Week in Review
- Victor Smorgon Group uses ANZ’s A$DC stablecoin to buy tokenised carbon credit units, with Zerocap as the market maker and custodian.
- Jerome Powell testifies on the economy and inflation, saying a recession is possible.
- Despite a recent rebound, stocks are headed for their worst Q3 start since 1970.
- UK inflation hits a 40-year high of 9.1%, according to May CPI results.
- Startup partners with software firm to build a $100 million metaverse hub in Melbourne.
- Bank of Israel tests CBDC and suggests the use of smart contracts may need oversight.
- WeChat blocks crypto and NFT accounts.
- South Korean prosecutors ban Terra (LUNA) employees from leaving the country.
Winners & Losers
Macro Environment
- The risk of a recession, as highlighted by Fed Chair Powell last week, appears to have weighed on crypto market participants. Upon Tuesday’s open, a weekend risk selloff was met with little movement in stocks and futures.
- The weekend crypto market sell-off may have been fueled by miner capitulation due to decreased mining profitability. Many miners subsequently paused mining efforts whilst selling off treasury stores.
- US 10-Year Treasury bonds fluctuated between 3 – 3.3% over the duration of the week, raising recessionary fears.
- The Korean won fell to a 13-year low, corresponding with a fall in the benchmark bond yield.
- Germany warned of price contagion and a potential “market collapse” after raising the risk level of its “National Gas Emergency Plan,” which is now in its secondary phase due to large supply cuts from Russia.
- BTC and ETH regained some momentum throughout the week, with a high of $21,868 for BTC and $1,281.43 for ETH. However, a volatile market suggests that these levels will need to be sustained to see any improvement in investor sentiment, generating the necessary momentum to test higher price levels.
- Proshares announced the launch of its Short-Bitcoin futures exchange-traded fund (ETF) dubbed “Short Bitcoin Strategy” on Tuesday. This comes about eight months after ProShares debuted its first Bitcoin Strategy ETF, ‘BITO,’ which was the first long Bitcoin-Futures ETF, amassing $1 billion in assets in 48 hours.
Technicals & Order Flow
Bitcoin
- This week, Bitcoin fluctuated within the 19,750 and 21,000 range. A push higher on Wednesday broke through resistance at 21,300 before a swing in momentum caught bulls on the back foot. Price then fell below 20,000 before being quickly bid up, affirming the level as significant short-term support.
- Bitcoin’s elevated correlation with equities continues to persist. The S&P and Nasdaq both gained 2% during Tuesday’s rally, setting the stage for Bitcoin’s mid-week move higher. However, comments from Fed Chair Jerome Powell on Wednesday about the possibility of further rate hikes leading to a recession prompted investors to de-risk. Correspondingly, Bitcoin dropped below 20,000.
- This week’s close marks Bitcoin’s second consecutive week of positive WoW returns. The aforementioned growing support at the 20,000 level is also depicted in the URPD metric and positions bulls to further challenge topside support placed at 22,000. Notably, price found limited support between 22,000 and 28,000 during the recent sell-off. URPD also shows a lack of volume between these levels and hence limited topside resistance until 28,000.
Data source: Glassnode
- Bitcoin’s net exchange flows show an interesting trend. Bitcoin’s net outflows from exchanges are at all-time highs, while the supply held by addresses with a balance greater than 100,000 Bitcoin is persisting higher. Whales are taking advantage of current market conditions and are accumulating.
Data source: Glassnode
- Following Celcius’ and 3AC’s liquidation events, Bitcoin’s implied volatility experienced a significant uptick as traders moved to protection strategies. Since then, these levels have somewhat normalised.
Data source: Skew
- Bitcoin’s mean hash rate has plateaued and is now decreasing. Data source: Glassnode
- Terra’s capitulation and the lagged effect of its contagion recently came in the form of substantial liquidations and price depreciation. For the time being, however, the panic appears to have subsided, and some investors are strategically accumulating at current levels. During the chaos, downside protection was in high demand. However, implied volatilities have since returned to normalised levels. While two weeks of positive returns paint a positive picture, Bitcoin’s classification as a high beta asset persists, subjecting its value to dependence on macro newsflow in the short term.
Ethereum
Data source: Tradingview
- Participants finally saw some bullish respite in Ethereum’s price action after eleven weeks of consecutive declines. As the week progressed, positive newsflow helped to alleviate concerns about short-term contagion. During range-bound trading on low volumes, key support levels were bid up. The weekly close of 1,200 showed a 10.62% return, a significant 41.6% rebound from last week’s low of 880.
- The recovery in digital assets mirrored the rally in US equities this week. Interestingly, crypto markets remained flat in comparison to the Nasdaq, which rose 3.57% during Friday’s session. Although the correlation between the two asset classes remains high, some crypto participants are de-risking their portfolios. While they have subsided somewhat, contagion risks remain, and they are exacerbated by a growing fear of a multi-year bear market across most asset classes. When compared to previous bear markets, this has resulted in more aggressive selloffs and weaker rallies; Ethereum recently surpassed its eleventh consecutive week decline, the longest on record.
ETHBTC Daily Chart
Data source: Tradingview
- ETH/BTC edged higher WoW. This reflects the rally in risk assets that occurred last week.Subsequent to breaking down through a multi-month ascending channel, relative to Bitcoin, Ethereum continues to regain lost ground. In the short term, ETH will face stiff overhead resistance at 0.06. This level also coincides with a 0.382 Fibonacci retracement drawn from the recent high at 0.077.
- Implied volatility (IV) in Ethereum options continues to normalise after a period of extraordinarily high volatility. As concerns about further liquidations fade, so does the demand for downside protection. As a result, ATM volatility has decreased. Front-week expiries are still high. This is due to the market pricing in event risk in the near term with the fallout from the collapse of major institutions still uncertain.
Data source: Skew
- Ethereum’s 2.0 merge formed the basis for a longer-term bullish narrative. Importantly, this narrative underpinned Ethereum’s early-year momentum. Market participants’ views on Ethereum’s migration to PoS can be further depicted in the options market by analysing various strategies with differing payoffs. Ethereum is placed at attractive levels and is currently below its 2018 all-time high.
Data source: Laevitas
- Arbitrum, a layer-two rollup built on Ethereum, recently launched ‘Arbitrum Odyssey’, a two-month-long initiative that allows users to experience different on-chain Arbitrum ecosystem projects. At the end of each week, eligible users will receive NFTs in return for having participated in that week’s event. The amount of NFTs earned is said to be a potential criterion for an airdrop of a future Arbitrum token launch.
- One of Ethereum’s final merge simulations on the Sepolia testnet is scheduled for July 6th. A failed simulation would be harmful to Ethereum and cast doubt on its ability to successfully merge with Ethereum 2.0, which is scheduled for August. Following FTX’s and Alameda’s extension of credit lines to implicated participants of the 3AC defaults, tail risk fears have subsided.
Altcoins
- Tether announced this week that it would launch a stablecoin pegged to the British Pound. This token, GBPT, will exist on the Ethereum blockchain alongside Circle’s Euro-backed stablecoin. Surprisingly, the announcement comes at a time when Tether’s USDT is losing market share to the second-largest stablecoin, USDC. Recently, confidence in the USDT has waned. This is reflected in an increase in short positions against USDT.
- The launch of Thorchain’s mainnet provides an alternative solution to bridges that have historically been vulnerable to exploits. Thorchain’s native RUNE token rose approximately 40% upon launch
DeFi
- dYdX, a popular decentralised derivatives exchange, has announced that in the 4th version of its protocol, it will be building its own layer 1 blockchain. dYdX plans to migrate from StarkWare’s layer 2 Ethereum scaling technology to a native blockchain built on the Cosmos network. According to the dYdX, Cosmos’ layer 0 blockchain enables increased interoperability, greater flexibility with Cosmos’ SDK, and a decentralised order book model.
- Harmony’s Horizon Bridge endured a USD$97 million exploit. The blockchain’s connection to the Ethereum network was compromised when a bad actor obtained control of 2 of the 5 multisig addresses. Moreover, the exploiter prompted the protocol to transfer funds to their wallet and not face limitations. Harmony stated in a blog post that various cybersecurity exchange partners and the FBI were requested to assist with the investigation.
Innovation
- Shifting their focus to mobile, Solana has developed a Web3 phone named Saga. Solana Labs’ subdivision claims that the Saga phone will be intertwined with the Solana blockchain. The estimated price of Solana’s Saga is $1k. Solana’s Saga will see competition from a range of products, including HTC’s Exodus, KlaytnPhone, Blok on Blok and more.
NFTs & Metaverse
- With the goal of facilitating interoperability between different metaverses, The Metaverse Standards Forum, an organisation between 33 technology giants including Meta, Epic Games, Microsoft, Nvidia, and more, has been formed. This organisation’s goal is to create open standards for metaverse technology. Furthermore, the forum has stated that it will not engage in philosophical debates about metaverse usage. Instead, its primary goal will be to build an interoperable and connected web between various metaverses.
- A research and development metaverse hub is being designed and built in Melbourne. Named the Metaverse Research and Development Centre (MRDC), the partnership between metaverse startup company Translucia Global Innovation and Australian software development firm Two Bulls, will initially set aside $100 million for the hub. The MRDC will explore a variety of of emerging areas in the metaverse, such as hardware and software, as well as economics (MetaFi) and gamification (GameFi). Moreover, the metaverse hub will look into ways to reduce metaverse energy consumption.
- Uniswap recently acquired Genie.xyz, a popular NFT marketplace aggregator. Uniswap stated that they intend to integrate aspects of the protocol into their own DeFi platform. This acquisition will eventually allow Uniswap users to purchase NFTs. Genie users will benefit from the purchase via a USDC airdrop based on a user activity snapshot, similar to Uniswap’s first airdrop.
- Bored Ape Yacht Club (BAYC) founders have faced a number of accusations relating to Nazi ties. These claims are based on the team’s logo, online names of founders, subtle phrases in social media posts and more. In a Medium post, the founders explicitly denied the allegations. The BAYC team explained why they chose their specific online pseudonyms as well as the logo design process.