Momentum Fades in Cryptocurrency From U.S. Debt Ceiling Optimism

Weekly News Wrap Up

Hype around the Artificial Intelligence (AI) theme, progress on the debt-ceiling bill passing the House of Representatives, and an uptick in the U.S. unemployment rate to 3.7% (vs. expected 3.5%, prev. 3.4%) buoyed risk assets in the last week. In Crypto, Beijing released its white paper on Web3 coinciding with Hong Kong’s opening of cryptocurrency trading on 01 June, analysts are cautious on cryptocurrency prices from a liquidity shock as the U.S. Treasury replenishes its cash reserves, and rumors of downsizing at Binance amid the bear-market.

U.S. equity markets rallied with uncertainty from U.S. debt-ceiling drama receding: SPX+1.83%, DJIA +2.02% and NASDAQ +2.04%. Cryptocurrency majors BTC -5.53% and ETH -1.10% dipped as momentum from last week’s rally cooled amid profit-taking with the former trading below $28,000 and latter below $1,900.

On-chain analysis from @Glassnode shows that Inscription Transactions on the Bitcoin network remain highly popular, especially due to BRC-20 tokens. Currently, these transactions account for an impressive 25% of all transaction fees. The widespread usage of Inscription Transactions has significant implications for the network and its stakeholders, highlighting the network’s evolution beyond its traditional roles. This is indicative of the network’s evolution, expanding its utility beyond its conventional roles as a store of value or medium of exchange.

Cryptocurrency News

• A House bill would make it harder for the SEC to argue crypto tokens are securities. The five-page, bipartisan Securities Clarity Act by Representatives Tom Emmer and Darren Soto would clarify that a digital asset that is sold as part of an “investment contract” does not necessarily become a security
• Texas bill that would limit miners’ participation in cost-saving grid programs stopped in House Committee. It would have limited bitcoin miners’ participation in demand response programs – under which they get paid in credits to turn off their operations when the power grid sees a surge of demand – to 10% and abolish tax abatements for the industry.
• India’s RBI intends to push G-20 to focus on crypto’s macro risks. The move is seen as a step to attract attention towards how crypto can hurt or change the global economy rather than just nations and customers individually.
• Beijing released a white paper aimed at promoting innovation and development of the web3 industry. Dubbed the “Web3 Innovation and Development White Paper (2023),” the paper was released by the Beijing Municipal Science & Technology Commission, also known as the Administrative Commission of Zhongguancun Science Park. The document states that web3 technology is an “inevitable trend for future Internet industry development.”
  Our View: recent developments in China show an opening attitude towards the crypto industry, coinciding with the release of Hong Kong’s regulations on 01 June, could lead to an influx of Chinese capital that has been impacted after China’s ban on cryptocurrencies in 2021. 
• Bitcoin, crypto prices brace for downturn in coming liquidity shock, observers say. Improving liquidity conditions so far this year have lifted risk assets such as cryptocurrencies, but the trend is poised to turn once the U.S. debt ceiling is lifted and the Treasury along with the Fed resume tightening, analysts say.
• TradFi giant TP ICAP brings crypto spot trading to institutional investors. The Fusion Digital Assets marketplace opened last week offering trading in bitcoin and ether versus the U.S. dollar.
• Hong Kong Virtual Assets Consortium launched with Huobi as first member. The new consortium will provide ratings of digital asset trading platforms and cryptocurrency market indexes when it becomes operational.
• Huobi HK offers crypto trading in Hong Kong to retail, institutional clients. The exchange said it applied for a regulated crypto exchange license in Hong Kong on 29 May. Having applied for the license, it is now offering spot trading to retail and institutional clients.
• Binance lays off non-performers amid shrinking market share. Responding to Wu Blockchain’s tweet about Binance’s layoffs, a spokesperson of the exchange told The Block, “We periodically review how we can best allocate our talent to the right teams with the right resources. And sometimes, this inevitably leads to letting go of some employees who might not be performing well or who might not be the right cultural fit.” The layoffs come two months after Binance reportedly said in March that it is “not planning any layoffs” and is instead trying to fill another 500 roles by the end of June.
• Crypto exchange volumes plummet to lowest monthly level since 2020. Monthly cryptocurrency exchange volumes are on track to hit their lowest monthly level since October 2020, with spot volumes across major trading venues just under $424 billion in May. That’s a far cry from May 2022 and May 2021, which saw monthly volumes of $1.4 trillion and $4.25 trillion, respectively, according to The Block’s data dashboard.

Investment Consideration

Our best strategy for the moment is to take at least 1-3 years in Moderate Portfolio because it has a good defense with 50% Fixed Deposit , 30% In DCD and 20% in Staking.  After  all,  we  still  have  potential  returns  in  DCD  and  Staking,  especially in BTC.

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