Weekly Research Report-Volatility Spikes after Fed Rate Hike

Market Recap

Crypto market trending higher after the Fed hiked rates for the first time since 2018.

Derivatives Market

Average funding rates turned slightly positive this week as crypto prices trended higher after the FOMC meeting on Wednesday (Chart 1).

Chart 1: 7dma of BTC, ETH Perpetual Futures Funding Rate (Source: FTX)
Chart 2: BTC Options OI by Expiry (Source: coinglass)
Chart 3: BTC Options OI on coming Friday [220325] (Source: coinglass)

More on Bitcoin

Bitcoin is currently trading at $40.8k (at the time of writing), lower than its price of $56k a year ago. However, Bitcoin outflow from exchanges has been increasing.

Chart 4: BTC Balance on Exchanges (Source: coinglass)
Chart 5: 30dma of BTC volatility (Source: coinglass)
(Mar 21, 2022, Major Crypto KPI)

Altcoins Roundups

Ethereum exhibited similar price action to Bitcoin this week. The ETH merge on ‘Kiln testnet’ earlier this week caused ETH to slightly outperform the market ($ETH +13.2%). The ‘Kiln testnet’ was the final public testnet before Ethereum’s transition to proof-to-stake network. It was regarded as an upgrade in terms of the transactions’ validations in Ethereum. The merge was successful with no major issue reported. Other smart contract platforms, Avalanche, in particular recorded the most significant increase. ($BNB +7.3%; $LUNA +7.6%; SOL

  • 10.8%; $AVAX +22.6%). Major Metaverse coins also rallied, Sandbox outperformed the rest with rising institutional adoptions. ($AXS +9.3%; $MANA +5.0%; $SAND +11.1%). London- based megabank, HSBC, announced their entry into metaverse with ‘The Sandbox’ on Wednesday by acquiring a plot of land.

Crypto Natives

Yuga Labs, the creator of Bored Ape Yacht Club (BAYC) — the blue chip NFT collection, announced the launch of ApeCoin ($APE). Beside trading on secondary market, the token will also be distributed as airdrops to NFT holders of BAYC, Mutant Ape Yacht Club (MAYC) and Bored Ape Kennel Club (BAKC). Yuga Labs added that the token would be operated by the ApeCoin DAO and used for culture, gaming, and commerce to complete the Web3 development for the company. $APE instantly became the hottest topic in the crypto community. It was then listed on major exchanges including Binance and FTX. According to FTX, $APE dropped from a high of $40 to $4.4, ~90% drop in the first hour, before recovering, and it is now trading at $10. Some speculators bought aforementioned NFTs prior to the airdrops and sold the NFTs immediately after their claims of the ApeCoin. The NFT market was not very liquid but the earning of $APE airdrop was more than sufficient to liquidate the NFTs at a discount. The airdrop boosted the trading volume for NFTs this week.

Government Front

A relatively quiet week on the governmental front. Ukrainian President, Volodymyr Zelenskyy, confirmed that Ukraine effectively legalised cryptocurrency in the country. In the last few weeks, Ukrainian government has raised funds and received donations in cryptocurrency. The funds were used for cyber security, digital infrastructure recovery and providing additional support for Ukrainian army and citizens.

Institution Front

Flood of capital continued to pour into the cryptocurrency space. Blockchain company, ConsenSys, has raised another

Macro Front

This week was action-packed with the Fed Rate Hike for the first time since 2018. The FOMC meeting ended on Wednesday and Jerome Powell raised interest rate by 25bps as expected. Crypto market reacted positively, and Bitcoin reclaimed $40k. Equities showed similar strong price actions (DJIA +5.8%; S&P500 +6.2%; NQ +10.4%). Although geopolitical tension is still ongoing between Russia and Ukraine, commodity prices eased (Gold -1.15%; Wheat -2.23%; Oil -4.5%).

Conclusion

Traditional and crypto markets recovered strongly after FOMC last week.

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