Market View
A number of headlines have impacted altcoin liquidity in recent days, reflecting a significant bifurcation in trading volumes relative to large cap names:
- Robinhood delisted three cryptocurrencies previously offered on its platform with volumes down by US$2.1B
- Haru Invest, a South Korean crypto lending platform with less than $1B in AUM, halted withdrawals and deposits on June 13
- Delio, another South Korean crypto lending platform with KRW8B (US$6.3M) in altcoins, halted withdrawals on June 14
- Voyager will reopen its platform from June 20 to July 5 for creditors to withdraw 35% of their crypto holdings worth around $1.3B
- Celsius could allow creditors to swap their altcoins into BTC and ETH starting on July 1
Note that the liquidity contraction has been ongoing since early April, and that's not entirely specific to crypto. Near-term, we have seen a peak in global liquidity. Central bank balance sheets across the Federal Reserve, European Central Bank, People’s Bank of China, Bank of Japan, Bank of Canada and Bank of England increased by $920B in 1Q23 but have subsequently unwound this in 2Q23. Recall that market activity seemed to peak in late March 2023, which we believe was caused by (1) the resolution to the US regional banking turmoil, (2) increased regulatory pressure on the crypto sector (including greater uncertainty surrounding non-bitcoin tokens) and (3) the end of Binance’s zero-fee bitcoin trading program on March 22.
Meanwhile, the Federal Reserve kept rates unchanged as expected on June 14, but the new dot plot accompanying its statement suggested that another two 25bps hikes may be possible this year. However, this seems incongruent with the fact that Fed funds futures have reduced the implied probability of a rate hike in July from 80% to 62% while pricing in a cut in 4Q23. In our view, additional hikes would be a potential policy error that ignores the tightening impact of the recent US banking stress. Moreover, moderating aggregate demand should cyclically support a stronger disinflationary trend alongside structural forces like artificial intelligence, which can lead to greater automation and lower input costs. As it stands, we think the Fed’s position represents a lack of clarity that could contribute to market turbulence in the short term.
On the upside for crypto markets, BlackRock's iShares unit has filed documents with the U.S. Securities and Exchange Commission (SEC) to create a spot bitcoin exchange-traded fund (ETF) named the iShares Bitcoin Trust. The fund will primarily hold bitcoin assets through custody provided by Coinbase and will be benchmarked against the CME CF Bitcoin Reference Rate. In our view, this could help stabilize the market sentiment toward the US crypto market as BlackRock's size ($10T in AUM) and influence will be hard to ignore.
Crypto & Traditional Overview
(as of 4pm EDT, Jun 15)
Asset | Price | Mkt Cap | 24 hour change | 7 day change | BTC correlation |
BTC | $25,370 | $488B | -3.00% | -5.40% | 100% |
GBTC | $13.40 | $9.23B | +1.06% | -3.25% | 79% |
ETH | $1665 | $199B | -4.73% | -10.82% | 91% |
Gold (Spot) | $1958 | - | +0.80% | -0.38% | 21% |
S&P 500 | 4426.03 | - | +1.22% | +3.08% | 29% |
USDT | $0.999 | $83.48B | +$0.06B | +$0.13B | - |
USDC | $1.000 | $28.15B | -$0.07B | -$0.44B | - |
Coinbase Exchange & CES Insights
Volatility has returned to the crypto markets. Last weekend saw altcoins get hit across the board. SOL, MATIC and ADA were down ~25% early Saturday morning. What started the move is unclear. It was likely connected to traders getting ahead of liquidations on Robinhood after the financial platform announced they were ending support for the tokens. The selling moved the front end of the ETH and BTC implied volatility curves up 10 and 5 points respectively, putting both into backwardation.
The weakness continued on Wednesday as markets sold off after the US Federal Reserve announced a hawkish pause and two South Korean linked crypto platforms halted withdrawals. Illiquid markets helped to exacerbate the move.
During both bouts of market weakness our desk saw buyers emerge. ETH, BTC, and a range of altcoins were all bought in varying sizes. Interestingly, we saw few sell orders, suggesting positioning remains low. June basis is now negative across BTC and ETH term futures, as some traders position for further price declines. ETH is now near its 200D SMA ($1632), which should provide some support. BTC’s next support level looks to be $23,705, 4.7% below current levels.
Financing Rates
6/15/2023 | TradFi | CeFi Min | CeFi Max | DeFi |
Overnight | 5.10% | 4.25% | 7.50% | 2.57% |
USD - 1m | 5.25% | 4.50% | 7.75% | |
USD - 6m | 5.50% | 5.00% | 8.00% | |
BTC |
| 3.00% | 6.00% | |
ETH |
| 4.00% | 8.00% | 1.80% |
Notable Crypto News
Institutional
- Salesforce Leads $6M Round for AI-Backed Web3 Data Platform Mnemonic (Coindesk)
- Crypto VC Eden Block hires former Goldman Sachs partner Orit Freedman Weissman (The Block)
Regulation
- Gary Gensler used to be much clearer on which cryptos are securities (The Block)
- Classifying Crypto Tokens as Securities Will Hamper Some Blockchains’ Decentralization Efforts, Bernstein Says (Coindesk)
- Coinbase tells SEC that DEXs can't be regulated as exchanges (The Block)
- Hinman Emails Reveal 2018 Speech on Ether Drew Input From Multiple SEC Officials (Coindesk)
General
- Crypto prime brokerage FPG halts withdrawals following $15 million cyber attack (The Block)
- eToro to delist Polygon, Decentraland, Dash and Algorand on US platform (The Block)
- Bank of China Investment issues tokenized security on Ethereum (Ledger Insights)
Coinbase
- Digital Asset Management with MPC (Coinbase Blog)
- United States of Crypto: Blockchain Technology Built in Ohio (Coinbase Blog)
- As policymakers consider crypto, we must take the right lessons from previous instances of offshoring technology. Our national security is at stake (Coinbase Blog)
View From Around the World
Europe
The economic secretary to the U.K. Treasury, Andrew Griffith, reaffirmed the government's view to regulate crypto as financial services instead of like gambling, in a rebuttal against an earlier proposal by lawmakers. He still plans for the UK to be a crypto hub and believes that regulations should focus on protection of consumers and ensuring fair markets through expertise and proper understanding of issues. (Coindesk)
Asia
Hong Kong’s banking regulator is pushing for banks like HSBC and Standard Chartered to bank with more crypto exchanges. According to the FT, the Hong Kong Monetary Authority questioned the reluctance of these banks in accepting crypto exchanges as clients, and said that due diligence processes on these exchanges should not ‘create undue burden’ for them when they are looking to set up offices in Hong Kong. (Financial Times)
The Week Ahead
| Jun 19 | Jun 20 | Jun 21 | Jun 22 | Jun 23 |
Notable Macro |
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| UK CPI | BoE Rate Decision US Initial Jobless Claims | EA PMI |
Notable Earnings |
| FedEx Corp | | | |
Crypto | | | | | |