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Binance Australia: Market update for January 2022

2022-01-31

Welcome to our first monthly newsletter from Binance Australia, where we discuss everything crypto, markets and noteworthy news. 

Markets

Federal Reserve Chair Jerome Powell has confirmed in a statement post the Federal Open Market Committee this week that “it will soon be appropriate to raise the target range for the federal funds rate”. This comes as no surprise, with US Inflation hitting a 40-year high, putting the annual inflation rate at 7%, the largest 12-month gain since 1982. Speculated to occur in March, this will be the first monetary policy tightening since the onset of the coronavirus nearly two years ago. The yield on the 10-year Treasury notes rose sharply whilst we continue to see stock prices fall. The Fed’s balance sheet stands at nearly $8.9 trillion, more than double its pre-pandemic size, with experts expecting an accelerating reduction of the Fed’s monthly bond purchases. Growth stocks have been the hardest hit as markets re-evaluate their future potential profits, shifting valuations from the change in the risk-free rate. VIX volatility metric continues to increase as ongoing FUD does not ease investors. 

Source: Google 

BTC 

BTC has historically seen a low correlation with the equity markets, however since the influx of institutional money hitting the crypto markets in 2020, BTC and the S&P500 (SPX) have been moving in similar direction. Since BTC’s peak in November, BTC has lost over 45% of its value. Other digital currencies have followed in tandem erasing more than $1 trillion in market value. Positively, hash rates continue to increase, and Miners’ Position Index stays flat, indicating miners are not selling. Companies such as Tesla, Block, MicroStrategy and Coinbase continue to hold bitcoin on their balance sheet and we look forward to see who will join them in 2022 earnings calls. 

Source: Delphi Digital 

ETH

ETH has seen a more significant correction over the past week, dropping it below $2.5K as money markets on ETH experience their largest liquidation event to date, amounting to over $200m. MakerDAO was responsible for 50% of liquidations as their second-largest vault owner with $600m of debt was at risk of liquidation. Fortunately, the owner was able to repay some of their positions to prevent further liquidation. Zooming out, Cathie Woods ARK Invest is still bullish on Ethereum, stating, “As the preferred collateral in DeFi and the unit of account in NFT marketplaces, Ether (ETH) has the potential to capture a portion of the $123 trillion in global M2.” in their latest Big Ideas report. 

TVL

Total Value Locked is still holding strong, despite slight dips. ETH still accounts for ~60% of TVL, followed by Terra, BSC and Fantom at 7.95%, 6.13% and 5.38%, respectively. TVL can be used as a measure of blockchain usage which rose from less than $1B during the 2017/2018 crypto boom to north of $190B today. 

Source: defillama.com 

In the news:

  • BlackRock Inc. filed on Friday with the SEC that they are creating the iShares Blockchain and Tech ETF that would invest in companies involved in the “development, innovation, and utilization of blockchain and crypto technologies”. Another positive sign of crypto shifting into the arena of mass adoption. 

  • The Fed released a long awaited paper on a potential U.S central bank digital currency (CBDC). “The introduction of a CBDC would represent a highly significant innovation in American money,” the authors said in the report. No official stance has been taken and the Fed has asked the public to submit answers on the 22 questions posed in the report. 

  • A16Z plans to raise $4.5B for two new crypto funds.

  • Crypto VC fund Paradigm launched a $2.5B fund for web3 companies and protocol. 

Food for Thought

Total investment into institutional focused custody firms in 2021 hit $3.4B+, ~4.8x the amount raised in the last ATH in 2018 according to The Block research. This puts crypto investment at around 5% of all VC investments, which also rose 100% for 2022 according to Crunchbase.

All values in USD

Disclaimer

This content is for general information purposes only, not investment advice. Cryptocurrencies including Bitcoin are volatile and fluctuate on a day to day basis, thus trading such requires proper diligence and sound judgment in order to evaluate the risks associated. Nothing in this newsletter constitutes an investment or legal recommendation, nor should any data or content mentioned in the newsletter be relied upon for any investment activities.You should consider seeking independent legal, financial, taxation or other advice to check how the newsletter information relates to your unique circumstances. 

 

Binance Australia is not affiliated, associated, endorsed by, or in any way officially connected with any individual or organisations mentioned in the newsletter. Binance Australia is not liable for any loss caused, whether due to negligence or otherwise arising from the use of, or reliance on, the information provided directly or indirectly, by use of this newsletter and expressly disclaims any and all liability for any loss or damage you may suffer.