Weekly Market Rollup - 27/06/22

In this Week's Market Rollup

After facing one of its sharpest drawdowns on record, the crypto market has shown positive signs of recovery this week. Most assets have enjoyed a green week for the first time in what seems like forever. However, market confidence remains low, as fears of contagion risk from Celsius and 3AC insolvency issues still linger. News of major bailouts across the industry have ensured investors remain cautious, with capital preservation and risk management back in vogue.

Macroeconomic Updates

• Major US indices showed strong performance this week, with the S&P 500 climbing 6%, Nasdaq 8.1%, and Dow Jones 4.8% respectively.
• The 10 year Treasury Bill also saw similar action to major indices with yields declining from roughly 3.3% to 3.1%.
• WTI Crude Oil saw a decline this week starting the week at approximately US$110 and ending it just shy of US$107; an overall decline of 2.5%.

Crypto Market Updates

• Crypto lender, BlockFi signed a term sheet with FTX to secure a US$250 million credit injection.
• America’s largest crypto exchange, Coinbase was downgraded by credit rating agency Moody’s to Ba3 from Ba2. Moody’s also stated that it “reflects Coinbase's substantially weaker revenue and cash flow generation.”
• Harmony plunges 10% after suffering a US$100 million theft through the protocol’s cross-chain bridge to Ethereum.
• Uniswap Labs, the company behind Uniswap is acquiring NFT marketplace aggregator platform Genie. Just two months ago, OpenSea announced it was buying NFT aggregator Gem.
• Reports say Goldman Sachs are preparing a US$2 billion raise to purchase Celsius’s assets in the event of a bankruptcy.

Market Overview

Major assets including BTC and ETH showed a positive recovery this week following last week’s major decline of over 30%. This trend has been shared across the markets with the total crypto market cap rising by 11% over the past 7 days to a total of US$980 billion. Furthermore, Bitcoin (BTC) dominance is currently at 43.4%, trending down from its local top of 48% made on the 11th of June. Ethereum (ETH) dominance however, has been trending upwards since last week where it now sits at 15.8%.

Bitcoin (BTC)

After a rough start to June, BTC volatility has tapered off. BTC price action has reversed from last week’s low of US$17,760 to finish the week at US$21,000, up nearly 19%. Despite the price of BTC remaining relatively stable, macroeconomic conditions have not changed as the market persists in trending down overall. BTC trading volume has also continued to taper off towards the end of the month, signalling a lack of confidence in the market and continued concerns surrounding the broader macroeconomic environment.

Low market confidence is prevailing as fears of contagion risk from Celsius and 3AC insolvency issues still linger. News of Celsius’s hiring restructuring consultants to advise on potential bankruptcy has perhaps added further fuel to the fire. In the event of a bankruptcy, however, Goldman Sachs has stated that they will look to raise US$2 billion to purchase Celsius’ distressed assets at a discount.

FTX CEO Sam Bankman-Fried announced on Tuesday that FTX will bail out lending platform “BlockFi” by supplying a US$250m revolving line of credit. Similarly, Bankman-Fried’s quant trading firm “Alameda Research” provided a US$200m line of credit to cryptocurrency broker “Voyager Digital” (VOYG). Both bail outs are pre-emptive efforts to reduce the likelihood of forced BTC liquidations, moving forward.

Ethereum (ETH)

ETH has had a full recovery in the past week, currently trading at an approximate price of US$1,218. This is an 8.1% increase week-on-week and a 35% increase from previous weeks’ low of USD$897. With crypto’s top two assets showing positive performance this week, ETH has made up the most ground, rallying 6% against BTC over the last seven days.

Tickets for the largest European Ethereum event, the ‘Ethereum Community Conference 5 (EthCC), have begun rapidly selling, with it now only three weeks away. To ensure fair access to the event, tickets have been sold as NFTs that are unique and untransferable.

The Ethereum network was in the spotlight this past week with Yuga Lab’s ‘Bored Ape Yacht Club’ (BAYC) hosting their exclusive ApeFest party in New York last Tuesday. Additionally, US-based rappers, Eminem and Snoop Dogg released an animated music video which used both of their avatars from the BAYC collection.

Market Sectors

The wider crypto market has also experienced a strong recovery this week. The DeFi sector has continued its run from last week, up 18.68% for the week. This rally continued to be led by major DeFi protocols UniSwap (UNI) and Compound (COMP), up an impressive 33.1% and 49.78%, respectively. Smart contract platforms were up an average of 8.5% week-on-week with Zilliqa (ZIL) and Waves (WAVES) performing most notably. Both were up 35.76% and 31.55%, respectively.

The best performing sector, however, was the gaming sector which rallied almost 25% this week. This was led by The Sandbox (SAND) which rallied 38.97% week-on-week. This price increase may have been sparked by rumours of established tech companies looking to takeover the protocol. However, Co-founder Sebastien Borget went to Twitter to quash the rumours, stating that, “This will never happen”.

There has been ONE major exception to the altcoin strong performance this week, as Harmony (ONE) was hacked for US$100 million. This was due to a flaw in the cross-chain bridge to Ethereum. ONE has since offered a US$1m bounty to the hacker in attempt to get the fund back, claiming to not press any legal charges.

NFTs

Binance announced a multi-year partnership with Cristiano Ronaldo in the NFT space. The aim is to bridge and introduce football/soccer fans within the Web3 ecosystem. The first product of this partnership will be a series of NFT’s created by Binance and Ronaldo that is said to be released later this year.

Meta, also made headlines by announcing they would start testing the integration of NFTs with Instagram Stories using its augmented reality application, Spark AR. In this announcement, it was stated that whilst testing has begun, the aim is to fully integrate NFTs within not only Instagram but also Facebook. This comes after social platform competitors such as Twitter, who integrated NFTs onto the platform in January 2022.

In another example of Web2 companies joining the world of crypto, eBay has recently announced the acquisition of KnownOrigin, an NFT marketplace. Earlier this year, eBay also stated they would be looking to introduce crypto payments on the platform as they strive to connect buyers and sellers globally and in the metaverse.

Regulatory

Gary Gensler, the SEC Chair, has reported that he is in consultation with the Commodity Futures Trading Commission (CFTC) in order to produce a memorandum of understanding addressing which regulatory body is responsible for different aspects of crypto regulation. Recent proposed pieces of legislation, including the Digital Commodity Exchange Act and the Responsible Financial Innovation Act, both seek to share regulatory oversight between both the SEC and the CFTC. However, this process is still at its infancy and it is likely that further bills on the topic will be proposed. Regardless, legislators will need to clarify how oversight over crypto markets and assets operates, in order to ensure that enforcement lines are clearly drawn between the SEC and the CFTC.

Recommended reading: How to Buy XRP (Ripple) Effortlessly