indeed, with the number of ETH on crypto exchanges continuing to decrease, general consensus seems to differ. According to Santiment, the percentage of ETH on exchanges hit its lowest point (10.1%) since public trading of Ethereum began back in 2015. Essentially representing the all-time high for non-exchange holdings, the amount of supply last active (7Y-10Y) reached its respective ATH of 3.88m ETH (Glassnode). Meanwhile, the number of ETH locked through staking on the network’s Beacon Chain topped 19.37m coins, with deposits rising some 500% since the Shapella upgrade. In other news, professional services giant EY has announced the launch of its Ethereum-based carbon emissions tracking platform. Aimed to help companies monitor and reduce emissions, the EY OpsChain ESG will provide a single, verifiable view of CO2 emissions to address the needs of enterprises, amidst a growing push towards verifiable ESG practices.
BNB closely followed general market movement following the recent regulatory hurdles. Binance CEO and majority stakeholder, Changpeng Zhao (CZ), is reported to be actively seeking a buyer for his stake in Binance.US given the increasing pressures from both the SEC and CFTC. Despite recent market downswings, the exchange's venture arm has grown its assets to more than $9bn, with more than 200 current portfolio companies. This comes as Binance announced its Connect offering, bridging institutional investors with crypto fund managers. During Q1 of 2023, Binance onboarded > 8% more institutional clients than during the previous quarter, with institutional users rising some 65% in 2022. Alongside the recent announcement, the exchange also teased Binance NFTs upcoming support for Bitcoin-based Ordinal inscriptions. Earlier this week, Binance temporarily paused withdrawals as network congestion saw close to 500,000 unconfirmed transactions at a single point in time. In response, the exchange adjusted its withdrawal fees, as well as integrating LN withdrawals for faster and cheaper transactions.
Comment: Prices aside, this week was relatively uneventful for the wider crypto markets, with little protocol specific news to report on.
Macro & Markets 🏦💱
The Week Behind: 🗓️⬅️
09/05: GBP/USD traded to near 1Y highs, with GBP/EUR trading at its highest since Dec ‘22
10/05: U.S filings for jobless claims rises to highest level since 2021
11/05: U.S stocks dip amidst resurging banking fears
11/05: BoE raises interest rates by 25 bps in its 12th consecutive hike
The Week Ahead: 🗓️➡️
15/05: CNY Industrial Production (YoY) (Apr)
16/05: U.S. Core Retail Sales (MoM) (Apr)
16/05: GER ZEW Economic Sentiment (May)
16/05: EU ECB President Speech
17/05: EU CPI (YoY) (Apr)
17/05: UK BoE Speech
18/05: U.S. Initial Jobless Claims
19/05: Fed Chair Speech
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’. In light of recent market developments, investor sentiment returned to neutral territory. Reflecting a stark departure from last month’s reading of 65, the index currently stands at 49, as BTC is down 9.2% (7D), ETH down 7.2% (7D) and the wider global crypto market cap is down 7.5% (7D).
CBOE VIX Index 📉🦘
The CBOE VIX Index measures the implied volatility of S&P 500 Index options, traditionally following an inverse relationship. Down 1.7% (24H) and 9.5% (7D), the VIX was at its month low, standing at 16.73 (pre-market). Earlier on Thursday, the S&P closed in negative territory with energy and utility stocks leading the losses, whilst additional banking fears (PacWest), and rising jobless claims saw both the SPX and DJI posting intraday losses.
BTC/DXY Correlation 💵📈
The DXY provides an indication of the value of USD relative to a basket of U.S trade partner currencies. Recording a strong uptick towards the end of the week, the DXY inched towards a new monthly high of 102.2. Having previously peaked during March’s banking crisis, the DXY has been unable to break out as easing inflation points towards an end of the Fed’s hawkish monetary policy. With BTC’s recent downtrend, the 1Y BTC/DXY correlation stood at 0.27.
Market Dominance 📊👑
Bitcoin dominance: 46.3% (-0.8%)
Ethereum dominance: 19.6% (+0.4%)
Bitcoin EU Crypto ETP dominance: 53.5% (-0.4%)
Ethereum EU Crypto ETP dominance: 27.3% (-0.1%)
Risers & Fallers 📈🚀
⬆️ Kava ($KAVA) rose 16% this week, outperforming all other assets in what has been a predominantly red week. Combining the flexibility and speed of Ethereum smart contract development with the interoperability of the Cosmos SDK, the L1 blockchain saw a spike of interest as less than a week remains before the Kava 13 mainnet launch.
⬇️ Pepe ($PEPE) fell from its golden spot, dropping more than 45% over the last 7D. The popular Pepe the Frog memecoin rose in rank after its launch last month, surpassing a $1bn market cap. With trading volumes hovering around the $790m mark, $PEPE continues to make waves despite its recent slide as the initial crypto twitter hype dies down.
17/05/23 - 18/05/23: Teamz Web3 Summit, Tokyo
26/05/23 - 28/05/23: ETHGlobal Hackathon, Istanbul
02/06/23 - 04/06/23: ETHSeoul, Seoul
04/06/23 - 05/06/23: UTXO, Prague
That’s all for this week!
to Decentralised Finance & Web 3