Monday, 4 July 2022

Market Summary

Market Summary 4 July 2022

Bitcoin Price: US$  19,315.83 (+0.33%)
Ethereum Price: US$ 1,074.26 (+0.68 %) 


It’s All Just Volatility

  • Quarter 2 draws to a horrendous close as the seemingly ever-worsening macro backdrop continues to plague and be an anchor to risk asset prices. Due to the “perfect macro storm”, crypto assets (being furthest out on the risk curve) have had a torrid 8 months.
  • Remember, the “perfect macro storm” is the current combination of:
    • Multi-decade high inflation prints
    • Rising interest rates (and more importantly, the downstream effects that an increased cost of capital entails)
    • Continued worsening liquidity conditions across asset classes
    • Continued strong dollar
  • Because of these things, unfortunately, “Bitcoin Is Behaving Like It Should”. Remember, “Bitcoin is one of the purest plays on fiat currency debasement.” While this below twitter thread is from January, it did a fantastic job of describing many of the dynamics that are now currently at play, and it is a good reference to remind us of how market conditions arrived at where they are today. It is well worth revisiting.
  • There is a very common saying in traditional finance… in a time of crisis, correlations trend towards 1. This is a phenomenon that we have seen play out many times in the past. We saw it in the 2020 Covid Crash, the 2008 Global Financial Crisis, the 2000s Dot Com Bubble, in the 1980s, in the 1970s, and we are seeing it play out again today.


Ethereum average gas fee falls down to $1.57, the lowest since 2020

  • For nearly two years, between Jan. 2021 and May 2022, the average gas fee required by the Ethereum network was roughly $40, with May 1, 2022 recording the highest average daily gas cost of $196.638.
  • The Ethereum ecosystem’s biggest roadblock to mainstream dominance is often attributed to the extremely high transaction fees — known as gas fees — it requires to complete a transaction. However, with Ethereum’s average gas fees coming down to 0.0015 Ether (ETH), the narrative is set to change. 
  • The average transaction fee on the Ethereum blockchain fell down to 0.0015 ETH or $1.57 — a number previously seen in December 2020. However, starting in January 2021, Ethereum’s gas fees surged, owing to the hype around nonfungible tokens (NFT), decentralized finance (DeFi) and a promising bull market.
  • Supporting this sudden drop in gas prices, Cointelegraph uncovered on Saturday that the daily NFTs sales have also dropped to one-year lows. The NFT ecosystem recorded its worst performance of the year in June as the total number of daily sales fell to roughly 19,000, with an estimated value of $13.8 million.


KuCoin CEO slams insolvency rumors citing “no plan to halt withdrawal”

  • Crypto exchange KuCoin found itself at the center of discussion when a sub-community of Crypto Twitter started warning investors about an incoming ban on funds withdrawal. KuCoin CEO, Johnny Lyu, was, however, quick to dismiss the unvetted rumors before they picked up steam.
  • Prominent crypto figures on Twitter, including trader @KongBTC and blockchain investigator @otteroooo, requested their followers to withdraw all of their funds from the KuCoin while claiming that the exchange may soon stop all users from withdrawing funds.
  • Rumors linked KuCoin’s intent to stop withdrawals with the Terra and 3AC collapse, which according to the warnings, led to “immense suffer” for the exchange owing to high exposure to the fallen tokens.


NFT hype evidently dead as daily sales in June 2022 dip to one-year lows

  • Nonfungible tokens (NFTs) took center stage in the year 2021 as artists, influencers, A-list celebrities and the sports industry finally came across a fan engagement tool that empowered the general public to cash in on their success. However, the hype around NFT did not manage to stand its ground, as sales plummeted to one-year lows amid the ruthless bear market of 2022.
  • The NFT boom, which started in early 2021, upheld its glory until May 2022 — supported by a healthy and bullish crypto ecosystem and positive investor sentiment. However, Bitcoin’s (BTC) struggle to hold on to its all-time high prices had an adverse impact across the crypto ecosystem.
  • The NFT ecosystem recorded its worst performance of the year in June 2022 as the total number of daily sales fell down to roughly 19,000 with an estimated value of $13.8 million — a number which was recorded back in June 2021. 
  • Last year, however, daily NFT sales of a similar amount were considered impressive as the nascent ecosystem saw mainstream implementations across various use cases.


BlockFi announces deal with FTX US, including ‘option to acquire’ for $240M

  • According to CEO Zac Prince, BlockFi signed agreements with FTX US totaling $680 million — for a company that had a $5 billion valuation in June 2021.
  • FTX US has inked a deal with BlockFi that will give the crypto derivatives exchange the option to purchase the lending firm.
  • In a Friday Twitter thread, BlockFi CEO Zac Prince said the crypto lending firm had signed agreements with FTX US for a $400-million revolving credit facility as well as the option to acquire BlockFi “at a variable price of up to $240 million based on performance triggers.” According to the CEO, the deal was reached as part of an effort “to bolster liquidity and protect client funds” at BlockFi.
  • The agreements are still subject to shareholder approval. Prince said volatility in the crypto market, “particularly market events related to Celsius and 3AC,” which had a negative impact on BlockFi, led to the decision. The crypto lending platform suffered roughly $80 million in losses the week following Celsius pausing withdrawals, and, after considering “​​various unattractive options” for recovery, partnered with FTX US.
  • “All of our products and services — including funding and withdrawals, our trading platform, credit card and global institutional services — continue to operate normally, with incremental capital strength behind them,” said Prince.


Argentina carries out crypto wallet seizures linked to tax delinquents

  • Argentina’s tax authority has seized more than 1,000 cryptocurrency wallets linked to delinquent taxpayers in the country.
  • According to a report from local media outlet iProUP, courts across Argentina authorized the seizure of 1,269 cryptocurrency wallets belonging to citizens with outstanding debt to Argentina’s Federal Administration of Public Income (AFIP).
  • AFIP signaled its intent to go after cryptocurrency wallets belonging to tax delinquents in May, ordering cryptocurrency exchanges and payment service providers to deliver monthly reports on users of their platforms.
  • Crypto services were requested to verify the identity of clients and keep records of user accounts as well as detailed financial statements including income, expenses and monthly balances.
  • With these firms supplying this information to the tax authority, AFIP has been able to enforce embargoes on the holdings in wallets linked to errant taxpayers over the past few months.
  • AFIP’s current standard operating procedure typically targets bank accounts and other liquid assets to recoup debts as the first port of call. If a taxpayer cannot settle their debt or is unbanked, the AFIP will look to seize other assets belonging to the individual.


Deutsche Bank analysts see Bitcoin recovering to $28K by December

  • Analysts from Deutsche Bank forecast Bitcoin (BTC) rebounding to $28,000 by December 2022 as the cryptocurrency market continues to grapple with gloomy times.
  • Bitcoin and the wider cryptocurrency markets have endured a tough six months, with the value of BTC, in particular, enduring its worst quarter in 10 years. Macroeconomic conditions around the world have played a role, with stagnating markets and fears of inflation driving conventional stock markets and their crypto-counterparts down to painful lows.
  • A report from Deutsche Bank analysts Marion Laboure and Galina Pozdnyakova provides an interesting perspective on the medium-term outlook for BTC. Their insights suggest that cryptocurrency markets have mirrored movements of the Nasdaq 100 and S&P 500 since late 2021.
  • The pair believe that the S&P will rebound to its January levels and that Bitcoin’s correlation to the index could result in a 30% increase in value from current levels midway through 2022. This would see BTC back up to the $28,000 mark.

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