Tuesday, 13 June 2023

Market Summary

Market Summary 13 June 2023

Bitcoin Price: US$ 25,905.19 (-0.08%)
Ethereum Price: US$ 1,742.57 (-0.58%)  


Crypto investment funds experienced their eighth consecutive week of outflows, with a total of $88 million leaving the market. This sustained trend of outflows, totaling $417 million over eight weeks, aligns with the significant decline in cryptocurrency prices following a strong start to the year. Bitcoin, for example, closed last week at around $26,000, down from its mid-April peak of nearly $31,000. Outflows from Bitcoin amounted to $52 million last week, bringing the total to $254 million over the eight-week period. Ethereum also saw outflows of $36 million, marking its largest single-week outflow since the Merge last year. Some minor inflows were observed in altcoins like Litecoin, XRP, and Solana. CoinShares attributes this outflow trend to monetary policy concerns, particularly the uncertainty surrounding interest rate increases, and regulatory issues, with the recent SEC lawsuits against Coinbase and Binance playing a role. In a separate development, the Bank of China’s investment banking arm, BOCI, issued tokenised securities on the Ethereum blockchain in Hong Kong. This marked the first instance of a Chinese financial institution issuing tokenised securities on a public blockchain in the city. The issuance, totaling CNH 200 million ($28 million), was underwritten by UBS and placed with clients in the Asia Pacific region. The tokenisation of real-world assets has garnered attention from major banks such as Citigroup and Bank of America, who believe it can drive crypto adoption and add trillions of dollars in value to blockchains. Meanwhile, Binance.US has witnessed a significant decline in market depth and market share since the SEC filed a lawsuit alleging securities violations. Market depth on Binance.US dropped by 76%, with liquidity falling from $34 million on June 4 to $7 million on Monday. Binance global also experienced a decline in market depth, while Coinbase’s liquidity dropped by 16% during the same period. Market makers and traders appear to be leaving these exchanges due to concerns over potential losses and the fear of assets being locked in an exchange, similar to the recent FTX collapse.

Robinhood, the popular trading platform, experienced a significant decline in crypto trading volume during May. While equities and options trading remained robust, crypto trading volume dropped to $2.1 billion, marking a 43% decrease compared to the previous month and a substantial 68% decline year-on-year. Daily average trading revenue for crypto also saw a decline of 22% in May and 53% compared to the previous year. Robinhood recently delisted three tokens, including Cardano’s ADA, Polygon’s MATIC, and Solana’s SOL, following the U.S. Securities and Exchange Commission’s classification of these tokens as securities in their lawsuits against Coinbase and Binance. In the broader crypto market, Bitcoin has been hovering below $26,000 amidst concerns over regulatory actions and uncertainty regarding the U.S. Federal Reserve’s inflation-fighting monetary policy. The release of the May Consumer Price Index (CPI) and the upcoming interest rate decision by the Federal Reserve are being closely watched by investors. Despite the ongoing market downturn, Bitcoin and select altcoins have shown resilience, with Bitcoin even experiencing a slight gain during the past week. However, the overall cryptocurrency market capitalisation has declined, primarily driven by the substantial plunge of several altcoins, including BNB, Cardano, Solana, Polygon, and Polkadot. The regulatory environment remains challenging, but derivatives metrics suggest that bullish investors are not giving up, although breaking the bearish trend may prove challenging.

Binance, the largest cryptocurrency exchange, has responded to the SEC lawsuit filed against it by filing several motions in opposition to the charges. Binance’s attorneys argue that the SEC’s request for a temporary restraining order should be denied, emphasising that there is no risk to customer assets held by Binance’s affiliated entity BAM. They contend that the alleged securities law violations have been public and open for years, and there is no genuine emergency necessitating the SEC’s actions. In other news, a solo Bitcoin miner has struck gold for the third time, solving a block that would typically take several years to accomplish. The miner, using limited processing power, solved the 275th block of the Bitcoin blockchain on the Solo CKPool platform, earning around $160,000. This achievement is remarkable given that a miner of similar size would typically take 450 years on average to solve a block. Additionally, new research from UK universities warns about the potential dangers of AI learning from AI-generated content. The phenomenon, referred to as “model collapse,” can occur when AI systems are trained on polluted data generated by other AI systems, leading to misperceptions of reality and potential inaccuracies. The researchers highlight the need for caution in this recursive learning process to ensure AI models remain grounded in accurate information.

Crypto lending firm BlockFi has announced its intention to resume customer withdrawals this summer, after a year-long suspension triggered by the collapse of the FTX exchange. BlockFi aims to complete the necessary preparations and testing to enable eligible clients to withdraw digital assets from their BlockFi Wallet accounts. While withdrawals will be conducted in batches, the company recommends users to establish third-party wallets for fund withdrawal. In a separate development, Republican lawmakers have proposed legislation to remove Gary Gensler, the Chair of the U.S. Securities and Exchange Commission (SEC). The bill, known as the “SEC Stabilization Act,” seeks to restructure the SEC and prioritise investor protection over the perceived whims of its Chair. This move comes amid criticism from the crypto industry regarding recent SEC enforcement actions and lawsuits. Additionally, JPMorgan strategists suggest that U.S.-based crypto exchanges, including Coinbase and Binance.US, may face regulatory pressure to register with the SEC, potentially treating most cryptocurrencies as securities. While this could increase costs and burdens for the crypto industry, it may also bring about greater transparency and investor protection. JPMorgan emphasises the need for U.S. lawmakers to establish a clear regulatory framework to avoid the shift of crypto activity outside the country and limited venture capital funding. They believe regulations can drive industry maturity and institutional participation by eliminating bad practices and actors.





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