CAM | Premium Market Report | February 2023

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The levels after the brilliant start into the new year could be held in February for the time being. The psychologically important price of USD 25,000 was also tested, which was the first time since August 2022 that the price met sellers for the time being. It should be challenging for Bitcoin to sustainably break through this price range. The Bitcoin network saw increased usage as the new 'Ordinals' protocol introduced the ability to store NFTs on the BTC blockchain. The recent regulatory steps of the Securities and Exchange Commission (SEC) have caused uncertainty in the crypto market.

On the one hand, Kraken's staking program was discontinued, which should have had a signal effect. The services should have been registered. On the other hand, the stablecoin BUSD respectively its issuer Paxos came into the focus of the SEC, which is considering a lawsuit. Fortunately, in preparation for the upcoming Shanghai upgrade (expected in March) of the Ethereum main network, the Sepolia test network was successfully forked. Currently, the price of BTC is hovering around ~USD 23,300. It remains to be seen whether the significant USD 25,000 mark can be broken through. The ETH price is currently at ~USD 1,630.-. 

Market cycle

Some exciting developments in February: the FED minutes confirm the intention that interest rates could remain at this level for longer. The SEC has announced further moves towards regulation, with Hong Kong now potentially charting a course to open up crypto trading to retail investors. Developments show that looking only at the U.S. may be too one-dimensional a view. Overall, global liquidity should be taken into account, which, as seen above, currently seems to come from the Chinese central bank, among others. Even though the U.S. Federal Reserve is currently trending in the opposite direction, Bitcoin, as a proxy for the crypto market, is showing corresponding reactions to these liquidity injections. Even if the government in China tolerates the crypto sector only to a very limited extent on the surface, Hong Kong could become a gateway to crypto for mainland China. Certain voices rumor that the government regulated the market at an optimal time, namely when Bitcoin was in the USD 60,000 range. Now

access could be facilitated again at significantly lower levels, which can be considered good timing. While the 7-day volatility has reached its highest point since November due to the strong fluctuations after the release of the US inflation numbers, the correlation of BTC and S&P 500, as seen in the chart above, is negative for the first time since the FTX collapse, which is welcomed by the industry. Due to certain metrics sending green signals, some market participants are already proclaiming the bull market again. A comprehensive look shows that the number of active addresses on the bottom left, which send and receive BTC, has not yet picked up comparably to previous increases. If demand for the network continues to rise, this should also bring corresponding price momentum. The aforementioned important psychological barrier of USD 25,000 to cross is also reflected in the positioning of short and long positions, in the chart of open orders below.

Bitcoin On-Chain Analysis

The graph on the left in blue shows the Bitcoins that are older than six months. The purple line shows all bitcoins that have not moved for more than a year. The number of coins older than six months is increasing and approaching a new all-time high of about 15 million BTC. Holdings older than one year have already reached an all-time high of 12.913 million BTC. Although there has been a price increase of ~50% since the beginning of the year, many old investors continue to hold their Bitcoins and do not sell. In the eyes of long-term investors, the worst of the bear market is probably already over and that is why they are not willing to sell despite the recovery.

The metric on the right shows the behavior of long-term Bitcoin holders. It visualizes the realized loss of investors who held Bitcoin for more than 155 days. An interesting observation is that they often sold their Bitcoins at the worst possible time. This suggests that many who bought at the top have now resigned despite holding on for a long time, indicating a final capitulation. The blue high points illustrate this behavior. Normally, this peak subsides quickly when investor behavior changes. The peak in losses by long-term holders was over 57% on January 5, but has since declined to around 21%.


After the hotter than expected price data, the U.S. stock market has corrected accordingly and a 3rd rate hike in June is currently priced in. However, if inflation & labor market data flatten out by the June meeting, the Fed can still refrain from this increase. Some indicators are signaling declining price momentum. The major online job market 'ZipRecruiter' highlights that the number of job ads from employers is at a level well below seasonal levels. This labor market trend would be in line with the FED's intention, as it would reduce demand pressures. However, other labor market data earlier in the month turned out to be even more stable than expected. In addition, there are further indications pointing to an easing of inflation and a decline in economic momentum. Mortgage applications in the US have fallen to their lowest level since the mid-1990s. Observed rents (chart below) are also declining (despite seasonal increases in February each year)

and, as the largest item in the basket, are likely to provide relief for consumer prices (US CPI). As can be seen below, the easing of pressure on supply chains has continued again in the new year, which was briefly interrupted by developments in Asia. The bond markets, on the other hand, have priced in further hikes and the market as a whole currently expects a key interest rate of around 5.25% by the end of the year. The bond market does not expect a rate cut and anticipates robust data until the end of the year. Looking at recessions since 1954, it can be seen that in all 10 cases they have occurred after interest rate hikes by the Fed. This fact continues to suggest a cautious approach and close examination of the data. As of March 1, the first February data of the U.S. purchasing managers' indices will be published, which, however, could still provide solid values, at best also with regard to the inflation component.

Market Update

At the time of writing, bond yields are already running slightly lower and the USD is losing momentum accordingly. Discussions about soft-landing, no-landing or recession are in full swing and are likely to continue over the course of an intense year in an up-and-down territory. The scenario of disinflation not going as desired and oil prices rising due to increased demand following the China opening is also making the rounds. From the perspective of the crypto market, maintaining the level is a desired course. With time passing, the market is approaching Bitcoin's much-watched halving, which should take place in the spring of 2024 (around the end of March, given the current block generation time). In previous cycles, Bitcoin has ended the downtrend 12-13 months before halving each time. Whether Bitcoin can follow the same trend this time in an environment of higher interest rates and indications of recession will be interesting to watch from March onwards.



FED Interest Rate Increase (01.02.23)
The U.S. Federal Reserve raised interest rates by a moderate 0.25 points due to declining inflation. The words of Fed Chairman Powell at the subsequent press conference calmed Wall Street and led to gains in the Nasdaq and the S&P 500. Powell confirmed the decline in inflation and stated that a large measure of tightening has already been completed. Recent signals from the U.S. labor market show, in part, that the Fed is succeeding in its fight against inflation. Powell says in the fight against high consumer prices, the slowdown in inflation is still in the early stages and it is too early to declare victory. Bitcoin reacted to the rate hike with gains, rising briefly from ~USD 23,000.00 to over USD 24,000.00, but quickly gave some of that back. Currently (2.2.23, 12:48), the BTC rate is still up at USD 23,834 since the Powell speech.
Source | Source 2)

Cooperation with Visa (13.02.23)
The crypto payment provider Wirex has announced its strategic partnership with Visa, which is aimed at a longer period. With this cooperation, Wirex aims to offer crypto-enabled debit and prepaid cards for assets such as Bitcoin in more than 40 countries. The company has the majority of its customer base in the UK and is seeing great growth in the APAC region. The move also underlines further commitment to the crypto space from payments provider Visa, which announced such products last year and is now expanding its range. This collaboration should enable Wirex to create appropriate solutions that make crypto viable for everyday use.(Source | Source 2)

Hong Kong: Expanding digital assets (20.02.23)
The Securities and Futures Commission (SFC) of Hong Kong has announced that it will now allow crypto trading for retail clients (previously only via licensed exchanges for professional investors). This involves the regulation of crypto trading platforms, which must conduct suitability checks on their clients, and the screening of logs. This regulatory framework, which is set to become active from June 1, 2023, initially provides for retail investors only "permitted large market capitalization virtual assets" that have been blessed by the SFC. The permitted digital assets are likely to be defined in an index and crypto-derivatives blocked. The move is interpreted as a signal that Hong Kong is aiming for a role as a leading Web3 hub. Clear regulation is expected to curb contagion risks that could spill over from virtual assets to the traditional market. Crypto exchanges are not allowed to engage in market-making. Opinions on this are split, for some too restrictive, for others a sensible start for one of the world's most important financial centers and as a possible gateway for Chinese investors. Moreover, some see Asia as the driving force for the next bull market.(Source | Source 2)

Update on Genesis (07.02.23).
Since mid-November, shortly after the collapse of FTX, the highly regarded trading company Genesis has halted disbursements from loan programs. Parent company Digital Currency Group (DCG) has now worked out a restructuring plan with key major creditors. According to co-founder of crypto exchange Gemini, which was among those affected, Cameron Winklevoss, this is an important step in recovering customers' assets. According to this agreement, convertible preferred shares of the parent company, sales of the credit and trading unit, as well as loans to be financed, should enable the repayment of customer funds as much as possible. In addition, it has been reported that DCG has sold holdings of your shares in the Bitcoin, Ethereum and other trusts, among others, to raise liquidity. The possible liquidations of the Grayscale Trusts have unsettled the market, but are less likely now that this more constructive path has been found. (Source | Source 2)

Banks invest in Taurus platform (14.02.23)
According to a press release, Deutsche Bank and Credit Suisse, among other well-known financial institutions, are investing a total of USD 65M in Swiss crypto platform Taurus in a Series B funding round. The company offers comprehensive services such as custody, tokenization and a regulated marketplace. Taurus is using the funds to expand its platform to serve globally relevant banks with digital asset services, focusing on cryptocurrencies, tokenized securities and digital currencies. The company aims to establish offices in Europe, UAE, and later in the Americas and Southeast Asia. With this strategic partnership, the banks are positioning themselves in the digital assets space and will expand their offerings accordingly. It is still unclear which services and assets will be included. A positive signal regarding the establishment of crypto and co.(Source | Source 2)  

Coinbase Launches Own Blockchain (02/23/2013)
Coinbase (CB), the second-largest crypto exchange by volume, has now launched its own layer-2 blockchain called Base. The testnet went live on Thursday. CB relies on Ethereum and uses the Optimism protocol's Layer-2 technology, which scores high on speeds and costs. This is technically implemented with Optimistic rollups, which collect hundreds of transactions and then feed them to Ethereum (Layer 1) as one transaction. CB wants to build a platform for decentralized applications (DApps), which will then be made available to their 110 million users. They also announced the Base Ecosystem Fund, which invests in early-stage projects that meet the investment criteria. Base is an open-source platform which is backed by Ethereum and is expected to become entirely decentralized in the coming years. Whether the regulator will not further scrutinize a decentralized platform from a centralized player remains an open question. It is obvious that Coinbase wants to offer the SEC as little attack surface as possible. Thus, it is not possible to invest in the project via tokens. The statement in the blog article is clear: "We have no plans to issue a new network token."
(Source | Source 2

Did you know? 

Not every millionaire could buy a Bitcoin even if they wanted to. According to the Credit Suisse 2022 Global Wealth Report, there were 62.5 million USD millionaires at the end of 2021. As mentioned earlier, the maximum supply around the year 2140 is 21 million Bitcoins. As of today, 19.3 million of these have already been mined. However, it can be assumed that about 4 million BTC's can no longer be accessed. Thus, 15.3 million Bitcoins are currently available. If every millionaire decided today (assuming they don't own any yet) to buy a Bitcoin, this would not be possible. Due to the limitation, everyone could only own 0.2448 BTC (today's equivalent USD 5'705.-). The figure on the right illustrates that this thought experiment is not entirely realistic. 

It shows the distribution of all Bitcoins currently in circulation. Four addresses have more than 100,000 coins, 3 of which are wallets of exchanges like Bitfinex and Binance. A person or entity can also have multiple addresses. Satoshi Nakamoto, the anonymous Bitcoin creator, is credited with ~1.1 million Bitcoins. These are distributed among multiple addresses.

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