Apr 25
Bitcoin Rejects $40k Once More
2022–04–25
Market Recap
Crypto market volatility further dampened last month and continued its range-bound price action.
Bitcoin started the week strong, rallying from $40k to $43k; $43k got rejected, bringing BTC down to $39k, wiping out all the gains for the week. BTC (-0.36%) finished the week rather flat. Altcoins mirrored BTC’s price actions, albeit with higher volatility, and overall underperformed BTC last week, implying lesser market risk appetite ($ETH -4.53%; $SOL -2.79%; $AVAX -8.21%; $LUNA +11.94%). The total crypto market cap now stands below $1.8T, indicating an outflow of capital in the crypto space. Macro concern overhang continues real, with concerns on broader liquidity conditions, especially with 50-basis-point hike slated in May FOMC meeting.
Derivatives Market
Average funding rates went south, in line with crypto price action (Chart 1).
Annual funding rates for BTC and ETH were at -3.59% and -5.74% respectively, reflecting lack of demand for leverage.
On the liquidation fronts, long liquidations were dominant, with over $800m BTC long liquidations vs. $442m short liquidations (Chart 2).
Altcoins Roundups
In general, altcoins underperformed bitcoin. Majority suffered single-digit loss ($SOL -2.8%; $BNB -3.5%; $AVAX -8.2%; $DOGE -8.4%). Outperformers were again the tokens related to the recent discussion of algorithmic stablecoin ($LUNA +15.2%; TRON +5.1%).
On Web3 front, the NFT token, ApeCoin ($APE) took the lead with a +41.7% gain this week. On social platforms like Twitter and Discord, there were increased chatters of YugaLabs’ airdrop to celebraite 1-year anniversary of BAYC mint.
On Gamefi front, STEPN continued its amazing rally, its governance token and utility token also had a week of green ($GMT +38.0%; $GST +15.5%)。
Crypto Updates
Inspired by the recent success of Terra and UST, Justin Sun, the founder of Tron, announced the launch of its decentralized algorithmic stablecoin called USDD. USDD will be backed by $10b in crypto reserves to start. As UST succeeded with the well-known Anchor Protocol which provided a ~20% annual yield to UST depositors, Sun will also issue a protocol, Tron DAO, with 30% APY on USDD deposits.
Defi hack continued, Beanstalk Farms suffered $180M exploit. The hacker borrowed $1b in crypto assets from another DeFi protocol, Aave, and exchanged to $BEANS. Through this flash loan, the attacker obtained more than 2/3 of the voting power in the protocol, allowing him to gain control of the project’s treasury.
MetaMask stopped working for an instant period on 22 Apr due to an Infura service fault. Ethereum gas fee tumbled immediately from 100gwei to 20gwei.
Regulatory Updates
In the collaboration of 21Shares and ETF Securities, Australia became the latest country to launch Bitcoin and Ethereum ETF. EBTC and EETH are scheduled to start trading on 27 Apr.
The US sanctioned Russian Crypto Mining Company, BitRiver, prohibiting any activity or relationship with US citizens.
The EU followed the American step and forced the cryptocurrency exchange, Binance, to crack down Russian users. Binance posed limiting services for Russian users, the restraint covered trading activities and deposits and withdrawals.
Institutional Updates
Institutions continued their interests in the crypto area.
Goldman Sachs was advising crypto exchange FTX among several issues including but not limited to US regulations problem and crypto trading for retail customers.
Morgan Stanley recently published an article, Buying a Coffee with Crypto, saying that cryptocurrency’s adoption is growing fast.
Despite the choppy price actions in 2022, crypto market continued soaking capital up.
Crusoe Energy, the bitcoin flare-gas powered miner, raised $505m in a Series C funding round to facilitate its eco-friendly mining operations.
The Sandbox, the metaverse giant, were in talks with new and existing investors. They were looking for a new round of funding of $400m at a valuation of more than $4b.
Macro Front
Russian-Ukraine woes continued and the IMF discussed its view on crypto asset. According to its recent financial stability report, the IMF mentioned that Russia could actually sidestep sanctions with the use of crypto. The IMF suggested foreign countries to amend their sanctions’ rules in order to cover crypto area too.
Fed Chair, Jerome Powell, indicated that a 50-bps rate hike will be on the table for May FOMC meeting. He mentioned that this policy was essential to revolve price stability. Risk adversely reacted to the headlines, as equities (DJIA -1.86%; S&P500 -3.25%; NQ -5.89%) and commodities both treaded heavy (Gold -2.26%; Oil -4.01%; Wheat -4.63%).
Conclusion
Crypto market continued to show high correlation to TradFi risk assets. Despite the growing interests from institutions, the upcoming rate hikes and geopolitical concerns decreased investors’ risk appetite, and thus hindering the sustainable growth in major cryptocurrencies.
Be patient and good luck!
