The latest moves in crypto markets, in context Was this newsletter forwarded to you? Sign up here. |
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Good morning, and welcome to First Mover. I'm Lyllah Ledesma here to take you through the latest in crypto markets, news and insights. In today's newsletter: - Price Point: After a strong week for the crypto market, bitcoin and ether suffer small declines. Crypto entrepreneurs Sam Bankman-Fried and Justin Sun are in talks to buy a majority stake of Huobi Global Exchange. It could be one of the biggest deals in the crypto market.
- Market Moves: The value of crypto derivative contracts traded rose 13.4% last month from June. This is the first uptick since March.
- Chart of The Day: Broadest tightening cycle in history signals pain for risk assets.
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Despite the crypto market showing some strength this week, bitcoin (BTC) was trading down on the day by 4%, while ether (ETH) declined by 2%. Bitcoin hit a two-month high of $24,900 on Thursday but now appears to be struggling for momentum. Ether was up 10% on the week after witnessing its third and final testnet ahead of the Merge. Ethereum Classic (ETC) was up 6% over the last 24 hours and OKEx's token OKB was also up 6%. Bitcoin's slower upward movement is in line with its declining dominance against altcoins. BTC dominance is currently at around 40%, a decline from its recent high of 47% in June. The decline in price for BTC today might encourage some profit-taking over the weekend, according to senior analyst at OANDA, Craig Erlam. "What's interesting about bitcoin at these levels is how little momentum there is in the rallies, which is going to make $25,000 very difficult to overcome," Erlam said in a note on Friday. "Is that a sign that we're seeing some profit-taking or that the correction has run its course and further downside pressure is on the horizon?" he added. Traditional markets also had a good week, with the Nasdaq and S&P 500 both set to post their longest sequence of weekly gains since November. In the news, the founder of crypto exchange Huobi Global, Leon Li, is in talks to sell a majority stake in the company in a transaction that would value the firm at $3 billion or more, Bloomberg reported on Friday. Li is looking to sell almost 60% of the firm, and has held preliminary talks with Tron founder Justin Sun and FTX, the crypto exchange founded by Sam Bankman-Fried, CoinDesk's Parikshit Mishra and Oliver Knight reported. In a tweet, Sun denied any involvement. Adding to Coinbase's already difficult week, the cryptocurrency exchange suffered another knock as the credit ratings agency S&P Global said in a note Thursday that the outlook for the crypto exchange giant was "negative." Also, Binance CEO Changpeng Zhao "CZ" said on Friday that the exchange has frozen or recovered $450,000, which was stolen from DeFi protocol Curve.Finance earlier this week. |
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Crypto Derivative Trading Volume Rose for First Time in 4 Months as Market Rallied in July |
The value of crypto derivative contracts traded rose 13.4% last month from June, the first uptick since March, CryptoCompare said. The London-based data aggregator and index provider said $3.17 trillion worth of the contracts changed hands in July, while turnover in the spot market fell 1.34% to $1.39 trillion, the lowest level since December 2020. Spot trading volume on Nasdaq-listed Coinbase (COIN), a venue preferred by institutional investors, declined 12.8% to $51.5 billion. Unlike spot trading, derivatives offer leverage. While that allows investors to control a sizable contract value with a relatively small amount of money and increase their potential profits, it also increases their risk. Market observers consider derivatives market activity a proxy for traders, or speculative interest, while the spot market is taken to represent long-term investors. "The rise in derivatives trading volume indicates an increase in speculative activity as traders believe there is room for further upside in this rally, with no Federal Open Market Committee meeting scheduled for next month," CryptoCompare said in its monthly report. "The increase in derivatives trading volume was also amplified this month as traders speculated on the impact of the Ethereum Merge and potential hard forks on Ethereum." Leverage, not the spot market, fueled a crypto market July rally that restored $240 billion in market capitalization. While leverage boosts returns, it exposes traders to forced liquidations by exchanges it they can't meet margin shortages. Therefore, derivatives-led rallies like July's often inject volatility into the market. That said, overall leverage still remains low compared with early 2021. Another key takeaway from the report is that there was no shortage of people chasing stablecoins despite the collapse of Terra's UST in May and the ensuing volatility in other cryptocurrencies with values pegged to the dollar or other external references. CryptoCompare's report shows volumes for bitcoin-to-stablecoin tether (USDT) spot trading increased 31.5% to 8.78 million BTC in July. Bitcoin spot trading into BinanceUSD (BUSD) surged 80.2% to 2.13 million BTC, surpassing bitcoin-to-U.S. dollar turnover for the first time on record. "Investors continue to prefer safety under macroeconomic conditions," CryptoCompare noted concerning the pick up in bitcoin to stablecoin volumes. The crypto market valuation on Thursday rose to a two-month high of $1.17 trillion, extending July's recovery. Volumes could pick up further in coming weeks as the supposedly-bullish Ethereum merge is due in mid-September. |
Broadest Tightening Cycle in History Signals Pain for Risk Assets |
Chart Sources: BIS, TS Lombard estimates and Jeroen Blokland. |
- The historically unprecedented synchronized monetary tightening across countries indicates the path of least resistance for risk assets, including cryptocurrencies, is to the downside.
- Markets haven't seen this type of global tightening in decades. During the previous Fed rate hike cycle of late 2015 to late 2018, other major central banks held on to low rates and liquidity-pumping asset purchase programs, providing a cushion to risk assets.
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The following are the biggest movers in the CoinDesk 20 digital assets over the past 24 hours: |
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Biggest Gainers Biggest Losers |
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Sector classifications are provided via the Digital Asset Classification Standard (DACS), developed by CoinDesk Indices to provide a reliable, comprehensive, and standardized classification system for digital assets. The CoinDesk 20 is a ranking of the largest digital assets by volume on trusted exchanges. |
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Disclaimer: The information presented in this message is intended as a news item that provides a brief summary of various events and developments that affect, or that might in the future affect, the value of one or more of the cryptocurrencies described above. The information contained in this message, and any information liked through the items contained herein, is not intended to provide sufficient information to form the basis for an investment decision. The information presented herein is accurate only as of its date, and it was not prepared by a research analyst or other investment professional. You should seek additional information regarding the merits and risks of investing in any cryptocurrency before deciding to purchase or sell any such instruments. |
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