Week 26, 2023 - Weekly Market Outlook

TLDR

• Fidelity has refiled for their own spot Bitcoin ETF
• Microstrategy has bought even more Bitcoin
• German regulators have refused Binance's cryptocurrency custody license.
• Bitcoin has made new Yearly highs
• Despite Ethereum's rally, Bitcoin remains a preferred investment until Ethereum breaks current structure.
• Bitcoin Cash 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. Fidelity is revisiting the pursuit of their spot Bitcoin ETF. MicroStrategy, the U.S. based provider of business intelligence, mobile software, and cloud-based services, has continued its unabated Bitcoin-buying spree, significantly expanding its Bitcoin holdings.Also, Binance, the world's largest cryptocurrency exchange, has faced another hurdle as German regulators have reportedly refused to grant it a cryptocurrency custody license. 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.

Microstrategy buys more Bitcoin

MicroStrategy has continued its unabated Bitcoin-buying spree, significantly expanding its Bitcoin holdings. As of a recent filing with the U.S. Securities and Exchange Commission (SEC), the company now holds a staggering total of 152,333 bitcoins, equivalent to approximately $4.5 billion in value.

The filing also revealed that the company had acquired an additional 12,333 bitcoins for roughly $347 million in cash between April 29 and June 27. This marks the largest Bitcoin purchase by MicroStrategy to date. The average purchase price of the Bitcoin it now holds is around $29,668 per coin, as noted in the filing.

Since MicroStrategy's initial foray into Bitcoin when the digital coin was under $12,000 per coin, the value of the digital asset has risen dramatically. Saylor has since compared Bitcoin to an “engineered, synthetic, pharmaceutical-grade gold.”

Despite the volatile nature of cryptocurrencies and Bitcoin having plummeted from its November 2021 all-time high of $69,044, MicroStrategy's Bitcoin strategy appears to be yielding positive results. The company’s stock, trading as MSTR on the Nasdaq, has seen an impressive surge of over 162% since its first Bitcoin purchase in 2020.

Last month, Saylor asserted that MicroStrategy's approach "is to buy and hold Bitcoin, and the key for us is to be consistent, transparent, and responsible in the pursuit of that strategy.” True to his word, the company has been consistently investing. The company's firm commitment to Bitcoin further cements its position as the public company with the most significant Bitcoin holdings worldwide.

Germany rejects Binance’s Crypto License

Binance has faced another hurdle as German regulators have reportedly refused to grant it a cryptocurrency custody license. Recently, the company has been under heightened scrutiny from global regulatory bodies. Earlier this month, Binance and its CEO, Changpeng Zhao, were sued by the U.S. Securities and Exchange Commission (SEC). The U.S. regulator accused the company of orchestrating a "web of deception" to circumvent U.S. laws, a claim that Binance has vehemently denied.

The German regulator, BaFin, has declined to provide specific comments on individual companies, citing confidentiality reasons. However, it is understood that their refusal to license Binance represents another significant regulatory roadblock for the exchange.

In response to the development, Binance stated that it would refrain from sharing the specifics of its discussions with regulators. Still, the company emphasized its ongoing efforts to meet BaFin's requirements. Binance described compliance as a "detailed and ongoing process" and expressed confidence in its team and measures to continue dialogue with German regulators.

Just last week, Belgium's FSMA regulator instructed Binance to cease offering any virtual currency services within its jurisdiction. Moreover, Binance is currently under investigation in France and has chosen to withdraw from the Dutch market due to its inability to fulfill the registration requirements necessary to operate as a virtual asset service provider.

Previously in 2021, BaFin had issued a warning to Binance, cautioning the company that it could face penalties for offering certain digital tokens to German clients without providing the requisite information. The recent developments suggest that Binance's regulatory challenges are intensifying and spreading globally.

Fidelity refiles for a Spot Bitcoin ETF

Fidelity is making another attempt to list and trade shares of its Wise Origin Bitcoin Trust spot bitcoin exchange-traded fund (ETF). The move is detailed in a recent filing by Cboe Global Markets with the U.S. Securities and Exchange Commission (SEC).

Fidelity joins several other major asset managers, including BlackRock, WisdomTree, Invesco, and VanEck, which have also recently applied to list Bitcoin ETFs. These firms have submitted paperwork for spot Bitcoin ETFs on exchanges such as Cboe BZX, Nasdaq, and NYSE Arca, the latter being owned by Intercontinental Exchange Inc.

The SEC, over the past few years, has turned down multiple spot Bitcoin ETF applications, including an application from Fidelity in January 2022. In each instance, the regulator reasoned that the filings did not meet the necessary standards aimed at preventing fraudulent and manipulative activities and safeguarding investors and the public interest.

The first Bitcoin futures ETF was given the green light in October 2021, which spurred Bitcoin's price to reach an all-time high of $69,000 the following month. This sparked optimism that a spot Bitcoin ETF, which directly tracks the price of the cryptocurrency, would soon gain approval, contrasting futures-based ETFs that follow the price of Bitcoin futures contracts.

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

The last week has seen Bitcoin trading between $30,000 and $31,000. After last week's market outlook, I said that new yearly highs would be made. Bitcoin proceeded to make new yearly highs right after that. Now you want to see buyers step in and continue pushing prices higher. Right now, this push higher is a liquidity grab. I can see us trading as high as $32,500 this coming week, but before we can push that high, $31,000 needs to be broken. For now, we are trading in a range. If we break above, we can trade as high as $32,500. If we break below $30,000, we are trading back at $27,500. If you want to position yourself, waiting for strength or a leverage flush is best. Till then no point in trying to force a trade.

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 chopping around this week, the best performing chain is Solana.

Solana has rallied significantly this week. The chain has been seen dead since the FTX collapse, but some projects are doing some cool stuff there. Solana is one of my dark horses for a potential upcoming bull run; everybody is writing it off, so I want to research it. For example, Drift Protocol is a perpetual futures trading platform built on Solana that allows users to execute cross-margined trades. Drift Protocol is just one of the few projects of my Solana Alpha. I will release it periodically in the coming weeks, so stay tuned.

Best and worst performers

Bitcoin Cash is the biggest gainer this week. BCH has now more than doubled in the week since it was listed on EDX Markets, a new crypto exchange backed by financial heavyweights. BCH has benefited from this listing, bringing new social interest and trading volume.

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

The week ahead

Right now, this push higher seems to be a liquidity grab. I can see us trading as high as $32,500 this coming week, but before we can push that high, $31,000 needs to be broken. For now, we are trading in a range. If we break above, we can trade as high as $32,500. If we break below $30,000, we are trading back at $27,500.

If you are not in any positions yet, it might be best for the market to show some strength. It's also great to start researching new narratives and projects. You can read those here.