FPG’s Weekly Perspective on Crypto Markets: Week of February 13th, 2023
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Market Summary
Weakness continues across risk assets with crypto markets digesting the implications of regulatory action against Kraken and Paxos/BUSD as well as the broader macro headwinds. This week’s CPI print will be a key driver of the macro picture going forward and any continued regulatory enforcement could be a source of additional volatility for crypto markets. Other key narratives have been rotating between LSDs, AI to ZK and NFT marketplaces. An additional sidenote, SAND will be having a major unlock on the 14th of Feb too.
There are a number of key releases in the cryptosphere poised to be released on the 14th of February and that includes the much anticipated Blur token airdrop (though the exact date is still pretty much a rumor). Shibarium’s release on the same day and the US government will also be holding a “crypto crash” hearing on the 14th too among many others. Watch for volatility leading up to then especially since there may still be further retracement before any interim bounce.
Notable Events and News
Tuesday 14 February
US CPI
Wednesday 15 February
US Retail Sales
US Empire Manufacturing Index
GBP CPI
Thursday 16 February
US Unemployment Claims
US PPI
US Housing Start
Notable Events and News:
Cantor Fitzgerald Helps Oversee Tether’s $39 Billion in Treasury Holdings
Billions of dollars in treasuries that back the world’s most traded cryptocurrency are being run on Wall Street. Tether Holdings Ltd., the secretive Hong Kong-based owner of stablecoin tether, is using Cantor Fitzgerald to help oversee its $39 billion bond portfolio, according to people familiar with the matter. Details of how Tether managed those assets haven’t been widely known.
SEC to sue Paxos for listing Binance USD stablecoin: WSJ
The U.S. Securities and Exchange Commission plans to sue Paxos for listing the Binance USD coin, alleging it is an unregistered security, according to the Wall Street Journal. The SEC sent Paxos, a blockchain and trust company, a letter informing it of “a possible enforcement action,” the WSJ reported, citing anonymous sources. The suit is reportedly for “violating investor protection laws.”
Genesis Unveils Proposed Sale Plan With DCG, Bankruptcy Creditors
Genesis Global Holdco, which filed for bankruptcy protection last month, unveiled the final details of a proposed plan to sell itself off alongside Genesis Global Trading to help parent Digital Currency Group pay off some of the firm’s creditors.
According to a proposal filed with a bankruptcy court on Friday, DCG will turn its equity in Genesis Global Trading over to Genesis Global Holdco, as part of an effort to sell both companies, and restructure an existing loan.
Kraken Agreed to Shutter US Crypto-Staking Operations to Settle SEC Charges
Kraken has agreed to shut its cryptocurrency-staking operations to settle charges with the U.S. Securities and Exchange Commission (SEC), according to an industry source briefed on the matter.
The SEC voted on the settlement during a closed-door commissioner meeting on Thursday afternoon, and an announcement may come later in the day, the industry person told CoinDesk.
Market Insights
Market Technicals and Blockchain Analysis
One of the key theories attempting to explain the recent rebound is that of flows from BUSD into BTC. Considering BUSD’s current limited venues of usage, this may actually be true as exchange reserves have gone down by more than 30% since December in one of the steepest drops in recent times. The same is also reflected in BUSD’s total circulating supply
With today’s news on the halt of BUSD issuance by Paxos, could this move in the past month have been with the expectation of the upcoming enforcement action? Possibly. However it seems more likely that it’s a result of traders derisking their positions on centralized exchanges since Binance is the primary minter of BUSD by autoconverting other stablecoin deposits into BUSD.
On the ETH front, ETH supply continues to set new post merge lows as on chain activity (and hence burn) outpaces daily new eth issuance with the primary contributors being Uniswap and Opensea.
With the Shanghai upgrade coming in March, expect to see increased volatility as the market anticipates a possible “sell on unlock”. However the reality may be very much different as there is a cap on daily unlocks in addition to the various liquid staking derivatives and ETH NFTs that these Ethereum miners and maxis may divert their ETH into as opposed to simply dumping on the markets. For the full ~16 million ETH to fully unlock, it would take more than one year to play out.
Over the longer term, overall on chain ETH activity may even increase as a result of this greater circulation of ETH by early ETH holders
Taking a quick look at the total crypto market cap excluding BTC has been well supported at the $470b levels, the recent move was one such successful bounce off that support levels. If the market weakens once again watch out for this level as a possible support level to either hold or break in the face of deteriorating global macro conditions.
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Disclaimer:
This communication should not be relied upon as research, investment advice, or a recommendation regarding any products, strategies, or any asset in particular. This material is strictly for illustrative, educational, or informational purposes and is subject to change.
