CAM | Market Update | April 2023

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March was also an eventful month in which the Bitcoin price once again developed positively. However, a possible contributory reason for the pleasing price increase of the cryptocurrency clouds the picture, as struggling banks may have been partly responsible. Also, the extraordinary event of the decoupling of the stable-coin USDC from its USD peg, is likely to have boosted the bitcoin price. Bitcoin was able to break through the important USD 25,000 threshold mentioned in the last market update to the upside in mid-month and hold this level despite a lot of momentum on the news portals including Binance charges. It tested the important resistance level of 28'800, which was the low of summer 2021. In addition, there was speculation about whether the support of the banks by the FED can be described as renewed quantitative easing. At best, this could be seen as another 

variant or interpretation (quantitative easing) with possibly different effects. From a Swiss perspective, the transaction between the two major banks is likely to go down in the history books. In addition, the Ethereum upgrade Shapella will take place in April, reflecting the ongoing development in the crypto space, independent of price developments. Despite uncertainty in the market due to the sometimes only partially coordinated steps of the regulators, many advocates are convinced that a joint development in coexistence with the existing financial system can be the right step. Further product innovations such as Polygon ID, Ethereum extensions ('entry point') and developer flows into the crypto sector also show pleasing progress. Now, after Easter, the 30,000 mark has even been broken.

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Graph from 7.3.23 for audio version: total market capitalization USD 1,020 billion, Bitcoin price USD 22,400, Bitcoin dominance: 42.2%, Ethereum dominance: 18.8%, Bitcoin time (block height): 779,737

Quote of the Month from Tyler Winkelvoss, founder of Winkelvoss Capital:
"We chose to put our money and trust in a mathematical mechanism that is free of politics and human error ."

Update to Silvergate (06.03.23)

According to information from the Californian bank Silvergate, the SEN ('Silvergate Exchange Network') service will be discontinued, while all other deposit-related services will remain. The SEN payment platform was self-described by Silvergate as its center. Crypto service providers who have deposited assets with Silvergate may not have access to their funds for longer if Silvergate becomes insolvent. Many larger crypto companies use the bank as an on- and off-ramp for fiat and stablecoins into and out of the crypto ecosystem. SEN enabled crypto firms to transfer and trade fiat and crypto 24h. Without SEN, crypto service providers such as exchanges, stablecoins, and other crypto firms might only be able to make desired transactions into and out of the crypto ecosystem during banking hours. If Silvergate went under, the example could provide an ideal excuse for regulators to explain the extent to which crypto threatens the traditional banking system. Silvergate was the first regulated bank to offer payment options into and out of the crypto universe for large entities. The major blue-chip crypto firms have already terminated their relationship and, according to their own statements, would not be more affected by a collapse. A switch to the second well-known crypto bank, Signature Bank, could be possible, with the latter announcing in December that it would reduce its crypto exposure. The crypto market did not react further to the uncertainties over the weekend after last Friday's setback.
(Source | Source 2)

Digital Yuan Integration in WeChat (07.03.23)

In China, the tech company Tencent Holdings (similar to the American Facebook resp. meanwhile Meta) introduces the digital central bank currency, the digital Yuan, in its messenger 'WeChat' (analogous to Whatsapp only more versatile and equipped with payment functions). The e-yuan has not yet taken off so successfully, although Alibaba's Alipay already supports the currency. However, with the widespread WeChat with one billion monthly users, its popularity is expected to increase.(Source)

FED raises by 0.25% to 5.00% (03/22/2013)

After liquidity problems at regional banks like SVB in California, rumors arose that this could stop the series of interest rate hikes. However, on Wednesday evening at 19:00, the FED raised the key interest rate from 4.5% - 4.75% to 4.75% - 5.00%, as expected. The FED remains true to its line to lower inflation to 2%. Most recently, inflation was still at 6% despite the decline. Excerpt from the FED meeting transcript: "As a result, we no longer expect that continued rate hikes are appropriate to contain inflation; instead, we now expect that some additional policy tightening may be appropriate." According to the dot plot forecast, we will end up in the 5.00% - 5.25% range by the end of 2023. The market, on the other hand, is expecting a lower interest rate of ~3.75%. The Bitcoin price dropped from $28,600 to $26,700 in the first two hours after the opening of the meeting. 24 hours later, the price was almost back at its initial value.
(Source | Source 2)

Ethereum's Shapella upgrade on April 12 (03/29/2013)
The long-awaited Shapella upgrade for Ethereum has been set for a date: Well-known Ethereum developer Tim Beiko has announced the evening of April 12 as the launch date on the mainnet. This will allow Ether previously staked on the Beacon Chain in a smart contract to be de-staked and used or transferred elsewhere. Shapella is a combination of Shanghai, which is the execution layer, and the consensus layer called Capella. This was announced after intensive testing and represents another important development step in Ethereum.(Source)

Microstrategy renewed bitcoin purchase (27.03.23)

While Bitcoin is down around 4% today, software company Microstrategy, whose stock is also seen in part as a Bitcoin proxy, announced today in a press release about

a new Bitcoin purchase. According to the report, at an average price of USD 23'238, the number of 6'455 Bitcoins with a total value of USD 150M was purchased. Meanwhile, the company also has a loan in the amount of USD 205M (which was mortgaged with 34'619 BTC) to Silvergate Bank, which is now in liquidation. Microstrategy's average BTC cost price is USD 29,817. Michael Saylor has not served as operating CEO since as early as 2022.(Source)

Further events in the banking sector (13.03.23)

After SVB (Silicon Valley Bank), Signature Bank has now also been closed. The crypto market rallied strongly on Sunday after Treasury Secretary Janet Yellen, FED Chairman J. Powell and the FDIC announced that their respective customer deposits would be secured. However, the banks, or rather their shareholders and certain bondholders, are deliberately not being bailed out. This decisive action is intended to strengthen confidence in the banking system and protect the economy and jobs. SVB clients will have full access to all their money as of today, Monday. The deposits of Signature Bank are to be secured in a similar way as those of SVB. The liquidation of both banks will not be covered by taxpayers, according to information provided by the authorities. The closure of SVB has also caused Circle's stablecoin USDC to lose its peg to the USD, as the company had about USD 3.3 billion in reserves deposited with the bank. Stablecoin USDC recovered after the authorities' announcement, but has not yet fully returned to its 1:1 ratio to the USD. USDC operator Circle lacks a key infrastructure in processing payments with Signature Bank, which can be shifted and absorbed by the well-known bank BNY Mellon for the time being. The important crypto exchange Coinbase and the stablecoin operator Paxos, which hold deposits of approximately USD 240M and USD 250M respectively at Signature Bank, should be protected accordingly. Accordingly, there is speculation in the media whether the FED will continue its path of monetary tightening on March 22 after these uncertainties around the banking system have arisen. Currently, the 0.5% rate hike seems to be off the table again, with the market currently seeing the probabilities for no rate hike at around 34% and for +0.25% at 66%. To what extent the contagion risk is manageable due to the rather specific client structure of SVB, which mainly serves tech and startup clients, remains to be seen.
(Source | Source 2 | CME FedWatch Tool)

Nasdaq goes Crypto (03/24-23)

As announced once before, global exchange operator Nasdaq will launch custody services for digital assets. The services are initially intended for the crypto heavyweights Bitcoin and Ethereum and are to be launched by the end of the second quarter of 2023. A trust company has been filed with the New York State Department of Financial Services specifically for this purpose. With this, Nasdaq wants to partially close the gap of FTX and catch up with the crypto plans of the oldest bank in the US, BNY Mellon and the well-known investment house Fidelity, which we have also reported on more often. This is expected to attract more institutional clients.(Source)

Silicon Valley Bank acquisition (03/26/2013)

There was news from the banking sector in the US this weekend as well. The insolvent Silicon Valley Bank (SVB), which was strongly interwoven with the technology and start-up sector, was taken over by First Citizen Bank. The transaction involves the acquisition of approximately USD 72 billion in assets at a discount of approximately USD 16.5 billion. The FDIC estimates the cost from the demise of SVB to the Deposit Insurance Fund to be approximately USD 20Mia. The FDIC will receive stock appreciation rights with a potential value of up to USD 500M from First-Citizens Bank, which today opens the 17 former branches of SVB. The market could be calmed with the decisive intervention of the authorities. It is difficult to assess the extent to which confidence in the financial system among depositors has taken a hit and demand for alternative solutions is developing. The bitcoin price rose from around USD 27,500 to the USD 28,000 range that day.(Source)

Update: Binance is sued (11.04.23)

On March 27, it was announced that the largest crypto exchange Binance and its CEO Changpeng Zhao (CZ) were sued by the U.S. Commodity Futures Trading Commission (CFTC) over various issues. The lawsuit was filed in the US District Court for the Northern District of Illinois. The CFTC accuses Binance of violating laws related to the offering of futures transactions, "illegal over-the-counter commodity options," failure to register as a futures commission merchant, failure to implement anti-money laundering procedures, and a poor anti-circumvention program. The lawsuit also includes allegations of unauthorized dealings with U.S. customers and instructions to employees and customers to falsify their locations through the use of VPNs. In the meantime, the initial turmoil has subsided, with certain observers stressing the importance of this case for Binance and that the crypto exchange must cooperate accordingly to the best possible extent in order to maintain a forward-looking and constructive attitude of the authorities towards the crypto market. It can be interpreted as a positive signal than the CFTC classifies Bitcoin, Ethereum, Litecoin and the stablecoins USDT and BUSD as commodities and not securities. (Source | Source 2)

Did you know? 

The hashrate secures the Bitcoin network and has never been higher than in 2023. But what is the hashrate anyway? Hashing is about irreversibly encrypting data sets and converting them into a fixed final format (numbers and letters). The encryption algorithm on the Bitcoin network is called SHA-256 (Secure Hashing Algorithm). On the right (Fig. 8), a simple example. The sentence serves as data input and the output value is the hash
521db3fe8259bafa701e3b4da72f". The same input always leads to the same hash (output). Only with one more space character the result changes completely. Simply put, the hash is a digital fingerprint of a data input. Among other things, a hashing function can be used to check a particular record to see if it has been altered without knowing the contents of it. In the Bitcoin network, each transaction has its own hash. All these hashes are combined in a block to form another hash, the so-called "root hash". Now, in order to mine a block on the Bitcoin blockchain and currently obtain 6.25 BTC, a hash with certain specifications (see Table 1, Criterion 5) must be created. To obtain this hash, the miners will now adjust the nonce (6) in the data input as often as they like. The nonce (number only used once) is an arbitrary number that thus serves as a lottery ticket when mining Bitcoin. With the input of the four constants (1-4) shown below and the variable nonce (6), one now tries to generate a hash (5), which for example shows four zeros at the beginning. The higher the mining difficulty, the higher the specifications for the required hash (5). The miners now adjust the variable nonce as often as necessary until they arrive at the desired hash (5).

The higher the computing power of a miner (prospector), the more attempts per second it can execute. An Internet user tried this with block and pen, which would be theoretically possible (without the block times of 10min). He needed 16 minutes and 45 seconds for one round of SHA-256 hashing. To hash a Bitcoin block you need 128 rounds. This therefore equates to 1.49 days if done manually, and one would have entered the lottery once to mine a Bitcoin. Even if by chance you hit the right nonce and would have been allowed to mine the block, this would already have been too late, since the next block was already mined after 10 minutes and the previous block hash (2) would have changed as a result.

The highest Bitcoin hash rate was 398 ExaHash/s on 23.3.2023. Currently it is at 356 ExaHash/s. How much that really is only becomes clear on Tab. 2. This means that 356 trillion calculations are performed per second to find the correct nonce and thus the next block. These elaborate computing operations secure the Bitcoin network. In its 14-year history, Bitcoin has never been as secure as it is today. And the trend is rising.

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Market cycle

From the perspective of the crypto market, some metrics have moved in an encouraging direction. The metric about bitcoins that were last active or shifted a year ago reached new all-time highs. Also, the much-watched MVRV-Z score, which measures overvaluation or undervaluation relative to a fair value, indicates that the market has left the lowest territories. This interpretation of the previously mentioned indicators is also confirmed by the RHODL ratio. These constructive price moves for Bitcoin, which has outperformed most major altcoins this year and Bitcoin dominance (see orange progression Fig. Xy or below/above/right) has increased accordingly, do not come out of the blue for some market observers. Bitcoin, which was originally created as a response to the global financial crisis, has been able to show its real strengths precisely in the environment of the current uncertainties in the financial sector. The significance of an asset that carries no counterparty risk and can be transferred from self-custody at any time could be rediscovered and appreciated by many people and already has been. The typical uses of Bitcoin, which seemed to be more limited to emerging market structures, now cover needs in the developed world as well. As a hedge to the existing system, the crypto sector's reserve currency has been highlighted for years. The current inflows into bitcoin and the price dynamics also suggest in the timing of events,


that the demand for effectively traded Bitcoins could arise from a need for hedging. Ongoing positive price dynamics could occur if further market participants seek hedging alternatives to the financial and banking system and possibly also to the USD-led currency system, which is currently being increasingly questioned by various countries. Another encouraging development is shown by the origin of Bitcoin demand. In the month of March, the highest spot volume (see volume profile in the chart) was recorded on the centralized exchanges. This direct demand for bitcoin is considered more sustainable compared to high derivative volumes. Some crypto advocates see the market as attractively valued due to the distance from the all-time highs and due to the lack of willingness to sell.

Etereum On-chain analysis

Figure 4 shows the age distribution of all existing ethers. Each color band shows the percentage of Ethereum, 

which was last moved within the period specified in the legend area.Each band, also called HODL wave, thus embodies an age class. Ethers that were last moved 7-10 years ago take ~3%. The largest age class in yellow (31.44%) are coins that have not been moved or sold for 1-2 years. Ethers aged 5-10 years in blue and turquoise are gradually taking larger percentages, which could mean that more and more people are realizing the long-term benefits of Ethereum.


The speed at which fundamentals are changing was breathtaking in March. After the congressional hearings on March 8 and 9, a 0.5% rate hike was still the most likely scenario. Four days later, after the turmoil at the banks, the 50 bps was off the table and suddenly a no increase was on the table. The voices that have been pleading for a pause of the Fed for months are getting louder and louder, since the effects of the tightening are known to be felt only with a delay. The additionally inflamed concerns regarding more difficult access to credit for smaller companies due to the problems of U.S. regional banks underscore these warning cries. Furthermore, some observers are expressing concerns about a significant portion of commercial mortgages maturing this year, which would now have to be extended at higher interest rates. 

These are commercial properties with occupancy rates of only 60-80%. A corresponding cooling on the labor market is likely to emerge. The most recently seen data, including that of the labor market from the beginning of April point to a cooling economy and increase the hope that the Zion increase cycle could be over.

Market Commentary

On 11.04. still correct? -> Check and adjust, at least number of days
Despite all adversities in March, the crypto sector will continue to develop and possibly experience further growth precisely because of the circumstances. As mentioned in the last market report, the downward trend usually ended 12-13 months before halving. In the month of March, Bitcoin was able to confirm the upward trend and gain further ground despite the FED's interest rate hike of 0.25%. From the starting point at USD 23,150, the important support of the 200-day average mark at USD 19,700 was tested on March 10. This could be held and at the same time served as a starting point for the rally to currently USD 28,200. For 13 days, bitcoin has been in a sideways movement. The 200-week average was breached from below in the second week of March. 

This is a rare event, as the 200-week moving average has proven to be a strong support in the past. This support is currently at USD 25'500. Setbacks to USD 25'500 or to the 200-day moving average at 19'700 cannot be ruled out. However, we consider it unlikely that we will retest the lows around USD 15,500 of November 2022.

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(*Information: bitcoin and Bitcoin: bitcoin lowercase is used in the crypto domain to denote the monetary unit. Bitcoin capitalized refers to the network as a whole. For simplicity, we use upper case in this newsletter).

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