CRYPTO week ahead: April 23 – 29Last week in the news
A relatively calm week on financial markets, but not for the crypto market, as it went into short term retracement during the previous week. Major negative sentiment is coming from news related to regulation of the crypto businesses both in the US and EU. Bitcoin is ending the week above FWB:27K , while Ether is still holding above $1.8K.
The most important news during the previous week was final adoption of the Markets in Crypto Assets regulation, or MiCA, by the European Parliament. It represents one of the first comprehensive regulations covering crypto business in the world. The regulation requires crypto businesses to be officially registered in one of the EU member states. Companies are required to comply with risk management rules, and need to have adequate governing processes in place in order to avoid any possibility of another FTX-style collapse of the company. Rules related to stablecoins, require companies to maintain enough cash reserves in order to meet demand in times of high volatility. Although, this represents significant improvement when it comes to regulation of the crypto industry, still, this law is not covering specific cases like crypto-staking or lending.
Whether US regulators will follow the EU example is to be seen. Certainly, the majority of the crypto companies in the US are calling for clear rules in order to conduct business outside of the current gray zone. During the time of the MiCA adoption, there has been a hearing in Washington, where SEC Chair Gary Gensler was under fire when it came to clarity of the crypto rules applicable in the US. However, he dismissed all accusations, noting that there is a question whether current crypto businesses want to comply with current rules, while for any sort of additional rules, this industry would have to wait for some other time. Based on his statements, it doesn’t seem that any sort of new digital-asset regulation will see the light of the day in the near future. On the other hand, several large crypto exchangers announced that they are considering moving their business overseas in order to avoid scrutiny from the SEC.
There has also been news over the regulation of the crypto industry from the Bank of England. Namely, it has been noted by the CB officials on the possibility for the UK to adopt a similar law as in the EU for the digital-assets industry within next 18 months. At the same time, they commented on the possibility to put a cap on stable coins in order to avoid financial risks which these coins might have on the UK financial system, especially banking system.
Recession fears are again topic number one among economists in the US. Namely, latest data show that there is a significant drop in lending activities, which would most certainly impact economic slowdown in the coming period. As a reminder, this was a prediction of several prominent economists from the beginning of this year, that potential for economic slowdown will most certainly hit the market during the second half of this year, based on which, some of them are expecting for FED to even cut interest rates.
Crypto market cap
There has not been much significant news on the macro data during the previous week, which is the main reason why equity markets remained relatively calm. Still, there has been a lot of news when it comes to regulation of the digital-asset businesses, both in the EU and US, which imposed a negative market reaction and short reversal to the down side. On one side, the EU Parliament adopted a so-called MiCA regulation, imposing a strict rule for the crypto business within 27 EU member states, while on the other hand, SEC Chair Gansler noted in a testimony his expectations for all crypto businesses in the US to comply with current Securities Law in the US, and that it should not be expected any kind of new regulation which would specifically address digital asset businesses. Although EU regulation was generally perceived as a positive among market practitioners, still, the market was disappointed by the standing point of SEC Chair Gensler, as it means that crypto firms in the US might face continuous scrutiny from the US regulator. This means probably more penalties and difficulties to maintain business in the US, in which sense, several large players on the US market already expressed the possibility of moving their businesses overseas. Total crypto market capitalization dropped by 8% during the previous week, losing some $104B in value. Daily trading volumes remained stable during the week, moving around $71B on a daily basis. Total crypto market capitalization increase since the beginning of this year currently stands at 50%, where it has added a total $376B to the market cap.
All coins ended the week in red, except stablecoins. Major coins were the ones which were dragging down total crypto market cap in nominal terms. Bitcoin lost $54B in value, or more than 9%. BTC was naturally followed by ETH, whose drop in value was $27B or 10.6%. XRP was another coin with a significant drop of $2.7B in value, losing more than 10% on a weekly basis. Cardano also lost $2B in its cap, which represents a drop of 12.6%. Interestingly, BNB was not in a group of significant losers, as it manages to hold its price steady, due to previous negative news surrounding Binance exchanger. During the week the coin lost only 1.1% and around $0.6B in value. In a relative term, some of the highest losers were DASH who lost around 18% in the market cap, Polygon was down by 13%, same as Filecoin. Tether continues to gain coins in circulation, adding 0.6% during the previous week. Filecoin traditionally continues with an increase of circulating coins, adding 0.5% on a weekly basis, while during the previous week Algorand also increased its coins by 0.3%.
Crypto futures market
The crypto futures market reacted to spot market reversals with decrease of future prices. On a positive side is that prices for longer term futures dropped less than the short-term ones.
BTC short term futures ended the Friday trading with a drop of more than 10%. On the other side, futures with maturity in December this year were down by 7.5%, same as futures maturing in December next year. December 2023 was lastly traded modestly below $30K.
ETH short term futures were traded down by around 13%, while longer term ones dropped by more than 7% and 4% as of the end of the week. Futures maturing in December 2023 ended the week at price $1.9K, while those maturing in December next year were closed at $2K.
