Weekly Research Report: THE FED IN A HOT SEAT
Market Recap
Crypto market slid below $1T market cap level as the Fed maintained a hawkish stance at the Jackson Hole symposium last Friday to restore price stability. Bitcoin and Ethereum dropped below $20k and $1.5k respectively (7d: BTC -8.3%, ETH -10.4%). Majority is expecting a 75bps interest rate hike in September FOMC meeting, which will be subject to the upcoming releases of August jobs data and CPI. Stablecoin dominance increased accordingly (USDT 7.1%, USDC 5.8%).
Derivatives Market
General perpetual funding rates deepened (annualized 7d funding: BTC -4.8%; ETH -11.6%).
Alts’ funding rates declined sharply (ADA -25.7%, SOL -18.8%, XRP -11.3%).
The September future basis remained negative, even Bitcoin’s, the only outlier last week, also suffered.
Over $27.6m BTC long have been liquidated in three hours since Powell’s speech, another $28m being liquidated on Saturday morning, plunging bitcoin to $20k.
Altcoins Roundup
Ethereum released an update of the merging schedule: “Bellatrix Update” on 6 Sep, “Paris Update” on 10–20 Sep, “Final Merge” on 15–16 Sep. Although the upcoming merge creates hope for the market Ethereum price also tumbled under extreme macro situation. Ethereum rejected the $2k level in mid Aug and dropped to a lowest of near $1.4k (7d: ETH -10.4%).
Compound upgraded its Defi lending platforms to v3. The new code base will contain in one single smart contract, which is expected to be easier and simpler, further increasing the governance participation rate.
Crypto Updates
FTX absorbed Venture Capital operations of Alameda Research, which historically operated independently, consolidating Sam Bankman-Fried’s crypto empire.
Mount. Gox rumour on the table, potentially 137,000 BTC with 40x in profit (bought at $500 in 2014) flowing back to open market, thus creating massive selling pressure.
Solana NFT — “DeGods” rallied up, market cap surpassed Ethereum-based blue-chips Azuki and Doodles. Floor price went up to 597 $SOL.
Voyager, crypto firm that filed for liquidation, extended its schedule for restructuring to 6 Sep.
Sui blockchain creator, Mysten Labs, suffered discord hack.
X2Y2, an NFT marketplace, offered buyers flexible royalty fee options.
Regulatory Updates
Monetary Authority of Singapore (MAS/Singapore Central Bank) requested information from licensed crypto firms for retail customers and stablecoin regulation purposes.
Tether, the stablecoin leading company, announced that they will not freeze any Tornado Cash addresses at this moment.
US Federal Deposit Insurance Corporation (FDIC) issued cease to five crypto companies for allegedly making false representation.
Binance signed with Busan for future blockchain technology development.
Institutional Updates
Fidelity teamed up with MicroStrategy for Digital Asset Account (DDA), offering bitcoin investment options for its 401(k) accounts.
Nvidia, the world-leading chips manufacturer, announced several metaverse-related projects at SIGGRAPH 2022.
Formula One filed NFT and crypto trademarks for Las Vegas Grand Prix Event, which will take place in Nov 2023.
Diamond Standard planned to open up a $1.2T market for diamond market by tokenizing diamonds into smaller pieces.
Animoca Brands KK (Japan) raised $45m funding from its parent company and MUFG Bank, valued at $500m, to secure local licenses for different intellectual properties.
Macro Front
Investors’ risk appetite has been evaporated as the Fed delivered a hawkish speech at the Jackson Hole. Powell will keep the strict tightening approach to bring down inflation to a target rate of 2%. The probability for September rate hike of 75bps increased accordingly, at 72% now. Equities also declined sharply on Friday with the strict instructions from the Fed (7d: DJI -4.4 %, S&P500 -3.9%, NQ -3.3%). US dollar rallied up with market expectation of more upcoming rate hikes (DXY +0.6%, trading at 108.7). August jobs report data and August CPI releasing on 2 Sep and 13 Sep respectively will be crucial number to confirm the level of upcoming rate hikes.
Conclusion
Crypto assets shed lower as the Fed planned to keep increasing interest rate, with high probability of another 75bps raise in September meeting. The risk assets are now macro-driven and may take some time to heal. Crypto fronts are expecting the Ethereum Merge to bring some hope to the industry. After Blackrock joined the crypto space, Fidelity and Nvidia were also entering this week, giving investors more confidence during macro downturn. SR will continue to buy the dips and looking forward to seeing an easing in the macro economy soon.
DYOR, Good Luck!
