Week 33, 2023 - Market Outlook

Introduction

In this weekly market outlook, we examine the most recent advancements in the crypto space. Elon Musk and SpaceX have been rumored to sell their remaining $373 million Bitcoin, but they only wrote down the value of its Bitcoin holdings. The U.S. Securities SEC is reportedly on the brink of approving Ethereum futures exchange-traded funds in the upcoming months. Barry Silbert and Grayscale have recently posted a cryptic tweet regarding their potential ETF. We also examine Liquid Staking Finance of Ethereum, which is becoming more popular, and the appearance of liquid staking derivatives in the cryptocurrency market. With an emphasis on Bitcoin and Ethereum, we analyze the recent nuke. We also go through the DeFi sector's results, emphasizing the large increase in Base. Finally, we rank the crypto market's top and bottom performers and offer a prediction for the coming week. Whether you're an experienced investor or an interested spectator, this article gives insightful perspectives into the changing worlds of finance and technology.

Did Elon Sell ?

IWhile some speculated that SpaceX's alleged Bitcoin sales might have triggered the recent nuke, there's no concrete evidence to support this. In fact, SpaceX merely adjusted the value of its Bitcoin assets downward, a standard business practice known as an asset write-down. This is done when an asset's market value falls below its recorded value. As of now, SpaceX hasn't confirmed any Bitcoin sales, and the exact cryptocurrency holdings of Elon Musk's company remain unknown.

The market's recent low volatile regeime made it vulnerable to sharp swings. Other potential contributors to the dip include the U.S.'s rising interest rates and the market's anticipation of a court decision on Grayscale's proposed Bitcoin ETF.

A new Ethereum ETF

The U.S. Securities and Exchange Commission (SEC) is reportedly on the brink of approving Ethereum futures exchange-traded funds (ETFs) in the upcoming months. This development has been highlighted by a Bloomberg report. The SEC is anticipated not to obstruct the applications of nearly a dozen companies, including notable names like ProShares, Volatility Shares, Bitwise, and Valkyrie, all of whom have expressed their intent to introduce Ethereum futures ETFs.

These proposed ETFs are designed to mirror the price of Ethereum futures traded on the Chicago Mercantile Exchange, as opposed to offering direct exposure to the digital asset itself. While there's no clarity on which specific ETF applications will get the nod, insiders have hinted that some could see approval as early as October.

The influx of Ethereum futures ETF applications to the SEC has been significant, with Valkyrie's dual Bitcoin and Ether Strategy ETF, a potential transformation of Valkyrie's existing Bitcoin Strategy ETF, being a frontrunner for a possible launch around October 3. Additionally, the first dedicated Ethereum futures ETF, sponsored by Volatility Shares, might debut around October 11.

While the SEC has previously approved crypto futures ETF, the SEC has been hesitant to approve any spot crypto ETFs. However, a discernible shift in their stance was observed in late 2021 when they approved several Bitcoin futures funds/

Grayscale posts a cryptic tweet

Grayscale Investments, known for its significant role in the cryptocurrency investment arena, has recently underscored its intent to add members to its ETF team. This move is particularly noteworthy as Grayscale could reach a final verdict concerning its lawsuit against the U.S. Securities and Exchange Commission (SEC).

"Our ETF team is hiring." This was further substantiated by their recent job listings on LinkedIn for a product specialist and a senior associate, both aimed at enhancing the ETF team. The primary responsibilities of these roles revolve around refining the investor experience, especially in the ETF domain, and playing a pivotal role in the evolution of investment products.

Last June marked a significant turn of events when Grayscale decided to take the SEC to court. This move was a direct response to the SEC's denial of Grayscale's request to transition its Bitcoin Trust (GBTC) into a spot Bitcoin ETF. While GBTC provides investors an avenue to delve into Bitcoin without the need for direct possession, it falls short in certain areas compared to a spot Bitcoin ETF. Notably, GBTC doesn't possess a redemption mechanism, which hampers its capacity to reflect Bitcoin's price faithfully and is also associated with elevated fees.

The market implications of this lawsuit's outcome are profound. A nod from the SEC allowing Grayscale to transform GBTC into a spot Bitcoin ETF could spark the market, possibly counterbalancing the recent crypto downturns. Such an approval would empower Grayscale to slash its management fees and tackle the "discount" dilemma, where GBTC shares often trade at a diminished value compared to its Bitcoin reserves. Conversely, if the SEC remains unmoved, the market might retain its current trajectory, especially in light of the recent slump.

The Narrative

Ethereum staking has surged as a result of this. The use of liquid staking derivatives has increased. The Liquid Staking Derivatives financing space is a recent development in the market.

LSDfi expands on LSDs to open up new market potential involving validator monopolies, staking yields, risk reduction, and even validator censorship. By encouraging healthy competition among validators and preventing one party from controlling the consensus layer, these approaches offer special potential for users.

LSDs, tokens that users obtain when they stake their assets, are the foundation of LSDfi. These tokens improve network security while also enabling users to increase their income beyond their staking payouts. The flexibility and liquidity that LSDs offer consumers is a crucial component. This means that even without locked assets, users can still benefit from staking cryptocurrency. Staked assets are represented by LSDfi, which can be exchanged, lent out, restated, or used in arbitrage transactions on secondary markets. Read more here to learn more about LSDfi

Crypto Market data

It finally happened. Bitcoin finally got some volatility injected into the chart. Bitcoin in a matter of 5 minutes dumped 7%. This move was instigated by all the built up leverage in the system.

It was the biggest liquidation event since the FTX crash. Bitcoin was trading in a range for the last two months. It just broke down from its range. After a breakdown from a range, the market will be looking to find balance. After breaking from our initial range of $31,000 and $28,500, we got a big spike to $25,000. If we look at our chart we are still in an even bigger range from $25,000 to $31,000. Right now we are trading at the lower bounds of the larger range. For now, I think it's best we wait for a new small range to form. To top it off after a big deleveraging event there is a very high probability that we trade back at the initial lows at $25,000

A lot of Ethereum leverage longers got blown out. Just like with Bitcoin, there is a high probability that we will trade at the initial lows of $1550. Till then I will wait for Ethereum to form a range.

The DeFi Sector

With Ethereum nuking this week, the best performing chain is Base

Base’s Onchain Summer has recently started and now over $150 million TVL has been locked up in the chain. With new projects launching everywhere, check out our article about 7 projects on Base.

Best and worst performers

After a big nuke it's always interesting to see which coins are performing well. When Bitcoin bounces these coins will probably perform the best.

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

After breaking from our initial range of $31,000 and $28,500, we got a big spike to $25,000. If we look at our chart we are still in an even bigger range from $25,000 to $31,000. Right now we are trading at the lower bounds of the larger range. For now, I think it's best we wait for a range to form. To top it off after a big deleveraging event there is a very high probability that we trade back at the initial lows.

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.