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Weekly Crypto Market Overview

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It is worth admitting that the period of relative calm and slight summer recovery in the historically hyper-volatile crypto market is coming to an end. The Fed chief’s speech before the weekend shook up all global markets. And if the main goal of the representative of the world’s largest central bank was to calm the market and bring more certainty, he certainly did not do it in the best way.

At the end of the 8-minute speech, equity indices lost between 3% and 5%, and the capitalization of the crypto market fell by more than 10% to around USD 930 billion for the week.

The stance of the main dollar liquidity regulator is putting direct pressure on the prices of high-risk assets. The decision to depend on future statistics and the lack of transparency when deciding on the refinancing rate deprives officials of initiative, with the result that all market attention will be focused on the release of economic indicators in mid-September, primarily the consumer price index.

News

Paraguayan President Mario Abdo Benítez has vetoed a bill that would have regulated commercial activities related to digital assets, including cryptocurrency mining. Abdo’s decision to veto the bill appears to be linked to the condition of recognizing cryptocurrency mining as an industrial activity with an electricity tariff 15% higher than the current industrial tariff. The bill will return to both houses of the Paraguayan legislature, where lawmakers can reconsider the proposal or veto it.

Animoca Brands, a gaming software development and venture capital firm, is set to announce that it is seeking additional capital in the form of convertible bonds. The crypto investment company has struck a $100 million deal with Singapore state fund Temasek as the main sponsor. Convertible bonds can be converted into equity at a later date. This method of raising funds is sometimes used when a company does not want to reduce its equity stake or has been unable to raise equity capital.

The a16z fund has led a $50m Series A fundraising round for Proof, which is a private collection of 1000 collectors and artists involved in NFT. Collab+Currency, Flamingo DAO, SV Angel, VaynerFund, and Seven Seven Six also took part in the round, the team said on Tuesday. Alexis Ohanian’s venture capital firm Seven Seven Six led a $10 million Proof funding round in April. This is a16z’s first investment in Proof, putting it on a par with companies such as Yuga Labs and Larva Labs — with the notable difference that its two main NFT projects are in the public domain.

Market on-chain data

On-chain data from the glassnode portal suggests that a local price bottom is forming. Even though the market is currently low-liquid and new price lows may be reached, the peak of maximum losses for BTC holders has passed. This summer’s correction is comparable to the declines of 2015 and 2018, which were followed by a protracted period of consolidation and a phase of new market growth, based on the average monthly Bitcoin ownership yield.

Options market

The high correlation between crypto assets and traditional markets forces market participants to hedge their investments against possible negative economic news. Before the Fed chief’s speech, traders actively bought short-term put options at 18 000 and 19 000 to hedge against a possible surge in volatility. The 20 000 level is still strong and important support for the market, and in case it is broken on the spot market, the price targets and interest levels on the options market will also shift.

For ETH, the moment of a consensus shift and the realization of the associated new opportunities is getting closer. As long as there remains theoretical uncertainty about the success of this transition, traders avoid opening positions in the medium term or trading distant execution levels. The concentration of interest and liquidity in a narrow range could then lead to an explosion in the intrinsic value of more distant options — by date (November) and by the strike. It should also be noted that with increased regulatory pressure on the DeFi ecosystem, some traders are using put options with strings of 1100 and 1200 and a late September strike date as a potential hedge to invest in altcoins.

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