Valour

Market update 21/04/23

April 24, 2023

Bitcoin backpedalled from April’s earlier gains, sliding back below $28k on Thursday. The recent decline follows the ongoing U.S. regulatory troubles and a sustained lack of market liquidity caused by the loss of the two major fiat to crypto on-ramp providers back in March. The recent woes have weighed heavily on BTC and resulted in the U.S. losing market share, a sentiment echoed by Coinbase’s decision to launch an exchange in Bermuda. Meanwhile, Thursday’s passing of the EU’s MiCA regulation reflects the evolving European landscape towards a supportive environment for digital assets, a sharp contrast to the current disjointed U.S efforts, as reflected by SEC chair Gary Gensler’s testimony to the House of Representatives over his iron-fist approach to crypto. In addition to these ongoing concerns, markets were further impacted by hot UK inflation data holding out above 10% for the month of March. Widespread inflation fears continue to stunt overall macro growth, with both the Nasdaq and S&P 500 slumping amidst growing concerns of a Fed rate hike in May’s FOMC meeting. Interestingly, despite its impact on crypto price levels, Bitcoin’s 30-day volatility has remained mostly unchanged (40.6%), unlike in previous price dips. On the mining front, infrastructure-focused TeraWulf announced the full energisation of its 50-MW stake in the Nautilus Cryptomine facility, marking the first U.S. nuclear powered Bitcoin mining plant. With the facility being powered by more than 91% zero-carbon energy, there is promise for the future development of the crypto mining industry, especially given the recent push by the IMF to incentivise the financial industry to offer more ESG compatible products.

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‍Ethereum fell by 8.9% over the last 7D in the broader crypto market sell-off. The increase in selling pressure follows the network’s recent successful Shapella upgrade, with more than 179,500 ETH ($375m) moving to exchanges in the four days after the upgrade went live. Currently, requests to unstake Ethereum validator deposits stands at the 17D mark, an increase from the 14D wait time last week. Much of this second wave of ETH withdrawals has been attributed to Kraken, with 330,000 ETH in full withdrawals and a further 175,000 ETH in principal withdrawals (worth a combined total of $975m). The recent Shapella hard fork represents a significant milestone for the network, with several further upgrades still to come. These include the likes of the Cancun hard fork, which will see the implementation of proto-danksharding for rollup optimisation, as well as Distributed Validator Technology (DVT) to make staking easier for validators. Whilst still some way off, Proposer-Builder Separation (PBS) will aim to address the problems caused by MEV attacks, reconfiguring the economics of MEV via the creation of a division of labour between the crucial proponents of block building. Thesee changes are structured to transition Ethereum from its current state to a fully scaled, maximally resilient platform. Earlier on Thursday, French banking giant Societe Generale announced the introduction of its Ethereum-based Euro stablecoin. The EUR CoinVertible (EURCV) is the first institutional stablecoin deployed on a public blockchain, with the TradFi banking giant aiming to use its latest offering to bridge the gap between traditional capital markets and digital assets.

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‍Solana welcomed the Internet of Things (IoT) Helium network to its blockchain following the project’s successful migration to Solana’s mainnet. Launched in 2019, Helium facilitated data sharing between low-powered wireless devices, creating a distributed network for IoT hardware. The 24H process saw Helium going offline, with the transition to Solana’s blockchain aimed to make Helium more scalable and resilient, whilst unlocking a new world of utility across Solana’s ecosystem. To mark the move away from its own L1, Helium minted more than 1m Solana-based NFTs to represent each physical node running on its network. The mint was the most prominent test case for Solana’s recently announced state compression feature, enabling creators to mint NFTs at scale at a significantly lower cost than existing means. Relying on Merkle tree data structures, the new integration has enabled Solana to become a much more viable option for enterprise use cases. This development comes as Solana began rolling out its Web3 Saga smartphone. With built in Web3 functionality, the Saga’s Seed Vault offers a native custody solution that secures the wallet’s seed phrase, tied to a user’s biometric fingerprint. Paired with the phone’s dApp store, Saga aims to make Web3 usage more accessible and user-friendly. On the market front, Grayscale has announced that its Solana trust has begun trading on OTC markets. Previously only accessible via private placement to accredited investors, the offering is now more publicly available, tracking the CoinDesk Solana Price Index (SLX).

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‍Avalanche followed the wider crypto market rhetoric, falling 5.4% over the last week. Despite its recent swing, AVAX neared a 100% growth (YTD) with the network’s February upgrade driving an uptick in price and volume. Since the start of the month, Avalanche’s developer activity score has risen by more than 38%, according to data by Santiment. Seemingly, the network’s daily active address count rose by 85% over the past 90D, reaching a total of 80,000 last week. The data, provided by Artemis, suggests that the network has become one of the fastest growing networks, leading the likes of BNB, ETH, APT and BTC. The only protocols to outpace Avalanche’s growth were Ethereum-based Layer-2s Arbitrum and StarkNet, as well as the Bitcoin layer for smart contracts protocol, Stacks. Avalanche’s milestone coincided with the blockchain having partnered with several financial institutions to test the potential use case of blockchain deployments via Avalanche’s Evergreen Subnets. At time of writing, AVAX was trading at $17.9, down 7.5% (24H).‍

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BNB began testing its decentralised data storage solution earlier this month. BNB Greenfield enables users to create wallets and manage data, whilst developers can exercise control over data assets. Despite recent market movement, BNB posted an impressive quarter as reported by crypto research firm, Messari. As of the end of Q1 2023, BNB’s market cap increased 24.9% (QoQ), with the network posting some gains from a usage standpoint. BNB Chain’s average daily active addresses rose by 4.2% (QoQ), whilst transaction activity increased by 4% (QoQ). Although revenues fell 5.8% in USD terms, findings suggest that this was primarily a function of a decrease in average transaction fees. Meanwhile, a recent court filing suggests that Binance’s proposed acquisition of bankrupt lender Voyager Digital’s assets has received the go ahead. The document suggests that non-contentious elements of the $1 billion deal could go ahead even before an appeal is heard. Binance proposed the deal late last year but has halted due to mounting pressure and objections from both the SEC and DOJ.

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For Cardano, Polkadot, Uniswap, Cosmos and Enjin, no noteworthy updates this week.

Macro & Markets 🏦💱

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The Week Behind: 🗓️⬅️

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19/04: U.S stocks fall flat following mixed U.S earning data

20/04: House prices in March post biggest annual decline since 2012

20/04: Fed report shows economy cooling after March’s banking crisis

The Week Ahead: 🗓️➡️

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24/04: GER Ifo Business Climate Index (Apr)

25/04: U.S Consumer Confidence (Apr)
24/04: U.S New Home Sales (Mar)
27/04: U.S GDP (QoQ) (Q1)

27/04: U.S Initial Jobless Claims

28/04 GER GDP (QoQ) (Q1)
28/04: GER CPI (MoM) (Mar)

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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’.
The crypto fear and greed index traced back into neutral territory with a reading of 50. The recent pullback across cryptomarkets has seen a 2.0% decrease in total market capitalisation, falling back below the $1.2tn threshold. Encouraging first quarter earnings from a number of major banks seems to have calmed investors of March’s banking crisis, with concerns of a hawkish Fed and weaker economy continuing to weigh on risk-assets.

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CBOE VIX Index 📉🦘

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The CBOE VIX Index measures the implied volatility of S&P 500 Index options, traditionally following an inverse relationship.
The VIX fell to its lowest level since November 2021, reaching a bottom of 16.22 on Wednesday. Directionless first quarter earnings saw both the Nasdaq Composite and S&P 500 trade flat, as U.S Treasury yields continued to decline. Whilst investors are anxiously waiting for an end to the Fed hawkish rate policy, the VIX’s lows suggest that volatility is still far from where it needs to be in order for the Fed to act, not least considering that it remains well below its long-term average of 20. At time of writing, the VIX was priced at 17.57 (pre-market).

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BTC/DXY Correlation 💵📈

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The DXY provides an indication of the value of USD relative to a basket of U.S trade partner currencies.
The DXY was trading marginally higher Friday following the regained support for the USD in light of the hawkish sentiment coming from the Fed late Thursday, renewing intraday highs of 102. Despite recent reports of a softening economy, the stalling of a decision on the U.S debt ceiling resulted in Treasury yields refreshing their monthly highs, thereby bolstering the DXY. At time of writing, the DXY is down 1.2% (30D), with BTC up 1.1% in the same period. The 1Y BTC DXY correlation currently stands at -0.54.

Market Dominance 📊👑

Bitcoin dominance: 45.8 (-0.6%)
Ethereum dominance: 19.5% (-0.3%)

Bitcoin EU Crypto ETP dominance: 53.5% (-1.3%)
Ethereum EU Crypto ETP dominance: 27.4% 26.2 (+1.2%)

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Risers & Fallers 📈🚀

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⬆️ OKB ($OKB) was up 12% this week, trading at $52.90 at time of writing. Launched by the OKX (formerly OKEx) exchange, $OKB serves as the platform’s utility token, enabling its users to access additional exchange features, Use cases include payment for trading fees, access to voting and platform governance, as well as revenue rewards. OKX recently announced that the widely anticipated SUI token sale would take place on the exchange, with user allocations distributed via a OKX snapshot lottery. Sale of the SUI token has been priced at $0.03 for early adopters, whilst the price for regular users is set at $0.1, payable in $OXB.

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⬇️ Stacks ($STX) fell 20% (7D), trading down at $0.72. The Bitcoin layer for smart contracts enables DeFi, NFTs and other smart contracts to operate on Bitcoin’s base layer where transactions are settled. Having rallied by over 135% in late February following the success of Bitcoin Ordinals, $STX faced a larger pullback than its counterparts, with Artemis suggesting that the number of active addresses and daily transactions (30D) on the protocol continues to drop, despite increasing DEX volumes.