Monday, 25 July 2022

Market Summary

Market Summary 25 July 2022

Bitcoin Price: US$ 22,570.60  (+0.58%)
Ethereum Price: US$ 1,597.71 (+3.17%) 

 

Out of The Frying Pan, Not Out of The Fire

  • The macro situation keeps getting more complex, and complexity often equates to uncertainty. Last week, the US CPI print came in even higher than expected, topping all economist forecasts (we discussed the implications of this in last week’s report, “Bitcoin Is Not An Inflation Hedge”).
  • This week was filled with more macro developments. The Bank of Japan raised its inflation forecast but maintained ultra-low interest rates despite the yen’s recent weakness and souring import costs. The implications of this are not without consequence though. Astonishingly, even with the unlimited bond buying promise, the 10-year JGB saw yields briefly ‘de-peg’ to levels beyond the 0.25% cap last month. This will be an important trend to watch given the high risk of further dollar strength from here.
  • The BOJ’s steadfast policy goes against the grain of most major central banks, but that’s a risk they’re willing to take in favor of continued stimulus. The Fed is well into its latest rate hike regime while the ECB surprised the market yesterday with a 50bps rate hike (expectations were for 25bps) as they liftoff for the first time in 11 years. The ECB also announced the creation of the Transmission Protection Instrument (TPI), a commitment to buy bonds of countries facing “unwarranted, disorderly market dynamics”. The program is aimed at providing aid to more indebted EU countries in hopes of “preventing financial fragmentation within the currency bloc.”
  • QT for Germany, QE for Italy? The challenge to make everyone happy is only getting harder.
  • At the risk of sounding redundant, we want to reaffirm the idea that this is a macro-driven bear market affecting risk assets broadly. So yes, for the time being crypto likely continues trading like high beta growth stocks.
  • Crypto markets find themselves leading the risk asset rally, with BTC and ETH up 20% and 50% from their range lows, respectively. Many other names have outperformed these bellwethers too, as we typically see during market rallies.
  • Starting with our high time frame, top-down approach to bitcoin market structure, we can see clear evidence of demand in the region of $19K-$20K. This support zone coincides with the all-time high prints from the previous bull cycle in 2017. Once the $30K support zone established in 2021 was broken, we highlighted how the next area of historical high time frame market structure (and demand) was likely to be found in the $20K region.
  • Continue on Delphi Digital…

 

Bitcoin network difficulty drops to 27.693T as hash rate eyes recovery

  • The difficulty in mining a block of Bitcoin (BTC) was reduced further by 5% to 27.693 trillion as network difficulty maintains its three-month-long downward streak ever since reaching an all-time high of 31.251 trillion back in May 2022. 
  • Network difficulty is a means devised by Bitcoin creator Satoshi Nakamoto to ensure the legitimacy of all transactions using raw computing power. The reduced difficulty allows Bitcoin miners to confirm transactions using lower resources, enabling smaller miners a fighting chance to earn the mining rewards.
  • Despite the minor setback, zooming out on blockchain.com’s data reveals that Bitcoin continues to operate as the most resilient and immutable blockchain network. While the difficulty adjustment is directly proportional to the hashing power of miners, the total hash rate (TH/s) recovered 3.2% along similar timelines, as shown below.

 

FTX proposes a way to give Voyager Digital clients some of their digital assets back early

  • FTX and Alameda Ventures want to offer Voyager Digital customers a chance to start a new FTX account with an opening cash balance funded by an early distribution on a portion of their bankruptcy claims, FTX announced in a statement Friday. To accomplish this, Alameda Ventures said it would like to buy all Voyager digital assets and digital asset loans, with the exception of loans to Three Arrows Capital (3AC). 
  • A letter from an FTX and Alameda Ventures legal representative explained that Voyager Digital customers who did not choose to create an FTX account would retain their rights in the bankruptcy proceedings, but would not receive early reimbursement. Accepting the offer would protect Voyager Digital clients from the depreciation of the crypto assets they currently do not have access to, as reimbursement for their digital assets will be based on their value on July 5.
  • After setting up an FX account, Voyager Digital clients would be able to continue trading their crypto or cash out their accounts immediately. FTX co-founder and CEO Sam Bankman-Fried said:
  • “The goal of our joint proposal is to help establish a better way to resolve an insolvent crypto business — a way that allows customers to obtain early liquidity and reclaim a portion of their assets without forcing them to speculate on bankruptcy outcomes and take one-sided risks.”

 

Ethereum Classic soars 100% in nine days outperforming ETH as ‘the Merge’ approaches

  • Ethereum Classic (ETC) has been outperforming its arch-rival Ethereum’s native token Ether (ETH) during the current crypto market rebound with the ETC/ETH pairs at 10-month highs.
  • ETC’s price has risen to $27 on July 22, amounting to a 100% gain in nine days after bottoming out at $13.35. Comparatively, ETH’s price has seen a 64% rally in U.S. dollar terms.
  • Ethereum’s rebound has been among the sharpest among the top cryptocurrencies, primarily due to the euphoria surrounding its potential network upgrade in September.
  • Dubbed “the Merge,” the long-awaited technical update will switch Ethereum from proof-of-work (PoW) to proof-of-stake (PoS).
  • Moreover, it will replace miners with stakers. As a result, the PoS switch could force existing Ethereum miners to switch to PoW chains.

 

3AC founders reveal ties to Terra founder, blame overconfidence for collapse

  • The founders of tainted crypto hedge fund Three Arrow Capital (3AC), which filed for bankruptcy in the first week of July, have finally resurfaced after five weeks of no known whereabouts.
  • In an interview with Bloomberg, the crypto hedge fund’s two founders Su Zhu and Kyle Davies admitted that the overconfidence born out of a multiyear bull market, where lenders saw their value swell by virtue of financing firms like 3AC, led to a series of bad decisions that should have been avoided.
  • Zhu also revealed their closeness to Terra founder Do Kwon and claimed they believed the firm was going to do big things. He admitted that the firm’s closeness to Terra made them overlook certain red flags about the firm, which eventually led to their $500 million worth of investment going to zero. Zhu explained:
  • “If we could have seen that, you know, that this was now like, potentially like attackable in some ways, and that it had grown too, you know, too big, too fast.”

 

Crypto.com scores regulatory approval from Cyprus SEC

  • Singapore-based cryptocurrency exchange Crypto.com continues to aggressively expand its reach, becoming the latest crypto firm officially authorized to operate in Cyprus.
  • Crypto.com has received regulatory approval from the Cyprus Securities and Exchange Commission (CySEC), the firm announced to Cointelegraph on Friday.
  • The approval enables Crypto.com to offer a number of products and services to customers in Cyprus in compliance with local regulations. The new regulatory milestone comes in line with Crypto.com’s growing global presence as the firm has been actively expanding its operations, receiving approvals to operate in countries like Italy, Greece and Singapore.
  • According to Crypto.com co-founder and CEO Kris Marszalek, the exchange currently prioritizes Europe as the main region for continued expansion. That is a “testament to our commitment to compliance and collaboration with regulators,” he said.

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