Weekly Research Report: Merging Very Soon

The crypto market escaped upwards from the chopping price actions over last several weeks. With Bitcoin trading at $22k and Ethereum at $1.4k, the cryptocurrency market cap is now at $1.1T. Despite the inflationary concern of 9.1% June CPI, released last Wednesday, the Fed unexpectedly leaned towards 75bps rate hike, lower than the public expectation of 100bps. In addition to the updated ETH Merge timeline which is said to be executed on September 19th, Ethereum took the lead and significantly outperformed Bitcoin (BTC +2.1%, ETH +18.1%).

Stablecoin dominance reduced accordingly ($USDT at 6.8%; $USDC at 5.7%).

General perpetual funding rates recovered over the weekend but are still holding below neutral level on seven-day average levels (BTC -0.0%; ETH -5.3%)
Alts’ funding rates rebounded strongly, ESP for Solana, whose rate increased from -9.7% to -2.5%. For liquidation, several short liquidations were recorded. At the point of writing, near $40m BTC short being liquidated pushed $BTC from $21k to $22.2k.

Chart 1: 7dma of BTC, ETH Perpetual Futures Funding Rate (Source: FTX)
Chart 2: 4hr BTC Liquidation Chart (Source: Coinglass)
Major Crypto KPI (July 18, 2022)

Altcoins Roundup

Ethereum released a tentative schedule for The Merge after the success of Sepolia Testnet switch earlier this month. The timeline proposed to turn PoW system off in mid to late September. The last test before the ultimate merge will be the Goerli Testnet on August 11th, and the terminal total difficulty (TTD) will be selected assuming Goerli test merges successfully. The sky-rocket ETH price action clearly explained the public excitement about The Merge ($ETH +18.1%).

Tokens under ETH ecosystem also benefited from the news ($LDO +154.7%, $ETC +49.7%, $MATIC +55.5%). In addition, the NFT market rebounded following ETH strong price action, with blue- chips NFT such as Cryptopunks, BAYC taking the lead. Furthermore, NFT-related tokens increased ($LOOKS +50.0%, $ENS +17.6%, $APE +17.4%).

StarkWare, Ethereum layer 2 solution, launching STARK token in September to progressively decentralize the protocol. The token will be used for on-chain governance, voting, paying fees on its network and rewarding for transaction operators.

Crypto Updates

Celsius, the crypto lending platform under a liquidity crisis, filed for bankruptcy after suspending withdrawals and repaying DeFi loans.

OpenSea, the leading NFT marketplace, cut 20% of its staff following the announcement of its co-founder, Alex Atallah, leaving.

The PROOF collective, the creator of Moonbirds NFTs, also one of the hottest companies in NFT market over the past few months, who acquired a London-based engineering team from Divergence. Divergence’s co-founders, Arran Schlosberg and Angharad Thomas will become Proof’s Vice President and Proof’s Director of Product respectively.

Regulatory Updates

The U.S. SEC delayed its decision on ARK 21Shares spot bitcoin ETF until 20 Aug.

Paraguay establishing a crypto regulatory framework for related operations within the country. The bill covered extensive areas of the industry, such as mining, exchange, transfer, trading, custody and intermediation.

The Central African Republic (CAR) planned to hold Bitcoin as a reserve asset. Bitcoin has recently approved as a legal tender in the country.

Kazakhstan imposed higher tax rates for crypto miners, which will be proportionate to their energy consumed or electricity utilized during the mining processes.

Institutional Updates

Meta continued its passion on web3 industry. The company developed new AI technology, enabling users to generate NFT art piece by simply entering text or simple sketches.

Snapchat, a social media platform, testing NFT features with AR lenses. The platform managed to partner with third parties to display creators’ NFTs in a more user-friendly way.

Mastercard collaborated with Fasset, an Indonesia-based crypto gateway provider, to boost crypto adoption in the country. The deal aims at increasing the country’s financial efficiency and improving the local economy.

5ire, a London-based layer-1 blockchain firm, raised $100m Series A funding at $1.5B valuation, led by SRAM & MRAM Group. 5ire raised $21m at $110m valuation in Oct 21. The new funding will be used for team expansion.

Protagonist, a venture capital, launched a $100m fund for early-stage blockchain firms, emerging gaming companies and projects enhancing the digital asset ecosystem.

Macro Front

Macro concerns are still on the desk with 9.1% June CPI released last Wednesday. The Fed will likely continue its aggressive approach with 75- 100bps rate hike on next FOMC meeting (26–27 Jul). Equities’ charts were quiet (DJIA -0.2%; S&P500 -0.7%; NQ +0.1%). Commodities continued to show weakness (Gold -1.1%; Oil -5.7%; Wheat -7.3%). The calendar this week will be dominated by the earning reports of some big names, Tesla (TSLA), Twitter (TWTR), Goldman Sachs (GS), Silvergate Capital and more. Of course, the odds for 75bps and 100bps rate hike will also be closely watched.

Conclusion

The Ethereum Merge progress has been running smooth and led the crypto market finally to break out after several weeks of consolidation. Regulatory framework continued to be the focus among countries after several failures of crypto institutions. NFT and metaverse related topics are still the major interests from web2 companies. As market stabilizing, SR continued the accumulation process for major crypto assets.

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