Market Update 04/08/23

Bitcoin’s momentum turned range bound amidst growing macro uncertainty and a sustained lack of liquidity in U.S. markets. Indeed, Bitcoin’s 5-day volatility has sat noticeably lower than that of other traditional indicators, with both the S&P 500 and Nasdaq marking significant drops after Flitch’s downgrade of the U.S. government’s long-term foreign currency default rating. Notwithstanding recent fluctuations, Bitcoin’s correlation with traditional financial assets has teetered near the 0 mark, with the leading crypto asset recently marking a new 5-year low in terms of 30-day volatility. Seemingly, markets are waiting for developments in the spot ETF race before making any significant moves. Characterised by a growing list of refiled ETF applications, the recent increase in institutional interest reflects the ever-changing sentiment regarding crypto assets on the whole. with KPMG’s report on Bitcoin’s ESG contributions being another recent example of such. At week’s close, BTC was trading at $29.1k, down 0.4% (7D).

Following the recent attention garnered by the flurry of spot Bitcoin ETF applications, several high-profile Ethereum futures and ETF applications have hit the markets. Despite this demonstrable increase in investor interest, ETH moved alongside BTC in the wake of tightening macroeconomic uncertainty. Marking 8 years since Ethereum first rolled out, the network celebrated a total of $400bn in secured value, more than $3.6bn in profits (annualised), and over 17.8m blocks of uncensored transactions. These metrics come amidst continued growth, as the number of active addresses rose to 450K at the close of July. At week’s close, ETH was trading at $1.8k, down 1.8% (7D).

Cardano developer, IOG, announced the first certified snapshot before the launch of the Mithril mainnet. First discussed in 2021, Mithril is a stake-based signature protocol that aims to improve the speed and efficiency of node syncing times. With Mithril, developers will be able to deploy light clients and mobile applications without the need to download the entire blockchain state to run a node. The upgrade - Cardano’s solution to the blockchain trilemma - will see an increase in the network’s speed and efficiency by utilising snapshots of the blockchain’s state without compromising on security. The news follows continued network growth with Cardano ranking third in terms of 30D developer activity. At week’s close, ADA was trading at $0.29, down 5.8% (7D).

Uniswap's native token experienced a flash spike following the Curve Finance exploit. The exploit in the Curve liquidity pools leveraging the Vyper programming language saw several DeFi protocols affected, resulting in losses of circa $52m. Consequently, perpetual futures for UNI surged some 20% as traders expressed bullish outlooks on the DEX’s native token. With the decentralised exchange having netted more than $3bn in fees, investors are keen to see governance changes that will result in a share of fee capture. However, with the recent decision by developers Uniswap Labs to delist the HEX token following a declaration by the SEC deeming it an ‘unregistered security’, the community was split with regards to their involvement, with some questioning the extent of the protocol’s current decentralisation. At week’s close, UNI was trading at $6.12, up 2.9% (7D).

BNB traded sideways for much of the past week hovering around the $240 mark. Following the exchange’s announcement of its launch in Japan, BNB saw some positive flows, riding on the back of its approved operational licence in Dubai. Meanwhile, BNB boasted significant Q2 growth with daily active addresses increasing 25% to 1.4m, and daily transactions rising some 24%. According to the report by Messari, BNB Chain revenue decreased some 6% (QoQ) after average transaction fees fell 25% in light of BSC validators voting in favour of reducing gas fees to 3 Gwei. These positive metrics shine some light on BNB’s ecosystem developments in spite of recent regulatory induced pressures. At week’s close, BNB was trading at $241, up 0.2% (7D).

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

Macro & Markets 🏦💱

The Week Behind: 🗓️⬅️

01/08: U.S. job openings fall to lowest level since April 2021

01/08: Fitch downgrades U.S. credit rating to AA+

02/08: U.S. treasury yields rise to 2023 highs with 30-year bonds reaching 4.2%

02/08: U.S. tech stocks rally amidst pullback from risk assets

03/08: BoE raises key interest rate by 0.25 bps (5.25%)

The Week Ahead: 🗓️➡️

08/08: German CPI (MoM) (Jul)

10/08: U.S. Core CPI (MoM & YoY) (Jul)
10/08: U.S, Initial Jobless Claims
11/08: UK GDP (QoQ & YoY) (Q2)

11/08: U.S. PPI (MoM) (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’. Closing the week at 54, market sentiment moved into the neutral territory, down from last month’s greed reading of 64.

CBOE VIX Index 📉🦘

The CBOE VIX Index measures the implied volatility of S&P 500 Index options, traditionally following an inverse relationship. Standing at 16.08 (pre-market), the VIX ends the week flat having hit its highest point since its peak last November. Fuelled by Fitch’s downgrade, stocks tumbled alongside mounting treasury yields, with the 10-year yield on treasury notes reaching 4.19%.

BTC/DXY Correlation 💵📈

The DXY provides an indication of the value of USD relative to a basket of U.S. trade partner currencies. Despite Fitch's U.S. credit rating downgrade, the USD was up 47 bps against most of its peers. The recent uptick follows much of (late) July’s trend with, riding on the back of this week’s upbeat employment statistics (UE down to 3.5%). At week close, the BTC/DXY correlation stood at -0.36 (6M).

Market Dominance 📊👑

Bitcoin dominance: 48.7%
Ethereum dominance: 18.9% 

Bitcoin EU Crypto ETP dominance: 56.6%
Ethereum EU Crypto ETP dominance: 26.1% 

Risers & Fallers 📈🚀

⬆️ XDC Network ($XDC) surged 46% over the last 7D, currently trading at $0.856. Previously named XinFin, the enterprise grade, EMV-compatible blockchain saw a spike in its price following its integration with the Infocomm Media Development Authority's (IMDA) TradeTrust which aims to connect governments and businesses to public blockchains. Launching the XDC Trade Network, the initiative will enable the creation and financing of METRO-compliant digital trade documents. Coupled with the integration of ChainIDE, $XDC has rallied some 200% (YTD). 

⬇️ Curve DAO Token ($CRV) fell some 21% over the last 7D, trading down at $0.57. The in-house token for the stablecoin DEX faced substantial selling pressure after an exploit in Vyper based liquidity pools resulted in substantial losses across several DeFi protocols. In the aftermath, $CRV founder Michael Egorov sold off $42.2m of his CRV holdings (OTC) to pay off $80m of on-chain debt, bringing some stability to the stable swap AMM protocol. 

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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