FPG’s Weekly Perspective on Crypto Markets: Week of February 7th, 2023

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Market Summary

US monthly jobs figures released last Friday suggested that the US economy remained resilient despite significant monetary tightening by the Fed. The blockbuster jobs figure forced market participants to re-evaluate their expectations on when the Fed would end rate hikes, leading to a cooling off of the market. Markets remain subdued and range-bound, with BTC trading in the $22,500-$23,000 level.

However, while the broad market struggles to find a clear direction, Artificial Intelligence (AI) related tokens have vastly outperformed the rest of the market in recent weeks. After ChatGPT gained widespread popularity and raised everyone’s awareness on how powerful AI might become in the future, AI related tokens have benefitted tremendously with the increased interest, with the likes of SingularityNET (AGIX), Fetch (FET), Alethea Artificial Liquid Intelligence Token (ALI) posting up to 550% returns in one month. It is a sector worth keeping an eye on.

Notable Events and News

Tuesday February 7th
US Fed Chair Powell Spoke

Thursday February 9th
US Unemployment Claims

Friday February 10th
US Preliminary University of Michigan Consumer Sentiment
US Preliminary University of Michigan Inflation Expectations

Notable Events and News:

a16z Votes Against Proposal to Deploy Uniswap V3 on BNB Chain
Venture capital firm Andreessen Horowitz (a16z) used its 15 million UNI holding to vote against a final proposal to deploy Uniswap v3 on the BNB Chain using the Wormhole bridge, choosing to back LayerZero as the interoperability protocol instead. a16z was one of the leading investors of LayerZero back in March 2022.

FTX Seeks to Recover Political Donations by end February 2023
FTX’s new management is seeking to recover political donations made by Sam Bankman-Fried and other FTX executives and have given a deadline of the end of the month. According to Unusual Whales, who used data from the Federal Election Commission, 196 members of Congress accepted campaign contributions from FTX’s former executives. The move by FTX’s new management is part of bankruptcy proceedings and an effort to repay the crypto exchange’s creditors.

South Korea Issues Guideline on Cryptocurrencies as Securities Tokens
South Korea published guidelines on Monday for defining what specific cryptocurrencies would fall under regulations applicable to financial securities. Blockchain-based tokens will be treated and regulated as securities if they have corresponding characteristics laid out in the country’s Capital Markets Act — financial investment instruments for which investors do not have an obligation to make additional payments on top of the original investment.

Chinese Local Governments Give Away Millions Worth of Digital Yuan to Boost Adoption
Over the Lunar New Year Period, multiple Chinese State Governments have distributed millions of dollars worth of China’s central bank digital currency in programs such as subsidies and consumption coupons as part of an ongoing effort to boost adoption. The last few months has seen the government enact other targets and features to boost the usage of the CBDC.

Market Insights

Market Technicals and Blockchain Analysis

The surprise 517,000 jobs added against analyst forecasts of 185,000 forced market participants to re-evaluate their expectations on when the Fed would end rate hikes, causing the price of risk assets to fall. BTC and ETH were no exception, with both coming down from recent January highs. However, BTC and ETH managed to stay above their key levels of $22,500 and $1,600 respectively as of the time of writing.

This week we take a look into net inflows to exchanges. A high net inflow of BTC or ETH typically suggests that selling pressure is expected to increase, the reason being investors are sending their holdings to exchanges for liquidation. However, the exchanges netflow volume does not show any significant inflow of BTC or ETH into exchanges, suggesting that the current selling pressure might abate soon and that markets might struggle to find a clear direction if there are no significant news catalysts.

We also cross checked the number of addresses of wallets with sizable holdings of BTC or ETH, and found that there was no significant change in the number of addresses, which suggests that most of the whales are not reducing their holdings.

Furthermore, we observe that the BTC Long/Short ratio is fairly even, with neither side dominating the other.

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About Floating Point Group:

Floating Point Group is a crypto prime brokerage platform and agency trading desk for asset managers that removes the barriers and complications to access liquidity across a broad set of markets in order to deploy advanced cryptocurrency-centric strategies at scale. The company carries insurance for custodied cryptocurrencies and is regulated in the U.S.; FPG has also secured VASP registration in the Cayman Islands.

Floating Point Group is backed by Tribe Capital, Coinbase Ventures, Anthony Scaramucci, FAST by GettyLab, Borderless Capital, CapitalX, Formulate Ventures, BoxOne Ventures, Seabury Global Markets, AngelList’s Naval Ravikant, and a host of angel and institutional investors.

For more information, visit floating.group.

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.