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Weekly Market Update: Here Come the Institutions

In this weekly market update, we take a look at institutions moving into the space, along with other macro economic developments from around the world.

Posted June 28, 2023

HUB Update - Big financial institutions pouring into crypto
HUB Update - Big financial institutions pouring into crypto

Crypto news this week was dominated by the wave of institutions moving into the space. Not just ETF applications, of which there are now several, but licensed exchanges in various jurisdictions.

None of those big players would outlay that much cost if they didn’t have customer demand and that is long term bullish for the sector. 🚀

In the global economy, most major economies put out their PMI data. As trend indicators for economic activity, they were almost universal in their direction, down. Manufacturing in particular is now in contraction, while services are holding up.

In a sign of just how distressed things are, China has eased its monetary conditions in an attempt to heat up its economy.

Regionally, the Australian and NZ housing markets appear to be rebounding, with prices particularly in Sydney growing at a healthy rate.

Commentators are saying it is largely immigration driven, and given that the Aussies were a bit ahead of NZ in loosening their immigration settings, is probably a warning of what is likely to happen here.

The sentiment in the crypto market has improved considerably, and now sits just inside Greed territory. What a change from a few weeks ago. 💪

crypto fear and greed index june 28th 2023

The uptick caused by the flood of institutional interest has meant that many of the top 30 assets are showing healthy gains compared to a week ago.

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  • At the time of writing BTC was still going strong, up another 10% (last week was +8%).
  • LTC was also up 10% as it heads into its halving.
  • ETH, ADA and MATIC were all up 7%.
  • XRP continued its slide as its court case drags on with no major news updates, down 2%.  
  • This week’s biggest gainer was Bitcoin Cash (BCH) who were named as one of the 4 assets on the new EDX exchange, up 112%.
  • Maker (MKR) was our biggest loser of the week, down 5%. 

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

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Highlights from the crypto space

Following on from last week’s Blackrock ETF buzz, the flood gates have opened with a whole bunch of other companies joining the queue to file for a Bitcoin ETF. Invesco, Wisdom Tree, Bitwise and Valkyrie all hitting go.

Screenshot of tweet by Josh Olszewicz

Banking giants Citadel, Fidelity and Charles Schwab have launched an institutional focused non-custodial exchange called EDX that will facilitate orders of 4 coins. 

Crédit Agricole and Santander have been approved by the French Market Authority to provide digital asset custody services.

Finally, the world’s 9th largest bank, Deutsche Bank has applied for a digital assets licence in Germany so it can build a digital assets and custody business. This points to a lot of customer demand. 

Bitgo has halted its purchase of Prime Trust. It seems that Prime Trust has been told to stop doing its fiat onramp/offramp services and that was a deal killer. 

Bitcoin’s correlation with the Nasdaq 100 turn’s negative. Not reacting like a tech stock supports Bitcoin (and crypto’s) hedge narrative.

Short term correlation between Bitcoin and Nasdaq 100

The UK upper house has approved legislation for crypto and stablecoins to be treated as a regulated activity.

Bitcoiners have continued to HODL hard, with the ‘illiquid supply’ now accounting for 78% of total supply.

TLDR; there is only a limited amount of Bitcoin in actual use and what is sitting on exchanges is very thin. This can lead to volatility as large orders can create outsized price movements. 

For you Bitcoiners who often receive questions about the sustainability of Bitcoin mining, Daniel Batten, an Auckland based Climate Tech investor published a report comparing Bitcoin mining to other industries – makes for fascinating reading.

Chart showcasing emission intensity across sectors

Binance has exited the Netherlands after failing to get its VASP licence. They have also withdrawn their application in the UK for ‘non-crypto related activities”.

However this “has no impact on, which does not own or operate any crypto services in the UK and is only available to UK consumers on a reverse solicitation basis.”. I think that means if you come to them, it’s ok. 🤷

Polygon has put out a pre-proposal to make its chain compatible with theZero Knowledge ecosystem. This will make the chain faster and future proof. 

The IMF is working on a platform to allow CBDC’s to transact between countries. 

South Korean crypto platforms Haru and Delio have both suspended withdrawals from their earn products. Users are lawyering up. 

The US house senate finance committee will vote in July on legislation designed to streamline the pathway from a security to a commodity. 

Kaiko data out says that 76% of all transactions are done using Stablecoins and that Fiat use is declining.

Stablecoin vs Fiat Market Share on CEX

The amount of ETH staked has hit 23 million. According to Nansen, there are 2.9m ETH queued for deposit into the Beacon chain, and 36k waiting to be withdrawn.

ETH waiting for withdrawal

The ASX has released a report on Australian investor activity, they report that 15% of Australians have crypto.

Investment Bank Berenberg is predicting stablecoins and DeFi will be the next SEC targets. 

Starting off with global news 

A clear sign of slowing global trade, Container shipping costs continue to fall, down 3.5% and way down on pre Covid rates

Illustration for HVC Macro news update

🌎 Macro news TLDR: Global PMI’s continue to fall

Central Banks across the world are lifting their inflation forecasts as they come to grips with the persistent inflation problem. ‘Higher for longer’ seems to be the realisation.

Core inflation chart

In a world of increasing China-US tensions, India is making plays and it looks like the US is receptive with a recent deal being announced on chips, tech and minerals. 

U.S. economic news

Fed chairman Powell reiterated that the FOMC expects more rate rises this year as inflation isn’t yet tamed in the US, particularly core inflation. Chair Powell also said that “ crypto appears to have staying power as an asset class”. 

Finally, we are seeing signs that the US labour market is softening with unemployment claims staying slightly elevated. In another signal of a softening economy, corporate failures are on the rise. 

The US housing market is showing signs of life! New home starts have picked up coming in at 1.6m against a forecast of 1.4. However, existing home sales are down 20% year on year as those with low rate, 30 year mortgages hold tight.

US Housing Market chart

US PMI’s came out this week. Manufacturing continues to decline, down to 46.3, while services are holding up at 54.1

Meanwhile, in Europe

European consumer confidence has bounced off rock bottom in June; it is still dire at -17 but is trending up. Manufacturing in the Eurozone is teetering on a recession, with the June PMI declining to 50.3. 

German producer prices (a measure of wholesale inflation), fell 1.4% in May and are up only 1% annualised. Good news! 

Producer Price Indices chart

As reported last week, UK inflation is not under control. Data this week confirmed that the BoE has a real battle on its hands with core inflation increasing to 7.1% in May from April’s 6.8%.

In response the BoE has lifted its rates by 50 bps, I’m not sure why markets were surprised? The UK’s PMIs also fell. 

Turkey has reversed its unique approach to inflation, with the Bank of Turkey finally raising rates in one staggering move, lifting rates by 650 bps from 8.5% to 15%.

Ukraine has been a hot spot of news. The EU agreed its 11th package of sanctions against Russia due to the conflict. These sanctions appear designed to restrict circumvention of the existing ones in place.

Then a story broke suddenly of a Wagner Group coup happening.

In conspiracy land, people are hypothesising that the $6.2 bn account error that the DoJ announced last week was enough to buy the mercenaries’ allegiance. 

And in Asiapac…

As widely expected, China’s PBoC cut both its 1 and 5 year lending rates by 10 bps in an attempt to spur investment. The 10 bps cuts didn’t really impress the market. The Chinese real estate market looks very troubling with two big lenders signalling distress.

Japan’s industrial production came back 0.7% in April, with all the bad news coming from their electronics sector. Japanese inflation data for May came out 0.1% higher than forecast at 3.2%.

Both Malaysian and Singaporean inflation are showing signs of moderation. South Korea PPI continues to fall, down 0.3%. Taiwan’s struggles continue, their year on year exports to May fell 17.6%.Disturbingly this beat forecast! 

Australian PMI data came out, in a similar pattern to the rest of the world, Services are ok, Manufacturing is contracting but has improved slightly.

Domain, an Australian real estate company, is forecasting that Sydney property prices will increase by 6-9% in the next year…. The RBA will be having conniptions.

New Zealand’s housing market may have bottomed. House sales have recorded their first annual increase in 2 years. 

Some (small) good news, we posted another trade surplus in May. However annualised, things are grim, with Stats NZ stating we have a $17.1 billion deficit.

Chart showcasing imports and exports

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

Stay tuned for the next update.

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Disclaimer: Information is current as at the date of publication. This is general information only and is not intended to be advice. Crypto is volatile, carries risk and the value can go up and down. Past performance is not an indicator of future returns. Please do your own research.

Last updated July 3, 2023

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