Good morning. Here’s what’s happening:
Prices: Bitcoin fluctuated between flying high above $25K and sinking to $23.6K during Thursday.
Insights: Alameda Research was ranked as one of the top market players in the crypto industry. Startups are increasingly being forced to delay their token launches by the collapse of Alameda Research and its parent company FTX.
Bitcoin Soars Above $25K, But Tumbles Below $23.5K
Bitcoin rose again on Thursday, but it didn’t rise as investors had second thoughts about persnickety inflation, Fed monetary policies and the crypto industry woes.
Recent trading of the largest digital asset according to market capitalization was at $23,618, a 4.8% decline over the past 24 hour and still well below its earlier high above $25,100. This mark was BTC’s highest trading level above $25,000 since August. It reflects rising optimism about inflation as well as the economy. Both seemed to disappear in just a few hours, as a 0.7% unexpected month-over-month spike on January’s Producer Price Index(PPI) indicated that the U.S. central banking monetary had not yet succeeded at taming the price rises that have plagued the economy for over a year.
The day brought up industry-specific issues that reminded us that crypto was still on rough ground. D.A. Investment Bank is another example. Chris Brendler, Davidson analyst, downgraded Coinbase to neutral (from buy); a New York judge in the criminal fraud case against Sam-Bankman Fried warned that he could revoke Bankman-Fried’s bond if Bankman Fried continued to defy bail conditions. Platypus Finance, a decentralized finance (DeFi), suffered a flash-loan attack and a possible loss of $8.5 Million.
Other cryptos turn red
Ether was on a similar trajectory to BTC. It rose well above $1700 for the second consecutive morning before falling. The $1,650 price of the second-largest crypto market capitalization was just recently changed hands, more than a percentage point lower. Other cryptos were also affected by APT, which is the token of layer one protocol Aptos. It dropped 7.9% on the news after climbing more than 9% earlier in day. MATIC, the native crypto layer 2 blockchain Polygon Network, was up 6.3% despite losing some of its gains earlier. After rising handsomely, popular meme coins DOGE (and SHIB) were both in the red.
After spending most of the previous 36 hours in green, the CoinDesk Market Index was down 3.8%.
The PPI data showed equity markets flinching at the data, with the tech-heavy Nasdaq and the S&P 500 all falling well above a percentage point. Investors are still wary of a strong job market, which is an indicator that economic growth remains solid.
Many analysts are still optimistic about the future of crypto. “The U.S. CPI has been playing a smaller role because more evidence has shown inflation is stubborn to tackle and investors are adapting to that and cautiously getting into high-risk assets as a way to cope,” Adrian Wang, CEO of digital assets wealth management company Metalpha Limited said before the Thursday downturn.
He stated that “we can expect the market to go more bullish ahead.”
Darius Tabatabai is the co-founder and CEO of Vertex Protocol. It is a decentralized exchange based in London. Tabatabai stated that although prices were affected by the SEC’s investigation of BUSD earlier in the week, the market seemed to ignore the news and retail sales data suggesting a soft landing for inflation. “We may be witnessing another bull market,” Tabatabai said.
The biggest gainers
|Polygon||MATIC||4.1%||Smart Contract Platform|
|Loopring||LRC||1.1%||Smart Contract Platform|
|Terra||LUNA||-7.6%||Smart Contract Platform|
Alameda Research’s Token Launches are Postponed by Startups: Contagion Effects
The crypto market is experiencing an “Alameda gap”, with many projects postponing token launch plans due to a lack liquidity, despite rising bitcoin (BTC), and ether (ETH).
CoinMarketCap data shows that new applications for coin fell from 10,264 to 6,350 during the first quarter of 2022. After crypto exchange FTX and Alameda Research, its sister concern, collapsed in November, the drop accelerated towards the end of the year. Alameda, one of the biggest market makers, provided billions of dollars in liquidity to small-cap and large-cap tokens before it went bust.
The number of applications received each year is only 3,000.
Guilhem Chaumont CEO of Flowdesk, a Paris-based market maker, stated in an email that “post-FTX we have witnessed liquidity dry as upto 50% on major coins.” “The liquidity reduction on smaller market caps has been worsened by Alameda closing all support for token issuers, and other large market makers having reduced their exposure and activity.”
Chaumont stated that he advises projects to delay by three to six more months. Flowdesk anticipates that the bear market will continue for 12-18 months.
The recently decentralized exchange dYdX announced last month that it would delay its token unlock (which would have released more than 150,000,000 tokens to founders and early investors) until December 2023 in the hope that the market will recover. According to people familiar with the matter, it was due to concerns about market liquidity.
Since Alameda’s downfall, liquidity in the bitcoin and ether markets has declined to 2%. This makes it difficult for traders to place large orders and does not affect the market price.
The 2% depth is a collection the buy and sale orders within 2% of a mid-price. This is the average of the ask/offer prices quoted at any given moment. Kaiko, a Paris-based data provider, has shown that the market depth of Bitcoin was 2% in January. This despite the fact that the cryptocurrency surged more than 40%.
“Crypto liquidity has been dominated by a few trading firms: Wintermute and Amber Group, B2C2, Genesis and Cumberland. In a November briefing note, Kaiko stated that we can expect a substantial drop in liquidity due to the loss of one the biggest market makers.
Arkham Intelligence data shows that balances at major market makers have fallen. Cumberland has a balance at $75 million, down from $220 million in December. Wintermute is at $122 million. This compares with $1.7 billion last Feb. and $4 billion at October 2021’s peak.
Amber Group, which in December dropped a sponsorship deal for U.K. soccer club Chelsea, has gone through multiple rounds Layoffs. Arkham claims it has a balance of $92million, down from $350 million at its peak in mid-2022.
March Zheng, co-founder and managing Partner of Bizantine Capital, stated that this is not necessarily a bad thing.
He explained to CoinDesk that although crypto markets are cyclical, they need stress tests like those in the past few months to show their resilience for the long-term. Although new token issuance activity is down, it offers more opportunities for top-ranked projects and incumbents.
Zheng identifies developments in Hong Kong to be bullish sentiments.
The market is still rallying, with bitcoin surpassing $24.5K during Asian Business Hours Thursday, while shorts suffered substantial liquidation losses.
Blockchain Fest 2023 (Singapore)
European Blockchain Convention 2023 (Barcelona)
H1HKT/SGT(UTC): China foreign direct investment (Jan./YoY)
If you haven’t seen it yet, here’s the latest episode of “First Mover” (CoinDesk TV):
Bitcoin surges to its highest level since August; Sam Bankman Fried’s Bond co-signers revealed
Bitcoin reached $25,000 just shy of the mark, its highest level since August 15. Digital Asset Strategist Joe Orsini also shared his reaction to the market. Prosecutors also asked a judge for a modification to the terms of Sam Bankman-Fried’s release on bond. This would have prohibited him from using the internet or cellphones except under very limited conditions. After Bankman-Fried’s bond signers were revealed, James Murphy, a Securities Lawyer, intervened.
Stablecoin Market Reshuffle on the Stage with Dramatic BUSD: Binance’s wager on its BUSD stablecoin may backfire and result in a reorganization of who is winning in crypto’s dollar pegged token markets.
Crypto Miner CleanSpark Continues Bear-Market Strategy by Buying 20K Bitmain’s Latest Rigs: CleanSpark’s computing power will be 37% higher with the Bitmain Antminer Pro machines.
Only 31% of Staked Ether may be profitable, Binance Research: When prices were between $400 and $600, around 2 million ETH were staked. Binance Research says these stakers are among the most committed Ethereum believers.
As Alameda Research’s contagion effects linger, crypto startups are increasingly putting off Token Launch Plans: CoinMarketCap data shows that token listing applications have declined precipitously as liquidity dried up.
Blur Surpassed OpenSea Wednesday, Nansen shows: Blur’s rapid ascent threatens OpenSea’s NFT marketplace dominance.