Litecoin's Halving Craze, Compounding Gains and Defying Gravity, Eastern Winds of Change

• Litecoin surged 23.6% this week in anticipation of litecoin halving
• Compound Finance led the DeFi pack with a standout +48.3% rally this week
• MAS mandates Singapore's crypto firms secure customer assets in trust by year-end

Litecoin's halving hype and bitcoin cash (Korean) won volume dominance

The crypto markets maintained their upward momentum. The total market cap of the cryptocurrency markets was just shy of the $1.2 trillion mark, with bitcoin leading the way and maintaining a dominance of over 50%. Among the blue chip names bitcoin rallied +8.3% (vs. the previous week) while ether posted weekly gains of 5.4%.

Crypto markets continued to advance. The total market cap of the crypto market universe hovered around the $1.2 trillion mark and the bitcoin dominance slipped below 50% as ETH and major alts outperformed bitcoin this week. Among the majors, bitcoin posted modest gains of +1.4% (vs. the previous week) while ETH rallied +4.5% this week. Within the POW family, litecoin and bitcoin cash demonstrated impressive rallies of 23.6% and 20.7% respectively, showcasing substantial week-on-week gains.

As litecoin gears up for its third halving event in early August, the cryptocurrency surpassed the key psychological price level of $100. The impending halving, which will reduce the block reward by half, adds to the market buzz surrounding litecoin. Currently standing at 12.5 LTC, the block reward will be reduced to 6.25 LTC after the halving. The halving event has historically been associated with significant price movements, and investors closely monitor such developments in the lead-up to these events. Another potential factor contributing to an uptick in demand could be its listing on EDX, a new cryptocurrency exchange supported by prominent Wall Street institutions. Litecoin's selection among four cryptocurrencies on EDX in the US has increased its likelihood of being viewed as a non-security asset. South Korea took the spotlight in this week's bitcoin cash rally, with BCH volume in Korean won soaring to over five times that of the US, according to Coingecko data.

Compounding gains and defying gravity with LLAMMA

Compound Finance stood out among DeFi projects, with a standout rally of +48.3% this week. This notable gain marks the second consecutive week of substantial growth for Compound Finance. Despite the absence of specific DeFi sector news, the price action appears to be driven by anticipation surrounding a new company (dubbed "Superstate") launched by Robert Lesher, the founder of COMP. The new venture aims to bridge TradFi and DeFi by establishing a short-term government bond fund and utilizing Ethereum as a secondary record-keeping tool. Although the role of the Compound token in the project remains undisclosed, the announcement has generated substantial speculation and caught the attention of significant players in the industry.

Curve DAO token surged 18.3% week on week, accompanied by substantial growth in its native stablecoin, CurveUSD. Curve DAO's official Twitter page reported that the stablecoin has surpassed $50 million in supply and debt within just two months of its launch, indicating robust usage. CurveUSD sets itself apart with soft liquidations, minimizing losses by gradually liquidating collateral in bands as its price falls, unlike the standard one-time hard liquidations. During loan creation the collateral is allocated across bands representing price ranges, enabling liquidation if the oracle price reaches a specific band. Collateral is distributed and deposited via the Controller to LLAMMA, a unique type of AMM (Automated Market Maker).

Its algorithm adjusts the AMM price faster during falling oracle prices, allowing for deposit of crvUSD and withdrawal of ETH, resulting in collateral liquidation. Conversely, during rising oracle prices, the AMM price increases faster, enabling deposit of ETH and withdrawal of crvUSD, leading to collateral reallocation. Soft liquidation does not involve debt repayment. It rebalances collateral between volatile asset and stablecoin to improve position health. While it is premature to draw conclusive inferences, the stablecoin has shown remarkable progress in a short period, displaying significant growth and a promising potential for widespread adoption in the future.

Eastern winds of change and Fink's gold-bitcoin symphony

The Monetary Authority of Singapore (MAS) recently announced that crypto service providers in Singapore must deposit customer assets in a statutory trust for safekeeping by the end of the year. Additionally, the MAS has imposed restrictions on cryptocurrency service providers, preventing them from facilitating lending and staking tokens for retail customers. However, institutional and accredited investors can still access these services. According to a former MAS regulator, Singapore now requires 90% of customer crypto to be held in crypto wallets, unlike Hong Kong's requirement of 98%, and cold wallets are not required to be onshore unlike in Hong Kong.

CT is all over the place with comments on an interview from Blackrock CEO, Larry Fink, about digital assets, in which he compared bitcoin to digital gold. The echoes of his comments evoke the summer of 2020 when legendary trader Paul Tudor Jones embraced bitcoin as an inflation hedge, likening it to the gold trade of the 1970s. This recurring hypothesis in a different market cycle highlights the enduring relevance and potential implications of such strategies.

Macro pulse

Among tradfi markets US equities rose 1.6% (vs. the previous week), primarily driven by Friday's rally, following a cooler-than-expected Core PCE report, accompanied by a decrease in housing prices and core services ex-housing components. Oil futures rallied 3.4% week on week, as markets reacted to the supply cuts announced earlier this week by Saudi Arabia and Russia. Elsewhere the US Dollar index rose 40bps, 10-year US treasury yields climbed 22 bps and the Gold & Silver index rose 1.7% week on week.

Note: Weekly (7 calendar day) performance figures are as of 8am SGT on July 06, 2023

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