BTC and ETH Consolidate, Altcoins Under Pressure

08.08.2023

Market Overview: 

As we look forward to the next couple of weeks, several key factors stand out that could potentially drive short-term market weakness.

1) This week’s inflation numbers, including CPI and PPI released on Thursday and Friday respectively, will be crucial market drivers. Following mixed employment figures last week, these numbers will provide further market direction guidance.

2) The inflation data gains significance in light of the recent steepening of the yield curve, driven by factors such as the Fitch downgrade, the Treasury Department’s aggressive $100B+ debt issuance plan, and a surge in oil/gas demand and prices. Some Fed members are advocating for further rate hikes in response to these inflationary pressures.

3) The yield resurgence could potentially impact equity prices, increase equity/rate volatility, and strengthen the dollar. With the S&P trading at 20x forward earnings (a 90th percentile level), the market is primed for a correction. If an aggressive sell-off occurs, crypto, which has had near-zero correlation with equities in recent months, may recouple with the equity markets.

4) BTC and ETH have dipped below support levels of 29k and 1850 respectively, but continue to consolidate within a tight range. Short-term implied volatility has decreased to the low 30s, with realized volatility even lower. BTC volatility, slightly higher than ETH’s, factors in the potential approval of a spot ETF.

5) The initial 20% BTC rally, sparked by Blackrock’s spot ETF announcement, has faded. The Ark ETF application review is due on August 13th, followed by Blackrock’s on September 3rd. The market seems to anticipate a likely extension of the review period, pushing the decision towards year-end, as reflected in the spot price consolidation and grayscale trust weakness (GBTC and ETHE).

6) Altcoins are facing pressure due to various FUD factors, including the resolved Curve exploit, upcoming token unlocks worth $180mm+, and profit-taking on catalyst-driven performers like XRP, LTC, etc

 

NFT Market News:

Beeple purchases CryptoPunk

Acclaimed digital artist, Beeple, recently ventured into profile-picture NFTs, procuring the distinct CryptoPunk #4593 for 113.7 ETH or $208,000. This CryptoPunk stands out for its unique clown like appearance, notably with the clown nose and clown eyes green traits. Before this acquisition, Beeple crowdsourced advice on Twitter for the ideal punk choice, and his audience eagerly responded. Following the purchase, Beeple unveiled a digital artwork titled “A Punk Is Born,” showcasing himself styled as his new NFT. This acquisition highlights Beeple’s appreciation for the transformative impact of NFTs, especially CryptoPunks, in redefining a move toward digital identity and ownership.

 

Latest News:

WELCOME FRIENDS: Hundreds of institutions and prominent individuals have invested directly in crypto, adopted the value thesis, or started building technology to support digital assets since Wave started tracking these developments in late 2020. Now the rise of the Metaverse, Decentralized Finance (DeFi), Non-Fungible Tokens (NFTs), and Decentralized Autonomous Organizations (DAOs) is driving mainstream adoption of blockchain technologies everywhere we look. We’re continuing to keep track of it every week here:

  • Deloitte has partnered with blockchain security firm Chainalysis to enhance digital asset tracking and investigations. In a recent blog post, Chainalysis said the collaboration will allow them to assist their mutual clients in addressing compliance challenges in the digital asset ecosystem. The alliance will allow Deloitte’s clients to leverage Chainalysis’ proprietary blockchain dataset, industry-leading analytics software, and training program, the announcement said. 
  • The Digital Dollar Project (DDP) announced the successful completion of a cross-border central bank digital currency (CBDC) trial in the Philippines, which it developed with Western Union. The pilot study assessed the potential advantages of using CBDCs for international remittances, leveraging a distributed ledger technology (DLT) platform to simulate the transfer of digital dollars and Philippine pesos. It highlighted key benefits such as reduced risks, lower costs, and enhanced transaction visibility.
  • Hyundai and KIA announced a new blockchain and AI-powered Supplier CO2 Emission Monitoring System (SCEMS). The public Hedera DLT will be used to record the carbon emissions data from suppliers and artificial intelligence (AI) will predict future emissions.
  • PayPal (PYPL) announced the global payments giant is issuing its own U.S. dollar-pegged stablecoin. The Ethereum-based token will soon be available to PayPal U.s. users and is the first time a major financial company is issuing its own stablecoin.

REGULATORY ROUNDUP: We’re living through the era of regulatory recognition of digital assets. The legislation, litigation, and regulation happening today will dictate the entire future of our industry, and we have a historic chance to shape those changes by staying informed and providing public commentary.

  • A US SEC Commission lawsuit against Terraform Labs is set to go ahead after a U.S. judge overseeing the case denied the firm’s motion to dismiss on July 31. In handing down the order, the judge also in part rejected a July 13 decision from U.S. District Judge Analisa Torres, who ruled that Ripple did not violate securities laws by selling its token on public exchanges.
  • Following multiple setbacks with European regulators, Binance has become the first digital asset exchange to receive an Operational Minimum Viable Product (MVP) license from Dubai’s Virtual Assets Regulatory Authority (VARA). The news comes as the exchange faces regulatory challenges in several European territories, including Germany, the Netherlands, and the U.K. The Operational MVP license, issued to the Dubai subsidiary, Binance FZE, allows the company to offer regulated virtual asset exchange services under VARA’s investor protection and market assurance standards.

 

Disclosure: The opinions expressed herein are those of the author alone and do not represent Wave Digital Assets, LLC or any of its affiliates. Certain information contained herein has been obtained from third-party sources, has not been independently verified and is believed to be accurate as of the date of its publication only. Certain Wave accounts hold investment positions in some of the assets discussed herein. Wave and/or the author may hold investment positions in some of the assets discussed.

Nothing in this Newsletter or linked information should be interpreted as an offer or recommendation to buy, sell or hold any security or other financial product. Wave is a federally regulated by the US Securities & Exchange Commission as an investment adviser. Registration with a federal or state authority does not imply a certain level of skill or training. Additional information including important disclosures about Wave Digital Assets LLC also is available on the SEC’s Website at WWW.ADVISERINFO.SEC.GOV. Or, learn more information about Wave Digital Assets at WWW.WAVEGP.COM.

 

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