August 21st, 2023 — 📉 BTC back to $26K

Get an overview of crypto market liquidity from August 14th to August 21st, 2023.

Top crypto market headlines:

• Coinbase International volumes pick up, topping $280 million in one day — 8/19/23 (link)
• Mastercard forms CBDC partner program with Ripple, Consensys — 8/18/23 (link)
• Crypto traders hit by $1.04 billion in liquidations amid intense market volatility — 8/18/23 (link)
• SEC Set to Greenlight Ether-Futures ETFs in Win for Crypto Industry — 8/17/23 (link)
• Coinbase Financial Markets, Inc. secures approval to bring federally regulated crypto futures trading to eligible US customers — 8/16/23 (link)
• BitGo secures $100 million in Series C round at $1.75 billion valuation — 8/16/23 (link)
• Europe’s First Spot Bitcoin ETF Lists in Amsterdam — 8/15/23 (link)
• Crypto custodian Prime Trust files for bankruptcy in Delaware — 8/15/23 (link)
• Crypto market maker GSR scales back, CFO and other top executives depart — 8/15/23 (link)
• Kraken Ventures seeks $100 million for second fund — 8/14/23 (link)

The Week Ahead:

Wednesday 8/23:

• HCOB Manufacturing PMI Flash AUG (Germany)
• Nvidia Q2 Earnings (US)

Thursday 8/24:

• Durable Goods Orders MoM JUL (US)

Friday 8/25:

• Fed Chair Powell Speech (US)
• ECB President Lagarde Speech (EU)

Weekly Insights Report:

Crypto markets went through a blood bath on last week’s “Black Thursday,” with BTC going as low as $25,250 before picking up. The 4 hours between 2:30 PM ET and 6:30 PM ET on Thursday saw more than $1 bn in long liquidations on futures markets, more than when FTX collapsed and the largest BTC long liquidation event since June 2022 (3AC bankruptcy). BTC is currently trading at ~$26K, its level before news broke out that BlackRock was filing for a spot BTC ETF in June.

The speed of the drop is unprecedented and can be explained by the parallel occurrence of three main events:

• China’s Evergrande filed for bankruptcy in Manhattan. It’s the world’s most heavily indebted property developer, and many fear the recent real estate problems could spread into other parts of the economy. There were also reports that Chinese authorities had asked banks and some funds to avoid net equity sales amid a slump.
• A WSJ story said that SpaceX had already sold the totality of its $300m+ BTC holdings.
• Record low liquidity and volatility levels in the crypto space in the weeks leading to the event. Prices dropping had a snowball effect leading to over $1 bn in liquidations across the major cryptos.

TradFi markets are also feeling the rise of risk-off sentiments, as the S&P 500 closed its third consecutive week in the red, its worst performance since February. US 10Y yields hit 15-year highs at 4.27%, the highest since 2007, and foreign sovereign bonds also spiked (Japan’s 10Y at its highest since 2014, UK at its highest since 2008). Minutes from the July FOMC meeting showed that most members remain primarily focused on inflation, suggesting another hike is possible in the Fall.

Coinbase received approval from the National Futures Association (NFA), a CFTC-designated self-regulatory organization, to operate as a Futures Commission Merchant (FCM). The endorsement allows Coinbase to offer eligible US customers access to crypto futures trading from its platforms. As of now, the company can provide BTC and ETH futures products. This is a massive win for Coinbase and the broader crypto ecosystem in its regulatory fight, as it discounts the SEC’s claims that Coinbase isn’t willing to register correctly. The SEC is also reportedly preparing to approve the first ETH futures-based ETFs. Several firms, including Volatility Shares, Bitwise, Roundhill, and ProShares, have filed to launch such ETFs. The SEC approved a Bitcoin futures ETF in 2021 after Bitcoin futures trading was allowed on the CME, so it would make sense for them also to approve an Ether futures ETF. This comes at the same time many companies are vying to launch ETFs based on spot Bitcoin itself, which has been a slower approval process.

News broke last week that GSR, one of the first and largest crypto market makers, has begun to scale back its crypto operations with several executives, including CFO Jonathan Hugh, leaving the firm. GSR claims its retreat has been chiefly due to an intense bear market and heavy regulatory scrutiny on the industry. This is another blow to global crypto market liquidity after market makers Jane Street and Jump Trading retreated from crypto trading in the US in May.

Mastercard is forming a central bank digital currency program to foster CBDC innovation, with Ripple, Consensys and Fireblocks among the initial partners. The program aims to bring together crucial blockchain and payment services players to collaborate on CBDC development. While Mastercard did not detail its plan for the new program, the payment giant noted that it will “help central banks understand how to develop a CBDC that adds something new and valuable to the economy.” US-based crypto custody firm BitGo announced it raised $100m in funding at a $1.75 bn valuation. The firm gave little information about the investors’ identities but revealed they were from the US and Asia. The funds will fuel strategic acquisitions, with two deals already underway.

On a weekly basis, BTC is down by 11% and ETH is down by 9%.

Check out full report

Weekly Anomalies Analysis:

On August 17th, around 09:50 PM, BTC-USD prices on Coinbase-Pro were 600 bps higher than other major CEXs after ~$1 million buy orders in less than 5 seconds.

Check out full report

Other major crypto headlines:

• Securitize Acquires $40B Crypto Fund Manager Onramp Invest — 8/18/23 (link)
• Payment Processor Checkout.com Drops Binance Over Money Laundering, Compliance Concerns — 8/18/23 (link)
• FTX-tied Alameda gets $175 mln claim on Genesis bankruptcy estate — 8/17/23 (link)
• Ledger launches PayPal integration for buying bitcoin and ether — 8/16/23 (link)
• Binance Connect winds down, cites shift in market dynamics — 8/16/23 (link)
• Binance files for protective order against SEC — 8/15/23 (link)
• Sei Mainnet is Live After Testnet Sees More Than 7.5M Wallets Created — 8/15/23 (link)
• FarmVille Creator Zynga Reveals First Ethereum NFT Game: Sugartown — 8/14/23 (link)
• CoinDesk to lay off part of editorial staff in preparation for sale of stake: Report — 8/14/23 (link)

And in case you haven’t seen, here is a selection of our latest articles:

• Why will at least 80% of centralized crypto exchanges (CEXs) disappear? NEW!
• Market Making Overview: TradFi vs Crypto
• Commentary notes on Credit Suisse’s rescue deal and recent banking turmoils (2/2)
• Commentary notes on SVB’s failure, Credit Suisse, implications for crypto, and where do we go from here (1/2)
• The Future of Trustless and Decentralized Cross-Chain DeFi — Focus on Interlay
• On Blockchain Interoperability — Focus On The Polkadot Ecosystem