Prices
Is the Bitcoin rally coming to an end?
Good morning Asia, this is how the markets are starting the Eastern trading day.
Bitcoin is starting the trading day in the red, down 0.63% at $27,805. Ether is down 2.5% at $1,741.
The big question on everyone's mind is, of course, interest rates.
In a recent note, Goldman Sachs chief economist David Mericle said the fed will pause interest rate hikes due to stress in the banking system.
“While policymakers have responded aggressively to shore up the financial system, markets appear not to be fully convinced that efforts to support small and midsize banks will be enough,” Mericle wrote. "We think Fed officials will share our view that stress in the banking system remains the most immediate concern for now."
Delphi Digital co-founder Tom Shaughnessy says the market is sending mixed signals. While many say that the possibility of the Federal Reserve halting rate hikes is a bullish sign for Bitcoin, the reality could be entirely different.
“The data suggests that once the Fed stops raising or pivots, that is historically when markets sell off,” he said in a recent appearance on CoinDesk TV. "I think the rally has less to do with the Fed pausing and more to do with liquidity pressures or surpluses there."
The CryptoQuant data could support Shaughnessy's thesis. Its adjusted exit profit ratio indicator, which tracks the profitability of HODLers, shows that more investors are selling at a profit. In the midst of a bull market, this can indicate a market top.
(cryptoquantification)
At the same time, their net unrealized profit and loss shows that investors are in an anxiety phase, where they have moderate unrealized gains.
(cryptoquantification)
All eyes will be on the next Fed announcement to see if it is bullish or bearish for bitcoin.
perspectives
Crypto VC funding was resilient in the bear market. It is now powering through this mini bullish cycle.
The crypto winter was harsh and cold for venture capital operations. A CoinDesk report in January painted a bleak picture for VC activity: down 91% year-over-year.
But spring has arrived and cryptocurrencies are picking up once again. The macroeconomic environment has turned a bit strange and Bitcoin has $30,000 in its sights.
crypto Venture capital funding is coming back with it.
Data from CryptoRank.io shows that a bounce is taking place.
(CryptoRank.io)
Despite the inherent volatility of the cryptocurrency market, VCs are undaunted and continue to invest significantly in the industry, recognizing its immense potential for long-term growth,” the CryptoRank analyst team said in a note prepared for CoinDesk.
CryptoRank analysts say that VC market confidence is bolstered by the substantial increase in the number of funding rounds seen in recent months, which analysts say indicates growing interest and optimism within the industry.
“Many funds reported losses in 2022 and now have to reduce their investment activity,” the analysts said in their note. “Other VCs, who were more cautious in their investments last year, are now seizing the opportunity to use the preserved capital.
Banking will remain a challenge
In the days before the Silvergate collapse, bitcoin was caught between Silvergate and China. The impending loss of the benchmark cryptocurrency bank dragged prices lower, adding selling pressure, while China's narrative of Hong Kong easing regulations on institutional and retail trading buoyed it.
And then the Bank Term Financing Program (BTFP) happened, with major money printing from the Federal Reserve.
Risky assets are suddenly back in play.
Banking remains a challenge, but other financial institutions are stepping up, some of which are outside the US and beyond the reach of its regulatory regime.
For venture capitalists, this is a unique and independent problem; they need a bank familiar with the sector. Many banks shun crypto and tech startups, as well as small venture capital funds, because they are seen as not worth the risk.
“The issue has much broader implications than the temporary decoupling of stablecoins. We expect to see a decline in VC activity, which will have a knock-on effect on crypto fundraising,” the analysts wrote in their note. “SVB provided one of the most popular banking infrastructures for venture capital investors. Now they will have to look for new opportunities, but the pressure on crypto banks is a significant red flag."
This could be Singapore's time to shine. It is understood that banks with USD rails will step up and fill the gap. DBS is believed to be a competitor, since it runs a crypto exchange. Or, it could be something else entirely.
“Cryptocurrency VC fundraising is driven by a younger generation of alternative fund managers breaking away from TradFi institutions to raise their own capital in Asia,” adds Katherine Ng, CEO of TZ APAC, the Asia's leading Tezos blockchain incubator.
For now, US banks continue to dominate the sector and have outsized influence in all regions. But it might be time for other institutions to step up.
