Week 46, 2023 - Weekly Market Outlook

Introduction

In this weekly market outlook, we examine the most recent updates in the cryptocurrency ecosystem. With an emphasis on Bitcoin, Ethereum and the macro environment, we analyze recent price action. We evaluate the global cryptocurency market cap, DeFi stablecoin flow and do a short review of the crypto market's biggest gainers and losers. Finally, we evaluate the performance of the Flagship Portfolio Vault.

Notable news

• Closely following the BlackRock iShares Ethereum Trust, BlackRock’s Ethereum ETF was verified in a Nasdaq filing.
  
• The window for the SEC to approve twelve Bitcoin ETFs is still running.
  
• CME (where institutions trade Bitcoin Futures) volume surpasses Binance. This could be a bullish indicator for institutional interest in Bitcoin
  
• NFT sales volume surged to $129 million in November, according to Nansen.
  
• Elon Musk announched an AI chatbot capable of outperforming ChatGPT called "Grog". The similarly named Memecoin saw a significant price surge.

Macro

Over the past week, the dollar strength index (DXY) dropped 1.3%, which is a significant drop after months of strength. A weakening dollar bodes well for all other assets and if this trend continues, risk assets like crypto will likely enter a strong bull trend. For the time being, the DXY is at support and will likely consolidate and possibly make a short run up before continuing down.

The above is in-line with the rate hike expectations, which have done a full 180 over the past weeks and the market is now expecting 0 rate hikes over the next years and even rate cuts as high as 2% in 2024. This strongly indicates that the rate hike cycle has ended and we're closing in on a reversal, which is good for all assets.

The International Monetary Fund (IMF) upgraded its GDP growth forecasts for China for 2023 and 2024. The Chinese economy is now expected to grow by 5.4% this year, up from the previous 5% estimate. However, slower growth is anticipated in 2024 due to weaknesses in the property sector and subdued export demand​​.

There is growing concern about a potential recession in the Eurozone. The composite purchasing managers' index fell to 46.5 in October, below the threshold indicating economic expansion. This downturn is marked by weakened demand in the services industry and contracting manufacturing activity, with major economies like Germany, France, and Italy experiencing shrinking service sectors.

These varied economic trends across major global economies could have significant implications for the cryptocurrency market. Investors may consider digital assets as a hedge against uncertainties in traditional markets, or conversely, they might become more risk-averse, impacting the flow of capital into cryptocurrencies.

Cryptocurrency ecosystem

Recent global events have had a notable impact on the cryptocurrency market. Zerocap's recognition as the Blockchain Organization of the Year at Blockchain Australia's Blockies 2023 highlights the growing significance of blockchain companies. Additionally, the potential introduction of BlackRock’s Ethereum ETF, as indicated by a Nasdaq filing, could herald new institutional interest in Ethereum.

In terms of security, Poloniex experienced a substantial $126 million hack, prompting concerns about the safety of assets on exchanges. Regulatory developments include Gary Gensler's openness to an FTX revival and the UAE Central Bank's decision to penalize unlicensed virtual asset service providers. These regulatory moves reflect the evolving landscape of the crypto industry.

Bitcoin

Bitcoin's market movements this week were characterized by relative stability in its range, with the price exceeding $37,000. With the window for the ETF approvals still open, but the deadline closing in, excitement seems to continue to build up and be priced in.

There was a significant outflow of Bitcoin from exchanges, indicating a potential buildup for a future price surge. The reduction in Bitcoin supply on exchanges to 2 million BTC, compared to the peak of 2.8 million in 2021, indicates a lower probability of a deep correction in Bitcoin's price. News on the ETF results (either positive or negative) can lead to heavy fluctuations in the market though.

Ethereum

BlackRock, the world's largest asset manager, filed an application for a spot Ethereum (ETH) exchange-traded fund (ETF) with the Securities and Exchange Commission (SEC). This action has significantly boosted market sentiment, marking a pivotal moment for Ethereum and the broader crypto market​​.

The news of the ETF application has already caused a short-term positive price movement for Ethereum, surging above $2,000 this week. If approved, the increased buying from institutional investors might create even more upward price pressure on Ethereum. However, the absence of staking rewards in the ETF format might impact the demand for spot ETH ETF.

Top Gainers and Losers

As top performer this week: CorgiAI with over a 400% gain. CorgiAI's goal is leveraging artificial intelligence for automated trading and investment strategies.

Last week, we saw ORDI token as the top performer, linked to the Bitcoin Ordinals protocol. This week, one of the top performers is TRAC (ordinals). Trac's decentralized API enables developers to create new things for the Ordinals space. This could be an indication that the Ordinals narrative is picking up again.

Other notable mentions are Zephyr Protocol, which is an over-collateralized privacy focussed stablecoin protocol and Pangolin, a multi-chain decentralized exchange (DEX) on the Avalanche blockchain offering fast and easy trade execution.

The worst performing asset this week is GAS, which is the the utility token of the NEO blockchain. GAS surged over 300% recently. The main reason for the surge is linked to the GAS/KRW pair on the Upbit exchange in Korea, but the price seems to be retracing after this steep price increase.

Global Market cap

The total market capitalization of the cryptocurrency ecosystem has seen a significant growth in the past week, growing from $1.4 trillion to $1.49 trillion in the past 7 days. Only today, we saw the market cap increase with over 3.5%. This could indicate that new money is flowing into the cryptocurrency ecosystem, contributing to a bullish market sentiment.

Stablecoin Flows

The total market capitalization of stablecoins has remains around its level at $125 billion. The Total Value Locked (TVL) of stablecoins in DeFi has been steadily climbing over the past weeks, again growing by approximately $5 billion over the past 7 days. This growth remains a solid catalyst for the altcoin pump, indicating that the positive sentiment and market performance could continue this uptrend.

Flagship Portfolio Vault Performance

Over the past 7 days, the share price of the Portfolio Vault went from 33.50 to 34.79, which is a 3.85% increase.

The weakness of the dollar combined with the overall market sentiment due to the ETFs, global market cap growth, growth of stablecoin Total Value Locked (TVL) and Bitcoin's sustained strength relative to traditional markets, results in our risk profile remaining at bullish.

If you’d like to access Flagship’s portfolio Vault, click here.