important point

  • Cryptocurrency prices are soaring, with Bitcoin up 20% in the last three weeks
  • Many high-profile Bitcoin ETF filings spark optimism in the market
  • While internal liquidity remains low and some worrisome trends emerge,
  • Regulatory issues still exist, Coinbase and Binance face an uncertain future
  • The macro environment remains uncertain, and the prospect of a delayed impact from monetary tightening looms large.

It is not the case that the cryptocurrency market is overly excited. Over the past few weeks, positive vibes have returned to the industry, led by the seminal filings for Bitcoin spot ETFs by the world’s largest asset managers, BlackRock and Fidelity.

In addition, Fidelity has joined the ranks of leading trad-fi operators including Schwab and Citadel to back EDX, a new exchange offering trading in Bitcoin, Ether, Litecoin and Bitcoin Cash.

Bitcoin rose 20% over the past three weeks to break through the $30,000 level, while Ether surged 16% over the same period, approaching the $2,000 level again. at first sight, fear and greed The Index, an interesting metric that measures the overall feeling of space, has a score of 61 (0 representing extreme fear and 100 representing extreme greed), clearly belonging to the “greedy” category. .

Still, a look under the hood raises some concerns. First, if ETF filings are apparently the reason for the recent stock price rally, is the 20% rise justified? It has informed Nasdaq and CBOE (which filed the paperwork on behalf of the asset manager) that there were not enough details regarding the “surveillance sharing agreement.” The SEC has previously said that bitcoin trust sponsors would need to enter into sizable regulated markets and oversight sharing agreements.

While the application can be renewed or re-filed (CBOE has indeed re-filed since then, and the Nasdaq will likely follow suit soon), this development is much-needed. It hints at how difficult it was to cross the line with spot ETFs. Despite the big companies involved, there is no guarantee that these will be approved, and the SEC has rejected Fidelity’s applications in the past, even rejecting them in January 2022.

In fact, it feels inevitable that bitcoin spot ETFs will one day become freely traded, but given what else has happened in this space and the current state of bitcoin, past numbers A 20% increase in just weekly filings is a significant increase. We will delve deeper into the market.


Liquidity lags continue and this factor cannot be overstated, but indeed the final approval of spot ETFs should help.

As we wrap up the second quarter of 2023, a look at centralized exchanges per Kaiko’s data shows that trading volumes have fallen again over the past three months, and 2020 before bitcoin and cryptocurrencies embarked on a relentless price rally. It was the lowest number since the year. A whirlwind takes place in the financial world.

However, a drop in liquidity worsens the move to both the upside and the downside. This probably contributed to Bitcoin’s surge over the past few weeks and since the beginning of the year, which is now up 83%.

However, market participants should be concerned that liquidity and trading volumes are so low. From a trading standpoint, many of the forays made during the pandemic, at least from a liquidity standpoint, have slowed, if not reversed, when it comes to Bitcoin’s position as second only to the real asset class.

As further proof of this, the chart below shows the total balance of stablecoins across exchanges, which has seen a staggering 60% decline over the past six months, with $26 billion in outflows.

That said, there is some optimism that suggests a brighter future if these spot ETFs are approved. If you look at the derivatives market volume, it’s pretty stable. In fact, it will rise significantly in the second half of 2022. Perhaps this means that the spot market has been more affected by regulatory crackdowns. Either way, it’s not as dire as what we’re seeing in the spot market.


At the moment, it all comes down to regulation when it comes to cryptocurrency-specific risks. While we discussed ETF filings, June also saw two key moments: formal lawsuits against Coinbase and Binance.

The two cases are very different. Just in case.Binance lawsuit not surprising, exchanges are always circumventing guidelines and laws. The charges represent a huge list of various offenses, including trading against customers, manipulating trading volumes, encouraging users to circumvent geo-restrictions and securities violations.

But it is the latter accusation that is central to the lawsuit against Coinbase, and is the most important point. This is also the reason for the Coinbase lawsuit. much more interesting. Remember, this allegation comes from the SEC, the same agency that presided over Coinbase’s April 2021 IPO. Why would the SEC list an unregistered stock exchange on a US stock exchange?

But let’s get back to what this means for the cryptocurrency market. While Bitcoin appears to have a unique status in the eyes of the law, numerous other tokens have been designated as securities by the SEC. Nonetheless, the stock has skyrocketed since news of the Bitcoin ETF came out. Does this make sense?


After all, cryptocurrencies will be cryptocurrencies. Prices fluctuate, and trying to determine why is often foolish. But last month, despite some bad news on the regulatory front, it feels like we’ve seen some very positive price gains.

Moreover, despite the pause at the last Fed meeting, the macro picture has not changed much. Fed Chairman Jerome Powell’s comments made it clear that this was a moratorium, not a shift in policy.

“Looking forward, almost all committee members believe that further rate hikes are likely to be appropriate later in the year,” Powell said in announcing the moratorium.

The market believes him. I have undone the odds from the Fed futures on the following chart. This suggests that there is currently an 86% chance of a 25bps rate hike at the next Fed meeting in three weeks, and only a 14% chance of holding rates again. I put this side-by-side with the same odds that the market reported just over a month ago (Bitcoin has risen 20% since then) to show that weak forecasts cannot explain the price spike. (The odds of not going up are actually decreasing).

As I said earlier, virtual currency will migrate to virtual currency. But as the sector is notoriously volatile, it would be wise to pause and consider whether a sudden wave of boom is justified. Given the liquidity situation and regulatory issues, there are plenty of reasons to be hesitant.

Then when I overlay the macro photo, the photo is blurry again. We forget that we are in the midst of the fastest rate hike cycle in modern history, with interest rates rising all the way from zero to over 5%, with further rate hikes expected later this month. should not be

Monetary policy lags and the scale of its tightening is enormous. Emotions may feel like they’ve changed dramatically, but there’s still a long way to go.

By Jules

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