Newsletter Volume 22
Article 1 – The Market This Week
The crypto industry is known for its volatility, with rapid changes in trading volume and market share being commonplace. However, recent data from crypto research firm Kaiko has shown a significant drop in US crypto trading volume of over 80% in less than three weeks. This comes after trading volumes peaked at four-month highs in mid-March amid the banking crisis and a general move away from traditional finance.
On 14th March, US exchanges recorded an impressive $3.2 billion in trading volume. However, on 2nd April, exchanges facilitated a mere $621 million in crypto trades. The sharp drop in trading volume happened over the weekend following the announcement of the Commodity Futures Trading Commission’s lawsuit against Binance on 27th March. Since then, Binance has experienced a significant drop in trading volume, losing 16% of its global market share in Q1 2023.
Coinbase maintains the highest US trading volumes despite the drop in trading volume, with nearly 50% of the market share. However, this is a significant drop from the exchange’s previous market share of an average of 60% a week in Q1 2023. During the same period, Binance.US managed to take over some of Coinbase’s losses, with its market share tripling from 8% to more than 24%.
While the Binance lawsuit is one factor that contributed to the drop in trading volume, it is not the only narrative shifting trading patterns, according to Kaiko’s head of research, Clara Medalie. US exchanges have also faced liquidity challenges with the loss of banks Silvergate and Signature, making it more difficult to deploy capital over the weekend.
Interestingly, March’s US trading volume highs depart from peaks in late 2022. In November 2022, after FTX’s collapse, US volumes spiked to over $1 trillion as investors scrambled to pull assets off exchanges. On 12th November 2022, the day after FTX filed for bankruptcy, US exchanges saw about $1.3 trillion in trading volume. By mid-December 2022, volumes fell back to around $586 million.
Notably, decentralized crypto exchanges saw a large increase in trading volume in mid-March. For example, Uniswap facilitated more than $13 billion in trading volume, while Curve facilitated close to $8 billion in trades on 11th March 2023.
Overall, the recent drop in US crypto trading volume highlights the volatility of the industry and the importance of external factors such as regulatory actions and liquidity challenges. It remains to be seen whether this drop is a temporary blip or a longer-term trend.
KEY METRICS
Total Crypto Market Cap: $1.23 T
Bitcoin Market Cap: $543.07 B
Ethereum Market Cap: $226.43 B
ETH/BTC Ratio: 0.07
Ethereum Gas Price: 22 gwei
DeFi TVL: $78.15 B
Fear and Greed Index: 64 (Greed)
Federal Reserve Balance Sheet: $8.63 T
Article 2 – Weekly Review of IC15
The global cryptocurrency market has recently experienced gains due to the increasing uncertainty in the banking sector. Investors are also eyeing the upcoming nonfarm payroll data of March, further fueling the rise in the crypto markets. The benchmark IC15 Index, which tracks the top 15 cryptocurrencies, saw a surge of 645 points to reach 38,982 on 5th April. The increase was mainly due to the impressive performance of Avalanche, Uniswap, Ethereum, and XRP, which gained between 3 to 6 per cent. However, the Index had three losers: Dogecoin, Shiba Inu, and Tron, ranging from 0 to 4 per cent.
In Canada, three major crypto exchanges – WonderFi (WNDR), Coinsquare, and CoinSmart – have announced their plan to merge, forming a single entity that will become the largest regulated crypto exchange in the country. The new entity will have a combined user base of 1.65 million and more than $600 million of assets under custody.
In Europe, Skandinaviska Enskilda Banken (SEB), a Swedish bank, and Credit Agricole Bank, a French bank, have jointly launched a new digital bond platform called so|bond. The platform is based on a public blockchain designed to help clients issue and settle bonds more efficiently and securely.
ANZ bank, on the other hand, has completed its use case pilot project on carbon credit trading in partnership with Grollo Carbon Ventures (GCV). This project is aimed at promoting sustainability and reducing carbon emissions.
The Central Reserve Bank of Peru (CRBP) has released a paper that examines the need, design, and timing of its retail CBDC. The aim is to improve the payment systems and lower the transaction costs in the country.
Coinbase, one of the largest cryptocurrency exchanges in the US, has revealed that crypto could save millions of dollars for Americans that they spend on remitting their money. This could transform how money is sent across borders, making it more affordable and faster.
Citi Bank believes that CBDCs could drive blockchain adoption in the future. The bank has predicted that by 2030, up to $5 trillion worth of CBDCs could be circulated in major economies worldwide. This highlights the potential impact of CBDCs on the global financial system and the need for regulators to embrace the technology to promote financial inclusion and stability.
Article 3 – Battle of Bull and Bear
The world of cryptocurrency has been a rollercoaster ride for Bitcoin (BTC) since the beginning of 2023, surging over 70% in the first quarter. This performance has outpaced other assets, such as physical gold and US stocks. However, the upward trend appears to be decelerating, as BTC recently fell by over 2% to $28,069.54, while Ethereum (ETH) also declined by 1.15% to $1,890.98.
Despite Bitcoin’s decline, Ethereum has outperformed BTC in the past week, primarily driven by the anticipation surrounding the upcoming Shanghai hard fork update scheduled for 12th April. As a result, Ethereum’s price has risen by 5%, and experts predict that BTC will follow suit soon.
In light of this, traders are hesitant to place any significant bids ahead of the publication of US non-farm payroll data on Friday, as this data can significantly impact the cryptocurrency market.
Investors are closely watching Bitcoin and Ethereum as safe-haven assets amid the possibility of a US banking crisis. The recent struggles of Bitcoin to break through the resistance zone of $28,800 to $29,000 since mid-March have been concerning. However, recent macroeconomic data and gold’s performance may provide the necessary boost.
Historical data indicates that April has typically been a strong month for cryptocurrencies like Bitcoin and Ethereum, which may contribute to investors’ confidence in the crypto market. Consequently, investors are optimistic about the cryptocurrency market, predicting that it will reach new all-time highs in the coming weeks.
In other developments in the cryptocurrency world, Ethereum has announced a new update to improve transaction speed and reduce fees. This update, called EIP-1559, is expected to go live in July 2023, and experts predict that it will make Ethereum even more attractive to investors.
Additionally, Dogecoin, a meme-inspired cryptocurrency, has gained popularity and has become one of the top 10 cryptocurrencies by market capitalization. Its price has risen by over 400% in the past month, driven by the endorsement of celebrities and billionaire investors.
Despite the cryptocurrency market’s excitement, investors should exercise caution and conduct thorough research before investing. Cryptocurrencies are highly volatile, and the market can be unpredictable, making it essential to have a sound investment strategy in place.
Article 4 – Weekly Spotlight
Investors in the cryptocurrency market are becoming increasingly greedy as Bitcoin’s (BTC) price continues to rise. However, doubts remain about the sustainability of the current momentum. The crypto market’s Greed and Fear Index shows that investor risk appetite is now 62, up 30% from one month ago, indicating mild greed. A value above 50 indicates that the market is mildly greedy, while 100 signifies extreme desire, indicating an indicator to sell. On the other hand, values below 50 and at zero indicate fear, which is seen as a buying opportunity.
The index considers various factors such as crypto market volume, volatility, social media, token dominance, and Google search trends. However, these metrics serve as market thermometers and can be leading or lagging indicators, making their accuracy challenging to determine.
Although the greed trended upward over the past year, Bitfinex warns that the market is transitioning, and investors must be cautious. Bitcoin’s non-zero balance addresses are reaching new heights, but on-chain metrics reveal the need for caution. Despite the influx of new market entrants, the sustainability of rapidly growing non-zero balances and tight-range trading for Bitcoin remains uncertain.
Crypto derivatives trading volume is growing, and open interest in crypto options is at its peak, according to Ilya Volkov, CEO of Swiss-based Web3 firm YouHodler. Moreover, on-chain data indicators show that this trend is likely to continue for a while. Although other portals track fear and greed across the digital asset market, each with its metrics, LookIntoBitcoin, for instance, studies only BTC sentiment. It shows practically the same local trend, although the greed has not yet returned to levels seen before Terra imploded last May.
