Weekly Research Report: DOUBLE SLAPPING

Market Recap

Crypto market volatility arrived at CPI release. Major cryptocurrencies had an epic turnaround (dump-and-pump) after the September CPI came out hot. Bitcoin plunged nearly 5% to hit a low of $18,131 and rebounded strongly to $19,954 in next 12 hours (7d: $BTC -1.7%). The crypto giant rejected at the 50dma and is now stabilizing at $19.2k. Total crypto market cap declined 2.4% to $964bn.

Crypto dominance: (BTC 38.4%, ETH 16.3%, USDT 7.2%, USDC 4.7%).

Derivatives Market

General funding rates stayed negative (7d avg funding: BTC -4.0%, ETH -8.4%) (Chart 1).

Alt’s funding rates also remained negative but varied in size (7d avg funding: ADA -25.9%, SOL -12.5%)

Perpetual contracts continued to trade at discount, hinting a bear market sentiment.

On liquidation side (Chart 2), over $199 worth of bitcoin positions have been liquidated this week, which was 73% more than last week number, with 1.4 Long/Short liquidation ratio this week.

The CPI announcement double slapped the market in next few hours, liquidating over $40m on the long side and then $29m on the short side.

Altcoins Roundup

Ethereum implied volatility increased ahead of CPI announcement. The second largest cryptocurrency underperformed Bitcoin after the CPI release, the ETH/BTC pair plunged to a low of $0.06556 on the same day. It is now stabilizing at $0.06801. (7d: $ETH -2.6%).

Solana continued to show weak price actions after the Solana-based Defi protocol, Mango, being exploit last week. (7d: $SOL -9.9%)

Huobi crypto exchange sold to a Hong Kong-based investment firm About Capital, reportedly spearheaded by Tron founder Justin Sun. Justin Sun tweeted his plans for Huobi and guaranteed users for Huobi’s bright futures. Huobi token rallied up strongly afterwards (7d: $HT +79.9%).

Crypto Updates

Solana continued to show weak price actions after the Solana-based Defi protocol, Mango, being exploit last week. (7d: $SOL -9.9%)

Regulatory Updates

WisdomTrees’s spot Bitcoin ETF “WisdomTree Bitcoin Trust” was rejected by the SEC.

G20 will review new crypto regulatory framework this week. The countries will discuss issue about cross-border crypto regulation. The Organisation for Economic Co-operation and Development (OECD) also mentioned tax reporting methods and raised concerns on international crypto tax evasion.

The EU lawmakers have passed the Markets in Crypto Assets (MiCA) bill with 28-to-1 community vote. The law covers several crypto aspects, including stablecoins, consumers’ protection and security problem, which will be effective in 2024.

Blockchain.com has been granted approval for Digital Payment Token licence by MAS, after the similar approval of Coinbase’s earlier this month.

Blockchain.com and Crypto.com restricted Russia-linked accounts.

Institutional Updates

Copper, the crypto custodian firm, raised $196m funding in Series C round, despite the $16m deficit in 2021. $181m out of $196m came from new and existing shareholders.

Uniswap Labs, the largest crypto Defi exchange, raised $165m in new funding led by Polychain Capital, valued at $1.66bn. The fresh fund will be used to expand protocol web’s app and build up more developer tools. The firm will also consider future NFT launch.

BlockTower, crypto asset management firm, launched a $150m venture capital arm. The fund will support Defi and blockchain related projects.

Macro Front

The hotter-than-expected CPI pushed the market lower on Thursday night, supporting the Fed’s tightening policy, with over 97% probability chance for the fourth consecutive 75bps interest rate hike in coming November. The market focus shifted to the December FOMC meeting. Another 75bps interest rate hike came into discussion (probability increased from 29.4% to 69.8% after CPI release). A “75+75” approach will bring up the year-end target rate to 4.75%, higher than the Fed’s previous target. US stocks also had a roller-coaster ride last week (7d: DJI -0.17%, S&P500 -3.3%, NQ -1.9%). Commodities was mixed (GOLD -2.3%, Oil -3.9%, Wheat -2.7%).

Conclusion

Crypto assets stabilized after the no-surprise CPI number. 75bps interest rate increase is likely confirmed and priced in for Fed’s November meeting. The uncertainty eased should bring positive price actions for risk assets soon. SR believes crypto assets to be one of the best asset classes to combat inflation and will continue the accumulation process.

DYOR, Good Luck!