Gate Ventures Weekly Crypto Recap (Jan 29, 2024)
Macro Overview
U.S. Stocks Hit New Highs Amid Earnings Optimism and Mixed Economic Signals: U.S. stocks soared to record levels, led by the Dow Jones Industrial Average and the S&P 500 Index. Investors focused on fourth-quarter earnings reports, with Tesla falling sharply after missing estimates, while Netflix recorded gains on subscriber additions. Manufacturing showed improvement, with the S&P Global flash manufacturing index returning to expansion territory. Business conditions remained strong, with higher-than-expected GDP growth for 2023. Weekly jobless claims surprised on the upside, balancing strong economic readings. Treasury yields were little changed. In the bond markets, municipal bond issuance saw strong demand, while corporate bond activity remained subdued. Bank bonds notably outperformed, and positive risk sentiment supported high-yield bonds. Overall, the week saw investor optimism amidst mixed economic signals.
Europe’s Markets Surge on Corporate Results and Stimulus Measures: The pan-European STOXX Europe 600 Index surged 3.11%, buoyed by positive corporate results and China’s announcement of additional stimulus measures. The European Central Bank leaving interest rates unchanged and signaling a more dovish outlook also lifted stocks. Major European indexes posted gains, with France’s CAC 40 Index rising 3.56%, Germany’s DAX advancing 2.45%, and Italy’s FTSE MIB climbing 0.32%. The UK’s FTSE 100 Index added 2.32%. European government bond yields fell, with declines seen in the benchmark 10-year German bond, as well as Swiss and French sovereign bonds of similar maturity. ECB President Christine Lagarde maintained interest rates at record highs, emphasizing that monetary policy would remain restrictive to bring inflation down to the 2% target. While Lagarde noted it was “premature to discuss rate cuts,” she acknowledged the disinflation process was at work, with risks to economic growth still tilted to the downside. Financial markets anticipate rate cuts starting in April or June. Eurozone business activity contracted for the eighth consecutive month in January but at a slower pace, indicating a potential stabilization in the economic downturn.
Chinese Equities Surged after Implement of Stimulus Measures, Boosting Equities: Chinese equities surged following Beijing’s decisive actions to bolster the economy. The Shanghai Composite Index climbed 2.75%, while the blue chip CSI 300 rose 1.96%. In Hong Kong, the benchmark Hang Seng Index surged 4.2%, according to FactSet. The People’s Bank of China (PBOC) announced a 50-basis-point cut in the reserve ratio requirement (RRR) for most banks effective February 5, marking its first RRR reduction this year. Additionally, PBOC Governor Pan Gongsheng revealed a 25-basis-point reduction in interest rates for refinancing and rediscounting loans to support agriculture and small businesses starting January 25. While the PBOC had reduced the RRR twice in 2023, with the last cut in September, the recent reductions mark a smaller decrease compared to the past two years. Chinese banks maintained their one- and five-year loan prime rates as expected, following the PBOC’s decision to hold its medium-term lending rate steady the previous week. Analysts anticipate continued pro-growth measures from the central bank to revive consumer confidence amid China’s prolonged property downturn and deflationary pressures. In regulatory news, Chinese authorities rescinded draft rules introduced in late December aimed at regulating online video games to curb spending and rewards. The initial regulations led to nearly USD 80 billion in market value losses for major gaming companies, sparking concerns among investors about potential sector crackdowns.
The DXY celebrated the uptick in US Treasury bond yields. On Friday, the US Core Personal Consumption Expenditures Price Index (PCE) for December indicated a 0.2% monthly rise, meeting expectations, compared to 0.1% in the previous reading. However, the yearly Core PCE increased by 2.9%, slightly below the anticipated 3.0% and the previous reading of 3.2%.
The FOMC is set to release its statement on Wednesday, January 31. Consensus anticipates the Committee to maintain the Fed Funds rate within the range of 5.25–5.50%. Nevertheless, the prevailing market sentiment leaning towards a rate cut in June 2024 (~50% chance) could potentially weigh down on the USD. Additionally, investors will closely monitor Tuesday’s Housing Price Index and Consumer Confidence figures for additional market cues. Another risk comes from the BTFP, which is set to expire on March 12. The U.S. Treasury might initially resist the idea of program renewal, leading to financial instability from a further tightening in liquidity. This decision could affect the banking sector and the broader financial markets.
Following data indicating faster-than-expected economic growth and inflation rates aligning with the Fed’s 2% target, investors flocked to Treasury bonds, driving prices higher and yields lower.
The benchmark 10-year Treasury note yield retreated to 4.128%, down from its U.S. close of 4.178% on Wednesday. Meanwhile, the two-year yield, which typically reflects traders’ outlook on future Fed fund rates, reached 4.3138%, a decline from its U.S. close of 4.378%. The negative gap between US10Y and US02Y is at a critical point, testing the resistance level of -0.213%.
Gold prices remained stable above $2,000 as investors awaited the release of the US Core PCE Price Index for December. This data will provide insights into the Fed’s stance on interest rates, with implications for gold’s performance. If inflation remains high, it could support the Fed’s current policy stance, while lower inflation may prompt speculation of a rate cut, benefiting gold. Amidst this uncertainty, gold prices are expected to remain range-bound until further clarity emerges from economic data and Fed announcements.
Historically, the volatility is at low levels that is never seen since 2020, with possibility of increased volatility in the near future.
Crypto Markets Overview
1. Bitcoin
On Jan. 22, the crypto market suffered significant bearish headwinds as Bitcoin prices wobbled below $40,000 for the first time in 50 days. At press time on Jan. 25, the global crypto market capitalization has shrunk 7%, with $108.5 billion in valuation wiped out within the weekly timeframe. Last week BTC has fallen below the support level of $42k and the rebound this week is at such a critical level. If BTC fails to break above $42 then the current support level will turn into the resistance level.
Bitcoin has displayed a notable shift in its daily chart, forming the first higher high in nearly two weeks, signaling a potential start to an uptrend. However, to confirm a positive trend reversal, BTC needs to achieve a daily candlestick close above the crucial level of $48,222. Further validation would come with a supportive weekly candlestick close. Investors are closely monitoring these developments to gauge the cryptocurrency’s trajectory in the high time frame perspective.
2. Ethereum
Despite the broader cryptocurrency market experiencing losses of up to 7% this week, Ethereum has managed to keep its losses below the 5% threshold. Notably, Ethereum’s resilience can be attributed to the rising level of whale trading activity recorded on its network. This increased activity among large investors has provided support for ETH’s price performance amid market volatility.
Daily ETHBTC ratio maintained the 0.054 level after the dip close to the support level of 0.053 last week, still above the 0.052–0.053 trading window in the past months.
3. Total Market Cap
This week, the global crypto market cap rose slightly to 1.581t, similar to the level from last week. Starting at the beginning of Jan, the crypto total market excluding BTC and ETH is trending weaker.
4. Stablecoin Flows
Over the last week, USDT’s market cap saw a mild decline, and USDC’s market cap experienced a smaller pump. The combined market capitalization of stablecoins is now around the $135.1b level, a 1.3% increase from last week.
5. Top 30 Crypto Assets Performance
Key Crypto Highlights
1. Highlights
1) Ethereum’s Dencun Upgrade Progresses: Final Testnet Upgrades Confirmed
Ethereum developers have outlined the timeline for the final upgrades of the Dencun protocol on key test networks, Sepolia and Holesky. The successful implementation on these testnets will pave the way for the upgrade to reach the main Ethereum network by late February or early March. Dencun, a significant upgrade termed a “hard fork,” aims to introduce “proto-danksharding,” which will reduce transaction costs on layer 2s and enable more affordable data access on the blockchain. The announcement follows a recent upgrade on the Goerli testnet, signaling progress toward the full deployment of Dencun. If the upcoming tests proceed smoothly, Ethereum’s mainnet will soon undergo the transformative changes brought by the Dencun upgrade.
2) Celo’s Blockchain Migration: Layer-2 Suitors Vying for Affection Amid Financial Terms Review
Celo, a standalone blockchain, is on the lookout for a suitable partner as it plans to migrate to become a layer-2 network on Ethereum. The selection process has become akin to a reality show, with major players such as Arbitrum, Optimism, Polygon, and zkSync all competing to win Celo’s favor. Over the past few months, developers at Celo have been evaluating technical proposals from these teams. Now, the focus is shifting towards the financial aspects of the partnerships. Terms like revenue sharing and incentive programs are crucial considerations for Celo as it seeks to make an informed decision.
3) Polygon’s ‘AggLayer’ Innovation Bridges Blockchain Divide
Polygon Labs is gearing up to launch its groundbreaking “AggLayer” next month, introducing a novel approach to blockchain architecture. Built upon zero-knowledge proofs, the AggLayer aims to address the limitations of both modular and monolithic blockchains. By leveraging ZK proofs, users on the AggLayer can seamlessly transact across different chains without the need for bridging funds. This innovation eliminates barriers to entry, enabling users to engage in activities on various chains without friction.
2. Key Venture Deals
1) Bitcoin Layer-2 solution B² Network closed Seed funding round from Hashkey Capital, OKX Ventures, etc.
B² Network, a cutting-edge Bitcoin Layer-2 solution, has successfully closed its Seed funding round, drawing support from prominent investors including Hashkey Capital, OKX Ventures, IDG Capital, KuCoin Ventures, ABCDE Capital, Waterdrip Capital, and Antalpha Ventures. While the exact amount raised remains undisclosed, the funding signifies a significant milestone for the project’s development.
2) EDX Markets closed Series B funding round led by Pantera Capital, Sequoia Capital
EDX Markets, a trusted platform for digital asset trading, has closed its Series B funding round with backing from Pantera Capital and Sequoia Capital. The platform offers efficient and liquid trading experiences for cryptocurrencies and digital assets, following best practices from traditional finance and employing a unique non-custodial model.
3) Semiconductor company focused on ZKP Ingonyama raised $21m in a Seed funding round led by IOSG Ventures, Walden Catalyst, Geometry
Ingonyama, a semiconductor company specializing in Zero Knowledge Proofs, has secured $21 million in a Seed funding round. The investment was led by IOSG Ventures, Walden Catalyst, and Geometry, with participation from RockawayX, Maven 11 Capital, IOBC Capital, Mirana Ventures, Samsung Next, BlueYard Capital, and Starkware.
The number of deals closed in the previous week was 28, with Infra leading the way with 11 deals, representing 39% of the total number of deals. The sector with the least number of deals is Social with 3 deals funded representing 11% of the total number of deals last week.
The total amount of funding raised in the previous week was $156.6m, with the Infra sector leading the way with $79.5m, representing 51% of overall funding. The sector with the least amount of funding in the previous week was GameFi with $8.3m raised, representing 5% of overall funding last week.
The positive momentum has been maintained since the end of November. Total weekly fundraising value has increased to $281.4m for the four weeks in December, and $156.6 at the end of January.
