Weekly Research Report #106: Bitcoin Miner Selling Off

Market Recap

Crypto market took a beating last week despite the 75bps rate hike confirmed on Wednesday has pumped Bitcoin to $23k, all the gains were immediately erased by the rumors of Three Arrows Capital’s (3AC) default.
Bitcoin lost the $20k mark which was the previous cycle top (Dec 17), with hitting an 18-month low at $17.5k on 19 Jun ($BTC -21.9%).

Altcoins also traded in pain, with ETH broke $1k, the price in Jan 21.
Stablecoin leader $USDT slightly went down to $0.993 due to DDOS attack but it recovered quickly, and dominance surged again,
$USDT: 8.5% (+3.7%); $USDC: 6.3% (+3.3%).
Macro headlines about interest rates and inflation, and the default risk of crypto institutions wiped out near $400b from the crypto industry this week, remaining $854b in total crypto market cap.

Derivatives Market

General funding rates turned negative, BTC and ETH funding were -13.0% and -8.0% over the last seven days (Chart 1).
Alts funding rates continued to head south (ADA -21.5%; DOT — 43.4%; SOL -16.2%).
For liquidation, $343m and $173m of long positions got liquidated on June 13 and June 18. Compared to the crash on 12 May with $145m long liquidation, the liquidation last week was significant.

Last week, “long liquidation:short liquidation” = “1.3:1.0”.

Chart 1: 7dma of BTC, ETH Perpetual Futures Funding Rate (Source: FTX)
Chart 2: 4hr BTC liquidation chart (Source: Coinglass)
Major Crypto KPI (Jun 20, 2022)

Altcoins Roundup

Ethereum has broken through the significant liquidation level ($965 as of June 16) on AAVE lending protocol, over $200M worth of ETH being liquidated, and $ETH plunged to a low of $880 (ETH -20.4%).

Elon Musk, CEO of Tesla and SpaceX, continued to show his interest in Dogecoin ($DOGE), despite receiving a $258b class action lawsuit for alleged ponzi scheme using $DOGE. Elon tweeted ‘I will keep supporting Dogecoin’ on Sunday, after that, $DOGE went up 8% in the following hour ($DOGE -13.7%). Synthetix Protocol, a liquidity protocol that provides crypto derivatives trading in DeFi, surpassed AAVE in crypto daily fees ranking. Its daily fees received has just exceeded $1M ($SNX +45%).

Crypto Updates

3AC, one of the largest crypto hedge funds, was at risk of insolvency (both off- and on- chain) and was considering asset sales or bailout to deal with its severe liquidity issue.

Babel Finance, Hong Kong-based crypto lending platform, followed the footstep of Celsius, and suspended withdrawals and redemption of crypto assets.

Bitcoin miners sold Bitcoin to cover their costs paid during expansion over the last few years. The current mining profitability is the lowest since Oct 2020.

Alameda Research, a crypto quant trading firm founded by Sam Bankman-Fried who is also the CEO of FTX, lent $200M cash and 15,000 BTC to Voyager Digital, a crypto broker firm to give them more flexibility to pass through current market conditions.

Solend, a Solana-based lending platform, offered users tokens in reward for voting on a proposal to liquidate the whales’ wallets to avoid bad debt.

Regulatory Updates

Lawsuits on stablecoin continued, still focusing on $UST de-peg issue:

Coinbase faced a class action lawsuit for misrepresenting the risk of TerraUSD, leading to $18B loss of investors’ money.
Do Kwon, founder of Terra, sued with selling unregistered securities and making false statements about the stability of stablecoin, $UST.

Institutional Updates

FTX, the leading crypto exchange, announced the acquisition of the Canadian crypto trading platform, Bitvo. Earlier this year, FTX acquired the Japanese crypto exchange, Liquid, implying that FTX would like to expand worldwide.

Immutable, an NFT scaling platform, raised a $500M developer and venture investment fund. The funding will be used in developing Web3 ecosystem and upcoming NFT projects. Immutable has closed a $200M funding round led by Temasek early this year, which was used to expand the team and support GameFi development.

Macro Front

Wednesday FOMC meeting confirmed the interest rate hike will be 75 bps as expected, leading to a one-time pump in TradFi and Crypto markets. However, the gain was wiped out immediately in every market. DJIA lost the $30k mark and S&P500 marked the worst week in 2022. Tech-heavy NQ continued to suffer with rising interest rates (DJIA -4.8%; S&P500 -5.8%; NQ -4.8%).

Commodities traded mixed (Gold +0.1%; Oil -7.3%; Wheat -2.2%). Macro uncertainty continued with rising inflation rate, supply chain risk due to Russia-Ukraine war and global Covid situation.

Conclusion

Crypto assets traded lower over the last seven days due to economic market headwinds, default risks from highly leveraged institutions and miner selling pressure. High volatility will continue during the cleansing process.

Be patient and Good Luck!

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