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Your Weekly Dose of Crypto 01/04/2023



MARKET OVERVIEW Market Overview by Josh Burke, DeFi Trader

  • Blockchain and cryptocurrency continue to evolve at a rapid pace, and this week has seen several interesting developments across the industry. One of the most notable is the news that transactions on Arbitrum have surpassed Bitcoin in terms of volume and fees. This is a significant milestone that demonstrates the growing popularity of layer-2 scaling solutions, which are increasingly seen as a way to improve the speed and efficiency of blockchain networks.


  • Another important development is the surge in the price of CTSI token, which has risen over 65% in the past week. This is largely due to excitement about an upcoming rollup update, which is expected to further improve the speed and efficiency of the Cartesi network. Cartesi is a Layer 2 scaling solution that facilitates the development of decentralized applications (dApps) across multiple blockchains. This is yet another example of how blockchain technology is continuing to advance and evolve, with new solutions and protocols being developed all the time.


  • However, not all news this week has been positive. The recent meme season has been blamed for a surge in ETH gas fees, which have hit a 10-month high. This is frustrating for Ethereum users who are already dealing with high fees, but it's also a reminder of the power of social media to influence cryptocurrency markets.


  • In broader financial news, the markets are currently pricing in a 90% probability of a 25bps hike from the Fed on 3 May (CME FedWatch Tool). This represents a significant shift from just a month ago, when the chance of a hike was only 39%. This is an important development for the cryptocurrency market, as it could signal a shift towards more traditional monetary policies and higher interest rates.


  • Meanwhile, NFT sales and users have dropped to lows not seen since 2021, according to Dune data. This suggests that the hype around NFTs may be starting to cool off, although it's still too early to say for sure. Tether's stablecoin market share is also at its highest point in two years, with a market cap of $81.5B, and digital asset investment products saw outflows of $30M last week.


  • Finally, there have been some interesting developments in the regulatory space. Republicans on the House Financial Services Committee have released a new draft of legislation to regulate stablecoin issuers, focusing on state regulators and issuers. Meanwhile, the French regulator is considering a "fast-track" to MiCA for registered firms, which could make it easier for companies to comply with EU regulations.

GRAPH OF THE WEEK

Bitcoin went from $30’000 two weeks ago to $27’000 earlier this week. BTC reaches more than $29’000 on Wednesday before falling to back to $27’000 within hours as $80M in BTC shorts were liquidated. Shares in First Republic (FRB) have tumbled nearly 50% as investors question its future. In March, First Republic was at the center of the regional banking crisis in the United States and the shares have lost 95% of their value since March 8. Just like when Silicon Valley Bank was going down, all eyes turned to Bitcoin once FRB started to tumble.

NFT MARKETS NFT Markets by Matthew Linares, Senior Analyst

A Look Into the State of NFTs

The State of Crypto 2023 by A16Z highlights the rise of activity in the non-fungible token (NFT) market. After a period of frenzied speculation and subsequent cooling off, NFT volume has begun to increase once again. Over the past few months, there has been a notable resurgence in the demand for NFTs, following a period of intense speculation and a subsequent decline. According to a recent report by DappRadar, the total sales volume of NFTs increased by more than 35% in March 2023, compared to the previous month. This organic use of NFTs is being driven by a growing variety of applications, from art and collectibles to on-chain gaming. The report notes that the rise in NFT activity is being facilitated by competition amongst exchanges, which traded over $100 billion and paid creators royalties of nearly $2 billion in 2022 despite the market's volatility. Additionally, new developments in zero-knowledge systems are unlocking further blockchain scalability, which many believe will benefit the NFT market by enabling more privacy-protecting applications. Another sector of web3 that is rapidly growing and evolving is gaming. In 2022 alone 713 different web3 games were launched. Many of which use NFTs for in-game purchases of clothing, weapons, land, characters, etc.The room for growth in the industry is what many participants and investors are most excited about with nearly $70 billion of in-game purchases made on digital assets in 2022. With only 5% of these digital assets being in the form of NFTs, there is still a lot of room for growth for NFTs within the sector.

Overall, the report paints a positive picture of the NFT market's growth and potential. As more people engage with NFTs, and as the technology continues to develop, many expect the market to see further expansion and innovation. While there are certainly risks and headwinds ahead, the report suggests that the NFT market could be trending positively.



LATEST NEWS: Curated by Sam Eisner, Associate

  • Reddit launched its third-generation (Gen 3) NFT collection, significantly expanding the number of artistic collaborators while turning its focus towards the theme of future realities. Previous collections began releasing on Polygon in June 2022, depicting the platform’s alien mascot Snoo in various styles and themes. Over the following months, Reddit released Halloween-themed avatars and Super Bowl tie-ins, generating significant buzz and attracting over 7.3 million unique wallets to date.

  • Uniswap’s mobile app has finally secured its place in the iOS app store. It is now available for users in “most countries” — including the United States.

  • eToro has announced a crypto and stock trading integration with Twitter.

  • The Reserve Bank of Zimbabwe is set to introduce a gold-backed digital currency to serve as legal tender in the country. The move is a government initiative to stabilize the local currency from continued depreciation against the U.S. dollar. The move will allow small amounts of Zimbabwean dollars to be exchanged for the digital gold token, enabling more Zimbabweans to hedge against currency volatility. Reserve Bank of Zimbabwe Governor John Mangudya said the plan intends to “leave no one and no place behind.” Zimbabwe’s currency trades at 1,001 ZWL against $1 but is typically exchanged for 1,750 ZWL on the streets of Harare, the country’s capital, according to Bloomberg. The country’s annual consumer price inflation reached a one-year low in March at 87.6%, down from 92% in February.

  • Google Cloud announced that it’s rolling out benefits to allow Web3 startups to apply for its Startups Cloud Program. The benefits include grants from foundation partners, which include Aptos, Celo, Solana Foundation, HBAR Foundation and Near.


REGULATORY ROUNDUP:

  • The securities regulator of Argentina has approved a Bitcoin-based futures index set to debut on the Matba Rofex exchange. The Bitcoin futures contract will start trading in May, with the exchange claiming it would be the first regulated Bitcoin futures index in Latin America.

  • The European Parliament has voted through landmark legislation on cryptocurrency which will bring in new rules for the industry across the 27-country bloc. Markets in Crypto Assets (MiCA) passed with 517 votes in favor and 38 against, with 18 abstentions, at a meeting in Strasbourg.

  • The Bank of England (BoE) will consider whether to put limits on stablecoins used for payments in new rules for the sector, Deputy Governor Jon Cunliffe said in a recent speech. The BoE and the Financial Conduct Authority plan on consulting on new rules for stablecoins later this year, Cunliffe said. Last May the bank said it will regulate stablecoins that could have an impact on financial stability.

  • The Texas House of Representatives, a 150-member lower chamber of the Texas State Legislature, has approved a bill that will require cryptocurrency exchanges to maintain reserves ‘in an amount sufficient to fulfill all obligations to digital asset customers.’ The bill seeks to amend the state's Finance Code to add a chapter on digital asset regulation that will ensure exchanges maintain funds in such a manner that all customers should be able to "fully withdraw" their assets. Additionally, the bill will prohibit digital asset service providers from "commingling," or mixing customer deposits, with other accounts including the provider's operating capital, proprietary accounts, digital assets, fiat currency or "other property that is not customer funds."

DISCLOSURE: The opinions expressed herein are those of the author alone and do not represent Wave Digital Assets LLC or any of its affiliates. The author may hold investment positions in some of the assets discussed. Nothing in this email or linked information should be interpreted as an offer or recommendation to buy, sell or hold any security or other financial product. Wave is 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.


This weekly review was given by the teams of Wave digital assets and Criptonite Asset Management

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