Market Spotlight: The Absence of a Market Catalyst

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In this month’s Market Spotlight blog, we explore the the most significant liquidation event since the FTX crisis, Binance’s dwindling market share, the latest ETF news and an exploration of the best performing altcoins of the month.

This blog was created using CCData’s award-winning research and data. You can learn more about our data solutions here.

August was on track to record another month of low volatility and participation, consistent with the narrow trading range of digital assets in recent months. However, on August 17th, an unexpected event occurred, resulting in the most significant liquidation since the FTX crisis. This event also marked the highest reduction in open interest for BTC trading pairs for the year.

The event signalled a rare volatility spike for August, which has seen volatility downtrend consistently since the start of the month. Bitcoin’s price reached ~$25,375 following this event, according to CCCAGG.

Interestingly, within an hour following the crash, positive news regarding Ethereum’s Futures ETFs was announced, causing sudden and sharp price action which adversely affected late shorters.

Since the event, BTC and ETH have been trading within a tight range. This is a common trend which tends to occur after large moves as the orderbook refills following the large wipeout in speculative positioning.

In August, the SEC also announced delays to the ARK 21Shares Bitcoin Spot ETF application, seeking public comments and pushing the deadline back for at least 21 days. The SEC is able to extend its review process for ETF applications by up to 240 days, as such, the final approval for the ARK Bitcoin ETF will likely take place in January 2024, with later applications needing to wait until March 2024.

In macro news, Core CPI came in at 0.2% on August 10th, matching expectations, whilst CPI year-on-year (YoY) came in at 3.2% vs 3.3% expectation, up from 3% YoY in June, which provides a mixed signal; while the YoY CPI was below the forecast, it still showed a rise from the previous month’s inflation data.

Inflation still remains heavily above the targeted 2% level, meaning work is not complete on the monetary policy side and hikes may still be required to achieve this outcome.

Altcoins & The Wider Digital Asset Market

The market dip, as usual, impacted the whole market more severely than Bitcoin, which remained to be the most resilient asset with lower influence compared to the majority of altcoins (the exception being Ethereum’s ETH and Tron’s TRX, which have been performing more resiliently than Bitcoin represented by their return to volatility ratio).

Despite the overarching trend of decline and negative returns among cryptocurrencies, certain coins/tokens remained relatively unscathed by the downturn and even posted positive returns. Examples from the Top 100 assets by market capitalisation include RUNE, HBAR, ASTR & FXS, which recorded gains of 67.4%, 12.7%, 11.9%, 2.20%, respectively, till the 22nd of August.

Looking from a basket perspective, AI tokens have shown significant resilience, yielding an impressive 18.4% increase despite recent market turbulence. AKT led the basket with an exceptional 248% return, followed closely by FET at 94.2% month-to-date till the 21st of August.

Looking also into open Interest BTC Open Interest Dominance has been increasing decently after recording a yearly high of 50.0% end of June. Despite a minor drop BTC still holds a significant share of Open Interest at 45% on the 22nd of August.

Exchange Analysis:

Since recording the lowest quarterly volumes since Q4 2019 in Q2, monthly volumes have continued to remain low on centralised exchanges, with only $333bn spot trading volume recorded in August so far as of the 21st.

Furthermore, the market cap of stablecoins has continued to decline for the seventeenth consecutive month. This suggests that new significant capital has not started to flow into the market or has failed to match the pace of crypto-to-fiat redemptions.

Looking at exchanges, the market share of Binance continues to slide down and is on trend for the 7th consecutive monthly decline in August. Surprisingly, the trading volumes on Huobi Pro spiked in recent weeks, resulting in it being the second-largest CEX by spot trading volume.

However, this might be attributed to the recent concerns around the outflows from the exchange, suggesting that traders might have sold their assets and transferred off the exchange.

Nevertheless, data suggests that crypto assets will still need more catalysts to blow past key resistance levels that have hindered the bullish price action in the last six months.

Though the sell-off last week was partly backstopped by the positive news regarding Futures ETFs, history has shown that the approval of crypto futures often marked the top of a bullish run, in ode to the approval of CME Bitcoin Futures in 2017 and ProShares’ BITO in 2021. The SEC decision on the spot Bitcoin ETFs, which is likely to be delayed till the next year, looks primed to be the catalyst that can spur the next breakout move for Bitcoin.

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