Last week was still a dull week for the cryptocurrency market. Bitcoin was still consolidating in the range of US$29,000. Although it once fell to US$28,500, it then rebounded to US$29,000 due to the downgrade of US debt. The momentum was obviously lacking, and other cryptocurrencies did not compare. There is a strong willingness to trade. Judging from the weekly increase, no crypto tokens in specific sectors have surged. The overall trading volume of the market can be said to be quite deserted. After all, the most popular project has shifted from AI to superconducting concept stocks. The latter We won’t talk more about it.
In addition to superconductors, last week was also the day for the financial reports of many heavyweight companies in the US stock market. The results were similar to analysts’ expectations. There was no big fluctuation in the market as a whole, with both good and bad results. However, the financial reports of Coinbase and Robinhood were the center of our confirmation. The cryptocurrency exchange's trading volume dropped a lot after being investigated by the SEC in the second quarter of this year. The financial reports showed that the fee income of both companies dropped significantly. Analysts attributed this to SOL, ADA, After main chain tokens such as MATIC were delisted, it meant that most retail investors were not interested in frequently buying and selling Bitcoin, a relatively stable mainstream currency, and the final trading volume was lower than expected.
On the other hand, as the application for Bitcoin spot ETF continues to be delayed, investors have lost patience and interest in such topics, and the popularity of other topics is also fading. In addition to the previous AI concept stocks losing momentum last week, even now The most popular superconductor is just a flash in the pan. The most outstanding performer in the cryptocurrency market is MakerDAO, which continues to rise, with a weekly increase of 13%. This is because the MakerDAO business model hits the core of the current market, and the DAI ecosystem can absorb the benefits of USDC. Legal currency funds are transferred to investment in U.S. debt. As U.S. debt yields rise, Maker will have more room to raise deposit interest rates to attract deposit funds.
Although the cryptocurrency market has been quite boring these past few weeks, the shrinkage of trading volume in the past two weeks has been particularly severe, resulting in almost no fluctuations in market prices. If investors want to make profits from the cryptocurrency market now, they probably only have to What is left is selling options to collect premiums, and you have to rely on long and short positions to make money. There is very little room for fluctuations. On the contrary, the traditional financial market is full of more opportunities. With Fitch Ratings downgrading U.S. debt, bond prices have fallen. As interest rates rise, many investors turn their investment focus to "short-term U.S. bonds."
The biggest news in traditional financial markets last week was that U.S. government bonds were downgraded by Fitch Ratings. The agency downgraded its bond rating for the first time due to poor fiscal governance and discipline in the United States, and adjusted its outlook from "negative" to "stable", it became the fuse that triggered the sharp decline in the U.S. stock market, and attracted hedge funds to come forward and call for shorting U.S. bonds. However, Musk, the best investment adviser, even came out to fight against Taiwan, claiming that short-term U.S. government bonds are " Brainless investing."
A. On July 31, Curve Finance was attacked by hackers due to protocol vulnerabilities, resulting in a loss of US$47 million.
Curve Finance, the Ethereum DeFi exchange protocol, reported on July 30 that hackers exploited the Vyper vulnerability to steal its stablecoin fund pool (alETH/msETH/pETH). Officials stated that the same vulnerability exists in several versions of the Vyper software. The vulnerability includes three updated versions: 0.2.15, 0.2.16 and 0.3.0.
Security company Ancilia said that about 136 contracts were affected, and an estimated $47 million in cryptocurrency was withdrawn from its pool. According to early investigation results, some Vyper compilers did not correctly implement its reentrancy protection. , causing multiple functions in the DeFi protocol to be called and executed at the same time, allowing hackers to withdraw the cryptocurrency in the fund pool.
There are also other DeFi projects affected by this vulnerability. Projects such as Ellipsis and Alchemix's have reported suspicious activities. Curving Finance CEO Michael Egorov later confirmed on Telegram that CRV worth $22 million had been stolen, which also caused the CRV price to go past It plummeted 15% in 24 hours.
B. August 3, triggering market turmoil, Fitch downgrades U.S. Treasury credit rating to AA+
Yesterday morning, Fitch Rating, a U.S. credit rating agency, downgraded its rating on U.S. Treasury bonds to AA+ and changed its outlook from "negative" to "stable." Citing the U.S.'s poor fiscal discipline and repeated increases in its debt ceiling, interest rates on U.S. Treasury bonds have The ratio to overall GDP continues to rise. The current U.S. debt interest rate is about 3.6% of GDP. The agency predicts that the U.S. fiscal situation will deteriorate in the next three years. This move also attracted U.S. Treasury Secretary Yellen to criticize the credit rating model as outdated and incorrect.
Since U.S. Treasury bonds were downgraded once by credit rating agencies in 2011, which triggered a considerable one-day drop of 7% in the S&P 500 index, investors followed the past pattern of selling stocks yesterday, but everyone knows that the U.S. Bonds are still the safest assets in the world, and the market is just looking for an excuse to sell, causing long-term U.S. bond yields to surge. However, this news also slightly pushed Bitcoin back from $28,500 to the $29,000 range.
Regarding the excessive borrowing and poor fiscal discipline of various governments, Bitcoin not only has the ability to fight inflation as a limited number of digital assets, but also has the ability to fight against the debt crisis caused by excessive national borrowing and the subsequent potential inflationary pressure. In countries with serious inflation, such as Argentina, Brazil or Turkey, Bitcoin plays its role as a reserve of value. Instead of holding local currencies or bonds, it is better to buy Bitcoin.
C. August 4 Robinhood’s cryptocurrency trading revenue fell 18% in the second quarter of this year
The cryptocurrency bear market and the overall market's recent low volatility have led to a continued decline in the willingness of most investors to trade. Online brokerage Robinhood released a financial report showing that the company's cryptocurrency trading fee income was only US$31 million, compared with US$3,800 in the first quarter. US$10,000 fell by 18%. Analysts speculate that in addition to the small fluctuations in cryptocurrency, the reason may also include Robhinhood delisting most main chain tokens in order to comply with SEC regulations, such as ADA, SOL, MATIC and other crypto tokens. currency.
In comparison, Coinbase benefits from institutional custody services, and its revenue performance is not as ugly as Robhinhood. Even if Coinbase has removed the above-mentioned main trading products, it still relies on the custody income of Blackrock and other institutional customers to make its revenue and profits exceed Most analysts expect revenue to fall from US$700 million to US$660 million, of which managed services amount to approximately US$330 million, representing an overall quarterly decrease of only 10%.
In the second quarter of this year, the SEC asked major exchanges to remove main chain tokens, causing a sharp market drop. This made most exchanges have a hard time. Previously, tokens such as ADA and SOL were the most popular products for investors. , only Bitcoin and Ethereum remained after being delisted, which had a huge impact on the exchange's revenue. Subsequently, the good news about XRP made the market better, but the overall trading revenue continued to decline.
The decline in U.S. bonds has become an attractive investment target, which will reduce the activity of speculative funds.
In view of the downgrade of the credit rating of U.S. government bonds, Bill Ackman, the founder of the hedge fund Pershing Square Capital Management, announced that he would short U.S. long-term bonds, believing that U.S. bond yields will rise further, pointing out that U.S. inflation As the pressure remains unresolved, the Fed will push interest rates higher, and the 30-year government bond yield is more likely to rise from 4% to 5.5%, but do you still remember the GME meme stock incident? The biggest fear of funds is to announce their strategies to the world.
Buffett was the first to speak out against Ackman's views last Thursday, revealing that he would not have any doubts about the downgrade of U.S. government bonds. He still believes that the U.S. dollar is the world's most important international reserve currency, and the Berkshire Hathaway he manages is even more so. It is one of the companies that holds the largest amount of public debt. As of July this year, Berkshire has invested a total of US$104 billion in U.S. short-term debt. Musk even supported Buffett on Twitter (now renamed X), commenting that investing in short-term U.S. debt is "Brainless investing".
Compared with Ackman's short-selling comments, Buffett and Musk's influence is obviously greater. Short-term U.S. bonds began to attract capital inflows, causing bond yields to suddenly plummet. Taking two-year bonds as an example, they fell from 4.9% fell to 4.8%, which shows the influence of these two "investment consultants". In addition, the latest employment report released by the United States on Friday showed that the growth in the number of job openings has slowed down, with only 187,000 new jobs in July. The number of job openings was lower than the expected 200,000, which means that the Fed's interest rate hike policy has taken effect, further reducing government bond yields and the probability of the Fed raising interest rates.
However, if you easily approach the statements made by hedge funds, you will definitely end up with heavy losses, because behind their statements are to induce investors to do specific behaviors and profit from them. Ackman is not bearish because of inflationary pressure. U.S. Treasury bonds, but the U.S. Treasury Department is about to run out of money again, and needs to issue more U.S. bonds in the second half of the year. Judging from the current direction of funds, a large amount of money will flow into U.S. government bonds in the second half of the year, so the market There will be less money, and the price of new bonds may be lower, funds will not be willing to buy old bonds, and there may be liquidity problems in the secondary market.
This will have a further impact on the price of US bonds. This is what Ackamn sees. It has nothing to do with the boring price index. On the surface, he claims that inflation and US governance are just a cover-up. Buffett and Musk actually do the same. Holding a similar position, they only say that "short-dated government bonds" are good investments, but "dated government bonds" that are subject to higher interest rates and greater demand for funds are not within the scope of the discussion. Short-dated government bonds are indeed the best investment at present. For a good investment, the risk-free annualized return is close to 5%.
More and more economists are issuing reports pointing out the advantages of short-term government bonds. In the future, a large amount of funds will be locked into U.S. government bonds. This also means that a large part of the market's speculative funds will also be transferred to medium- and long-term government bonds. And locking it in will likely reduce speculative funds, and both the stock market and the cryptocurrency market may be affected. In particular, the price of U.S. long-term bonds is likely to fall further, and the higher yields may be more attractive.
When speculative funds move into the short-term debt market, cryptocurrencies will likely be sold off. Judging from these possible scenarios, the activity of speculative funds may continue to decline in the second half of the year, because some of the funds will be locked in public bonds and unable to flow into the market. Raising the price, this will be the worst case scenario. At this time, the cryptocurrency is more likely to be hit hard, and we do not want this to happen.
In this regard, we can only place our hope that the price index will open better this week. Since the July price index for the draw on August 10 is compared with the price index in July 2022, the base period is already very high, and the annual growth rate is expected to drop to Starting from 2%, if this is the case, the expectation of interest rate increases will be slower, which is expected to give the cryptocurrency market a breath of relief. Considering the ability of public bonds to absorb funds, there is a high probability that speculative funds will decrease, which will have a negative impact on the trend of the cryptocurrency market. Pretty bad.
Review of last week [MICA RESEARCH] The Fed’s interest rate hike cycle may be extended, and the crypto market needs more time to recover
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This article [MICA RESEARCH] U.S. debt has once again become the focus of market investment and will affect the trend of cryptocurrency. First appeared on Blockchain.
