Collective rate hike announcements from the Federal Reserve, Bank of England (BoE), European Central Bank (ECB), and the Swiss National Bank (SNB) sent BTC and ETH prices tumbling over the last weekend, past Crypto Twitter’s psychological bottoms of $19,665 and $1,448 respectively, which represent the all-time-highs of the previous crypto bull cycle circa end-2017 / early-2018. BTC dipped as low as $17,760 over the weekend while ETH went to $897 before rebounding.
Source: CoinGecko
Prices of both major crypto assets were already on the decline throughout last week, as latest data indicated stubbornly high inflation despite fiscal tightening moves already undertaken by the Fed Reserve and several other central banks. Financial markets quickly reacted to the data with growing expectations of accelerated fiscal tightening, in particular for the Fed to hike rates by 75bps instead of the previously announced 50bps, and the monetary authorities duly obliged by the end of the week. By Tuesday (14th June), total crypto market cap had dipped below $1T, the first time it has been this low since Jan 2021.
On Sunday (19th June), the Crypto Fear & Greed Index hit its lowest point of 6 since August 2019.
Big leverage unwind in OTC markets over the weekend which resulted in a barrage of spot selling
— Andrew Kang (@Rewkang) June 20, 2022
You got the liquidation cascade (it just wasn't in derivs)
A lot of pressure released, probably range a bit before seeing lower
Not in long term extreme value zone yet for spot buys
Reports of prominent crypto hedge fund Three Arrows Capital running into insolvency and being liquidated by their creditors last week exacerbated sentiments in the crypto market. Some accounts on Crypto Twitter suggested that the collapse over the weekend was also partly due to liquidations in the OTC market. Since Sunday, BTC and ETH prices have crept back up to ~$20,000 and ~$1,100 respectively, though total crypto market cap still remains below $1T at $945B.
With carnage across crypto markets, we take a look at some of the largest market indicators.
Bitcoin
Source: Blockchain.com
After hitting its ATH of 230mTH/s on June 12, the Bitcoin hashrate experienced a sharp drop to ~205mTH/s, representing a >10% drop amidst reports that falling BTC prices are making mining less profitable and miners have had to start selling their BTC reserves to cover costs (see 7th June market coverage article).
#Bitcoin Long-Term Holders contributed to the sell-side, liquidating around 178k $BTC at prices below $23k.
— glassnode (@glassnode) June 19, 2022
This represents around 1.31% of their total holdings, and returns aggregate LTH balance to Sept 2021 levels.
4/9 pic.twitter.com/uwXKUu4omn
Glassnode also reports that BTC’s long-term holders have also begun to sell their BTC, with a 1.31% decline reported since May levels. On the flip side, the number of BTC addresses with ≥10BTC has continued to rise, despite declines in number of addresses with ≥100BTC.
Source: Coinglass
On the derivatives end, BTC Futures Open Interest (OI) has retreated since the start of the year, and has now sunk to its lowest level since mid-2021. Funding rates remain extremely low across all derivatives exchanges. There were also significant liquidations totaling $1.7B last week.
Ethereum
For Ethereum, all eyes remain on the path to the Merge.
🧊 Gray Glacier Upgrade Announcement 🧊
— Tim Beiko | timbeiko.eth 🐼 (@TimBeiko) June 16, 2022
At block 15,050,000, the Ethereum network will undergo the Gray Glacier fork to push back the difficulty bomb, hopefully for the last time ever 😁
If you run a node or validator, make sure to upgrade 🔜!https://t.co/wmPqzQSgL7
As we updated last week, the difficulty bomb is being delayed. The latest choice of block number indicates that the difficulty bomb will only activate mid-September, instead of mid-August as initially proposed and discussed during the June 10th All Core Devs Call. The hard fork to delay the difficulty bomb, known as Gray Glacier, is expected to occur Wednesday next week, 29th June 2022. This hard fork should alleviate the heightened network difficulty that has spiked due to the early activation of the difficulty bomb last week, thereby also easing current blocktimes (~14.5 secs, should be closer to ~13 secs).
Source: Glassnode
Inspite of falling ETH prices, total value staked in ETH2 continues to grow, and is now at ~10.7% of total ETH supply. This is matched by total validator count, which now stands at 403,910.
stETH:ETH Ratio
Source: CoinGecko
Tangential to ETH staking is obviously stETH, and the ongoing saga of stETH:ETH ratio. It seems attention and trading activity has largely moved away from stETH for now, and the ratio seems to have settled around 0.94~, though the Curve stETH-ETH pools seems to still be heavily unbalanced.
From an Ethereum Futures perspective, the behavior of the market largely mimics those of BTC Futures, with OI and funding rates being relatively low. However there were more than twice as much liquidations on ETH Futures last week compared to BTC Futures, reaching a total of $3.7B.
Other Things We’re Watching
Source: CoinGecko
Share of Stablecoin Market Cap over total crypto market cap ex-BTC and ETH have hit a historic ATH of >33%, i.e. more than a third, despite the collapse of UST and declines in actual total stablecoin market cap from its utmost peak of $188B to $138B now. The growth in the ratio is perhaps the reflection in the broader decline of all altchains and other projects,
Of the top 5 stablecoins, only USDC has seen an actual increase in market cap since the UST collapse, reaching $55B. Meanwhile, continued FUD on market leader USDT has seen its market cap shrink significantly from ~$83B at peak to now at ~$68B.
Source: Bloomberg, CoinShares
The latest report from CoinShares indicate that total assets under management (AUM) for digital asset funds fell to its lowest point since February 2021, at $36B. This is down 59% from its peak in November 2021. However despite seeing almost $100M in fund flows in June alone, year-to-date (YTD) flows remain positive at $403M.
Upcoming Economic Data Release
Tuesday, June 21: US Existing Home Sales
Wednesday, June 22: UK CPI
Thursday, June 23: German Manufacturing PMI; US Initial Jobless Claims
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