10/30/2023 0 Comments

1. US Remains Largest Crypto Market But Stablecoin Activity Shifts Away

The United States is the world’s largest cryptocurrency market, accounting for 24.4% of global transaction activity, according to a recent report by Chainalysis.

The report, released on October 23, revealed that there was an estimated $1.2 trillion in value received on-chain between July 2022 and June 2023 in the U.S. Moreover, institutional activity makes up 76.9% of North America’s crypto transaction volume, and activity is split between centralized exchanges and DeFi, it added.

Stablecoins Shift Away

However, it also reported that crypto activity is falling due to the ongoing ‘war on crypto’ by financial regulators in the wake of last year’s high-profile collapses. Activity has fallen further this year following the collapses of a number of major banks in the U.S. in March.

Moreover, stablecoin activity is also shifting away from America. “We’ve also observed a relative decline in North America’s stablecoin usage, compared to other digital assets, beginning around February 2023,” the report noted.

Confidence in stablecoins such as Circle’s USDC was rattled following the collapse of Silicon Valley Bank, where the firm had massive exposure. Additionally, the shift has reduced regulatory oversight of dollar-pegged stablecoins in the U.S.

Congress has dragged its feet in regulating and legitimizing stablecoins despite a number of bills proposed by pro-crypto politicians.

In summary, crypto and stablecoin regulation will play an important role in reversing the trend of declines in North America.

DeFi Adoption Still Grows

Despite the aforementioned regulatory challenges, DeFi adoption is still on the rise within the North American region, as reported earlier this week.

The overall on-chain value that changed hands in the period between July 2022 and June 2023 is estimated to be around $1.2 trillion, which is just over 24% of the global number.

At the same time, DeFi usage in the North American region has continued to increase by raw transaction volume, especially for protocols with highly speculative trading.

2. Bitcoin’s On A Tear But Not All Crypto Is Booming

Bitcoin’s price briefly surged past the $35,000 mark this week and some analysts think that growing small-investor participation may bode well in the coming weeks, but the rise in the cryptocurrency hasn’t helped the rest of the market.

Trading related to the news of a potential approval of a spot bitcoin exchange-traded fund (ETF) intensified, pushing up the price above $30,000 and squeezing shorts, according to Deutsche Digital Assets Head of Research André Dragosch. The short squeeze led to more than $250 million liquidation of short positions over the past three days, according to data from Coinglass.

At the same time, the Bitcoin Dominance Index (BDI)—a measure of bitcoin’s share of the overall crypto market—reached heights not seen since April 2021.

Bitcoin Dominance Index at Highest Levels in Two Years

While a rising bitcoin tends to lift all crypto assets, the rest of the market has not been able to keep up with bitcoin this week. In fact, this has been the trend for nearly a year, as the BDI has seen a steady increase since the collapse of crypto exchange FTX in November 2022. Today, BDI is about 54.4%— its highest level since April 2021.

Indeed, the darlings of the previous crypto bull market have not fared well relative to bitcoin over the past year. For example, the native crypto asset of Ethereum, ether, is up only 14% in the past year as opposed to a roughly 66% gain for bitcoin.

At the same time, Bloomberg reported that crypto tokens are being delisted from exchanges at a rate never before seen in the industry’s history, according to data from Kaiko.4 Nearly 3,500 crypto token delistings have either already taken place or are expected to take place in 2023, and Coinbase (COIN), which is currently being sued by the U.S. Securities and Exchange Commission, is said to have delisted 80 trading pairs this month alone.

Small Investors Laying Groundwork For Bitcoin Bull Market?

Dragosch observed increased bitcoin wallet activity for both small and large invetsors, but there was one number that stood out. An increase in “median value of transfer volumes on the Bitcoin blockchain”—an indicator of small-investor participation—could hold some clues about the price direction for bitcoin.

“Small-investor participation is a necessary condition for a sustained bull market in crypto assets,” Dragosch wrote.

3. Public miners weigh in: Why is a potential ETF propping the bitcoin price?

Bitcoin is a new focus of the financial world right now as growing market momentum pushes it past near-term price highs. The excitement stems from the increasing chances that at least one spot bitcoin exchange-traded fund (ETF) is approved for launch in the U.S. soon and a recent discussion led by Roundtable anchor Rob Nelson offered insight into why.

Nelson was joined by a panel of bitcoin mining industry leaders, including Frank Holmes of HIVE Digital Technologies (HIVE), Sam Tabar of Bit Digital (BTBT) and Adam Swick of Marathon Digital Holdings (MARA). 

Reports of an impending approval for BlackRock’s spot bitcoin ETF proposal pushed the bitcoin price past the $35,000 mark for the first time in 16 months. That spike begs the question: How much of the anticipation around a spot bitcoin ETF approval is already factored into its current price?

Holmes, a veteran in the gold market with over 34 years of experience, drew an insightful parallel between bitcoin and gold. According to Holmes, banks and regulatory authorities were initially wary of gold until the introduction of the GLD gold ETF. This ETF not only legitimized gold but also led to a dramatic tenfold increase in its price over two decades. Holmes believes that bitcoin could potentially follow a similar trajectory, especially given the market’s historically volatile reaction to mere rumors.

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Harvey CHEN

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