GB Market Commentary 14/09/2021
by Marcus Sotiriou
Yesterday was a volatile day for Bitcoin and the crypto markets. After Bitcoin had dropped almost 5% in the first half of the day, news of Walmart accepting Litecoin for payments was reported on Reuters, Bloomberg News and CNBC. Litecoin and the whole market saw a great rally for 15 minutes before Litecoin and Walmart confirmed that this news was fake, causing Bitcoin to retrace back down. Since yesterday’s lows of $43,300 approximately, Bitcoin has recovered to the high $45,000 region, as a 4-hour bullish divergence on the RSI indicator has been confirmed, indicating short term continuation to the upside. The crypto markets have shifted into a range-bound environment since the crash last week, between $43,000 and $47,000, with neither bulls or bears having a firm grip.
On-chain metrics continue to show whale accumulation, as supply distribution (shown above) shows whales have added recently. Whale holdings have increased by roughly 44,000 BTC ($2bn) in the past week, and 103,600 BTC ($5bn) in the past 3 weeks. Yesterday MicroStrategy announced their purchase of 5,050 BTC at an average of $48,099, leaving the remaining buyers of the 98,000 BTC unknown. This means we may see a flood of institutional BTC purchase announcements over the coming weeks or months.
Despite bullish on-chain data, the overall sentiment in the market has turned negative, with the fear and greed index at fear levels. This could be in part due to regulatory concerns. Commentary from Gary Gensler, the SEC chairman, to the US Senate was released yesterday, which indicated that Gensler will be targeting stable coins and that the SEC believe that the majority of tokens listed on major crypto exchanges at the current time are in fact securities and should be treated as such. The Litecoin fiasco yesterday was a poor look for the industry and could be used as ammunition if the SEC go after crypto exchanges. In summary, this news of stringent regulatory action brings short term risk to the industry.
Adoption from major financial institutions continues as EY partners with Polygon in order to action Ethereum’s blockchain utilities, further proving the longevity of the crypto space. EY claim that this move will raise transaction volume, deliver predictable costs and fix troubles for corporate prospects. Other layer 2 scaling solutions for Ethereum have seen tremendous progress recently - in particular Arbitrum and Optimism. Arbitrum had a TVL (total value locked) of around $170m on Friday. After the weekend though, this raised to a staggering $1.6bn, as yield farms for speculative tokens launched. Activity for Optimism grew significantly over the weekend also, with over 9,000 unique depositors, from below 1,000.
Lastly, it was announced over the weekend that Coinbase will use XRP for remittance services. Coinbase has a new page where users will be able to send money to other Coinbase accounts using XRP or USDC. This news of Coinbase integrating XRP suggests that they are not worried at all about Ripple’s SEC lawsuit. Many are speculating that Coinbase is getting ready to list XRP soon as the trading tab for XRP is now in place. Ripple has continued business internationally throughout the lawsuit, as Ripple’s on-demand liquidity recently went live in Japan, with SBI remit – the largest money transfer provider in Japan. Ripple do not seem worried at all about the lawsuit, which I think for good reason. A settlement looks like it may be on the cards soon, as former SEC director Hinman recently admitted the SEC never warned Ripple of XRP being a security, after saying they did in his deposition.