U.S. Federal Reserve Pauses After 10 Rate Hikes; Retains Hawkish-tilt

Weekly News Wrap Up

After cooler inflation in May at 4%, the U.S. Federal Reserve opted to pause its rate-hiking cycle after 15 months of consecutive rate-hikes, raising interest rates by 500bps. However, it maintained a hawkish-tilt leaving room for 1-2 more rate-hikes by end-2023 as they assess the impacts of tighter monetary policy on the economy. Elsewhere, the ECB raised interest rates by 25bps as expected, while the BoJ held its monetary policy unchanged. In Crypto, BlackRock files for a Bitcoin ETF and Hong Kong continues to woo crypto-players to the city state.

U.S. equity markets: SPX +2.58%, DJIA +1.25% and NASDAQ +3.25% rallied on the back of a U.S. Fed pause. Cryptocurrency majors BTC +1.53% and ETH -1.88% had a wild week falling as much as -4.3% and -7.1% below $25,000 and $1,630 respectively on the back of secondary trading implications from the U.S. SEC’s charges against Binance and Coinbase from the prior week before recovering as we headed into the weekend.

Looking on-chain, data from @glassnode indicates a shift in capital allocation between BTC and ETH. Although the percentage trading volume for both assets was equally matched by the close of 2022, Ethereum’s share in futures volume has experienced a considerable decline in 2023, showing a clear reversal pattern relative to BTC. As seen in the Perp Volume Dominance chart, BTC currently accounts for 65.5% of the trading volume between these two leading cryptocurrencies. This indicates that investor preferences are potentially changing as investors are injecting more liquidity towards BTC as more of the ‚Äúsafe haven‚ÄĚ asset compared to ETH.

BTCvsETHPerpVolumeDominance

BTCUSD19Jun23

ETHUSD19Jun23

Cryptocurrency News

  • Binance.US and the U.S. Securities and Exchange Commission ordered to start negotiations amid asset freeze tussle. A U.S. federal judge rejected the SEC’s request to order a freeze on Binance.US’ assets ‚Äď provided the parties could agree on limits.
  • Thailand launches retail Central Bank Digital Currency pilot with 2 banks and a Singapore-based payments service provider. Bank of Ayudhya (Krungsri), Siam Commercial Bank and Singapore-based payments service provider 2C2P will partner with the Thai central bank on the project. Each of those organizations has made an app available to selected users that includes a wallet and a QR code scanner.
  • Bank of China issues $28M in digital structured notes on Ethereum blockchain, the first Chinese financial institution to issue a tokenized security in Hong Kong.¬†
  • Hong Kong lawmaker invites Coinbase to apply to operate in the region amid U.S. crackdown. The country began accepting applications for crypto trading platform licenses on June 1, and Coinbase has expressed interest to build in Abu Dhabi, Canada and Singapore.
  • BlackRock close to filing for Bitcoin ETF application, according to a person familiar with the matter. BlackRock will be using Coinbase (COIN) Custody for the ETF and the crypto exchange‚Äôs spot market data for pricing.
    Our View: given Greyscale’s hurdles to listing a Bitcoin ETF, if this is approved, would confirm U.S. regulator’s preference for TradFi firms to provide crypto services
  • Crypto.com to suspend service for US institutional clients. The Singapore-based crypto exchange will be shutting down its institutional exchange service for US customers on June 21, 2023 due to ‘limited demand’ in the ‘current market landscape’, according to a statement from the company. The lack of demand mentioned in the statement can likely be attributed to the ongoing lawsuits against major exchanges Binance and Coinbase.¬†
  • MetaMask Institutional to integrate with Fireblocks MPC platform. Fireblocks will be added to the list of MetaMask Institutional custody technology providers, allowing its users to perform token swaps and stake ETH using the app‚Äôs dashboard.
    Our View: the collaboration between one of the industry’s largest custody-providers and the most popular wallet application could open the doors for more institutional interest, providing a decentralized option away from Centralized Exchanges (CEX).
  • Ethereum developers cement final lineup of changes in ‚ÄėDencun‚Äô upgrade. Proto-danksharding is at the heart of the package, with other improvements for storage on-chain, as well as minor code changes related to the Ethereum Virtual Machine. The upgrade expected later this year includes five Ethereum Improvement Proposals (EIPs) that are designed to add more storage for data and reduce fees.
  • Curve Finance now lets users mint crvUSD for staked Ether. crvUSD is a decentralized stablecoin issued by stablecoin swapping protocol Curve Finance, backed by a basket of tokens and controlled via smart contracts. Users can put up their stETH as collateral, and Curve shall automatically mint crvUSD. Borrow currently stands at 6% and will be automatically liquidated to maintain the intended $1 peg of crvUSD if the value of supplied collateral falls.
    Our View: this service has implications to the rising popularity of liquid staking derivatives (LSD) and the structural changes in stablecoin leadership that are currently ongoing Рmore utility for stETH could see greater demand, with crvUSD as a viable alternative to USDc, DeFi’s current stablecoin-of-choice, especially given the unfriendly regulatory environment in the U.S. that Circle might be exposed to.
  • Uniswap releases version 4 code, allowing for new types of liquidity pools. The new version introduces “hooks” that enable developers to create customized liquidity pools, fostering innovation and flexibility. Moreover, features like time-weighted average market makers and on-chain limit orders could be introduced. This release of the code initiates the process of community engagement and iteration before the final deployment of Uniswap V4.

 

 

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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