Newsletter Volume 19
Article 1 – The Market This Week
Recently, there has been a lot of uncertainty in the markets as banks collapsed and investors are pulling out their capital. This has led traders and investors to turn to bitcoin as a safe haven following the collapse of Silicon Valley Bank last week, amid speculation that the Federal Reserve may reconsider its rate hikes campaign and resume quantitative easing measures.
However, only some believe that the fallout from Silicon Valley Bank, Silvergate, and Signature Bank will lead to a bailout and a return to quantitative easing. Dmitry Lapidus, a junior partner at Dragonfly, is not convinced, although markets are beginning to challenge the Federal Reserve once again, with crypto responding accordingly.
Bitcoin has been performing well, leading a risk-on rally based on shifting sentiment. According to data from Blockworks Research, bitcoin is up more than 48% this year compared to ether’s 39%, and both assets have seen significant gains in the past week alone. Moreover, the bitcoin to ether ratio, which measures the relative value of the two, is also at its highest point since the collapse of FTX in November last year, suggesting that bitcoin is outperforming ether.
Traders and investors often use the ratio to determine which crypto performs better at a given time. For example, a high ratio suggests that bitcoin is outperforming ether, while a low percentage indicates the opposite. When traders are unsure about crypto prices, they tend to move to stable assets. According to Paul Kremsky, trader and global head of Business Development at Cumberland, they flee to banks when unsure about stable assets.
This week, the markets are undergoing turbulent times with the collapse of banks and a significant capital outflow from investors. As a result of the uncertainty surrounding traditional banking institutions after the recent collapse of Silicon Valley Bank, traders and investors are turning to Bitcoin. In addition, speculation is growing as to whether the Federal Reserve intends to reconsider its campaign of future rate hikes in the face of uncertainty and whether the government will resume quantitative easing (QE) measures.
Bitcoin may be leading a risk-on rally based on that shifting sentiment. The world’s largest digital asset by market value is up more than 48% this year compared to Ether’s 39% at $24,800 and $1,660, respectively. In the past week alone, assets have been up around 20% and 15%. Moreover, the bitcoin to Ether ratio, which measures the relative value of two, is now at its highest point since the collapse of FTX in November last year, TradingView data shows. Bitcoin’s outperformance over Ether could reflect some unease over Ethereum’s upcoming Shanghai-Capella upgrade.
In the past, a bank run in Cyprus caused bitcoin to experience its largest-ever rally in percentage increase, surging from $45 to $260 within a month. Typically, following a bitcoin-induced rally, the market experiences a period of consolidation or correction. However, data shows that the market has begun to consolidate in a tight range between $24,300 and $25,000.
According to Hal Press, founder of North Rock Digital, “Not to be biased, but the most obvious takeaway so far is that bitcoin and ether are probably the two best assets to own in the entire universe of investable assets.” In a world where moving money around matters, crypto is a better asset for handling that. In addition, Crypto is a more obvious beneficiary of potential future stimulus.
KEY METRICS
Total Crypto Market Cap: $1.12 T
Bitcoin Market Cap: $479.59 B
Ethereum Market Cap: $200.40 B
ETH/BTC Ratio: 0.07
Ethereum Gas Price: 21 gwei
DeFi TVL: $71.54 B
Fear and Greed Index: 52 (Neutral)
Federal Reserve Balance Sheet: $8.34 T
Article 2 – Weekly Review of IC15
Recently, the cryptocurrency market has been experiencing a price surge, as evidenced by the third consecutive day of gains. This comes in the wake of the US CPI inflation data coming down to 6% in February from 6.4% in January. As a result, Bitcoin, the most popular cryptocurrency, hit the $26,000 mark for the first time in nine months in the last 24 hours, although it is currently hovering around the $2 5,000 mark. Meanwhile, the benchmark IC15 Index rose by 199 points to 34,096 at 4.00 pm, and all the coins in. the IC15 were positive except for Cardano, which was down by 1.35%. Avalanche, Polygon, Uniswap, and Solana were among the major gainers, ranging from 2% to 4%. The overall market capitalization of cryptocurrencies currently stands at $1.087 trillion.x-apple-ql-id://E0967922-FA07-4803-AED2-892B55631649/x-apple-ql-magic/D8812F4F-5BF8-4CAF-8D67-F916AF0E4A6D.png
However, the news was only positive for some cryptocurrencies. For example, the Shiba Inu price fell by 4% in the past 24 hours, dropping to $0.00001057 after allegations emerged that the code for the Shibarium layer-two network had been copied from the Rinia blockchain. This has resulted in a 3.5% loss in the past week and a 15% drop in the last 30 days, although SHIB has remained up by 30.5% since the beginning of 2023.
While the accusations of source code theft have negatively impacted SHIB’s price today, developers have responded by stating that chain IDs for Shibarium were picked at random and that the beta’s ID happened to duplicate Rinia’s by chance. Unfortunately, this explanation has done little to restore SHIB’s price in the short term, yet with Shibarium now launched in beta form and SHIB: The Metaverse due later in the year, holders are hopeful for more significant gains in the months to come.
Article 3 – Battle of Bull and Bear
The week started with an interesting turn of events in the crypto world as Cathie Wood’s Ark Investment launched two new private crypto funds, raising more than $16 million. According to recent filings with the U.S. Securities and Exchange Commission, the ARK Crypto Revolutions U.S. Fund LLC raised $7,281,630 from nine investors. In contrast, the ARK Crypto Revolutions Cayman Fund LLC raised almost $9 million from one backer. It’s important to note that these two new funds are private and open only to a small number of investors, with the overall target being “Indefinite,” meaning the fund is open-ended.
Cathie Wood’s bullish stance on crypto firms despite recent regulatory scrutiny and the crypto meltdown is not a secret. In fact, the fund has been interested in shares of major US-based cryptocurrency exchange Coinbase, purchasing more than 350,000 shares at the cost of $20.6 million. Cathie Wood has been a vocal proponent of Bitcoin, and in 2020, she made headlines with her infamous prediction that Bitcoin would hit $500,000 by 2030. Despite the recent crypto downturn, she still stands by her prediction, reiterating that she expects Bitcoin to hit $500,000 in February. Wood has also praised Bitcoin for being the most decentralized and transparent blockchain in the crypto space, unlike other blockchains preferred by some firms that went under during the crypto market downturn last year. She claimed that these firms were all “completely opaque and centralized.”
Meanwhile, the cryptocurrency market has been gaining for the third day, with Bitcoin hitting the $26,000 mark for the first time in 9 months. The benchmark IC15 Index was up, and all the coins in the IC15 were positive except for Cardano, which was down by 1.35%. The major gainers were Avalanche, Polygon, Uniswap, and Solana, in the 2–4% range, and the market capitalization of cryptocurrencies is $1.087 trillion. However, the Shiba Inu price fell by 4% in the past 24 hours due to claims that code for the Shibarium layer-two network had been copied from the Rinia blockchain, leading to a 15% fall in the last 30 days. Despite this setback, developers have responded to the accusations by stating that the chain IDs for Shibarium had been picked randomly. They hope for more significant gains in the coming months.
Article 4 – Weekly Spotlight
This week’s news spotlighted the charges brought against Chinese businessman Miles Guo by the Securities and Exchange Commission (SEC) for crypto and other assets fraud. The charges were brought against Guo for selling fraudulent and unregistered offerings, which raised over $850 million, $500 million of which was allegedly from a crypto scam. Guo also made false promises to investors in H-Coin, a crypto asset that he claimed was 20% backed by gold and for which he promised to compensate investors for any losses.
Miles Guo, also known as Guo Wengui or Miles Kwok, is a New York-based businessman with close ties to a former advisor to Donald Trump, Steve Bannon. The SEC charged Guo alone for the crypto-related fraud and his financial advisor William Je for the other charges. According to the SEC, Guo and Je “misappropriated a large portion of the funds raised from investors to enrich themselves and their family members”.
The SEC alleges that part of the funds raised was diverted to a hedge fund for the sole benefit of a company owned by Guo’s son. In addition, the funds were used to finance Guo and his family’s lavish lifestyle, including purchasing a New Jersey mansion for $40 million and a Ferrari for his son costing $3.5 million.
In a comment, Gurbir S. Grewal, Director of the SEC’s Division of Enforcement, stated, “we allege that Guo was a serial fraudster, who raised more than $850 million by promising investors outsized returns on purported crypto, technology, and luxury good investment opportunities.” The charges against Guo highlight the importance of regulatory oversight in the crypto industry and the risks associated with unregistered and fraudulent offerings.
