Welcome to the latest edition of our Market Roundup, where we cover the past week’s highlights in the rapidly evolving world of blockchain and decentralized technologies.
(as of 10:00 AM Singapore Time, October 27, 2023)
Bitcoin surged above US$35,000 on Tuesday morning, with the rest of the crypto market moving higher along with it. This was the highest level for BTC since May 2022, likely the consequence of continued optimism about a spot exchange-traded fund receiving approval from the US Securities and Exchange Commission. Ether also hit its highest point since August 2022.
As BTC was being pushed higher, US$167 million in short positions were liquidated, creating a “god candle” as described by one analyst who spoke to CNBC.
The enthusiasm was well-founded. A ticker for BlackRock’s proposed spot bitcoin ETF, the iShares Bitcoin Trust (IBTC), showed up on an online list put together by the Depository Trust and Clearing Corporation (DTCC), which provides clearance, settlement, custody, and information services.
While there’s no confirmation from the DTCC that a launch is imminent, the signals point to new developments.
There is another reason to explain the current crypto pump. Traditional ways of mobilizing assets — including the widely adopted “60% stocks, 40% bonds” approach — are failing many retail investors. Since BTC offers a fresh option for diversification, mainstream investors are increasingly eager to move some funds into crypto.
There’s still a long way for BTC to go before it reaches its November 2021 all-time high, when its value was over US$65,000 — that is, if it reaches that level at all. But for now, Uptober is living up to its reputation, and investors feel positive about a new phase for crypto that’s about to begin.
For more insights about market movements, be sure to check out the routine updates on BTSE’s blog.
- The crypto market hiked over the week. By Friday morning Asia time, SOL was up more than 30% compared to seven days prior, and LINK climbed nearly 50% over the same period. Other cryptocurrencies have also been moving up — MATIC’s value increased by around 20%, while ETH and ADA both climbed roughly 15%. The crypto market in general has been green throughout the week.
- Institutional interest in Bitcoin has surged, propelling open interest for the Chicago Mercantile Exchange’s (CME) bitcoin product to a record 100,000 BTC (US$3.4 billion). This growth was driven by heightened optimism regarding the potential approval of a spot exchange-traded fund (ETF). Bitcoin’s value also ascended to a 17-month peak of US$35,000 following indications of a BlackRock ETF on the DTCC website. This institutional enthusiasm is juxtaposed against a decline in open interest from retail investors across other crypto exchanges. Furthermore, the CME has now garnered an impressive 25% market share, closely rivaling Binance’s perpetual futures market.
- Polygon has launched its new zk-powered token, POL, on the Ethereum mainnet, marking a significant shift from its previous MATIC token. This move is part of Polygon’s 2.0 strategy, aiming to establish the platform as the internet’s “value layer.” The new POL token, which supports a broad ecosystem of zero knowledge layer-2 chains through a re-staking protocol, enables holders to validate various chains within the Polygon network. Currently, the Polygon proof-of-stake ecosystem boasts a US$758.28 million total value locked (TVL) and nearly US$1.7 billion in stablecoin market cap. MATIC token holders can transition to POL by sending their tokens to a designated smart contract, which facilitates the conversion.
- Grayscale Investments has teamed up with FTSE Russell, a subsidiary of the London Stock Exchange, to introduce the Crypto Sector Index Series. This series will monitor the prices of digital assets segmented by their specific use cases, encompassing categories like store of value, smart contract initiatives, financial services, and practical applications like storage, among others. This collaboration comes on the heels of a recent lawsuit faced by Grayscale’s parent company, DCG, initiated by the New York Attorney General over alleged financial discrepancies.
- Throughout 2023, almost all crypto mining stocks have significantly outperformed Bitcoin, with an average year-to-date return of nearly 150% for the top 11 publicly listed mining firms, in stark contrast to Bitcoin’s 84.61% increase. This robust performance of mining stocks can be attributed to their higher beta relative to bitcoin, implying greater volatility and more pronounced movements in tandem with the cryptocurrency. However, this also means these stocks experience sharper declines during market downturns. As the next Bitcoin halving event approaches in April 2024, mining companies are proactively selling their mined BTC to finance expansions and boost computational capabilities, gearing up for the event that will cut their mining rewards by 50%. Experts suggest that the subsequent performance of these firms will hinge on Bitcoin’s price trajectory and the miners’ strategic preparations leading up to the halving.
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- The defunct cryptocurrency exchange FTX is reportedly transferring US$8.6 million in Ethereum, Chainlink, Aave, and Maker to Binance. Crypto analytics firm Nansen spotted and publicized the fund movement from both FTX and Alameda Research wallets, suggesting that these funds might be being prepared for a sale, likely to reimburse creditors. FTX collapsed due to alleged illicit mismanagement, with approximately US$9 billion of client funds vanishing. However, its new management is working on reimbursing customers who were affected. Meanwhile, FTX’s former CEO, Sam Bankman-Fried, faces legal trials connected to the platform’s downfall.
- The recent surge in Web3 projects has led to a critical developer shortage in the industry, as revealed by a survey from Versatus Labs. While existing web3 developers are highly skilled, the overwhelming demand means they’re constantly being headhunted by competitors. The study underscores the need for increased training and resources, with many developers citing hurdles like the necessity to learn new languages and the complexity of building decentralized applications.
- In response to a scandal involving Hong Kong-based crypto exchange JPEX, Hong Kong’s central bank and securities regulator have introduced stricter regulations on cryptocurrency dealings. The new guidelines restrict certain complex virtual asset products to professional investors, emphasizing that such products might be too intricate for retail investors to understand fully. Intermediaries will now be required to ascertain clients’ comprehension of virtual assets and confirm their financial stability before conducting transactions. While some virtual asset-related derivative products remain available to retail investors due to their regulated nature and transparency, many exchange-traded derivatives are classified as complex, barring broader access. Intermediaries are given a three-month transition period to align with the updated standards. This regulatory shift aims to protect investors and mitigate the risks associated with the volatile cryptocurrency market.
- Global regulators are intensifying their control over digital assets. In Europe, the European Banking Authority and the European Securities and Markets Authority have outlined standardized criteria to evaluate management members of crypto firms. The Basel Committee on Banking Supervision under the Bank for International Settlements (BIS) is pushing banks to disclose both qualitative and quantitative data on their crypto exposure. In the US, the Treasury Department’s Financial Crimes Enforcement Network is proposing stricter recordkeeping and reporting requirements for cryptocurrency mixing transactions, following concerns about money laundering.
- California lawmakers have introduced a bill aimed at imposing a daily withdrawal limit of US$1,000 on cryptocurrency ATMs to counteract scams. The legislation, titled “Digital financial asset transaction kiosks,” will also cap fees at either US$5 or 15% (whichever is higher) starting in 2025. If passed, it will be effective from January 1, 2024. This move follows a legislative investigation that discovered some crypto ATMs charged premiums up to 33% and had withdrawal limits of up to US$50,000. Another stipulation in the bill mandates digital financial asset businesses to be licensed by the California Department of Financial Protection and Innovation by July 2025. There are over 3,200 bitcoin ATMs in California. While crypto ATMs are convenient for users to exchange cash for digital currencies, they have also become focal points for fraud. However, crypto ATM operators argue that this legislation would adversely affect their businesses and fail to address the root causes of fraud.
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