Weekly Market Update: FTX Sell Pressure Weighs on Market

After 2 weeks of drops, the current market appears to be on a slight downwards trend. With liquidity on centralised exchanges still low, many are fearful of potential volatility, especially if it leans towards the downside.

Adding to this, there is growing market concern about the $3.4bn in FTX assets that may be approved for sale this week.  This fear seems overcooked as it is likely that Galaxy will want to obtain the best returns for the estate, something that dumping all that volume on the market won’t achieve.  

At odds with this backdrop, or potentially in spite of it, we also saw more news regarding institutional participation in the sector. Established participants are continuing to announce new features or products. The adage of using the crypto winter as a time to build seems to be in full effect.

In the global economy, energy commodities prices continue to trend upwards due to supply constraints. The US dollar is also strengthening against other currencies which is usually a bearish signal for risk assets. Perhaps in response to this, and the worsening geopolitical situation, talk of the BRICS alliance gaining momentum continues.

In other major economies, Europe doesn’t appear to be in great shape, especially Germany. China’s outlook remains poor, Japan’s resurgence continues whilst Australia continues to post trade surpluses, even if they are lower than expected.

In New Zealand, Treasury’s pre-election fiscal update made upbeat reading at the headline level, but the detail paints a more challenging picture with the optimistic case being an outlook of the government running a decades long austerity budget just to squeak through. 

The market sentiment retreated further into fear territory this week as less informed investors panicked on the news that FTX was looking to sell its crypto holdings.

Trend highlights this week: 

• It has been a pretty wild week as markets first digested the ‘higher for longer’ positioning from central banks, and then moved onto the FTX announcement.  In a market with no discernable catalyst, traders appear to be latching onto more bearish news. 
• Having said that, there was an even spread of winners and losers in the top 30 assets this week.
• BTC was up 1.5% on the week while ETH came back 2%.
• Decentralised GPU provider Render (RNDR) was our best performing asset, up 12% on last week. 
• Apecoin (APE) and Arbitrum (ARB) were our  biggest losers this week, ending down 14%. 

View all top gainers: Visit the top gainers page to find out more. 

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Highlights from the crypto space

Crypto nay-sayers often deride the volatility of crypto, or even ask what’s the point. We forget we are fortunate enough to live in a country with stable banking. Turkey, on the other hand, now sees 50% of their population using crypto as a more viable financial option than their fiat alternatives.

The estate of FTX is partitioning courts to sell $3.4bn in crypto assets via Galaxy.  While at a headline level that’s not great, the reality is that it can’t or won’t all happen at the same time.

Ark Invest and 21Shares filed the SEC for an Ether spot ETF. 

Australian senators have opposed a crypto regulation bill in it’s current form because it could disadvantage the digital assets sector. 

Grayscale trust is ramping up pressure on the SEC to approve it’s ETF and wants a meeting asap to discuss it. 

There are reports that a Russian backed hacker group has created malware targeting hot wallets like Binance, Coinbase and Trust wallet. Remember your keys, your crypto! Take the time now to check on your assets and look into the most secure options available to you.

Other notable highlights around the crypto space:

• Vitalk’s X (Twitter) account got hacked with the perpetrators going on to fish $700k out of people. 
• The London Stock Exchange is looking to blockchains to make the trading experience better. They have ruled out crypto currencies though. 
• An Amberdata report found that 48% of institutions surveyed held Digital Assets already. Surprisingly many of the asset managers were bullish on the US supporting adoption. 

• Crypto casino Staked suffered a $40m hack on Ethereum, BSC and Polygon networks. The FBI has linked North Korea’s Lazurus group to the hack. 
• MasterCard has launched a CBDC partner program to foster collaboration. Meanwhile Visa is adopting Solana to allow lower cost USDC settlement. 
• Grab, a really popular South East Asian app, has added crypto on the polygon network. This is supported by the Singaporean Monetary Authority. 
• Metamask is introducing payout options to banks and Paypal in the US and EU. They come at a cost with some Twitter users claiming 9% in fees. 
• Multisig wallet SAFE now supports layer two Polygon. 
• The US regulatory crackdown on DeFi continues. This time the CFTC is going after 3 DeFi protocols. 
• The US Financial Accounting Standards Board has unanimously approved rules for accounting for a companies’ cryptocurrency holdings. When implemented, companies can report unrealized gains and losses on their holdings. 
• Telegram trading bot, Unibot has partnered with OKX to provide optimal routing for swaps. 
• Public service announcement and probably stating the obvious… but if you used Lastpass when it got hacked last year and you stored your private keys in it, you 100% should have rotated your wallets. People are still figuring that out at their cost. 
• In CBDC news, India is trialling wholesale (interbank) use cases, while Brazil is delaying their rollout due to privacy concerns. India is also proposing a global regulatory framework for Crypto assets and suggests that active discussions are underway at the G20 summit.
• USDC issuer, Circle is adding native support for Near protocol, which means no more bridging.

And that sums up the major updates from around the crypto space. Moving on, we’ll take a closer look at other macroeconomic developments from around the globe.

Starting off with global news 

Saudi Arabia and Russia have agreed to extend their production cuts another 3 months. In response Brent Crude hit its highest price this year. 

Adding to the energy price pressures, Australian workers at a Chevron site that produces 5% of global LPG went on strike. Energy prices spiked 12% immediately after the news broke. 

The US led sanctions against Russia could have the unintended consequence of bringing the BRICS alliance closer. Here is a doozy of a quote: 

“Everybody is irritated by the U.S. government, the U.S. Treasury sanctioning … So people say is there any way to create a counterforce, counterbalance to G7 or G20? BRICS is the candidate.”

🌎 Macro news TLDR: … Markets waiting on US CPI release

U.S. economic news

The global market is waking up to the fact that inflation isn’t won and higher for longer is a reality. This had led to a rapid strengthening of the US dollar relative to other currencies. This is usually bad for all risk assets including BTC. 

US new mortgage applications have hit a 27 year low. We are now talking about generational change! The market news is relatively quiet as we await the August CPI announcements later this week. The market has 95% predicting no change. 

And in Europe….

Later this week, the ECB will meet to decide if they need further rate increases. Inflation has held stubbornly at 5.3% in August, however the decision looks like a coin toss at this point. 

Eurozone industrial producer prices (a measure of inflation from a producer point of view) declined 0.5% in July. This decline was attributed to cheaper energy costs. Eurozone GDP for Q2 came in at 0.1% and they have revised down the 2023 growth to 0.8% for the year.

German manufacturing continues to struggle with Factory orders for July down 0.8%. They are also predicted to be the only European economy to be in a recession. Hindsight is a great thing, being energy dependent on Russia didn’t work out well. 

President Putin doused any hope of a new grain deal until the west agrees to loosen sanctions against Russia. Grain prices shot up immediately on the news.

Finally, the G20 nations issued a watered down statement on the Ukraine conflict. The other interesting development at the G20 was the proposal of a western counter to China’s belt and road project, called the modern day spice route. 

And in Asia Pacific…

Meanwhile, in China… oh boy. The Caixin services PMI is at 51.8 which is down sharply from the July 54.1. China’s exports for August were better than July, but were still down 8.8% on last year. This is the 4th month of declines.

The declining economy led the Yuan rate against the USD to hit a 16 year low (2007), and led to the PBOC intervening in the currency markets. Chinese CPI for August (0.1%) returned to positive territory, just.

PPI is still underwater though at -3%. They clearly need something new. The previous economic model focusing on infrastructure and property at the expense of consumption has gotten them into this pickle. 

Elsewhere across Asia, Taiwan’s inflation rose in August, coming in at 2.52%. Japan’s Q2 GDP came in at an impressive 1.2%, whilst they are running at 4.8% annualised. Governor Ueda of the Bank of Japan opened the door to them ending their negative interest rate policy. 

Australia’s GDP for Q2 rose 0.4%, slightly exceeding expectations. Annualised they are running at a healthy 2.1%. Australia also posted a monthly trade surplus of $8bn for August, this was below estimates of $10bn. 

For New Zealand, the latest global dairy trade auction was a good one with prices going up finally. The effects of pulling the migration lever to stimulate the economy are having some profound impacts with a record net 92600 migrants in the July year.

The Treasury’s Pre-Election Economic and Fiscal Update (Prefu) came out Tuesday, and was better than expected. Key items in the release are that inflation is higher for longer.

That the government will be operating near austerity budgets for 15 years, and that despite the surging immigration, spend per person goes down. In short, there is no room for big election promises. 

That’s a wrap for this week. Thanks for reading!

Stay tuned for the next update.

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