Tuesday, 26 July 2022

Market Summary

Market Summary 26 July 2022

Bitcoin Price: US$ 21,310.90  (-5.62%)
Ethereum Price: US$ 1,440.79 (-9.82%) 


ETH Outperforms BTC, Update On Macro Outlook

  • Since the beginning of July, the balance of ETH on CEXs has reduced from 21.7 million to 20.6 million, putting net outflows at approximately 1.1 million ETH. 
  • On 7th-July, we saw the largest daily net outflow of ETH from exchanges since July-2021, totaling more than 600k ETH. An additional net outflow of 400k ETH took place on 14th-July.
  • These large outflows have coincided with ETH’s price recovery. Not only has ETH bounced 80% from last month’s low, but it has also outperformed BTC by 35% in the past week. The ETH/BTC ratio currently sits just below 0.07, levels unseen since early May-2022.
  • An updated deadline for the ETH Merge may have acted as a leading catalyst for the strong price performance, as investors gain more certainty around potential timelines. Although not finalized, 19th-Sept is now the tentative date for the Merge.
  • Estimates indicate that daily issuance of ETH will drop by ~90% post Merge, from 13k to 1.6k ETH minted per day.
  • 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.
  • Risk assets have finally had a decent few weeks, rallying off of the June lows, notching some much-needed relief and reprieve from the relentless selling of the two months prior.


Tesla reports $64M profit from Bitcoin sale

  • Tesla’s decision to offload most of its Bitcoin (BTC) treasuries netted the company a hefty profit in the second quarter, even as crypto prices plunged into a bear market.
  • In the first six months of 2022, Tesla recorded $170 million of impairment losses “resulting from changes to the carrying value” of its Bitcoin holdings, according to an official Form 10-Q filing with the United States Securities and Exchange Commission, or SEC. After selling 75% of its BTC stash for dollars in the second quarter, the company netted a realized gain of $64 million.
  • In finance, an impairment loss occurs when the fair value of an asset held by a company falls below the carrying value of the investment.
  • The electric vehicle maker still has 10,800 BTC on its books, according to Bitcoin Treasuries. At a current price of around $22,000 BTC, Tesla’s digital asset holdings are worth roughly $237 million.


3AC: A $10B hedge fund gone bust with founders on the run

  • Three Arrow Capital (3AC), a Singapore-based crypto hedge fund that at one point managed over $10 billion worth of assets, became one of the many crypto firms that went bankrupt in this bear market. 
  • However, the fall of 3AC wasn’t purely a market-driven phenomenon. As more information surfaced, the collapse looked more like a self-inflicted crisis brought upon by an unchecked decision-making process.
  • To put it concisely, the hedge fund made a series of large directional trades in Grayscale Bitcoin Trust (GBTC), Luna Classic (LUNC) and Staked Ether (stETH) and borrowed funds from over 20 large institutions. The May crypto crash led to a series of spiral investment collapse for the hedge fund. The firm went bust and the loan defaults have led to mass contagion in crypto.
  • The series of liquidations for 3AC had a catastrophic impact on crypto lenders such as BlockFi, Voyager and Celsius. Many of the crypto lenders had to eventually file for bankruptcy themselves due to exposure to 3AC.


Bitcoin drops below $21.8K realized price as FOMC spooks markets

  • Bitcoin (BTC) stuck to its realized price just below $22,000 on July 25 as Wall Street opened with a flat performance.
  • Data from Cointelegraph Markets Pro and TradingView tracked BTC/USD as it consolidated after falling from $23,000 overnight.
  • The pair echoed equities in cool trading prior to the July 27 United States Federal Reserve decision on interest rates. Analysts were expecting several days of volatility, and despite buyer interest in Bitcoin being strong below spot price, everything could still change.
  • Adopting a more hopeful outlook, meanwhile, PlanB, creator of the stock-to-flow Bitcoin price models, noted that the speed with which Bitcoin bounced above its 200-week MA this month could belie underlying strength absent from similar bear phases.


Aptos Labs raises $150M, more than doubling valuation

  • Layer-1 blockchain developer Aptos Labs has closed a $150 million funding round to further its ambitions in the Web3 space, further highlighting venture capital’s appetite for budding crypto-focused startups. 
  • The funding round was co-led by venture studios FTX Ventures and Jump Crypto, with additional participation from Andreessen Horowitz, Apollo, Franklin Templeton and Circle Ventures. According to Bloomberg, the funding round more than doubled the startup’s valuation, which was over $1 billion as of March.
  • Aptos was launched by former Meta employees Mo Shaikh and Avery Ching. The founders also had a role in advancing Mark Zuckerberg’s failed Diem project. As Cointelegraph reported, the Diem Association and its subsidiaries wound down operations in February of this year, with Meta moving to sell the project’s intellectual property and other assets.

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