Tuesday, 23 May 2023

Market Summary

Market Summary 23 May 2023

Bitcoin Price: US$ 26,849.27 (+0.38%)
Ethereum Price: US$ 1,817.35 (+0.69%)  


Bitcoin’s downward trajectory has prompted a fifth consecutive week of outflows from crypto investment funds, with a total of $232 million withdrawn during this period, as reported by CoinShares. The dominant outflow was from bitcoin products, with investors pulling out $33 million last week alone. Despite bitcoin’s surge earlier this year, surpassing $30,000 in April, it has struggled recently and now trades below $27,000. CoinShares expressed uncertainty regarding the coordinated negative sentiment affecting both long and short investment products. In another development, Tether’s stablecoin, USDT, has experienced a decline in trading volume to multi-year lows, raising questions about its considerable rise in market capitalisation. Crypto market research firm Kaiko has pointed out that the substantial increase in USDT’s supply to $83 billion, while its usage diminishes, is a matter of concern. Stablecoins, including USDT, have played a pivotal role in connecting traditional currencies with cryptocurrencies and facilitating trading. One possible explanation for USDT’s growth amidst falling usage is the migration of traders from regulated exchanges to offshore ones due to increased regulatory measures in the United States. Meanwhile, Bitcoin’s lack of movement has generated speculation about the impact of rising interest rates in the United States, potentially leading to significant volatility in the market. Market commentators are wary of a breakdown, with crucial trend lines, such as the 200-week moving average, at risk of a retest or worse. Despite the mundane sideways trading, some view it as a healthy consolidation period, strengthening the current range as a significant support and resistance zone.

 MicroStrategy’s Michael Saylor, known for his strong support of Bitcoin, has recently shown interest in Ordinals, a concept similar to non-fungible tokens (NFTs) on the Ethereum network. Ordinals enable the inclusion of arbitrary and non-financial information, like images, on the Bitcoin blockchain using the BRC-20 protocol. However, as transaction fees surged and discussions about potential network attacks arose, questions have emerged within the Bitcoin community regarding the legality and censorship of these transactions. Saylor discussed Ordinals, BRC-20 inscriptions, and their potential classification as unregistered securities during an interview at the Bitcoin 2023 conference in Miami. In a separate development, the tokenisation trend, involving the issuance of financial securities on the blockchain, has gained traction. Six projects, including Matrixport, Backed Finance, Ondo, and Franklin Templeton, have collectively achieved a market capitalisation of over $220 million in tokenised securities on Ethereum, Polygon, and Gnosis Chain. While Ethereum remains the dominant platform, tokenisation efforts are expanding to other chains. Lastly, the Tornado Cash project experienced an attack on its governance system, with the attacker submitting a new proposal to undo the damage caused. The attacker gained control over the project’s governance and obtained a significant number of TORN tokens, which were subsequently exchanged for ETH through the privacy protocol.

The Securities Commission of Malaysia has ordered Huobi, a crypto exchange based in Seychelles, to halt its operations in the country due to operating without registration. The exchange and its founder, Leon Li, have received a public reprimand, with Li being tasked with winding down local operations, discontinuing communication with Malaysian investors, disabling the website, and withdrawing the app from app stores. The regulatory action was taken to address concerns regarding the platform’s compliance with local regulations and to safeguard the interests of investors. In another development, Hotbit, a crypto exchange, has announced the cessation of its operations, citing various issues and questioning the long-term viability of centralised exchanges. Users have been advised to withdraw their remaining assets by June 21. The decision to shut down comes amidst deteriorating operating conditions and a forced suspension in August last year. Additionally, Gemini, a crypto exchange, has stated that Digital Currency Group (DCG) has missed a $630 million payment that was due. This payment is connected to a loan made by Gemini to Genesis, a crypto lender and subsidiary of DCG. Gemini has raised concerns about DCG’s ability to meet its financial obligations, and discussions are underway with creditor committees regarding the possibility of granting forbearance to prevent default. If a resolution cannot be reached, Gemini is considering presenting an amended plan of reorganisation independently.

According to Ark Invest analyst Yassine Elmandjra, the United States is facing the risk of losing its leading position in the global cryptocurrency ecosystem to countries such as the United Arab Emirates, South Korea, Australia, and Switzerland. Elmandjra highlighted a significant decline in crypto liquidity within the US, noting the reduced participation of trading firms Jane Street and Jump Trading in the domestic market. He also pointed out that bitcoin trading volume in the US has dropped by 75% since March, with weaker price discovery observed on American exchanges. Regulatory uncertainty in the US is seen as discouraging both existing firms and new entrants in the crypto space. In another development, the recent frenzy around memecoins has impacted Ethereum’s on-chain stablecoin trading volume, which is on track to be the lowest since December 2020. On-chain trading of USDC and USDT has decreased significantly, likely due to high fees on the Ethereum network and the focus on memecoins. Despite this, the Bitcoin payments app Strike has integrated Tether’s USDT stablecoin, enabling users to conduct on-ramps, off-ramps, and settlements within the app. This integration aims to enhance liquidity and provide users with the ability to convert digital assets into fiat currency swiftly. Strike plans to support multiple blockchains for USDT on its platform, aligning with its goal of democratizing finance and promoting inclusivity globally. 

Ethereum co-founder Vitalik Buterin has expressed caution regarding the expansion of the Ethereum consensus mechanism, particularly in relation to re-staking. Buterin raised concerns about initiatives that could introduce unnecessary risks and complicate the role of Ethereum validators beyond their primary duty of verifying core protocol rules. Specifically, he voiced worries about re-staking, which involves Ethereum validators securing external chains, potentially compromising the network’s safety. Buterin emphasised the need for careful consideration when extending the scope of blockchain consensus. In related news, Apple’s crypto policy appears to be softening as Stepn, a blockchain-powered fitness app, introduces in-app trading of digital assets. This development marks a significant shift, allowing Stepn users to buy and sell digital assets within the app itself, without the need for external marketplaces. Stepn also announced an integration enabling users to purchase digital assets using traditional debit and credit cards linked to Apple Pay, suggesting a growing acceptance of blockchain-based applications by the tech giant.





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