Week 35, 2023 - Weekly Market Outlook

Introduction

In this weekly market outlook, we examine the most ETF advancements in the crypto space. We also examine Liquidity Provider Derivatives, which is becoming more popular. 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.

Grayscale Beat the SEC

Grayscale Investments won their lawsuit against the U.S. Securities and Exchange Commission (SEC). The legal battle centered on Grayscale's attempt to turn its Grayscale Bitcoin Trust (GBTC), an over-the-counter product, into a listed Bitcoin exchange-traded fund (ETF). Initially, the SEC rejected the application, citing concerns about fraud prevention. However, the U.S. Court of Appeals overturned this decision, calling it "arbitrary and capricious."

Judge Neomi Rao of the U.S. Court of Appeals granted Grayscale's petition for review and vacated the SEC's original order to deny the GBTC listing. This happened after Grayscale's senior legal strategist filed a petition for review following the SEC's initial denial on June 29, 2022.

Financially, this is a big deal for Grayscale, which manages the largest Bitcoin fund traded over-the-counter, with assets exceeding $14 billion. The ongoing lawsuit had caused the shares of GBTC to trade at a nearly 50% discount. Michael Sonnenshein, Grayscale's CEO, stated that their legal team is now actively reviewing the court's opinion.

So, what does this all mean? The win could ease the way for other firms seeking to get Bitcoin ETFs approved, altering the regulatory landscape. Lastly, the case sets a legal precedent that could influence future legal battles between the SEC and other crypto-related entities.

Bitcoin ETF Delayed

The SEC recently decided to postpone its rulings on several bitcoin ETF applications until October. This delay has affected a range of firms, including BlackRock, WisdomTree, Invesco Galaxy, Wise Origin, VanEck, Bitwise, and Valkyrie Digital Assets.

The SEC is extending the comment periods for these applications and inviting more public feedback. New deadlines have been set: Wise Origin, Galaxy, and WisdomTree have until October 17, while Valkyrie and Bitwise have until October 19 and 16, respectively. The SEC has a total of 240 days from the start of its review to make a final decision and has a history of using every possible review period to delay its rulings.

Earlier this week, the D.C. Circuit Court of Appeals criticized the SEC for its inconsistent reasons for rejecting bitcoin ETF applications. This came after Grayscale argued that the SEC had no solid grounds for denying its request to convert the Grayscale Bitcoin Trust into an ETF.

Uniswap Lawsuit Dismissed

A New York court recently dismissed a lawsuit against Uniswap. The suit, filed in April 2022, claimed that Uniswap and its creator, Hayden Adams, broke U.S. securities laws by allowing questionable tokens like EthereumMax, Bezoge, and Alphawolf Finance to be traded. The judge in the case took the notable step of classifying ether as a commodity, something the SEC has been hesitant to do.

The court pointed out that the real culprits should be the issuers of these tokens, not Uniswap. The judge also mentioned that Uniswap's decentralized nature makes it hard to pinpoint who exactly issued the scam tokens. The court concluded that these investor concerns are better suited for Congress to address, not the judiciary.

This decision could set a legal precedent for future cases involving decentralized platforms, especially those accused of breaking U.S. securities laws. It may also push the SEC to clarify its stance on cryptocurrencies. The ruling shifts the focus from platforms like Uniswap to the actual token issuers, indicating that they should be the ones held accountable for scams.

The Narrative

LSDfi has been one of the biggest narratives in recent times. But now a new potential narrative is brewing. Introducing Liquid Provider Derivatives (LPDfi). LPDfi is a new field in protocols that focus on creating derivatives centered around LP (liquidity providing) on Uniswap V3. This narrative could be particularly bullish as it recycles the LP positions to create more structured products. This also benefits LPs as they will earn much higher fees, finally rewarding the LP risk. You can read more about LPDfi in our article here.

Crypto Market data

This week we first got news that Grayscale had beaten the SEC. This caused a 7% percent rally, causing everyone to become extra bullish. Most Market participants thought that because they won, a Bitcoin ETF will 100% be approved before the end of the year. While the win was great, it doesn't necessarily mean that a Grayscale Bitcoin ETF will come. This win means that the SEC reasoning for denying Grayscales review isn't valid anymore. The SEC still has 45 days to rectify the decision and also give new reasoning. On top of that if this win was so important, why are we trading back at the impulse of the move? Trading back at the impulse of the move is a bearish reaction.

This is the range that has been developed. In my opinion it doesn't look very good. I'm of the opinion that we are going to trade at $23,500 soon. After the breakout of the range, caused by the Grayscale win, we should not be trading back inside the range. If you want long exposure its best to wait for underside liquidity to be grabbed. Holding $23,500 will be very important, if lost it could lead to $20,000 and potentially lower.

Ethereum looks even worse. I expect us to trade at $1500 soon enough. Between $1450 and $1500 is where you could see a bounce. I'm of the opinion that in the next 6 months trade at the lower end of this range.

The DeFi Sector

With Ethereum chopping around this week, the best performing chain is Base

Base’s Onchain Summer has recently started and now over $370 million TVL has been locked up in the chain. Aerodrome has added $200 million TVL in the last 2 days. Aerodrome is an AMM designed to serve as Base's central liquidity hub, combining a powerful liquidity incentive engine, vote-lock governance model, and friendly user experience.

Best and worst performers

Cyber Connect is the biggest winner this week. Cyber Connect enables developers to create social applications. Cyber Connect was on the Binance Launchpool. Projects that get listed on Binance Launchpool always do really well at the start.

Bitcoin has been one of the strongest coins in the summer. It seems like an opportunity for buying rather than it fading away in the sun.

The week ahead

This is the range that has been developed. In my opinion it doesn't look very good. I'm of the opinion that we are going to trade at $23,500 soon. After the breakout of the range, caused by the Grayscale win, we should not be trading back inside the range. If you want long exposure it's best to wait for underside liquidity to be grabbed. Holding $23,500 will be very important, if lost it could lead to $20,000 and potentially lower.

It's possible that we can trade higher but for that to happen we need to sweep the lows and trade back into the range. Till a move is ignited to the upside or lower there is no reason to buy any spot Bitcoin.

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.