Tuesday, 23 August 2022

Market Summary

Market Summary 23 August 2022

Bitcoin Price: US$ 21,399.83 (+0.54%)
Ethereum Price: US$ 1,624.66 (+0.40%) 

 

Bullish Sentiment Flips Amid Large Liquidations

  • Fei Labs proposes the dissolution of Tribe DAO. Holders of FEI can redeem tokens for DAI.
  • ImmutableX over takes Solana in daily NFT sales volume, led by Gods Unchained, DC Comics, and Illuvium Land.
  • BendDAO Founder proposes emergency protocol changes amid liquidation concerns.
  • Samsung seeks approval to launch a crypto exchange in South Korea.
  • On August 19, crypto markets witnessed a major plunge as we saw over $562 million worth of long positions getting liquidated, the largest amount since the liquidation cascade in June.
  • Out of the $562 million, 65% of the liquidations came from BTC and ETH positions, while the remaining 35% came from altcoins including Ethereum Classic, Solana, and Filecoin.
  • By the end of the day, Bitcoin had declined 10% while Ethereum had sunk by over 12%. Speculation of more intensive and prolonged interest rate hikes may be the leading factor in the market sell-off, alongside strength in the US Dollar Index (DXY).
  • The economic calendar showcases a busy week ahead, with the Jackson Hole Symposium beginning on August 25. Some important US economic data is also set to be released, including core PCE Price Index, Initial Jobless Claims, and revised Q2 GDP readings.
  • As you can see from the three previous halvings, an interesting pattern is emerging with Bitcoin’s price action in relation to the periods of time post halving.
  • From the most recent one (May of 2020), we can see that it took Bitcoin 77 weeks to reach this cycle’s top of ~$69,000, in November of 2021. Jumping to the previous halving (July of 2016), it took Bitcoin 75 weeks to reach last cycle’s top of $20,000, in December of 2017. Now when we look at the halving in November of 2012, the pattern slightly falls apart (as it only took BTC 55 weeks to hit that cycle’s top).
  • However, one could argue that this could be chalked up to BTC being such an unknown and immature asset of that time. It’s possible that the influence of Bitcoin’s economic model over its volatile price action was still in its infancy of discovery and understanding.
  • It’s not just about seeking a cycle top, but also identifying cycle bottoms. From the previous two cycles, BTC bottomed out 59 and 53 weeks following its cycle top. If we use this historical data, it can give us reasonable estimations of when Bitcoin will find this cycle bottom and the next cycle top.
  • Based on this, history suggests a bottom sometime around the end of November 2022 and a new cycle top in August 2025. It is also interesting to note that in both of the previous bear markets, BTC found its price floor after falling 85%. From our current, all-time high, an 85% decrease would translate to $10,000 BTC.

 

South Korean financial majors want to create virtual assets exchange in 2023: Report

  • Samsung Securities is among seven large South Korean securities companies that have applied for government approval to create a virtual assets exchange, according to a report in South Korean publication Newspim. The companies aim to create a corporation to open an exchange in the first half of next year. Newspim quoted an unidentified executive as saying that discussions on the project are now being finalized.
  • According to the local coverage, Samsung Securities had been studying ways to develop and operate a securities token trading platform but was unable to recruit the necessary personnel to proceed last year. Mirae Asset Consulting, an affiliate of Mirae Asset Securities, South Korea’s largest investment banking and stock brokerage by market cap, is hiring personnel for cryptocurrency and nonfungible token (NFT) research and development as well.
  • The report also mentioned NH Investment & Securities, KB Securities and Shinhan Financial Investment. KB Bank announced earlier this year that it was preparing to launch South Korea’s first crypto investment products for retail investors.

 

Prosecutors want to claim NFTs as securities, alleges legal team of former OpenSea employee

  • Lawyers representing Nathaniel Chastain, the former OpenSea product manager accused of insider trading, have claimed United States authorities only filed charges in an attempt to set a legal precedent that nonfungible tokens (NFTs) are securities.
  • In a Friday filing with the Southern District of New York court, Chastain’s legal team from Greenberg Traurig filed a motion to dismiss the indictment against him, which included allegations of wire fraud and money laundering related to an NFT insider trading scheme from June to September 2021. The lawyers argued that the charges against the former OpenSea employee were invalid in part “because the NFTs at issue are neither securities nor commodities” and the tokens were not legally considered the platform’s property.
  • “The government has brought the instant prosecution using ill-founded applications of criminal law to set precedent in the digital asset space,” said Chastain’s legal team. “While seeking to use this first-of-its-kind prosecution to posit broad assertions of insider trading, property theft and money laundering, the government’s arguments are contrary to years of settled precedent and are a transparent effort to plant a flag in the blockchain industry.”
  • Prosecutors charged Chastain with insider trading in June, alleging he had used his position and insider information at OpenSea to purchase 45 NFTs before they were scheduled to be featured on the marketplace’s website. He allegedly used anonymous hot wallets and accounts, later selling the NFTs for a profit. Not writing about Chastain by name, OpenSea co-founder and CEO Devin Finzer confirmed some of the allegations in a September 2021 blog post, noting the employee had resigned.

 

Cryptocurrencies react to Jackson Hole, Fed rate hike plans and a weakening bear market rally

  • The European stock markets and the United States equities markets are both deep in the red on Aug. 22 as investors fear that aggressive rate hikes may not be off the table. 
  • Another thing keeping investors nervous could be the upcoming  Jackson Hole economic symposium, which is scheduled to begin on Aug. 25. Investors are concerned that Federal Reserve chairman Jerome Powell could further elaborate on the Fed’s hawkish stance and plans for future interest rate hikes.
  • This macro uncertainty has kept the institutional investors away from the crypto markets. CoinShares data showed that crypto investment products recorded weekly volumes of $1 billion, which is 55% lower than the yearly average.

 

Crypto.com moves forward with multimillion-dollar renovation of Staples Center following staff cuts

  • Despite announcing it would cut its staff by roughly 5% in June and the recent market downturn, cryptocurrency exchange Crypto.com has continued to move forward with an agreement to rebrand the Los Angeles-based venue formerly known as the Staples Center.
  • In a Monday tweet, Crypto.com released an artist’s rendering of some of the changes it planned to implement at the iconic arena in a reported “multimillion-dollar campaign” before many major sports teams begin playing later in 2022. Some of the renovations included new jumbo screens and concession stands, as well as a terrace overlooking the downtown Los Angeles area.
  • The crypto exchange signed a $700-million agreement with arena owner AEG in November 2021, giving Crypto.com naming rights over the venue for 20 years. In October 2021, Hollywood star Matt Damon plugged the platform in an ad campaign that later went viral. However, many in and out of the crypto space subsequently ridiculed Damon’s appearance and Crypto.com’s “Fortune Favors the Brave” tag line.

 

Metaverse is a key factor in long-term NFT success, says new research

  • A new report from Juniper Research analyzed the trajectory of the nonfungible token (NFT) market over the next five years. According to the study, global transactions related to NFTs will escalate from 24 million in 2022 to nearly 40 million by 2027. 
  • One of the top catalysts to push NFT adoption will be those linked to metaverse use cases, according to the study. This niche of NFTs will be the fastest growing in the next five years. Metaverse-related NFTs will experience an increase in transactions from 600,000 transactions in 2022 to 9.8 million by 2027.
  • A good indicator for brands such as Gucci and Adidas, which have already adopted the technology for wearables in the digital universe, this data shows that consumers want their digital assets to have value beyond the monetary.
  • This is also backed up by a recent report from Ripple (XRP), in which the company surveyed major financial institutions on NFT interest. The NFTs of most interest were music-related.

 

Correlation growing between crypto and equity markets in Asia, says IMF

  • Before the COVID-19 pandemic in Asia, there was a strong division between the crypto and financial markets in general. Now, that border has got thinner and the situation demands additional regulatory measures, the International Monetary Fund (IMF) believes. 
  • In a blog post from Sunday, a group of IMF economists shared their concerns over the dynamics of Asian markets, where the integration of crypto in the larger financial system appears to be growing swiftly. This poses certain risks to financial stability, the economists stated, adding:
  • “While the financial sector appears to have been insulated from these sharp movements, it may not be in future boom-bust cycles. Contagion could spread through individual or institutional investors that may hold both crypto and traditional financial assets or liabilities.”
  • The economists further mentioned an example of the Indian market, where the return correlations of Bitcoin (BTC) and Indian stock markets have increased 10-fold over the pandemic.

 

Average Bitcoin transaction fee drops under $1 as network difficulty recovers

  • The average transaction fees on the Bitcoin (BTC) blockchain fell below $1.00 for the first time in over two years, further strengthening its use case as a viable mainstream financial system.
  • High transaction fees over blockchain networks work against the users, especially when making low-value transactions. For example, transaction fees over the Ethereum blockchain skyrocketed several times during the nonfungible token (NFT) hype, inducing stress on general users.
  • While the Bitcoin ecosystem has also endured its fair share of high transaction fees in the past, timely upgrades — including the Lightning Network and Taproot — guarantee faster and cheaper transactions over time. As of Monday, the average Bitcoin transaction fees fell down to $0.825, a number last seen on June 13, 2020.
  • In addition to timely upgrades, the drop in transaction fees can be attributed to multiple factors, including falling market prices and lower mining difficulty. However, the difficulty of mining a new BTC block sees a steady recovery as miners gain access to cheaper hardware while recovering from the prolonged chip shortage.

 

USDC whale holdings percentage lowest in almost two years

  • The percentage of USD Circle (USDC) stablecoins held by major wallet addresses dropped to its lowest point in almost two years as the cryptocurrency market downturn continues.
  • Cryptocurrency analytics firm Glassnode has released the latest data on USDC metrics, reflecting a recent sell-off of the second biggest U.S. dollar-backed stablecoin by market capitalization.
  • As Cointelegraph previously reported, sanctions imposed on cryptocurrency mixer Tornado Cash by the U.S. Treasury Department had a marked effect on the capitalization of both USDC and its biggest competitor, Tether (USDT).
  • While USDT markets saw growth of almost $2 billion in the days following the sanctions, USDC’s market cap shrunk after its issuer Circle decided to freeze some 75,000 USDC tokens held by addresses linked to Tornado Cash.

 

Glassnode:

#Bitcoin markets experienced a brief wave of relief, with prices trading above the Realized Price.

However, weakness in underlying network activity has manifested as a sell-off this week, as prices fall back below the $21.7k level.

The Realized Price currently trading at $21.7k, while spot prices are slightly below the Realized Price at $21.3k. During the 2018-2019 bear market, prices fluctuated below the Realized Price for 140 days, making the prevailing bear market duration of 36 days relatively brief, and thus indicating more accumulation time may be required (as discussed in WoC 28).

  • Bear Market Confirmation 🔴: Alongside prices plunging from the April 2021 ATH, the 30 DMA of the New Address fell sharply below the 365 DMA. This established confirmation that the bear market phase was likely in effect through the lens of network activity.
  • New Demand Confirmation 🟢: After a lengthy market consolidation phase, an abrupt spike of 30 DMA above 365 DMA for New Addresses has historically signalled a promising sign of new demand entering the market.
  • Examining the recent spot price bounce above realized price shows that the monthly average of New Addresses is still lower than the yearly average 🟡. This pattern can be considered a validation of low demand in the market.

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