When the Times They are A-Changin', Bitcoin Leads the Bid Storm's Reign

• Crypto markets surged as bitcoin led the charge, the bitcoin dominance surpassed the 50% mark
• BlackRock tackled market manipulation risk by including a surveillance-sharing agreement in its bitcoin ETF proposal
• EDX made its debut as a non-custodial cryptocurrency exchange, going live in the US

Bid storm, bitcoin’s reform

Crypto markets caught a wave of bids this week, driving the total market cap beyond $1.1 trillion. Bitcoin led the charge with a standout +19.5% rally week on week, and bitcoin’s dominance breached the 50% mark. Among the old timers, the proof-of-work coins tracked bitcoin’s trajectory: Bitcoin Cash surged +33.6% and Litecoin rallied +16.4% week on week. For the second consecutive week, ether continued its underperformance compared to bitcoin, still posting a solid +14.6% gain in weekly returns.

This week, bitcoin’s dominance reached over 50%, marking fresh highs not seen in the past two years. It is worth noting that, while there may be exceptions historically, notable increases in bitcoin dominance often occur during cycle turns, such as the beginning of bear markets when investors rebalance their crypto exposure from more volatile altcoins to relatively less volatile bitcoin. Similarly, during the start of bull markets, when sentiment improves after a period of negativity, a significant portion of new inflows for long crypto exposure tends to concentrate on bitcoin.

The times they are a-changin’

At the end of last week, BlackRock, the world's largest asset manager, filed an application to offer a spot bitcoin ETF that sparked optimism heading into a short week (in the US). In the majority of rejected spot-only bitcoin ETF applications, the SEC has consistently expressed concerns about potential price manipulation. According to the filing, in order to address market manipulation risks, there is a provision for Nasdaq to enter into a surveillance-sharing agreement with a bitcoin spot trading platform operator. Despite CT (Crypto Twitter) frequently citing BlackRock's impressive success rate with the SEC (575 to 1), the inclusion of a proposal to address price manipulation concerns could potentially enhance their chances of approval.

BlackRock has selected Coinbase as the custodian. Although this move by Coinbase may appear counterintuitive for Coinbase, as it could potentially cannibalize their revenue by transitioning from high double-digit basis points in exchange trading fees to a low single-digit basis points providing custody to an ETF. However, looking ahead to the long term, if the market becomes regulated and accessible to the masses, profit margins are expected to shrink, transforming it into a volume-driven competition. Therefore, partnering with the largest asset managers today is a strategic move to potentially secure a position in the market before widespread adoption takes place, rather than competing for a smaller slice of the pie later on.

This short week (in the US) witnessed a series of positive developments within the crypto markets ecosystem, which had a favorable impact on prices. Firstly, Deutsche Bank confirmed its pursuit of regulatory approval from Bafin to offer digital asset custody services. Shortly thereafter, EDX Markets, a non-custodial cryptocurrency exchange supported by Fidelity Digital Assets, Charles Schwab, and Citadel Securities, made its debut. Later in the week, reports surfaced about Wisdom Tree and Invesco filing for spot bitcoin ETFs, igniting hopes and intensifying the race for a bitcoin ETF. Lastly, Ripple announced that it had received an in-principle license from the Monetary Authority of Singapore, further boosting the positive sentiment.

Macro pulse

Among tradfi assets, US equities declined 0.2% (vs. the previous week), as the Fed indicated the possibility of further rate hikes to address inflation concerns. Meanwhile, oil futures rallied by 5.8% week on week. The grain markets soared to multi-month highs, which has sparked expectations that global crop shortages might reduce biofuels blending and subsequently boost oil demand. Additionally, the US Dollar index fell 90 bps, 10-year US treasury yields slipped 7 bps, and the Gold & Silver index declined 3.3% week on week.

Note: Weekly (7 calendar day) performance figures are as of 8am SGT on June 22, 2023.

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