Bitcoin’s flash crash late Thursday saw BTC cross the mid $25k mark amidst mounting macro concerns. News of Chinese real estate giant Evergrande’s filing for Chapter 15 bankruptcy protection caused markets to tumble, with reports of SpaceX disposing of their $373m in BTC holdings leading to an 8% (24h) dip. Prior to Thursday’s developments, volatility remained at historically low levels, demonstrated by BTC’s 90D volatility sitting below that of both gold and oil, with a sustained squeeze in market liquidity cited as the largest contributing factor towards Bitcoin’s recently observed tight trading range. Interestingly, on-chain data from CryptoQuant suggested that close to 80% of unspent transaction outputs (UTXOs) were in profit, highlighting the risk of a potential sell-off. Indeed, investors were hoping for material developments on the ETF front, with the SEC’s invitation for public comments on Ark Invest’s ETF potentially postponing a decision until 2024. Making use of the 240 day extension window afforded by the regulator, markets continue to await a host of decisions following earlier spot ETF applications from the likes of BlackRock, WisdomTree, Invesco, Valkyrie, and numerous others. Meanwhile, Europe has approved its first spot Bitcoin ETF, leaving its U.S. counterparts trailing, with many citing the unfavourable regulatory conditions as a limiting factor in the region’s ability to innovate and compete on the international stage. At the week’s close, BTC was trading at $26,199, down 10.7% (7D).

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‍Ethereum briefly fell to the mid $1.5k mark before recovering to mid June lows. Echoing BTC’s movements, the price decrease still positions ETH below the volatility levels of traditional instruments, including the S&P 500 and tech heavy Nasdaq. On the regulatory front, Coinbase announced that it has obtained approval from the NFA to operate as a Futures Commission Merchant, offering eligible U.S. investors Ethereum-based futures products. Meanwhile, Valkyrie has disclosed its attempt to change its approved Bitcoin futures ETF strategy to include ETH futures in an attempt to circumvent the rapidly growing queue to market. Seemingly, the incursion of traditional investment firms now has seen the likes of Bitwise submit a revised prospectus for their spot Bitcoin ETF, filing for an equal weighted Bitcoin and Ether fund. On the ecosystem front, payment giant Visa has shared an experimental solution for paying on-chain gas fees with a Visa card. Using account abstraction and the ERC-4337 standard, the pilot removes the need for the use of native Ether for gas fees, removing potential onboarding barriers for ETH-based systems in the TradFi scope. At the week’s close, ETH was trading at $1,671, down 9.5% (7D).

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BNB’s slump to $215 reflected a new 1Y low for the Build N Build Chain’s native coin. Seemingly unable to distance itself from the regulatory onslaught directed towards the Binance exchange, BNB has seen increasing selling pressures since the SEC’s action this past June. In the latest development, the exchange has taken legal measures by filing a protective order against the SEC, with recent court filings referring to the SEC’s probes as being too broad. Meanwhile, Binance has announced the closure of its regulated buy-and-sell crypto arm, Binance Connect. Offering businesses the ability to accept crypto payments through its payment software and API solution, Binance cited changing market conditions and evolving user needs as the basis for its decision. The move comes as the BNB network deployed its opBNB Layer-2 scaling solution on mainnet. Using Optimism’s OP stack, the L2 will bring enhanced speed, security, and scalability to users, focusing on enhancing fraud-proof systems, account abstraction, and interoperability with the network’s data storage system, BNB Greenfield. At the week's close, BNB was trading at $218, down 8.6% (7D).

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Market Wrap: Despite Bitcoin’s decoupling from traditional assets, this week’s macro events heavily impacted the crypto space to diminishing recently observed gains. Overall, volatility still remains low, with few developments on the ecosystem side. The Threshold Network launched its tBTC token on Solana, marking the first decentralised and permissionless way for BTC holders to deploy their holdings on the Solana blockchain. Collaborating with the cross-chain Wormhole protocol, the launch reflects the network's first integration on a non-Ethereum Virtual machine (EVM) chain, unlocking access to a suite of Solana based DeFi opportunities for BTC holders. Closing the week, the Avalanche Foundation announced its $3M (AVAX) grant to central order limit book protocol Dexalot. As part of its $290M Multiverse initiative, the latest funding follows the foundation’s recently announced $50M fund to bring more tokenised assets to its blockchain network. 

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Macro & Markets 🏦💱

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The Week Behind: 🗓️⬅️

15/08: U.S. retail sales rise 0.7% in July

16/08: FOMC minutes indicate continued inflation fears 

16/08: U.S. 10-year treasury yields rise to a 16 year high of 4.28%

16/08: UK 10-year bond yields reach highest level since 2008

17/08: Chinese property giant Evergrande files for bankruptcy protection in the U.S.

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The Week Ahead: 🗓️➡️

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20/08: CNY PBoC Loan Prime Rate

21/08: GER PPI (MoM) (Jul)
22/08: U.S. Existing Home Sales (Jul)

23/08: EUR Manufacturing & Services PMIs (Aug)
23/08: U.S. New Home Sales (Jul)
23/08: U.S. Services PMI (Aug)
24/08: U.S. Initial Jobless Claims
25/08: GER GDP (YoY & QoQ) (Q2)

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Fear & Greed Index 😨🤑

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The multifactorial index looks at investor sentiment across Bitcoin and other large cap crypto markets, covering volatility, volume, momentum, dominance, and social trends. A score closer to 0 represents ‘Extreme Fear’ whilst a score closer to 100 is linked to ‘Extreme Greed’. In light of recent developments, the index fell some 14 points with close to $1bn in liquidations following a 6.4% decrease in the total market capitalisation for crypto assets.   Ending the week at 37, the index has moved into the fearful territory with the gauge last at this level in March of this year

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CBOE VIX Index 📉🦘

The CBOE VIX Index measures the implied volatility of S&P 500 Index options, traditionally following an inverse relationship. Starting the week with an 8% surge, retail earnings and better-than expected sales data suggested prevailing inflationary pressures that sent the S&P 500 down 0.8%. With fears of China’s worsening economy contributing towards the S&P reaching new monthly lows, the VIX rose 13.8% (5D), ending the week at 18.26 (pre market).

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BTC/DXY Correlation 💵📈

The DXY provides an indication of the value of USD relative to a basket of U.S. trade partner currencies. Fuelled by this week’s Fed insights, the dollar peaked at its 2-month high before a slight pullback. Overall, a mix of fears surrounding further rate hikes, rising treasury yields, and uncertainty surrounding the robustness of China's economy saw some fluctuations in the DXY. At time of writing, the DXY stood at 103.65, with a 1Y correlation to BTC of 0.33.

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Market Dominance 📊👑

Bitcoin dominance: 48.4% (-0.4%)
Ethereum dominance: 19.1% (+0.2%)

Bitcoin EU Crypto ETP dominance: 56.9% (+0.2%)
Ethereum EU Crypto ETP dominance: 26.1% (+0.1%)

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Risers & Fallers 📈🚀

⬆️ THORChain ($RUNE) continued its surge, topping the chart for the second consecutive week. Rising 33.5% (7D), $RUNE climbed to $1.60 before Thursday’s market slide saw a retrace to $1.46. The native token behind the cross-chain settlement layer has seen increased interest following several significant ecosystem developments. Following the introduction of streamed swaps, daily volume has continued to see significant growth, with THORChain entering the top 3 DEX after introducing the option for users to choose between time-optimised and price-optimised swaps.

⬇️ Conflux ($CFX) dropped 26% (7D), trading down at of $0.13. The high-throughput, regulatory compliant Layer-1 blockchain led this week’s losses, falling > 18% (24h). Given its standing as China’s borderless transactional ecosystem for global crypto projects, it has unsurprisingly been the most adversely affected by news of Evergrande’s bankruptcy filing, with Asian markets seeing significant sell-offs amidst continuing economic turmoil.

Upcoming Conferences

28/08/23 - 30/08/23: Stanford Blockchain Conference, California

30/08/23 - 03/09/23: Solana Hacker House, Berlin

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That’s all for this week! 

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