Market Update 19/05/23

Bitcoin ended the week offsetting market gains prompted by the optimism of a forthcoming deal over the U.S. debt-ceiling. Having reached a weekly low of $26,500, BTC rose 3% before strong U.S. job data suggested that the Fed’s contractionary policy may not be over just yet. With initial jobless claims down 8% from last week, strong labour markets have been a significant contributing factor to record levels of inflation, resulting in aggressive interest rate hikes. Although this has undoubtedly affected investor sentiment towards alternative assets, Bitcoin whales continue to increase their holdings, amassing a total of $2.3bn in BTC over the last 5 weeks. According to data by Glassnode, whales have added 14,000 BTC to their holdings since the start of March, whilst the number of addresses holding 1 BTC+ has surpassed the 1m mark. Since February 2022, more than 190,000 new ‘wholecoiners’ have surfaced, capitalising on lower prices. The bullish indicator follows the increasing institutional adoption of BTC, with stablecoin issuer Tether, announcing plans to regularly allocate up to 15% of net realised profits into BTC.

Ethereum experienced a second short-lived network bug which resulted in validators being unable to finalise transactions. A loss of finality can negatively impact the security of a blockchain by enabling validators to create invalid blocks, potentially leading to blocks being removed and replaced by a longer simultaneously produced chain (reorg). This emergency state, known as an ‘inactivity leak’, results in attestors receiving no rewards and non-participating validators receiving increasingly large penalties based on their track record in order to restore finality across the network. According to Glassnode, the two ‘outages’ resulted in 253 missed blocks, significantly less than those missed during the Shapella upgrade (658). Since its April upgrade in which staking withdrawals were enabled, Nansen has reported a net zero impact on the state of staking, with a close equivalent to the amount staked on the Beacon Chain at the time of upgrade. With most exiting validators (principal withdrawals) attributed towards several CEX’s, the total stake currently stands at 20,480,135.7 ETH across 575.9k validators, with a queue of 56.3k activating validators (31d).

Comment: Another surprisingly quiet week in the crypto space. Polkadot developers Parity Technologies announced that leading DEX, Uniswap, will be deployed on its network via the Moonbeam parachain. Meanwhile, several entities in the Cosmos ecosystem announced the Mesh Security alliance, aimed at increasing the economic security of the network. Utilising a shared emergency treasury, the NATO-like alliance will enable individual blockchains to retain sovereignty, whilst benefiting from the security of larger blockchains. On the regulatory front, Binance announced that it will be leaving the Canadian market after strict guidelines outlined by the Canadian Securities Administration. This comes as Binance Australia had to temporarily halt AUD deposits following the determination by Westpac Banking Corp to bar customers from sending AUD to several exchanges, including Binance.

Macro & Markets 🏦💱

The Week Behind: 🗓️⬅️

15/05: USD falls from 5-week high following debt ceiling concerns
16/05: Japan’s stock index has risen to a 33-year high, rising 13.9% YTD

17/05: Existing home sales (U.S) fell 3.4% in April, with yearly price decrease at 11-year high

18/05: U.S equities hit 9-month high on hopes of debt ceiling deal

The Week Ahead: 🗓️➡️

21/05: CNY PBoC Loan Rate

23/05: GER Manufacturing PMI (May)
23/05: UK Composite and Manufacturing PMI (May)
23/05: U.S. New Home Sales (Apr)
24/05: UK CPI (YoY) (Apr)
24/05: UK BoE Speech

24/05: U.S FOMC Minutes

25/05: GER GDP (QoQ) (Q1)
25/05: U.S. GDP (QoQ) (Q1)
26/05: UK Retail Sales (MoM) (Apr)

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’. Marking almost no change from the week prior, investor sentiment remains neutral with this week’s reading of 48. Despite turbulence caused by U.S. debt ceiling negotiations, crypto markets remained balanced for the most part, hovering around the same $1.12tn market cap as of last week.

CBOE VIX Index 📉🦘

The CBOE VIX Index measures the implied volatility of S&P 500 Index options, traditionally following an inverse relationship. Currently standing at 16.18 (pre-market), the VIX is down 3.75% (5D), having declined more than 25% YTD. Thursday’s 0.53% in the S&P 500 saw a 4.8% drop in the VIX as better than expected Q1 earnings reports, strong labour data and ongoing concerns regarding the implications of a potential default on the U.S. debt ceiling continue to dominate market sentiment.

BTC/DXY Correlation 💵📈

The DXY provides an indication of the value of USD relative to a basket of U.S trade partner currencies. Hovering around the 103.2 mark, the DXY has retraced slightly from this week’s observed 2-month high, with hawkish commentary from the Fed, and hopes of a U.S. debt agreement providing the greenback with a strong floor. The DXY was up 1.2% (7D), whilst Bitcoin was up 1.9% (7D), with a 1Y correlation of 0.89. 

Market Dominance 📊👑

Bitcoin dominance: 46.3% (+0.0%)
Ethereum dominance: 19.4% (-0.2%) 

Bitcoin EU Crypto ETP dominance: 52.6% (-0.9%)
Ethereum EU Crypto ETP dominance: 27.6% (+0.3%) 

Risers & Fallers 📈🚀

⬆️ Render ($RNDR) rallied more than 40% this week, rising to $2.44. The decentralised network for GPU rendering services has seen a spike in interest following the surge in demand for cloud computing services. With the rising popularity of AI-based services, $RNDR has dominated the landscape of distributed computing, boasting several major partnerships and tokenomic updates.

⬇️ Bitcoin SV ($BSV) was down 5.9% (7D), trading at $33.28. Founded by Craig Wright, Bitcoin SV was created by forking Bitcoin Cash ($BCH), given Wright’s belief that $BCH had strayed away from the Bitcoin vision. Designed with a larger block size and increased transaction capacity, $BSV rallied earlier this month following BTC network congestion, having fallen to its lowest levels in both USD and BTC terms last month.

Upcoming Conferences

26/05/23 - 28/05/23: ETHGlobal Hackathon, Istanbul
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04/06/23 - 05/06/23: UTXO, Prague

That’s all for this week! 

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