Market Wrap #8: Second Guessing
It has been quite a tough week as BTC ended the week ~14% lower, while ETH -19% and SOL -23%. A big portion of BTC’s drop happened on Friday, 19th Aug, when BTC fell ~8% in a day, unwinding much of its gain since the later part of July. Taking a step back from the BTC price movement itself, most of the selling pressure came from long liquidations that spiked on the 19th of August, to a level not seen since 18th June 2022 when we saw BTC dip to its lowest level below the $18k handle.
While it was a relatively quiet week from a macro perspective (equity market had the lowest turnover this year on Thursday, with only ~9.4bn shares traded across all US equity exchanges vs ~12.3bn shares daily average), many traders began to second guess themselves on the Fed’s pace of interest rate hikes post the relatively neutral Fed meeting minutes released earlier on Wednesday. BTC’s sell off pushed below the very closely watched $22k level, breaking down the hopeful upward trend formed in late June.
Chart of the Week
Referencing March 2020’s low and November 2022’s high, the next natural support line post the recently broken $22k level would be the $18k level.
This is also further confirmed by the dealer’s positive Gamma Exposure at around ~$18–19k levels. When dealer gamma is positive, their delta increases when the underlying asset increases, thus their delta-hedging strategy requires selling more of the underlying asset following an increase in the underlying price. Therefore, it limits the magnitude of the initial price movement, vice-versa. However before we get there, it is likely that $20k-22k will be BTC’s trading range in the next few days.
Selling any vol on BTC at above ~$22–23k level for the next week may be the best way to play this.
The information presented is not investment advice and does not constitute any offer or solicitation to offer or recommendation of any investment product. As always, please do your own research.
Market Recap
1. Genesis CEO stepping down and cutting down 20% of workforce
Crypto brokerage Genesis announced on Wednesday that CEO Michael Moro is stepping down and laying off 20% of its workforce. It’s the latest major crypto firm to show signs of struggle as the cryptocurrency market unwinds. Last month, Genesis disclosed it incurred losses tied to the collapse of 3AC.
2. Dogecoin surged with added utilities on Dogechain
Dogecoin surged more than 15% last week, mostly due to hype around its recently launched blockchain — dogechain. It’s a layer 2 companion blockchain for dogecoin, allowing users to bridge the meme token onto the network to access different applications and NFTs. If users move the meme coin to dogechain, they will receive a wrapped version of the coin (wDOGE).
3. Galaxy backs out of BitGo acquisition
Galaxy Digital is terminating a $1.2 billion deal to acquire crypto broker BitGo. This was the largest corporate acquisition in Crypto when it was announced in May 2021.
Galaxy said it terminated the deal because BitGo didn’t hand over audited financial statements for 2021. BitGo called the termination “improper” and said it plans to “hold Galaxy Digital legally responsible.”
4. Voyager Creditors objects to paying out employee bonuses
Voyager asked a judge to approve an employee retention plan that cost up to US$1.9 million. Its motion stated that these employees are “exceptionally hard to replace in the marketplace because of their invaluable institutional knowledge and understanding of the cryptocurrency industry.”
However, Voyager did not provide sufficient evidence to justify the retention awards nor did the company offer evidence that the 38 employees on the plan are at risk of resigning.
5. U.S. bank regulator ordered FTX to halt what it called “false and misleading” claims the exchange had made about whether funds at the company are insured by the government.
A deleted tweet by Brett Harrison, head of FTX US operations, stated that direct deposits from employers to the crypto exchange are “stored in individually FDIC-insured bank accounts” and that stocks purchased via FTX US “are held in FDIC-insured” brokerage accounts.
FDIC said in its cease and desist letter to FTX US that those statements implied that FDIC insurance was available for cryptocurrency and stock holdings, and that the agency does not insure brokerage accounts.
FTX CEO Sam Bankman-Fried emphasized FTX is not FDIC-insured, and apologized if anyone misinterpreted previous comments.
6. South Korea blocks 16 unregistered foreign-based Virtual Asset Service Providers (VASPs) that targeted domestic consumers by offering services in Korean
They (KuCoin, MEXC, Phemex, XT.com, Bitrue, ZB.com, Bitglobal, CoinW, CoinEX, AAX, ZoomEX, Poloniex, BTCEX, BTCC, DigiFinex, and Pionex) operated without obtaining a registration despite notifying them in July last year about their obligation to register with the authority.
Transfers of virtual assets to and from those companies will be blocked and credit card companies will inspect and block credit card-based crypto purchases and payment services offered by them to disable their use in the domestic market.
Economic Summary/Market Stats
7d Market Update
Crypto
🔻 BTC: -12.65% to $21,419
🔻 ETH: -18.38% to $1,619
🔻 SOL: -21.70% to $36
🔻 Overall Crypto Market Cap: -12.97% to $1.024T
🥴 Bitcoin Fear & Greed Index: Fear (29/100)
Equities
🔻 S&P 500: -1.21%
🔻 DJ Industrial Average: -0.16%
🔻 Nasdaq 100: -2.62%
🔻 Hang Seng Index: -1.32%
🔻Stoxx Europe 50: -0.51%
Rates
💸 USDC Supply APY: 0.43%
💸 ETH Supply APY: 2.11%
💸 BTC Supply APY: 0.07%
💲3-Month US Dollar Libor: 2.95771%
💲US Treasuries 2-Year: 3.253%
💲US Treasuries 10-Year: 2.956%
Key Economic Releases
23 Aug (Tues)
9.45am ET: S&P U.S. manufacturing PMI flash (median forecast 51.7, previously 52.2)
9.45am ET: S&P U.S. services PMI flash (median forecast 50, previously 47.3)
25 Aug (Thurs)
8.30am ET: Initial jobless claims (median forecast 254k, previously 250k)
26 Aug (Fri)
8.30am ET: Core PCE price index YoY (median forecast 4.8%, previously 4.8%)
