Weekly market review. ETH hold the line!
After peaking locally at $1.167 trillion at the beginning of last week, the total cryptocurrency market capitalisation index began a precipitous decline. By the middle of the week, the index stood at $1.089 trillion, and by the end of the period it had fallen to $972.5 billion. The final decline amounted to 16.6%.
The bitcoin situation generally followed the same paradigm. At the beginning of the week, the price of the “first cryptocurrency” exceeded 25 000 (25 040), but immediately after reaching a local peak, a precipitous decline began. By the middle of the week, the price dropped to 23 400 and by the end of the week to 20 960. The total decline by the end of the week was 16.3%.
Despite the approaching “merger” in the Etherium network, the price of the asset correlated quite strongly with bitcoin during the past week. Etherium reached its local peak (around the $2016 level) a day before bitcoin reached its peak, and began the week slightly lower (from $1908). Then there was a further decline to 1564. The week’s decline amounted to 18.02%.
Safeharbor, a web3 storage solution for small and medium-sized enterprises, announced the closing of a preliminary $7 million Series A round. Investors in the round included venture capital firm Yunqi Partners and hybrid venture capital and hedge fund Webvision. Other investors include M77 Ventures, Prime BlockVentures and Waterdrip Capital. Singapore-based Safenet was founded in 2019 by Wade Wang, Max He and Bruce Wang. The founding team is a collective of tech industry heavyweights: Bruce spent years working in the tech teams at Tencent and Alibaba, while Wade played a founding role in the creation of Damai.com, China’s largest e-commerce platform for concert ticketing.
Web3 investment fund CoinFund has raised $300 million amid a period of turbulence in the cryptocurrency markets. The new fund is backed by institutional investors, family offices and founders of cryptocurrency start-ups. A limited list of partners includes Teacher Retirement System of Texas, Adams Street Partners, StepStone Group, Accolade Partners and Theta Capital Management.
HUSD, a stablecoin issued by Stable Universal, lost its peg to the US dollar, dropping to $0.88 on Thursday. The stablecoin is currently priced at $0.90. The first leg of the price drop gave way to a recovery to 97 cents. However, this rebound was short-lived as the asset fell again. The price decline also led to a reduction in the liquidity available for HUSD trading. The reduction in liquidity was probably due to traders exiting their HUSD positions. At the moment, the Stablecoin has almost regained its peg to the US dollar.
A group of around 50 cryptocurrency privacy advocates participated in a protest against the arrest of Tornado Cash developer Alexei Pertsev at Dam Square in Amsterdam. On 12 August, Pertsev was arrested by Dutch authorities in the Netherlands, two days after the US government imposed sanctions on Tornado Cash claiming it was used to launder stolen funds for North Korean actors. Dutch authorities claim that the people behind Tornado Cash made large profits from these transactions. Protesters argue that Pertsev should not be held responsible for writing open-source software, regardless of how it is used by unscrupulous actors.
Bitcoin has continued to trade in a relatively narrow channel of 18 000–25 000 since early August. Despite the recent perception that cryptocurrencies are highly correlated to the traditional market, it is noticeable that the price dynamics of ETH and BTC have been significantly different in recent months. Firstly, ETH has shown an independent and strong outperformance on the back of the upcoming blockchain validation consensus change. Secondly, crypto assets easily lost their anchor to the stock market under the influence of local news — this is true for both price rises and falls. Third, while the stock market has been in a consolidation zone since early August, ETH and BTC have been much more vulnerable to price declines, losing much of their acquired capitalisation on news of a possible broad address blocking by OFAC.
The likely prolonged nature of the coming market decline is also indicated by glassnode’s onchain analysis. Assuming the hypothesis that the current bear market is similar to the previous one, assessing the time for the price to be below the average buy price, one can conclude that at least another quarter of uncertainty and pressure on prices lies ahead.
The price decline before the weekend had little impact on the medium-term optimism of ETH options traders. Buying Call options with strikes in the range of 3000–4500 continues to be one of the most popular strategies. Additionally, the block trades of Call spreads and “butterflies” are very popular. The difference in movement dynamics between BTC and ETH has not gone unnoticed, leading to cross volatility trading — when options are sold for ETH and at the same time options are bought for BTC.
Overall, despite a sharp decline on the last trading day of last week, the market remains relatively stable. The reassessment of the DeFi sector’s strategic outlook and the specifics of validators in the face of possible increased regulatory pressure has so far yielded to positive expectations related to the ‘merger’ in the Ethereum network.