Q9 Markets: Half Empty or Half Full?
14th January 2021
Q9 Capital: www.q9capital.com
- BTC dips below $40k for first time since Sept ‘21
- 12 month CPI confirmed at 7%
- Crypto volumes empty; NFT volumes brim
Over $340mn of positions and 109,000 individual traders were liquidated early this week as BTC dipped below $40k for the first time since September 2021, and for the first time since October, ETH also tumbled below $3,000. Both assets have since recovered ending the week $42.5k (-1.3%) and $3.2k (-5.0%). The recovery came on the back of the US releasing CPI numbers mid-week showing inflation rose 7% over the last 12 months — broadly in line with expectations. Many altcoins also saw double-digit positive returns since the news broke.
It worth noting that these price swings are all happening on wafer thin volumes, which can amplify price movements. Investors seem to be heeding the industry mantra of “HODL” and shying away from active trading. No fresh capital is coming in and nobody is willing to sell or buy. Given the recent volatility, remarks from the Fed and global market backdrop it looks like investors are happy to just sit on their positions and wait it out. Both futures and spot crypto volumes have halved since Spring ’21.
Bitcoin Futures Volumes Fall
A Similar Story in the Spot Market
NFTy Business
Maybe all this volume hasn’t left digital assets, but just found a new home. In somewhat divergent fortunes OpenSea, the top NFT marketplace in the world, is set to break new records for NFT trading volumes and is on pace to exceed $6 billion in transactions by the end of the month. OpenSea’s $2.7 billion in trading volume of NFTs so far this month is now close to the total trading volume for the entirety of August 2021, the highest month on record. Volume reached nearly $3.5 billion in that month, according to Dune Analytics.
Current trading volume on OpenSea has been driven by the new “PhantaBear” collection, which recorded 18,870 ETH (USD $60mn) in sales over the past seven days. “Bored Ape Yacht Club” is a close second place with 15,828 ETH (USD $50.6mn). Other key factors contributing to the record pace for OpenSea include the number of active users, which at 260,369 is rapidly approaching the all-time high of 362,679 tallied last month.
Although a lot of it is pure hype, there are a lot of tailwinds for the overall NFT market. Ethereum Layer-2 scaling solutions and the growth of non-Ethereum Layer-1 blockchains are major catalysts that will help significantly expand the space. NFT gaming will also likely continue to receive significant. NFT financialisation — NFT loans, liquidity, insurance, etc — will also grow as users seek to ensure that their NFTs can either produce yield or remain as liquid as possible. The last quarter of 2021 and the onset of 2022 has already seen increased interest in different types of assets including photography and music NFTs.
Meanwhile NFT Volumes Soar (OpenSea Daily Volume, ETH)
Top Collections on OpenSea by Volume
Total OpenSea Traders Over Time (ETH)
Drifting Apart
Following price declines in crypto you usually see a lot of quick volume from people trying to sell off during a panic, but then a longer period of decreased volume as people shy away from the market after the volatility. Declining prices could drive lower trading volume when it gets to the point to discourage traders to get engaged. There needs to be more confidence from investors for crypto trading volumes to come back.
Shifting volumes and other market conditions may lead to a decoupling of crypto prices from NFTs — where the glass appears to fuller for now. NFTs include a significantly broad category of music, art, collectibles, gaming assets, fantasy sports, financial assets, and more. As such, it’s possible that NFT commerce in one specific vertical grows while others decline or fluctuate over time. It’s possible we’ll see a greater decoupling whereby one asset like art NFTs might perform well amidst the overall crypto market performing poorly or vice versa.
In the News…
- Hong Kong to establish plan for new crypto regulation by July
- Pakistan plans to ban cryptocurrencies as stance hardens
- Tether freezes three Ethereum accounts with $160mn of USDT stablecoin
- Bitcoin hashrate nears recovery as Kazakhstan’s internet is partially restored
- Here’s how much El Salvador’s Bitcoin is currently worth
- Ruling Party sources deny plan to levy 40% tax on crypto yields in Turkey
- Arbitrum goes down citing sequencer problems
- Coinbase buys crypto futures exchanges, plans to sell derivatives in US
- Visa partners with ConsenSys to develop CBDC on-ramp tool
- Solana could beat out Ethereum to ‘become the Visa’ of crypto: Bank of America
- Majority of JPMorgan’s clients see Bitcoin at $60,000 by year-end; just 5% expecting $100,000
- Fidelity adds Bitcoin exposure to traditional ETFs
- WisdomTree adds Bitcoin futures exposure to fund, refiles for Spot ETF
- Dorsey’s Block hiring to develop next-gen Bitcoin mining ASIC
- Associated Press launches NFT marketplace for photography
- Disney moves toward the Metaverse with approved US patent to create a ‘Virtual-World Simulator’
Legacy Markets
Oil futures rose +2.8% while the SPX slipped -0.8%. 10-year US treasury yield was unchanged (-1bp), the US Dollar index fell -1.4% and the Gold and Silver index rose +5.4% over the week.
Crypto Markets
- BTC/USD fell -1.3% while ETH/USD dropped -5%. The total market cap of crypto flirted with the $2tln mark and Bitcoin’s dominance dropped below 40%
- SOL/USD and EOS/USD dropped -2.9% and -5.8%. YFI/USD was the key DeFi laggard dropping -12.9%
- Annualized volatility in BTC continued to subside dropping to 43% for BTC. However it rose to 84% for ETH this week
Flows
- Client pad skewed towards buying (1.4x buyers vs sellers) on modest volumes
- Two way activity in ETH. Well bid on BTC
- Net buyers in SOL and SUSHI
Q9 Capital: www.q9capital.com
