Week 25, 2023 - Weekly Market Outlook

TLDR

• EDX Markets, a new non-custodial digital asset exchange, has begun operations.
• BitGo's acquisition of Prime Trust failed due to legal and regulatory issues.
• Deutsche Bank seeks BaFin license for custody services for digital assets, highlighting its strategic push into crypto.
• Bitcoin surged to $30,000; new yearly highs predicted through a pullback or increased shorting.
• Despite Ethereum's rally, Bitcoin remains a preferred investment until Ethereum breaks current structure.
• Memecoin Pepe performed well this week.
• Growth in Liquid Staking Derivatives (LSDfi) market highlighted.
• Analysis of Bitcoin and Ethereum
• DeFi sector overview
• Review of the week's top gainers and losers in crypto.

Introduction

The once hesitant giants of the financial world are now making strategic moves into the cryptocurrency and digital asset sectors. This surge in institutional interest, which arguably began with BlackRock's Bitcoin ETF, is reshaping the narrative and fueling the legitimacy of cryptocurrencies. From the launch of a new institutional crypto exchange, EDX Markets, to Deutsche Bank's significant strides into digital asset services, this report provides a deep-dive into the latest advancements in the space. Also covered are some of the challenges encountered by these institutions, like the collapse of the planned acquisition of Prime Trust by BitGo. This article delves into these major events, providing an analysis of the current state of markets and providing perspectives on what lies ahead. We also go through the performance of the crypto market, highlighting the market data and shedding light on the DeFi sector. Lastly, we provide a brief review of the best and worst performers of the week and a look at the week ahead.

A New Institutional Crypto Exchange

A new digital asset exchange, EDX Markets, has launched operations. This launch comes with the backing of heavy-hitting financial firms such as Citadel Securities, Fidelity Digital Assets, and Charles Schwab Corp. EDX is distinct from existing cryptocurrency platforms such as Coinbase and Binance, as it adopts a "non-custodial" model. This means that EDX doesn't hold clients' digital assets during trading, which is the typical practice for most crypto exchanges. Instead, a third-party custodian will manage these assets, as stated by EDX's CEO, Jamil Nazarali.

EDX has attracted further investments from companies such as Miami International Holdings, GTS, GSR Markets, and HRT Technology. The plan is to launch EDX Clearing, a service to settle trades, later this year. These financial commitments signal continued support and confidence in EDX's model, despite the regulatory heat on the crypto sector.

Recently, the U.S. Securities and Exchange Commission (SEC) increased its oversight of the crypto industry, even suing prominent firms like Binance and Coinbase. These companies are accused of operating as unregistered securities exchanges, broker-dealers, and clearinghouses. Both companies have rejected these allegations.

SEC Chair, Gary Gensler, has long argued that crypto platforms need to better separate their business functions, such as custody, market-making, and trading, to prevent possible conflicts of interest. Traditional financial institutions continue to show interest. For instance, BlackRock, the world's largest asset manager, has recently filed to launch a spot Bitcoin exchange-traded fund.

Prime Trust Issues

BitGo, a cryptocurrency company, recently announced on Twitter that its planned acquisition of Prime Trust has fallen through. Prime Trust offers token and FIAT custody, funds processing, anti-money laundering and know your customer compliance, and transaction technology services This follows a trend of failed acquisitions within the crypto industry.

BitGo is no stranger to legal disputes, having recently dismissed a lawsuit in court regarding a failed acquisition from Galaxy Digital. Meanwhile, Prime Trust has encountered regulatory issues, prompting it to halt both fiat and cryptocurrency withdrawals and deposits.

The planned acquisition of Prime Trust by BitGo was announced just two weeks ago, when Prime Trust was already facing issues and had to delay client withdrawals. Since then, Prime Trust has been hit with legal action, including in Texas, where it has agreed to stop its operations. Moreover, Prime Trust client Stably announced that Prime Trust had received a cease and desist order from the Nevada Financial Institute Division, causing it to halt all fiat and digital asset transactions. This is particularly significant since Prime Trust is primarily incorporated and operates in Nevada. Banq, a subsidiary of Prime Trust, has recently filed for bankruptcy protection.

The problems at Prime Trust have prompted many clients to look for alternatives. For instance, Binance US has turned to Wyre, although Wyre has since announced that it will cease operations. Cryptocurrency lender Swan has also transitioned away from Prime Trust, opting for Fortress Trust instead.

Interestingly, Banq has sued Fortress, accusing it of starting its operations with stolen assets and reiterated these claims in its bankruptcy proceedings. However, other Prime Trust clients, like the stablecoin TrueUSD, despite having to disable Prime Trust-related features, insist they plan to reactivate these features and continue using Prime Trust's services.

Deutsche Bank

Deutsche Bank, Germany's largest bank, is making significant strides into the digital asset world. It has officially applied to BaFin, the German financial regulator, for a license to offer custody services for digital assets, including cryptocurrencies. Deutsche Bank has been investigating the digital asset space since 2020 and this development marks a new phase of that commitment. Lynne highlighted the bank's expansion into digital assets and custody, indicating readiness to step into the thriving crypto market. The bank plans to offer secure storage and management of digital assets for its clients, a key service for both institutional and individual investors.

The bank’s application to BaFin shows its aspiration to legally market and offer its crypto-related services in Germany, thus ensuring it aligns with local regulations. In February, Deutsche Bank showed its interest in supporting local digital asset innovation, revealing plans to invest in Deutsche Digital Assets and Tradias, two German cryptocurrency firms. The bank also participated in a funding round for Taurus Technology, a digital asset infrastructure provider, highlighting its focus on digital innovation.

Furthering its commitment to expand digital asset services, Deutsche Bank announced a partnership with Galaxy Digital in April. The aim is to launch a range of exchange-traded products on certain digital assets in Europe and to explore other digital asset solutions. This partnership is set to give European investors cost-effective, straightforward access to the growing digital assets market via traditional brokerage accounts.

This strategic move towards digital assets aligns with the global trend of financial institutions acknowledging the significant role digital assets will play in the future of banking and finance. As Deutsche Bank continues to expand its digital assets and custody business, clients can expect a range of innovative, secure, and reliable digital asset services.

The Narrative

With this increased interest staking in Ethereum. Liquid Staking Derivatives have also grown. A new sector growing in the space is the Liquid Staking Derivatives finance space.

LSDfi builds on LSDs to create new market opportunities related to staking yields, validator monopolies, slashing risks, and even validator censorship. These mechanisms provide unique opportunities for users, promoting healthy competition among validators and preventing one party from monopolizing the consensus layer.

At the core of LSDfi are LSDs, LSDs are tokens that users receive when they stake their assets. These tokens enhance network security and allow users to earn an additional yield on top of their staking rewards. An essential feature of LSDs is that they provide users with flexibility and liquidity. This means users can still reap the benefits of staking crypto without locked assets. LSDfi represents staked assets and can be traded, loaned, restated, or used for arbitrage trading on secondary markets. To learn more about the potential of the market, read more here.

Crypto Market data

Bitcoin decided to leave everyone in the dust. After 2 days of sitting at High Time Frame Support Bitcoin rocketed to $30,000. It left a lot of people sidelined. It left me taking profit very early, I was not expecting for BTC to rally this hard this quick. I knew buying HTF support was the play, but was expecting a much weaker reaction. What I didnt account for is the amount of people that were shorting support. These shorts were used as fuel to drive us back to $30k. As I mentioned last week, if $27,500 was cleared, new yearly highs are on the table, right now we are chopping at $30,000 dollars. There are 2 scenarios I see possible for us making new yearly highs. 1. We pull back to $29,500-$28,800, this range was where we previously failed. Flipping this as support will indicate strong buyers in the market and will propel us to $32k. The second scenario is we move straight to $32k, for this people need to be shorting the market. Either way I see new yearly highs on the table.

In my opinion Ethereum still doesnt look better than Bitcoin. While it did reclaim $1750 and shot straight up to $1900, it hasn't been able to break its structure. If we have some daily closes about $1900 I can see Ethereum running up to $2300. Till then, Bitcoin looks like the better chart.

The DeFi Sector

With Ethereum rallying this week, the best performing chain is Pulsechain.

Pulsechain is the Proof of Stake chain. PLS is the native token of the chain, the token was created by Richard Heart and is down 99%. I think Pulse is a huge scam. One of the red flags surrounding Pulsechain is the fact that its native token, PLS, is untracked on platforms like CoinMarketCap and Defillama. The absence of reliable market data raises concerns about transparency and liquidity. Before his involvement in Pulsechain, Heart was associated with projects that generated controversy and skepticism within the cryptocurrency community. Heart gained initial attention through the launch of Hex, a cryptocurrency that was widely criticized for its alleged pyramid schemes and questionable marketing practices. If you want to use a scam of a chain, be my guest, I won't be touching the chain or token with a 10-foot pole.

Best and worst performers

With this amazing week for Bitcoin, which is up over 15%. The best performing asset this week is Pepe. The green loveable frog seems to be a hot topic as the memecoin to replace Shiba Inu and Doge at the top of the memecoin charts.

There isn't any narrative when it comes to the losers. These are all random coins that had previously had their time in the sun.

The week ahead

As I mentioned last week, if $27,500 was cleared, new yearly highs are on the table, right now we are chopping at $30,000 dollars. There are 2 scenarios I see possible for us making new yearly highs. 1. We pull back to $29,500-$28,800, this range was where we previously failed. Flipping this as support will indicate strong buyers in the market and will propel us to $32k. The second scenario is we move straight to $32k, for this people need to be shorting the market. Either way I see new yearly highs on the table.

If you are not in any positions yet, it might be best to wait for a pullback as the market still might be on edge. It's also great to start researching new narratives and projects. You can read those here.