Bitcoin and cryptoassets were little changed over the week and remain in their narrow trading range amid low volatility and exceptionally thin trading volumes. After a slow and uneventful August, flows and liquidity in cryptoassets continue to dry up. Both decentralized exchange and derivatives volumes hit pre-2020 levels in terms of some metrics. At the same time, fund flow data show that outflows from publicly-traded crypto products continue in September. In monetary policy news, the ECB raised interest rates to an all-time high in a attempt to cool persistently high inflation while ECB officials also cut their growth forecasts for the eurozone. On Thursday, the central bank decided to hike its deposit rate by 25 basis points – for the 10th consecutive time – to 4% but signaled that its cycle of rate hikes is near its end. Unlike in Europe, the market does not expect the Fed to raise rates next week but to leave them unchanged throughout the rest of the year. Earlier this week, US inflation data also came in above expectations at 3.7% year-on-year (yoy) for headline CPI. The inflation gauge increased by 0.6% vs. July – the largest month-over-month increase of the year – fueled by higher energy costs such a 10.6% increase in gas prices. Meanwhile, yields of US Treasury notes remain elevated, hovering near their 15-year highs amid the hot inflation report.
Sentiment in crypto markets is shaping up to remain subdued for a second consecutive month, according to a set of key metrics. A look at trading volumes, supply dynamics and fund flows underlying the most important digital assets – bitcoin, ether and stablecoins – leaves no doubt that investors have been holding back. Despite the brief surge in volatility experienced during the recent sell-off to $26k in BTC as well as two weeks later, in the wake of Grayscale’s successful challenge of the SEC in the courts, bitcoin’s realized volatility is hovering near historical lows. Subdued volatility, in turn, has often been a precursor to heightened volatility in the near-term.
According to a recent Glassnode report, liquidity across the digital asset market continues to dry up, with both on-chain (DEXs) and off-chain (spot and derivatives) volumes reaching historical lows. The data analytics firm points out that stablecoins have also been experiencing a persistent decline in outstanding supply as redemptions are made across all major stablecoin assets with the exception of Tether (USDT). We believe ongoing redemptions in stablecoins can at least be partly attributed to the fact that short-term US Treasury yields have exceed yields of significantly riskier on-chain stablecoin yields for some time. As a result, US based institutions have moved capital to higher-yielding interest rate markets. Overall, stablecoins have registered a persistent decline in supply since April 2022, as redemptions commenced following the collapse of the Terra/Luna USD stablecoin. Glassnode data shows that a total of $43 billion in USD stablecoins has been redeemed since the high set in March 2022, representing a total decline of 26%.
On the fund flows front, sentiment remains equally poor, with many publicly traded crypto products such as ETFs and ETPs registering outflows. Digital asset investment products saw withdrawals to the tune of $59 million last week, according to CoinShares’ weekly fund flow blogpost. The current trend in weekly outflows has now hit $294 million over the past weeks. Bitcoin experienced the largest outflows on the order of $69 million last week, while short-bitcoin products saw their largest single week of inflows since March 2023 at roughly $15 million of new funds.
On the upside, long-term crypto holders appear unfazed. In Bitcoin, HODLing remains the primary market dynamic. Glassnode data shows that the supply held by long-term holders has reached a new all-time high at 14.74 million BTC. Conversely, the supply held within the short-term cohort which represents the actively-traded portion of the market, has fallen to 2.46 million BTC – the lowest level since 2011.
Market Overview
The global cryptoasset market capitalization currently amounts to almost $1.1 trillion – compared with $1.08 trillion last week, with bitcoin accounting for 47.1%. Among the Top 30 cryptoassets by market cap, Toncoin (TON) outperformed, gaining 27.2% over the week. The price of bitcoin (BTC) rose by 2.5% to $26,530 and the price of ether (ETH) was little changed at $1,635. The total value locked (TVL) in DeFi is sitting at roughly $38.8 billion, with Ethereum (excluding Layer 2s) currently accounting for about 55% of TVL.
This Week’s Headlines
- Franklin Templeton files with SEC for spot bitcoin ETF
- Coinbase CEO Brian Armstrong says bitcoin is most important asset in crypto, confirms Lightning integration
- Binance.US CEO Brian Shroder departs, The Block reports
- German finance heavyweights develop fully-insured crypto staking offering, plan 2024 release
- Deutsche Bank to delve into crypto custody and tokenization with Swiss firm Taurus
- PayPal launches crypto to USD off-ramps
- Gemini Earn customers will be made “nearly whole”, DCG and Genesis say about remuneration plan
- Cosmos Hub upgrades to add liquid staking module allowing $1 billion worth of staked ATOM to be deployed as capital in DeFi
- Crypto exchange Bullish among bidders for bankrupt FTX
- Miner refunds transaction fee after Paxos accidentally pays more than $500,000 for a small bitcoin transaction
- The Monetary Authority of Singapore (MAS) issues business bans against Three Arrows Capital founders
- Telegram integrates TON-based crypto wallet for its 800 million users
- SEC goes after Ashton Kutcher’s Stoner Cats NFT project, two SEC Commissioners publish letter of dissent against the decision
Notable Deals and Fundraising
- Crypto VC Electric Capital aims to raise $300 million for its third fund
- Bitget unveils $100 million fund to invest in exchanges, data analytics and media
- Thai banking giant KBank sets up $100 million Web3 and AI fund
- Investment firm Reverie launches $20 million crypto venture fund
- Mountain Protocol launches yield-bearing stablecoin, announces seed fundraise
- Animoca Brands raises $20 million to expand Web3 identity project Mocaverse
- Layer N raises $5 million in a seed round co-led by Peter Thiel’s Founders Fund
- Movement Labs raises $3.4 million in a pre-seed round to grow “Move”
