LTP Research

Table of Content
● Summary of October 2023
● Market Commentary
● News Highlights
● November Volatility
● Appendix

Summary of October 2023

The month of October was characterized by a prevailing "risk-on" sentiment within the realm of cryptocurrency. In this period, there was a noticeable increase in the circulating supply of major stablecoins, amounting to a substantial $842 million. Bitcoin, in particular, showcased remarkable resilience against broader market corrections, achieving an impressive price increase of over 30%. Additionally, there was a significant uptick in the volatility of major cryptocurrencies, with Bitcoin experiencing a 70% increase in volatility compared to the previous month.

Trading volumes across major cryptocurrency exchanges, especially in SPOT trading, witnessed substantial upsurges. Notably, Binance and OKx both reported nearly a 100% increase in their SPOT trading volumes when compared to the previous month.

The surge in Bitcoin’s price and the increased volatility in October can be partially attributed to a gamma squeeze triggered by option dealers. This was further accentuated by a considerable increase in spot trading volume, especially on the Binance and OKx exchanges. Despite these bullish price movements, it’s important to note that the Bitcoin Perpetual Futures Aggregate Open Interest did not surpass its peak in August, which was over $21 billion. At the end of October, the Open Interest stood at $19 billion, marking a significant 23% increase compared to the previous month. Total short liquidations amounted to $397B, while total long liquidations were at $260B for the month.

Moreover, the recent Quarterly Refunding Announcement from the U.S. Treasury revealed a decrease in the issuance of treasury securities for Q4. This is expected to place downward pressure on bond yields, potentially leading to a temporary shift towards higher-risk assets. If the equities market witnesses a revival in November, it could result in increased capital inflows into the cryptocurrency markets, potentially leading to higher trading volumes and volatility.

1.  Macro Economic Outlook
1.1 Steadfast Bond Yields Maintain Their Resilience

In September, the Consumer Price Index (CPI) for the year-over-year (YOY) period registered at 3.7%. However, during October, there was a sustained upward trajectory in bond yields, with the 10-year yield nearing 5%, the 20-year yield reaching 5.3%, and the 30-year yield reaching 5.1%.

Significantly, the recent Quarterly Refunding Announcement indicated a substantial $76 billion reduction in treasuries issuance, leading to a reduced supply of treasury securities available in the market. Typically, short-dated treasury securities are expected to be absorbed by the funds in the Reverse Repo market with the Federal Reserve. The reduction in the issuance of long-dated treasuries is likely to exert downward pressure on bond yields. Consequently, this could foster a risk-on sentiment in risk assets.
1.2 Bitcoin Defies Broader Market Correction, Surges to Annual High

In November, major indices sustained ongoing declines, with the S&P 500 and the Nasdaq decreasing by 2%. Gold exhibited significant growth, surging by 7.3% due to heightened geopolitical risks. The U.S. Dollar Index held steady at 106 levels. Remarkably, Bitcoin outperformed and defied the downward gravitational force exerted by the correction in major indices, experiencing a remarkable 30% surge, reaching the 35K mark, thereby surpassing its yearly high. The correlation between Bitcoin and the S&P 500, as well as the Nasdaq, dipped below 0.2

2.  Digital Assets Market Commentary
2.1 Bitcoin and Ethereum CME Futures Commercial Traders Positioning

During October, the cohort of commercial traders participating in CME Bitcoin Futures trading significantly reduced their combined net short positions from -1475 to -438. This adjustment coincided with Bitcoin's resurgence in the latter part of the month. In contrast, concerning Ethereum Futures, this group of traders opted to maintain their collective net short position. 
2.2 Bitcoin Price Model

Bitcoin surpassed both the 200-Week Moving Average and the Short-term Holder Cost Basis, which were positioned at $28,000. Meanwhile, the Long-term Holder Cost Basis and Realized Price closely approximated $20,000.
2.3 Top 4 Stablecoins Circulating Supply, Bitcoin Marketcap, No. of Total Staked ETH & DeFi TVL (ETH)

In October, the Bitcoin market capitalization achieved a yearly high of $670 billion. Concurrently, the number of staked Ethereum continued its upward trajectory, reaching 32 million. During October, there was a notable influx of stablecoin supply, with USDT increasing by $1 billion, USDC decreasing by $192 million, TUSD declining by $102 million, and BUSD decreasing by $237 million, resulting in a net aggregate increase of $842 million.
2.4 Bitcoin/Ethereum SPOT and Perpetual FUTURES Trading Volume on Binance

In the month of October, the BTCUSDT SPOT trading volume on Binance registered at $34 billion, representing a noteworthy increase of 62% compared to the preceding month. Conversely, the BTCTUSD SPOT trading volume declined to $3.56 billion, marking a substantial 71% decrease compared to the previous month. Simultaneously, the combined SPOT volume encompassing USDT, TUSD, and FDUSD experienced a robust 90% surge compared to the preceding month. Additionally, the ETHUSDT SPOT trading volume exhibited a commendable 39% increase.

Moving to the perpetual futures market, the BTCUSDT Perpetual Futures trading volume reached an impressive $324 billion, reflecting a significant 59% upsurge compared to the previous month. Likewise, the ETHUSDT Perpetual Futures trading volume reached $115 billion, demonstrating a substantial 48% increase.

2.5 BTCUSDT/ETHUSDT SPOT and Perpetual FUTURES Trading Volume on Bybit

In the month of October, the BTCUSDT spot trading volume on Bybit amounted to 302,000 BTC, marking a notable 45% surge in comparison to the preceding month. Concurrently, the BTCUSDT perpetual futures trading volume reached a substantial $124 billion, indicating a remarkable 65% increase when juxtaposed with the previous month's figures.

Similarly, the ETHUSDT spot trading volume exhibited significant growth, recording 2,968,000 ETH, which translates to a substantial 75% uptick compared to the previous month. Furthermore, the ETHUSDT perpetual futures trading volume reached a total of $30 billion, representing a commendable 40% increase compared to the preceding month's metrics.

2.6 BTCUSDT/ETHUSDT SPOT and Perpetual FUTURES Trading Volume on OKX

In October, the BTCUSDT spot trading volume on OKX recorded a substantial $10 billion, representing a remarkable 92% increase when compared to the previous month. Simultaneously, the BTCUSDT perpetual futures trading volume reached $14.6 billion, demonstrating a commendable 63% increase from the preceding month.

A similar surge in trading volume was observed in ETHUSDT spot trading, with volumes reaching $5 billion, marking a significant 53% increase compared to the previous month. Additionally, the ETHUSDT perpetual futures trading volume amounted to $8 billion, reflecting a noteworthy 48% increase from the previous month's figures.

2.7 BTCUSDT.P (Binance) 3% Market Depth (October)

In October, as the price of Bitcoin experienced a surge, there was a noticeable decrease in liquidity on the Binance BTCUSDT perpetual futures trading pair. Specifically, on the 23rd of October, the 3% market depth dropped below 10,000 BTC, marking the lowest level observed in the past three months. However, as Bitcoin's price stabilized later in the month, liquidity gradually returned to its nominal levels.
2.8 Binance Top 20 Traded FUTURES Pairs 

During mid-October, LOOMUSDT experienced a notable surge in trading volume, particularly on the 13th and 14th of the month, accounting for 17% and 18% of Binance's total perpetual futures trading volume during this period, respectively. Following the Bitcoin rally, we observed heightened trading activities within the altcoin market, particularly with SOLUSDT, LINKUSDT, TRBUSDT, and PEPEUSDT. Consequently, the trading volume dominance of Bitcoin and Ethereum decreased to 30% and 10%, respectively, as altcoins gained momentum.
2.9 Binance Top 20 Traded COIN-Margined Pairs 

Coin-margined trading pairs continue to be predominantly dominated by Bitcoin and Ethereum in terms of trading volume.
2.10 BTCUSDT.P (Binance) Trading Traffic (UTC) Per 15mins Interval

n October, the highest trading activity for Bitcoin occurred during the overlap of London Trading Hours and New York Trading Hours, specifically from 13:00 UTC to 16:00 UTC. During this period, we observed that the London Range accounted for 45.22% of the total trading volume and 43.55% of the total trades. Similarly, the New York Range represented 36.19% of the total volume and 37.14% of the total trades. On the other hand, the Asian Range contributed to 23.47% of the total volume and 24.22% of the total trades for the month.
Additionally, there was an observed increase in trading activity between 22:00 UTC and 23:00 UTC during the same month. It's essential to consider these timings when analyzing trading patterns, as they provide insights into the most active periods for Bitcoin trading on Binance.
2.11 Price Density - Selected Perpetual FUTURES Pairs on Binance 

The Price Density Indicator is a valuable tool for assessing the price efficiency of various financial instruments. A higher Price Density reading indicates that asset prices exhibit less choppiness and follow cleaner trends with reduced noise. In the context of October, it's noteworthy that XEMUSDT, CELOUSDT, and DGBUSDT demonstrated the highest readings on this indicator, suggesting smoother price trends. Conversely, UNFIUSDT and POLYXUSDT exhibited the lowest readings, indicating more erratic price movements.

It's important to highlight that the mean threshold for all FAPI pairs registered at 5.13. This value serves as a reference point for evaluating the relative efficiency of individual trading pairs. Furthermore, it's notable that the chart annotates only the top 10% and the bottom 10% of the distribution, providing a focused view of the most and least efficient pairs within the dataset.

2.12 Annualised Volatility of Major Cryptos I

Among the popular cryptocurrencies, Bitcoin experienced the most significant gain in volatility during the month of October, with a substantial 78% increase by the end of the month. Following closely behind, SOLUSDT exhibited a notable 41% increase in its volatility readings. Ethereum and XRP also saw substantial increases in volatility, recording gains of 36% and 40%, respectively.

In contrast, Litecoin's volatility remained relatively low, indicating a comparatively stable price movement throughout the month of October.

2.13 Annualised Volatility of Major Cryptos II

Among other altcoins, there was a notable surge in volatility observed in several trading pairs, including LINKUSDT, AVAXUSDT, DOTUSDT, and DOGEUSDT. Particularly, DOGEUSDT, which is often associated with the memecoin sector, experienced the most significant increase in volatility. By the end of October, DOGEUSDT had recorded an impressive 136% gain in terms of volatility, signifying substantial price fluctuations and market activity within the meme cryptocurrency segment.

2.14 Correlation Matrix of the Top 20 Cryptocurrencies Traded by Total Volume (Perpetual Futures on Binance) October

In October, BTCUSDT maintained the tightest correlation with ETHUSDT, BCHUSDT and BNBUSDT. ETHUSDT maintained the tightest correlation with BNBUSDT, ARBUSDT, MATICUSDT and DOGEUSDT.

2.15 Bitcoin Price, Logarithmic Returns, Average True Range (ATR), and Close Minus Moving Average (CMMA) Indicator

The Close Minus Moving Average (CMMA) is a widely employed indicator utilized to gauge the degree of deviation of an asset's price from its moving average. It can be effectively employed in conjunction with other assets exhibiting strong correlations to formulate mean-reversion strategies, with a focus on meticulous optimization and necessary adjustments.

Observing the provided chart, it becomes apparent that the CMMA indicator generated extreme readings on two specific dates, namely the 16th and 23rd of October. These instances of extreme CMMA readings may serve as potential signals for trading opportunities, especially when comparing the CMMA values of one asset to those of other correlated assets. This analytical approach can aid in identifying potential mean-reversion scenarios, enabling traders to make informed and strategic decisions in their trading activities.

2.16 Ethereum Price, Logarithmic Returns, Average True Range (ATR), and Close Minus Moving Average (CMMA) Indicator

ETHUSDT had a relatively moderate CMMA reading compared to BTCUSDT.

2.17 Intermarket Difference BTCUSDT CMMA Minus ETHUSDT CMMA

On both the 16th and 23rd of October, significant extreme readings were observed in the intermarket difference between BTCUSDT's CMMA and ETHUSDT's CMMA. It's important to note that a high reading in this context signifies that BTCUSDT outperformed ETHUSDT during those periods, while a low reading would indicate the opposite, with ETHUSDT outperforming BTCUSDT. These extreme readings can offer valuable insights into the relative performance of these two cryptocurrency pairs and may be used to inform trading decisions and strategies.
2.18 Bitcoin Perpetual Futures Aggregate Open Interest, Long/Short Liquidations and Aggregate Funding Rate

In the month of October, the aggregate open interest of Bitcoin Perpetual Futures experienced a noteworthy increase of approximately $3.5 billion, marking a substantial 23% uptick over the course of the month. It is worth noting, however, that despite this significant increase, the open interest reading did not surpass the high point recorded on the 15th of August, which stood at $21 billion.

Furthermore, it should be emphasized that Alex Thorn from Galaxy Research highlighted the role of a gamma squeeze executed by option dealers in contributing to the heightened volatility and substantial price appreciation during this period. This observation is substantiated by the remarkable 90% increase in SPOT trading volume on Binance and OKX.

Gamma Squeeze Explained:
Options Trading: Traders buy call options, betting that the price of Bitcoin will go up. The sellers of these options are often market makers.

Delta Hedging: Option sellers need to hedge their positions to manage risk. They do this through a process called "delta hedging," which involves buying or selling the underlying asset (Bitcoin) to offset the risk of the options positions. The amount they need to buy or sell is determined by the "delta" of the options, which measures how much the price of the option is expected to move for every $1 move in the underlying asset.

Gamma and Rapid Price Movement: "Gamma" measures how much the delta of an option will change for every $1 move in the underlying asset. When traders buy a lot of call options, and the price of Bitcoin starts to rise, the delta of the options increases, and the gamma becomes positive. This forces option sellers to buy more Bitcoin to stay hedged.

Feedback Loop: As option sellers buy more Bitcoin, the price of Bitcoin goes up even more. This, in turn, increases the delta and gamma of the options, requiring the sellers to buy even more Bitcoin. This creates a feedback loop, driving the price of Bitcoin higher and higher in a short period of time.

Purchasing Spot Bitcoin: In order to adjust their hedge positions quickly and effectively, option dealers might need to purchase spot Bitcoin directly in the market, contributing to the rapid price increase.

In summary, a gamma squeeze forces option sellers to adjust their hedge positions by buying more of the underlying asset, which can lead to rapid price increases and heightened volatility in the market. This is why option dealers might need to purchase spot Bitcoin during a gamma squeeze.

The sudden and sharp price surge also triggered significant short liquidations in the Perpetual Futures market. The total short liquidations in October amounted to $397 million, whereas the total long liquidations recorded $260 million during the same period. 

2.19 Trending L1s Price Performance (October)

SOLUSDT exhibited a remarkable price appreciation of 80% throughout the month of October, making it one of the standout performers. It was closely followed by LINKUSDT and CFXUSDT, which also demonstrated impressive gains. Notably, all of these cryptocurrencies outperformed Bitcoin, which experienced a 28% increase in its price during the same period. 

2.20 Trending L2s Price Performance (October)

MATICUSDT outperformed among L2s.

2.21 Trending DeFi Tokens Performance (October)

INJUSDT took the lead throughout the month of October, delivering an impressive 85% price appreciation. It was followed closely by RUNEUSDT and ZRXUDT, which also demonstrated notable price gains during the same period. 

2.22 Trending GameFi/ Metaverse Tokens Performance (October)

In October, GALAUSDT exhibited a noteworthy 34% price increase, surpassing the performance of other tokens within the GameFi and Metaverse concept category.
2.23 Trending CEX Tokens and Memecoins Price Performance (October)

In October, the memecoin sector displayed heightened volatility, largely influenced by an increased risk appetite in response to Bitcoin's substantial price surge. Notably, within this sector, FLOKIUSDT and PEPEUSDT stood out as notable outperformers.
2.24 Seasonality of S&P 500, Nasdaq, Gold and Bitcoin

Past performance is no guarantee of future results. November was generally bullish for equities and cryptocurrencies.
News Highlights
Bitcoin gains legal recognition as digital currency in Shanghai, China
Taiwan bans unregistered foreign crypto exchanges from operating
SEC’s Motion to Appeal Loss in Ripple Case Is Denied
Ripple obtains digital asset license from Monetary Authority of Singapore
Coinbase granted full license in Singapore
Current laws sufficient to charge Sam Bankman-Fried for alleged fraud: DOJ
Hong Kong to list ‘suspicious’ crypto platforms in wake of JPEX scandal
US lawmakers urge IRS to implement crypto tax reporting requirements before 2026
European regulator: DeFi comes with significant risks as well as benefits
Hata receives in-principle approval to be fifth Malaysian digital exchange
California 'BitLicense' Bill Signed by Gov. Newsom
Tether Freezes 32 Crypto Addresses Linked to Terrorism, Warfare in Israel and Ukraine
Bitcoin Jumps to $30K, Then Dumps, as False Spot ETF Approval Report Circulates
Genesis Ordered to Comply With Terra Subpoena Within 5 Days
Binance to Stop Accepting New U.K. Users to Comply With Ad Rules
California Assembly Passes Crypto Regulation Bill That Requires Bank-Issued Stablecoins
Franklin Templeton Joins Spot Bitcoin ETF Race
SEC Won’t Appeal Loss in Grayscale Case, Boosting the Odds GBTC Can Become a Bitcoin ETF
Senators Urge IRS to Speed Up Plan to Snag Crypto Tax Cheats
FTX Plans to Return 90% of Customer Funds, but There's a Catch
Binance.US Halts Direct Dollar Withdrawals
Uniswap Foundation targets $62M in additional funding
Coinbase Trading Volume Slows Further as Crypto Winter Continues: Berenberg
EU Formally Agrees on New Crypto Tax Data Sharing Rules
New York Attorney General Sues Gemini, DCG, Genesis; AI's Role in the Future of Web3
Coinbase Picks Ireland for EU Hub With MiCA Law Set to Open European Market
SEC Drops Charges Against Ripple CEO Garlinghouse, Chairman Larsen
Binance withdrawals spike to $1.4B in 24 hours amid continued executive departure and regulatory struggles
Hong Kong regulator updates policy for virtual asset activities
FinCEN proposes designating crypto mixers as money-laundering hubs
Banks’ crypto exposure must be disclosed — BIS’ Basel Committee
PetroChina Completes First International Crude Oil Trade in Digital Yuan: Report
FCA warns about common issues with crypto marketing
BlackRock’s spot Bitcoin ETF now listed on Nasdaq trade clearing firm — Bloomberg analyst
Bitcoin volatility triggers over $147 million in liquidations
European Banking Authority, ESMA issue crypto entity suitability guidelines
November Volatility

Appendix
Fig A. Fed Balance Sheet, U.S. Treasury General Account (TGA), Reverse Repurchase Agreements (RRP), Euro Central Banks Total Assets and Treasury Yields

The U.S. Treasury has released its Quarterly Refunding statement and schedule for the fourth quarter of 2023. In this statement, it is indicated that the U.S. Treasury plans to continue a gradual increase in coupon auction sizes from November 2023 to January 2024. This increased supply of bonds could potentially exert downward pressure on bond prices, consequently leading to upward pressure on bond yields. Such developments in the bond market have the potential to influence the performance of equities in the longer term.

Fig B. Bitcoin Liquidation Heatmap (Hyblockcapital)

Liquidation zone below market price:
$22,000 - $24,000.
Source: Hyblock Capital., as of November 1, 2023.
For informational purposes only and should not be considered investment advice or a recommendation to buy, sell, or hold any particular security or cryptocurrency.

Disclaimers
The information, opinions, estimates, and projections contained in this cryptocurrency market commentary (collectively "Information") are provided by LIQUIDITY TECHNOLOGIES INC. (the "Company"). This Information is for informational purposes only and is not intended to serve as investment advice or any form of endorsement or recommendation. The company has taken reasonable measures to ensure the accuracy and validity of the Information provided but makes no warranty as to its accuracy or completeness. The opinions expressed reflect the judgment of the authors at the date of publication and are subject to change without notice.The Information should not be construed as an offer or solicitation to buy or sell or trade in any cryptocurrency, security, or financial instrument. It does not account for individual investment objectives or the financial situation of any readers. Cryptocurrencies are volatile and complex products and are subject to significant risks including the risk of sudden and substantial price movements.Investments in cryptocurrencies are not protected by any statutory compensation arrangements in the event of the firm's failure. The value of cryptocurrencies may be affected by changes in currency exchange rates, regulatory interventions, or other political and economic developments.Investors should be aware that the value of their investments can fall as well as rise, and they may not receive back the original amount they invested. If you are in any doubt about the contents of this document, you should seek independent professional advice.Any historical information contained in this Information is based on our own analysis and is provided for illustrative purposes only. Past performance is not indicative of future results, which may vary.In no event shall the company, nor its directors, employees, agents, partners, suppliers or affiliates, be accountable or liable for any indirect, incidental, special, consequential or punitive damages, including without limitation, loss of profits, data, use, goodwill, or other intangible losses, resulting from the use of this Information. The company  reserves the right to change, modify, add, or remove portions of this Information for any reason at any time without notice.

Digital Assets Market Commentary - September
LTP Research
Table of Contents
Summary of September 2023
Market Commentary
News Highlights
October Volatility
Appendix
Summary of September 2023
September experienced a broad-based market correction as the U.S. Dollar Index surged to its 2023 yearly high. The S&P500 depreciated by 5.3%, while the Nasdaq declined by 6.4%. Gold retraced 4.7%. However, Bitcoin stood out performing well, recording a 4% increase in September. The de-correlation between the performance of Bitcoin and these major financial instruments warrants continuous monitoring. Generally speaking, the strengthening of the U.S. Dollar results in a risk-off market environment, which often leads to underperformance of equities and risky assets, including cryptocurrencies.
The market correction was accompanied by rising long-dated treasury yields, with 10-year, 20-year, and 30-year bonds reaching their highest levels since 2008. The Federal Reserve maintained interest rates at 5.25% to 5.5% in September FOMC, while the market has started pricing in potential rate cuts as early as the second half of 2024. The increase in the consumer price index (CPI) to 3.7% in August, coupled with rising energy prices, provoked concern regarding the efficacy of efforts to combat inflation.
In this macroeconomic context, commercial traders on CME maintained aggressive net short positions with Bitcoin. The collective cryptocurrency markets experienced reduced trading volume and activity. The Aggregate Open Interest with Bitcoin Perpetual Futures did not recover since the last sell-off. Additionally, there was a shift in trading volume from BTCTUSD to BTCFDUSD on Binance, following the launch of FDUSD on their exchange, which could present new trading opportunities for market participants.
Regarding the performance of cryptocurrencies, Layer 1 and Layer 2 tokens generally outperformed GameFi/Metaverse tokens in September. Among Layer 1 cryptocurrencies, LINK exhibited the highest performance, with an impressive 40% price appreciation throughout the month.
In terms of regulatory developments, the U.S. Securities and Exchange Commission (SEC) has recently postponed its decision on Spot Bitcoin ETF applications, which includes prominent applicants such as BlackRock and Fidelity. Concurrently, the SEC warned that additional crypto exchanges, dealers, and brokers could face charges regarding inadequate disclosures or failure to register with the agency.Market Commentary
1. Macro Economic Outlook
1.1 Long-dated Bond Yields Continued Rising as Inflation Spiked in September

The August Consumer Price Index (CPI) year-over-year (YOY) inflation rate surprised to the upside, climbing to 3.7%, exceeding expectations and fueling concerns about the potential for sustained inflationary pressures. This development was reinforced by the continued ascent of long-dated Treasury securities yields, including the 10-year, 20-year, and 30-year, which broke all-time highs since 2008. The surge in Treasury yields suggests that investors are increasingly uneasy about the prospect of higher interest rates and inflation in the medium to long term. Meanwhile, the Federal Reserve maintained the interest rates at 5.25%-5.5% in September.
1.2 September Saw a Broad-based Market Correction

In September, a widespread market correction occurred as a result of the US Dollar's strong performance, leading to a significant pullback across major asset classes. The S&P 500 Index, Nasdaq Composite, and gold all experienced declines, which coincided with the resurgence of the US Dollar Index. The S&P 500 depreciated by 5.3% during the month, while the Nasdaq declined by 6.4%. Gold also faced challenges, resulting in a loss of 4.7%. However, Bitcoin stood out performing well, recording a 4% increase in September. The correlation between Bitcoin and the S&P 500, Nasdaq, and Gold decreased, indicating that Bitcoin moved independently. This raises the question of whether Bitcoin's appreciation in September will be sustained in October.

2. Cryptocurrency Market Commentary
2.1 Commercial Traders Maintained Aggressive Net Short in Bitcoin CME Futures

Against the backdrop of a strengthening Dollar, weakening risk appetite for equities and risky assets in the macro environment, commercial traders on the Chicago Mercantile Exchange (CME) maintained an aggressive record net short position in September, according to the latest Commitment of Traders (COT) reports.

2.2 Bitcoin Price Is Retesting the Short-term Holder Cost Basis and 200-Week MA

In September, the price of Bitcoin exhibited consolidation below both the 200-Week Moving Average and the short-term holder cost basis. The 200-Week Moving Average, a commonly utilized trend indicator, is considered significant, as a price below it may indicate a potential transition into a downtrend. Currently, the price is undergoing a retest of this level. Furthermore, there was convergence between the realized price and the long-term holder cost basis at $20,600.
2.3 Top 4 Stablecoins Aggregate Circulating Supply, No. of Total Staked ETH and Stablecoin Supply Ratio Oscillator

Bitcoin's market capitalization remained stable in September, as the price remained stagnant throughout the month. Meanwhile, the number of staked Ethereum continued to increase, reaching 30.5M, with more Ethereum holders staking their holdings to earn staking rewards. According to StakingRewards, the current staking yield stands at 3.5%. Additionally, the total value locked (TVL) in DeFi remained subdued, ending the month at $21.2 billion. The circulating supply of the top 4 stablecoins continued to decline, reaching $114 billion.

2.4 SPOT and Derivatives Volume of Major CEXes and DEXes

In September, the spot trading volume of Centralized Exchanges remained relatively stable comapred to August. However, Upbit recorded a significant rise in trading volume. On the other hand, spot volume of Decentralized Exchanges experienced a decrease in September. With  derivatives, the trading volume on major Centralized Exchanges remained relatively unchanged compared to August.

2.5 Binance Top 20 Traded FUTURES Pairs 

In early September, there was a notable increase in trading volume for CYBER and PERP. Similarly, in mid-September, TRB experienced a significant rise in trading volume.
It is observed that weekend trading volume for Bitcoin and Ethereum was generally subdued. However, certain altcoins such as PERP, TRB, and WLD saw active trading on weekends.
2.6 Binance Top 20 Traded COIN-Margined Pairs

BTCUSD_PERP and ETHUSD_PERP accounted for nearly 80% of the total Coin-Margined trading volume. Weekend trading volume tended to be relatively low in comparison. Apart from Bitcoin and Ethereum, the most actively traded Coin-Margined pairs included SOL, LTC, LINK, and BNB.

2.7 Bitcoin/Ethereum SPOT and Perpetual FUTURES Trading Volume on Binance

In September, Bitcoin SPOT trading volume on Binance reached a yearly low, falling short of the previous month's levels. Notably, there was a shift in trading activity from BTCTUSD to BTCFDUSD, as depicted in the chart, with BTCTUSD experiencing a significant decline in volume while BTCFDUSD saw a corresponding increase. Meanwhile, the volume of Bitcoin and Ethereum Perpetual Futures remained relatively stable, albeit with a slight downward trend.
2.8 BTCUSDT/ETHUSDT SPOT and Perpetual FUTURES Trading Volume on Bybit

In September, Bybit observed an uptick in trading volume for the Bitcoin and Ethereum spot markets. However, the trading volume for Bitcoin and Ethereum perpetual futures remained relatively stable compared to August.

2.9 BTCUSDT/ETHUSDT SPOT and Perpetual FUTURES Trading Volume on OKX

In September, OKX experienced increased trading volume in the Bitcoin and Ethereum spot markets. Additionally, the trading volume for Bitcoin and Ethereum perpetual futures markets recorded a slight increase compared to August.

2.10 Price Density - Selected Perpetual FUTURES Pairs on Binance 

In September, XEMUSDT had the highest Price Density value, approaching nearly 6. On the other hand, AMBUSDT and ETHBTC had the lowest Price Density values, measuring at 4.3 and 4, respectively. These measurements indicate that XEMUSDT displayed more turbulent and erratic price behavior, while AMBUSDT and ETHBTC exhibited smoother trend characteristics.
It is important to note that the measurements mentioned were conducted using a 20-hour rolling method. Different timeframes can indeed yield different results when analyzing Price Density. The choice of timeframe can influence the perceived choppiness or trend characteristics of a particular asset.
2.11 Annualised Volatility of Major Cryptos Declined in September

In September, there was a decrease in the Annualized Volatility for major cryptocurrencies, including Bitcoin, Ethereum, Litecoin, and Bitcoin Cash. Specifically, for Bitcoin, the Annualized Volatility reached 0.18 in early August, then experienced a significant increase to 0.42 in early September. However, it gradually declined and fell steadily as the month progressed, indicating a decrease in volatility towards the end of September.

2.12 Bitcoin Trading Traffic (UTC) peaked during London Close to New York Opening

During the period when the New York Trading Session overlaps with the London Trading Session (13:00 - 16:00 UTC), there was an observed increase in trading activities with BTCUSDT.P on Binance.

2.13 BTCUSDT.P (Binance) 3% Market Depth (September)

Market Depth on BTCUSDT.P (Binance) experienced a drop during the sell-off that occurred on August 16th, 2023. However, since then, liquidity has been gradually recovering. 

2.14 Bitcoin Aggregate Open Interest Remained Subdued After Last Liquidation

After the last liquidation event on August 16th, 2023, the aggregate open interest for Bitcoin remained subdued, recording $16B USD. Furthermore, on September 11th, there was a specific stop hunt that occurred, resulting in the erasure of $0.4B worth of Crypto Margined Open Interest. The stop-hunt is visualized in section 2.16.
2.15 Bitcoin Perpetual FUTURES Liquidation Visualisation 29th August 2023

On August 29th, Bitcoin experienced a sudden price spike, resulting in a $2B increase in Aggregate Open Interest as traders pursued the upward movement. However, the pump was not sustained, as evidenced by a lack of trading volume immediately following the spike. Then, on August 31st, 2023, a selloff occurred, triggering a cascade of liquidation. Trading activities and volume remained subdued outside liquidations.

2.16 Bitcoin Perpetual Futures Liquidation Visualisation 11th September 2023

On September 11th, 2023, a specific stop hunt occurred, resulting in the elimination of $0.4B worth of Crypto Margined Open Interest. The chart indicates a cascade of taker sell orders that pushed the price below the range low of the entire August, where stop-loss orders were likely placed. The following day, after the taker sell orders were exhausted and the price dropped below the range low of August, aggressive taker buy orders entered the market and drove the price above $25, 800. This triggered a late short recovery.

2.17 BTCFDUSD Picking Up Volume, Trading at a Premium Over BTCUSDT

Binance launched FDUSD on August 4th, offering 0% Maker and Taker fees. The trading volume for BTCFDUSD started to increase from September 5th onwards. As the trading volume rose on September 5th, BTCFDUSD began trading at a premium compared to BTCUSDT. Currently, BTCFDUSD accounts for half of the Bitcoin spot market volume on Binance.

2.18 Despite BTCTUSD Lost Significant Volume, BTCTUSD Retains Premium Status

BTCTUSD's trading volume experienced a significant decline starting on September 5th, yet it's noteworthy that it continues to trade at a premium over BTCUSDT despite this decrease in volume.

2.19 Despite Trading Volume Migrated From BTCTUSD to BTCFDUSD, BTCTUSD Retains Premium Status

Trading volume on BTCFDUSD began to climb starting from September 5th, while volume on BTCTUSD simultaneously decreased. This indicates a clear migration of trading activity to the BTCFDUSD pair. Despite this shift, BTCTUSD continues to trade at a premium over BTCFDUSD.

2.20 LINK Outperformed Among L1s

Among Layer 1 cryptocurrencies, LINK showed the highest performance, with an impressive 40% price appreciation throughout September. It was followed by TRX with a 15.5% increase, BCH with a 12.7% increase, and SOL with an 8.3% increase. Bitcoin also experienced a 4% price increase during the same period.

2.21 IMX Outperformed Among L2s

Among Layer 2 cryptocurrencies, IMX showed the highest return in September, with a 5.3% increase. It was followed by ARB with a 0.9% increase. However, Matic and OP experienced a decrease in price, with Matic declining by 3% and OP by 3.45% during the same period.

2.22 MKR, RUNE and AAVE Outperformed Among DeFi Tokens

Among DeFi tokens, MKR showed the highest performance, delivering an impressive 32.8% price increase in September. It was followed by RUNE with a 28.25% increase and AAVE with a 21.58% increase. However, JOE underperformed, experiencing a 20% price depreciation during the same period.

2.23 MAGIC Outperformed Among GameFi/Metavese Tokens

Among GameFi/Metaverse tokens, MAGIC displayed the strongest performance, with an 8.46% price increase in September. However, overall, the GameFi/Metaverse sectors experienced a sluggish performance compared to the DeFi sector during the same period.

2.24 KCS and FLOKI Outperformed Among CEX and MEME Tokens

Among CEX tokens, KCS demonstrated strong performance, with an 18% price increase. On the other hand, among memecoins, FLOKI outperformed, delivering an 11.56% price increase.
2.25 Seasonality of S&P 500, Nasdaq, Gold and Bitcoin

Past performance is no guarantee of future results. In terms of seasonality, October has historically been known as a turning point for market corrections.

News Highlights
Shock in India: An unexpected global call for crypto regulation
Coinbase launches crypto lending platform for US institutions
Coinbase, Aave, And Circle Form Coalition to Promote Tokenized Assets: Report
U.S. CPI Inflation Jumped to 3.7% in August, More Than Expected
Hong Kong Probe Into Crypto Exchanges JPEX Results in Arrest
9 US senators publicly back Elizabeth Warren’s crypto bill
South Korea focuses on OTC crypto regulations as unlawful deals reach $4B
India working on 5-point crypto legislation as ban is ruled out
EU parliament votes overwhelmingly in support of DAC8 crypto tax reporting rule
Binance.US not cooperating with investigation, US SEC says in filing
Grayscale files for new Ether futures ETF — Official
Bybit expects to exit UK market as new regulations loom
SEC Delays Spot Bitcoin ETF Decision for All Applicants Including BlackRock, Fidelity
OKX Planning Web3 Foray Into India, Chief Marketing Officer Says
Robinhood to Buy Back Sam Bankman-Fried's Stake for $605.7M
Bitcoin's Use as Margin Collateral in Crypto Futures Trading Is Growing
Crypto funds hit $342 million outflow streak as bitcoin bucks trend
Genesis to Shutter Crypto Trading Desk for U.S. Market
Solana users fall to lowest level in more than 2 years
Following SEC delays, ARK Invest and 21Shares file for spot Ether ETF
Vitalik Buterin’s X account hacked to carry out phishing attack that stole $700,000 in crypto, NFTs
Messaging App Telegram Gives Endorsement to TON Project; Token Surges
Judge Allows Bankrupt FTX to Sell Its Crypto Holdings, Including BTC and SOL
A Year After Ethereum Merge, Net Supply Down Nearly 300K Ether
Bybit expects to exit UK market as new regulations loom
JPEX exchange suspends certain operations, hikes fees amid liquidity crisis
Mark Cuban loses $860,000 of crypto to phishing attack
Hong Kong regulator: Crypto firms cannot claim to be 'banks'
Grayscale Investments files for new ether futures ETF
Hong Kong looks to release stablecoin regulations by mid-2024, lawmaker says
Tether reportedly shuts USDT redemption for some Singapore customers
Tension rises between Coinbase and SEC over Celsius bankruptcy plan
SEC Extends Ark, Global X ETF Deadlines as Government Shutdown Looms
Binance Sells Russian Unit to Day-Old CommEX, Exits Country
US Treasury sanctions Ethereum wallet tied to cartel over ‘illicit fentanyl trafficking’
Coinbase rolling out perpetual futures trading for retail users outside US

October  Volatility

Appendix
Fig A. Fed Balance Sheet, U.S. Treasury General Account (TGA), Reverse Repurchase Agreements (RRP) and Euro Central Banks Total Assets

Funds have been observed to continue to move out of Reverse Repurchase Agreements (RRP) with the Federal Reserve and shift towards Treasury bills. This rotation is driven by the higher yields offered by Treasury bills compared to RRPs.

Fig B. CPI YOY% Change, Crude Oil Prices and Gas Price

Oil and gas prices have reached their yearly high, which is concerning considering that energy prices are significant contributors to inflation. The spike in energy prices adds to the overall concerns in the fight against inflation.

Fig C. Bitcoin Liquidation Heatmap (Hyblockcapital)

Liquidation zone above market price:
$32,000 - $34,000.
Liquidation zone below market price:
$22,000 - $24,000.

Disclaimers
The information, opinions, estimates, and projections contained in this cryptocurrency market commentary (collectively "Information") are provided by LIQUIDITY TECHNOLOGIES INC. (the "Company"). This Information is for informational purposes only and is not intended to serve as investment advice or any form of endorsement or recommendation. The company has taken reasonable measures to ensure the accuracy and validity of the Information provided but makes no warranty as to its accuracy or completeness. The opinions expressed reflect the judgment of the authors at the date of publication and are subject to change without notice.The Information should not be construed as an offer or solicitation to buy or sell or trade in any cryptocurrency, security, or financial instrument. It does not account for individual investment objectives or the financial situation of any readers. Cryptocurrencies are volatile and complex products and are subject to significant risks including the risk of sudden and substantial price movements.Investments in cryptocurrencies are not protected by any statutory compensation arrangements in the event of the firm's failure. The value of cryptocurrencies may be affected by changes in currency exchange rates, regulatory interventions, or other political and economic developments.Investors should be aware that the value of their investments can fall as well as rise, and they may not receive back the original amount they invested. If you are in any doubt about the contents of this document, you should seek independent professional advice. Any historical information contained in this Information is based on our own analysis and is provided for illustrative purposes only. Past performance is not indicative of future results, which may vary.In no event shall the company, nor its directors, employees, agents, partners, suppliers or affiliates, be accountable or liable for any indirect, incidental, special, consequential or punitive damages, including without limitation, loss of profits, data, use, goodwill, or other intangible losses, resulting from the use of this Information. The company  reserves the right to change, modify, add, or remove portions of this Information for any reason at any time without notice.

1. Fed Paused in September, Long-dated Treasury Yields Surged

On September 20th, the Federal Reserve announced that it would maintain interest rates at a target range of 5.25% to 5.5%, in line with market expectations. During his postmeeting press conference, Fed Chair Jerome Powell emphasized that the committee is closely monitoring current economic data to determine whether they have achieved their desired monetary policy stance. Powell also noted that inflation excluding volatile food and energy prices is coming down. However, rising energy costs remain a concern, particularly given the recent surge in gasoline prices to 2023 highs.
The 10year treasury yield has been steadily increasing over the past couple of months, reaching a yearly high in 2023 at 4.37%, surpassing its previous peak of 4.25% set in November 2022. This is the highest level since the 2008 Great Financial Crisis. Despite the surge in yields, the latest Commitment of Traders (COT) report shows that asset managers are maintaining a long position in 10year bonds. The US - Philly Fed Recession Probability Index indicates a 34% likelihood of a recession occurring in the next year. The long bond is currently overcrowded, with investors anticipating a potential recession that could force the Federal Reserve to cut interest rates. However, Federal Reserve Chairman Jerome Powell has emphasized that their primary objective is to engineer a soft landing.
If the market has already factored in the belief that inflation is under control and will not pose a significant threat, it remains important to monitor the upcoming period's Consumer Price Index (CPI) data. However, recent trends show that the YOY CPI has increased from 3% in June to 3.7% in August. If the inflation data continues to indicate an upward trajectory, it may prompt the need for the market to reevaluate the pricing of equities and risky assets, considering the possibility of an extended period of higher interest rates.
2. Trading Slump: Bitcoin Trading Volume and Activity Decline

The first two weeks of September saw a decline in trading volume for Bitcoin Spot and Perpetual Futures markets on Binance. Notably, the Bitcoin Spot market experienced a yearly low in trading volume, with a combined total of approximately 400k BTC per week for BTCUSDT, BTCTUSD, and BTCFDUSD.
3. COT Report: Commercial Traders Increase Bearish Bets
The Commitment of Traders (COT) report showed that commercial traders raised their net short exposure during the past two weeks, with their aggregate net short position reaching a yearly high in 2023, suggesting a bearish outlook. During the same period, the U.S. Dollar Index has been on a strong upward trajectory, marking 10 consecutive weeks of gains.
4. BTCTUSD Trading Volume Shifts to BTCFDUSD
Binance introduced FDUSD on August 4th with 0% Maker and Taker fees. Trading volume on BTCFDUSD began to climb starting from September 5th, while volume on BTCTUSD simultaneously decreased. This indicates a clear migration of trading activity to the BTCFDUSD pair. Despite this shift, BTCTUSD continues to trade at a premium over BTCFDUSD.
5. BTCFDUSD Trades at Premium Over BTCUSDT
As trading volume began to rise on September 5th and activity shifted from BTCTUSD to BTCFDUSD, BTCFDUSD started to trade at a premium over BTCUSDT.
6. BTCTUSD Maintains Premium Despite Volume Decline

BTCTUSD's trading volume experienced a significant decline starting on September 5th, yet it's noteworthy that it continues to trade at a premium over BTCUSDT despite this decrease in volume.
Disclaimers
The information, opinions, estimates, and projections contained in this cryptocurrency market commentary (collectively "Information") are provided by LIQUIDITY TECHNOLOGIES INC. (the "Company"). This Information is for informational purposes only and is not intended to serve as investment advice or any form of endorsement or recommendation. The company has taken reasonable measures to ensure the accuracy and validity of the Information provided but makes no warranty as to its accuracy or completeness. The opinions expressed reflect the judgment of the authors at the date of publication and are subject to change without notice.The Information should not be construed as an offer or solicitation to buy or sell or trade in any cryptocurrency, security, or financial instrument. It does not account for individual investment objectives or the financial situation of any readers. Cryptocurrencies are volatile and complex products and are subject to significant risks including the risk of sudden and substantial price movements.Investments in cryptocurrencies are not protected by any statutory compensation arrangements in the event of the firm's failure. The value of cryptocurrencies may be affected by changes in currency exchange rates, regulatory interventions, or other political and economic developments.Investors should be aware that the value of their investments can fall as well as rise, and they may not receive back the original amount they invested. If you are in any doubt about the contents of this document, you should seek independent professional advice. Any historical information contained in this Information is based on our own analysis and is provided for illustrative purposes only. Past performance is not indicative of future results, which may vary.In no event shall the company, nor its directors, employees, agents, partners, suppliers or affiliates, be accountable or liable for any indirect, incidental, special, consequential or punitive damages, including without limitation, loss of profits, data, use, goodwill, or other intangible losses, resulting from the use of this Information. The company  reserves the right to change, modify, add, or remove portions of this Information for any reason at any time without notice.

Summary of August 2023

In August, broader financial markets experienced corrections amid a strengthening U.S. dollar and weakening risk appetite.The S&P 500 Index registered a 5.1% decline while the NASDAQ Composite Index decreased 7.6%. Additionally, Gold pulled back 4.4% and Bitcoin retraced 11%.

Annual inflation data released in August showed the first notable uptick after a 12-month continual deceleration. Rising energy costs sparked concerns over near-term inflation projections. Investors remained cautious of an impending recession given elevated interest rates, despite the unemployment rate remaining stable at 3.5%.

Diminishing trading activity signaled bearish market sentiment. Records from the Commitment of Traders report indicated that commercial traders on The Chicago Mercantile Exchange (CME) held record high net short positions in Bitcoin, intimating bearishness.

A significant sell-off in Bitcoin occurred on August 16th, resulting in the elimination of $5 billion in Aggregate Open Interest and the cascade of liquidation of long positions worth over $150 million. The deleveraging event reduced approximately 25% of leverage on Bitcoin in aggregate.

On August 29th, a federal appeals court ruled that the U.S. Securities and Exchange Commission (SEC) must reevaluate its rejection of Grayscale Investments' application to convert its Grayscale Bitcoin Trust (GBTC) into an exchange-traded fund (ETF). Bitcoin price reacted positively, appreciating approximately 6%. However, the SEC has yet to approve any applications for a Bitcoin spot ETF. It is reasonable to expect ongoing subdued trading conditions in cryptocurrency markets until the SEC grants approval of a spot Bitcoin ETF.

1.0 Macro Economic Outlook

1.1 Long-dated Bond Yields Surged as Inflation Fears Mounted

The United States Consumer Price Index for July 2023 has shown a notable uptick in its year-over-year inflation rate, rising to 3.29% from 3% in June 2023. This marks the first increase in the inflation rate (CPI YOY) after a consecutive 12-month decline from 8.93% in June 2022.

The uptick in inflation is concurrent with a surge in oil and gasoline prices (see Appendix B), where gasoline pricehas increased over 20% since the the beginning of 2023.

As concern over inflation rises, long-dated Treasury Securities yields have climbed above November 2022 peak, suggesting investors' growing apprehension regarding near-future inflation and higher for longer interest rates policy. Meanwhile, the Unemployment Rate for July has remained relatively stable, registering 3.5%.

1.2 Cryptocurrencies Trailed A Broader Market Correction

The decline in Bitcoin's value in August was concurrent with a broader market correction, including declines in the S&P 500, Nasdaq, and Gold prices. The correction began after the latest Federal Open Market Committee (FOMC) meeting, where Chairman Powell signaled a likely prolongation of interest rate hikes and was exacerbated by the increase in the Consumer Price Index (CPI) for July, which marked the first uptick in 12 months.

2.0 Digital Assets Market Commentary

2.1 Commercial Traders Are at Record High Net Short in Bitcoin CME Futures

Commercial Traders on CME turned net short on Bitcoin in August. Indeed, the net short stance of commercial traders currently represents the highest level recorded thus far in the calendar year 2023. This concentrated shorting behavior among commercial market participants signals apprehension towards favorable near-term price performance for Bitcoin against a backdrop of deteriorating risk sentiment globally. The continued accumulation of short positions by this cohort warrants monitoring.

2.2 Bitcoin Price Dropped Below Short-term Holder Cost Basis

In mid-August, the price of Bitcoin fell below the Short-Term Holder Cost Basis, indicating a potential transition into a downtrend. In the meantime, Long-Term Holder Cost Basis and Realized Price remain relatively unchanged at $20,300.

2.3 Aggregate Circulating Supply of Top 4 Stablecoins Continued to Decline and Number of Total Staked ETH Rose

In August 2023, the combined circulating supply of stablecoins, namely USDT, USDC, TUSD, and BUSD, experienced a continued decline, reaching $114.96 billion by August 31st. Additionally, the Total Value Locked (TVL) in Decentralized Finance (DeFi) also saw a decrease, recording $22.38 billion. However, the total amount of ETH staked continued to rise, registering 29.23M ETH staked. The market capitalization of Bitcoin dropped to $505 billion. Notably, the Stablecoin Supply Ratio Oscillator indicates a neutral price condition for Bitcoin.

2.4 Trading Volume of Popular Cryptocurrency Exchanges

On the 18th of August, there was a spike in trading volume across centralized exchanges (CEXes) and decentralized exchanges (DEXes) following the sell-off on the previous day. Despite this outlier, trading volume, in general, remained subdued in August.

2.5 Bitcoin and Ethereum SPOT/Perpetual FUTURES Trading Volume on Binance

In August 2023, Binance saw continuously diminishing Spot (USDT pair) and Perpetual Futures trading volumes for both Bitcoin and Ethereum. BTCTUSD Spot market trading volume increased slightly compared to July 2023.

2.6 BTCUSDT/ETHUSDT SPOT and Perpetual FUTURES Trading Volume on BYBIT

In August 2023, Bybit saw continuously diminishing Spot and Perpetual Futures trading volumes for Ethereum. The Bitcoin Spot and Perpetual Futures market trading volume increased slightly compared to July 2023.

2.7 BTCUSDT/ETHUSDT SPOT and Perpetual FUTURES Trading Volume on OKX

In August 2023, OKX saw continuously diminishing Perpetual Futures trading volumes for both Bitcoin and Ethereum. The Bitcoin and Ethereum Spot market trading volume increased slightly compared to July 2023.

2.8 Relative Trading Volume of Major Cryptocurrencies in August Remained Stagnant After A Spike During Sell-off

In mid-August, the relative trading volume of Bitcoin, Ethereum, Litecoin, and Bitcoin Cash experienced a notable spike as the market underwent a sell-off. However, the heightened trading activities were not sustained for Litecoin and Bitcoin Cash, and the markets subsequently witnessed a decline in trading volume, with relative volume dropping below 90-Day benchmark, resulting in a subdued trading environment. Trading activities primarily focused on Bitcoin and Ethereum.

2.9 30-day Rolling Volatility of Major Cryptocurrencies, Measured on an Annualized Basis

From on 15th August, the Annualized Volatility of Bitcoin and Ethereum reached its lowest point in 2023. However, the subsequent sell-off led to a spike in their volatility. In light of ongoing macroeconomic conditions constraining risk appetite and the fact that Bitcoin Spot ETF applications are still being processed by the SEC, we anticipate that trading activities will continue to remain subdued.

2.10 Trading Traffic Analysis by 15-Minute Interval

In August, trading activities concentrated during the period between 14:00 - 16:45 (UTC) where London Trading Session overlaps the opening of New York Trading Session. August also saw increased trading activities towards the end of New York Trading Session. The spike in Average Daily Displacement is likely due to the sell-off and a cascade of long liquidations which took place at 21:30 (UTC).

2.11 Bitcoin Aggregate Open Interest, Funding Rate and Liquidations

During August, the U.S. Dollar Index demonstrated strength, coinciding with a decline in Bitcoin's performance. A significant sell-off occurred on August 16th, resulting in the elimination of $5 billion in Aggregate Open Interest and the cascade of liquidation of long positions worth over $150 million. The deleveraging event reduced approximately 25% of leverage on Bitcoin in aggregate. On August 29th, the United States Court of Appeals for the District of Columbia Circuit ruled that the Securities and Exchange Commission (SEC) was obligated to re-examine its previous rejection of Grayscale Investments' application to convert its Grayscale Bitcoin Trust (GBTC) into an exchange-traded fund (ETF). In response to the court's decision, the price of Bitcoin increased by approximately 6%. Additionally, data from exchanges indicated that aggregate open interest across Bitcoin futures contracts grew by $2 billion subsequently. This substantial rise in open interest suggests that speculators may have initiated new positions in expectation that regulatory approval for the first Bitcoin ETF remained a possibility pending the SEC's evaluation.

2.12 Bitcoin Sell-off Order Flow Visualised

A series of liquidation events occurred within a 5-minute timeframe on August 17th, between 21:41 and 21:45 (UTC). The above visualization indicates that the Perpetual Futures market of Bitcoin on Binance exhibited a significant sell-side skew, causing the price to deviate from that of the BTCTUSD spot market during the liquidation period. Furthermore, it is evident that speculative buyers entered the market at 21:45 when the Buy/Sell Skew climbed back above equilibrium. At the same time the price of Bitcoin Perpetual Futures dropped just below its previous low ($24777) on June 15th at 11:17 (UTC) which reasonably triggered remaninng stop-loss and liquidation orders. It is noteworthy that the spot price did not reach its previous low ($24720) from June 15th at 11:17 (UTC).

2.13 Ethereum Sell-off Order Flow Visualised

The above visualization indicates that the Perpetual Futures market of Ethereum on Binance exhibited a significant sell-side skew, causing the price to deviate from that of the ETHUSDT spot market during the liquidation period. Furthermore, it is evident that speculative buyers entered the market at 21:45 when the Buy/Sell Skew climbed back above equilibrium. ETHUSDT Binance Spot also saw a spike in buyside skew at 21:45 where spot buyers stepped in and bought the dip.

2.14 Layer 1s Price Performance (August)

Hedera Hashgraph (HBAR) demonstrated strength amidst the market sell-off, as Federal reserve’s FedNow lists its micropayments platform, Dropp. Most Layer 1 blockchains experienced a decline. Bitcoin and Ethereum recorded an 11% decline, while other popular Layer 1 blockchains also faced a significant downturn.

2.15 Layer 2s Price Performance (August)

Layer 2 blockchains also experienced a sustained sell-off throughout August.

2.16 DeFi Price Performance (August)

Rune demonstrated strength amidst the market sell-off, as most DeFi protocols experienced a sustained decline.

2.17 GameFi Price Performance (August)

Most of the GameFi protocols experienced a sell-off in August.

2.18 CEX Tokens and Memecoins Price Performance (August)

BitMEX Token (BMEXUSDT) outperformed other CEX Tokens. Memecoins tanked.

2.19 September Historically Sees Broader Market Sell-off

The sell-off observed in Bitcoin during August aligned with its historical seasonality for that month. Looking ahead, September is generally characterized as a relatively downtrodden period, with the potential for a broader market downturn such as the S&P 500 and Nasdaq.

2.20 Greyscale Bitcoin Trust Premium/Discount to NAV

As the SEC is required to re-evaluate the application for the conversion of Greyscale Bitcoin Trust into an ETF following a court's ruling, the gap between Greyscale Bitcoin Trust's Net Asset Value and Market Price/Share is narrowing, indicating growing investor optimism towards the recent developments. For your information, GBTC is a closed-end fund that holds Bitcoin. Unlike ETFs, which can create or redeem shares based on investor demand, GBTC has a fixed number of shares. This structure can lead to imbalances in supply and demand, resulting in a discount or premium to the underlying asset's value.

3.0 News Highlights

Open interest on $CRV futures skyrockets amid recent exploit and its founder’s large loan position

SEC sues Hex founder Richard Heart on unregistered securities and fraud allegations

DCG close to reaching agreement on Genesis Capital’s Chapter 11

Tether reported $850M net profit for Q2 2023

Curve founder deploys new liquidity pool on Curve

Microstrategy plans to raise up to $750M to purchase more $BTC OKX adds new account abstraction feature to its Web3 wallet Six entities have filed applications with the SEC for an $ETH ETF

Curve founder sells $CRV tokens OTC to Justin Sun, DCFGod and others

Binance lists zero-fee BTC/FDUSD and ETH/FDUSD trading pairs

Binance approves Shiba Inu as collateral asset

Coinbase to launch L2 Base on August 9th

Huobi’s stablecoin reserves dipped >30% amid reports of executive arrests

Tether is reportedly the 11th largest $BTC holder in the world

Paypal launches its own stablecoin $PYUSD on Ethereum

Paxos is the issuer of Paypal’s $PYUSD stablecoin

Cathie Wood expects another delay for ARK’s proposed $BTC ETF

Microsoft partners with Aptos to explore innovative solutions related to asset tokenization, digital payments and CBDCs

Europe’s first $BTC ETF gets listed in Amsterdam under the ticker $BCOIN

Crypto custodian Prime Trust files for bankruptcy protection

Chinese Filecoin mining firm charged for orchestrating $83.3M pyramid scheme

SEC delays $BTC ETF approval to early 2024

Valkyrie files for $ETH ETF

SEC to appeal Ripple decision

Hashdex applies for spot $BTC ETF

Binance is considering a full exit from Russia

US appeals court ruled in favour of Grayscale in its ongoing case against the SEC to convert its Grayscale Bitcoin Trust into a spot ETF

X, formerly Twitter has obtained money or currency transmitter licences in seven US states

4.0 September Volatility

5.0 Appendix

Fig. A. Fed Balance Sheet, U.S. Treasury General Account (TGA), Reverse Repurchase Agreements (RRP) and Euro Central Banks Total Assets

The Fed Balance Sheet and total assets of Euro Central Banks continued to contract in August. Additionally, there was a persistent outflow of funds in Reverse Repurchase Agreements (RRP) as investors sought higher yields from short-dated Treasury Securities. As of August 31st, the RRP Award Rate stood at 5.3%, while the 1-month Treasury Market Yield reached 5.55%, the 3-month Treasury Market Yield was at 5.56%, and the 6-month Treasury Market Yield stood at 5.51%.

Fig. B. CPI (YOY), WTI Crude Oil Prices, U.S. Regular All Formulations Gas Price

The uptick in inflation is concurrent with a surge in oil and gasoline prices, where gasoline price has increased over 20% since the beginning of 2023.

Fig. C. Liquidation Heatmap

Liquidation zone above market price:

$32,000 - $34,000.

Liquidation zone below market price:

$22,000 - $24,000.

Source: Hyblock Capital., as of September 1, 2023.

For informational purposes only and should not be considered investment advice or a recommendation to buy, sell, or hold any particular security or cryptocurrency.

Disclaimers

The information, opinions, estimates, and projections contained in this cryptocurrency market commentary (collectively "Information") are provided by LIQUIDITY TECHNOLOGIES INC. (the "Company"). This Information is for informational purposes only and is not intended to serve as investment advice or any form of endorsement or recommendation. The company has taken reasonable measures to ensure the accuracy and validity of the Information provided but makes no warranty as to its accuracy or completeness. The opinions expressed reflect the judgment of the authors at the date of publication and are subject to change without notice.The Information should not be construed as an offer or solicitation to buy or sell or trade in any cryptocurrency, security, or financial instrument. It does not account for individual investment objectives or the financial situation of any readers. Cryptocurrencies are volatile and complex products and are subject to significant risks including the risk of sudden and substantial price movements.Investments in cryptocurrencies are not protected by any statutory compensation arrangements in the event of the firm's failure. The value of cryptocurrencies may be affected by changes in currency exchange rates, regulatory interventions, or other political and economic developments.Investors should be aware that the value of their investments can fall as well as rise, and they may not receive back the original amount they invested. If you are in any doubt about the contents of this document, you should seek independent professional advice. Any historical information contained in this Information is based on our own analysis and is provided for illustrative purposes only. Past performance is not indicative of future results, which may vary.In no event shall the company, nor its directors, employees, agents, partners, suppliers or affiliates, be accountable or liable for any indirect, incidental, special, consequential or punitive damages, including without limitation, loss of profits, data, use, goodwill, or other intangible losses, resulting from the use of this Information. The company reserves the right to change, modify, add, or remove portions of this Information for any reason at any time without notice.

U.S. Long-dated Bond Yields Surged as Inflation Fears Mounted

Long-dated treasury securities have breached 2022 highs, with 10-Year reaching 4.34%, 20-Year reaching 4.45% and 30-Year reaching 4.64% as of 23rd August. The market is pricing in a prolonged and higher interest rate policy, which may trigger further downside in equities and risky assets if the upcoming U.S. Core PCE Price Index release on 31st August indicates a rising inflation situation.

Bitcoin Trailed A Broader Market Downturn

The recent decline in Bitcoin's value has been concurrent with a broader market downturn, including decreases in the S&P 500, Nasdaq Composite, and Gold prices. This downtrend began after the latest Federal Open Market Committee (FOMC) meeting, where Chairman Powell signalled a likely prolongation of interest rate hikes, and was exacerbated by the 3.2% increase in the Consumer Price Index (CPI) for July, which marked the first uptick in 12 months.

Bitcoin Sell-off Wiped out $4B in Aggregate Open Interest

Throughout July and mid-August, the price of Bitcoin has been trading within a range-bound consolidation pattern, coinciding with the strengthening of the Dollar Index. However, on August 16th, the release of the July FOMC Meeting Minutes triggered a sell-off in the cryptocurrency market, as the Fed indicated that they would maintain a restrictive monetary policy until there are clear signs of inflation containment. This resulted in the liquidation of over $150 million in long positions and a decline in open interest of approximately $5 billion in aggregate. The deleveraging event also caused funding rates to turn negative. Notably, the sell-off paused at $26,000, funding rates have returned to neutral territory, while aggregate open interest has remained relatively unchanged, suggesting ongoing uncertainty in the market.

Liquidation Order Flow Visualised

A series of liquidation events occurred within a 5-minute timeframe on August 17th, between 21:41 and 21:45 (UTC). The provided visualization indicates that the Perpetual Futures market on Binance exhibited a significant sell-side skew, causing the price to deviate from that of the BTCTUSD spot market during the liquidation period. Furthermore, it is evident that speculative buyers entered the market at 21:45, as the price of Bitcoin Perpetual Futures dropped just below its previous low ($24777) on June 15th at 11:17 (UTC).

It is noteworthy that the spot price did not reach its previous low ($24720) from June 15th at 11:17 (UTC). Consequently, it is reasonable to assume that stop-loss orders placed below $24,720 remained untouched and may be revisited in the near future.

Aggregate Liquidation Heatmap (Hyblockcapital)

According to the aggregate liquidation heatmap from Hyblockcapital as of 23rd August, significant liquidation orders ranging from $22,000 to $25,000 are still present. These orders are triggered when the market price reaches or falls below the specified level, resulting in the automatic liquidation of their positions.

The existence of such substantial liquidation orders suggests that there is a considerable amount of selling pressure in the market, particularly in the range of $22,000 to $25,000. Traders who have placed their stop-loss orders at these levels are likely anticipating further price declines and are prepared to exit their positions if the market moves against them.

It's important to note that this information is based on the provided aggregate liquidation heatmap from Hyblockcapital, and it represents a snapshot of the market conditions at a specific point in time. Market dynamics can change rapidly, so it's crucial for traders and investors to stay informed and monitor the market closely for any updates or shifts in the order book.

Disclaimers

The information, opinions, estimates, and projections contained in this cryptocurrency market commentary (collectively "Information") are provided by LIQUIDITY TECHNOLOGIES INC. (the "Company"). This Information is for informational purposes only and is not intended to serve as investment advice or any form of endorsement or recommendation. The company has taken reasonable measures to ensure the accuracy and validity of the Information provided but makes no warranty as to its accuracy or completeness. The opinions expressed reflect the judgment of the authors at the date of publication and are subject to change without notice.The Information should not be construed as an offer or solicitation to buy or sell or trade in any cryptocurrency, security, or financial instrument. It does not account for individual investment objectives or the financial situation of any readers. Cryptocurrencies are volatile and complex products and are subject to significant risks including the risk of sudden and substantial price movements.Investments in cryptocurrencies are not protected by any statutory compensation arrangements in the event of the firm's failure. The value of cryptocurrencies may be affected by changes in currency exchange rates, regulatory interventions, or other political and economic developments.Investors should be aware that the value of their investments can fall as well as rise, and they may not receive back the original amount they invested. If you are in any doubt about the contents of this document, you should seek independent professional advice. Any historical information contained in this Information is based on our own analysis and is provided for illustrative purposes only. Past performance is not indicative of future results, which may vary.In no event shall the company, nor its directors, employees, agents, partners, suppliers or affiliates, be accountable or liable for any indirect, incidental, special, consequential or punitive damages, including without limitation, loss of profits, data, use, goodwill, or other intangible losses, resulting from the use of this Information. The company reserves the right to change, modify, add, or remove portions of this Information for any reason at any time without notice.

Inflation Fears Grow, Bitcoin Remains Stable, Market Saw Increased Trading Activities on Binance Futures New Listings #$YGG #DODO #BNT

Consumer Price Index for July 2023: Year-Over-Year Inflation Rate Experiences First Increase since June 2022, Rising from 3% to 3.299%.

The United States Consumer Price Index for July 2023 has shown a notable uptick in its year-over-year inflation rate, rising to 3.29% from 3% in June 2023. This marks the first increase in the inflation rate after a consecutive 12-month decline, which began in June 2022. The inflation rate had previously peaked at 8.93% in June 2022, before steadily decreasing over the following months. The uptick in inflation is concurrent with a surge in long-dated Treasury Securities yields since May, which have approached their November 2022 peak, suggesting investors' growing apprehension regarding near-future inflation and higher for longer interest rates policy. Meanwhile, the Unemployment Rate for July has remained relatively stable, registering 3.5%.

The price of gasoline has increased by $0.30 per gallon in July, while the price of crude oil has risen by $13.00 per barrel. This recent surge in energy prices has raised concerns about the potential for rising inflation in the near future.

As we enter August, the Commodity Futures Trading Commission (CFTC) reports that commercial traders are not holding significant net long or net short positions. This neutral stance follows a period of profit-taking in July, during which commercial traders reduced their net long positions, taking advantage of the rally in June.

YGG Futures was enabled on Binance on August 5th, and since then, the Open Interest has rapidly increased, surpassing its total market capitalization of $144M as reported by Coinmarketcap on August 6th, 2023. The introduction of YGGUSDT futures on Binance has attracted a significant number of traders, contributing to increased volatility and trading volume in the market. On August 7th, the rally abruptly ended, with more than $100 million in open interest being eliminated. The sudden reversal of uptrend led to liquidations and subdued trading activities in the subsequent period.

DODOUSDT was enabled on Binance on August 8th, and since then, its open interest has been rapidly accumulating, reaching $150 million as of August 11th. The open interest is currently three times the size of its market capitalization, which stands at $53 million according to Coinmarketcap, indicating that traders are eager to take positions. The introduction of DODOXUSDT (the contract name on Binance) has led to increased speculative activity. The increased speculative activity of DODOUSDT on both Bybit and Binance suggests that traders are anticipating potential price movements in DODO, and are keen to take advantage of any opportunities that may arise. This heightened interest in DODO could be a sign of increased volatility in the near future, as traders scramble to take positions and react to any changes in the market. It's worth noting that the open interest in DODOUSDT is still relatively small compared to other cryptocurrencies, but the rapid growth in interest suggests that as more traders take notice of DODO and its potential for price movements, we may see further increases in open interest and volatility in the coming days and weeks.

BNTUSDT Futures was introduced on Binance on August 10th, and since then, there has been a significant increase in aggregate trading volume and open interest on both Bybit and Binance. As of August 11th, the open interest of BNTUSDT has reached $40 million, with a market capitalization of $78 million reported by Coinmarketcap.

Disclaimers

The information, opinions, estimates, and projections contained in this cryptocurrency market commentary (collectively "Information") are provided by LIQUIDITY TECHNOLOGIES INC. (the "Company"). This Information is for informational purposes only and is not intended to serve as investment advice or any form of endorsement or recommendation. The company has taken reasonable measures to ensure the accuracy and validity of the Information provided but makes no warranty as to its accuracy or completeness. The opinions expressed reflect the judgment of the authors at the date of publication and are subject to change without notice. The information should not be construed as an offer or solicitation to buy or sell or trade in any cryptocurrency, security, or financial instrument. It does not account for individual investment objectives or the financial situation of any readers. Cryptocurrencies are volatile and complex products and are subject to significant risks including the risk of sudden and substantial price movements. Investments in cryptocurrencies are not protected by any statutory compensation arrangements in the event of the firm's failure. The value of cryptocurrencies may be affected by changes in currency exchange rates, regulatory interventions, or other political and economic developments. Investors should be aware that the value of their investments can fall as well as rise, and they may not receive back the original amount they invested. If you are in any doubt about the contents of this document, you should seek independent professional advice. Any historical information contained in this Information is based on our own analysis and is provided for illustrative purposes only. Past performance is not indicative of future results, which may vary. In no event shall the company, nor its directors, employees, agents, partners, suppliers, or affiliates, be accountable or liable for any indirect, incidental, special, consequential or punitive damages, including without limitation, loss of profits, data, use, goodwill, or other intangible losses, resulting from the use of this Information. The company reserves the right to change, modify, add, or remove portions of this information for any reason at any time without notice.

Summary of July 2023

In July, the trading volume of cryptocurrencies experienced a general decline, with the exception of a significant increase in trading activity in certain cryptocurrencies following the verdict in the Ripple vs SEC Lawsuit in mid-July.  There was a shift in commercial trader positioning on the Chicago Mercantile Exchange (CME), where they capitalized on the June rally. Additionally, there was a decrease in the annualized volatility of Bitcoin as trading activities dwindled. The price of Bitcoin remained range-bound, consistent with its historical seasonal patterns.

These market dynamics suggest that investors and traders are cautiously awaiting catalysts to trigger extended price discovery in the cryptocurrency market. The Federal Reserve's monetary policy stance and the potential for a "higher for longer" interest rate environment may contribute to a heightened level of uncertainty and market volatility, which could impact the performance of digital assets in the near term.

It is important to note that the cryptocurrency market is highly speculative and prices can be influenced by a wide range of factors, including regulatory developments, adoption rates, and technological advancements. As such, investors and traders should exercise caution and perform thorough risk assessments before making any investment decisions.

Macro Economic Outlook

Quantitative Tightening

The Federal Reserve's Quantitative Tightening program is ongoing, and the Committee will continue reducing its holdings of Treasury securities and agency debt and agency mortgage-backed securities, removing liquidity from the markets and economy. Reference: 

FOMC July Statement.

Inflation and Interest Rates

Inflation data dropped signs of moderation, with U.S. CPI (year-over-year) falling to 3% and CORE CPI (month-over-month) falling to 0.2% in June.

In July FOMC meeting, the Fed raised 25bps. Despite inflation data dropping to the yearly low, during the FOMC press conference, Chairman Jerome Powell stated that the process of getting inflation back down to 2 percent has a long way to go. After the announcement, CME FedWatch Tool reflected that an additional rate hike is expected in the Sep FOMC.

Inflation in European countries remained elevated, with the CPI (year-over-year) dropping to 5.5% in June. In July, the European Central Bank raised rates by 25 basis points.

Market Commentary

2.1 Commercial Traders Capitalized on June Rally, Shifted to Slightly Net Short Position in Bitcoin CME Futures

Source: LTP Research, 2023. Data retrieved from Glassnode, CBOT & CFTC, as of August 1, 2023. 

For informational purposes only and should not be considered investment advice ora recommendation to buy, sell, or hold any particular security or cryptocurrency.

In July, commercial traders on the CME Exchange adjusted their positions, reducing their net long exposure and capitalizing on the June rally that was fuelled by news of bullish institutional adoption. During the latter half of the month, the Dollar Index experienced a notable increase, indicating a weakening risk appetite. Consequently, Bitcoin price trended downwards towards the end of the month.

2.2 Bitcoin Price Stayed Above Realized Price and Cost Basis for Short- and Long-Term Holder 

Source: LTP Research, 2023. Data retrieved from Glassnode, as of August 1, 2023. 

For informational purposes only and should not be considered investment advice or a recommendation to buy, sell, or hold any particular security or cryptocurrency.

In July, Bitcoin's price consolidated above the 200-week moving average and short-term holder cost basis. The realized price converged with the long-term holder cost basis at $20,300. Since March, we have observed increased buying power near the short-term holder cost basis.  Given that the Dollar Index regained strength and commercial traders on the CME Exchange have shifted to a slightly net short position, we anticipate that the Bitcoin price will erode steadily towards the short-term holder cost basis.  This raises the question of whether trend-following investors will step in and add to their positions.

2.3 Aggregate Circulating Supply of Top 4 Stablecoins Continued to Decline, Total Staked ETH Rose, Stablecoin Supply Ratio Oscillator Suggested Moderate Conditions for Bitcoin Price

Source: LTP Research, 2023. Data retrieved from Glassnode, as of August 1, 2023. 

For informational purposes only and should not be considered investment advice or a recommendation to buy, sell, or hold any particular security or cryptocurrency.

The stablecoin supply ratio oscillator pointed towards moderate conditions for the Bitcoin price in July, providing further evidence of a cautious investor sentiment. The aggregate circulating supply of the top 4 stablecoins experienced a persistent decline since mid 2022, culminating in a total value of $117 billion by the end of July. This downward trend suggests a weakening of capital inflow and purchasing power for the majority of cryptocurrencies. 

Concurrently,  the total value locked for DeFi (ETH chain) remained relatively stagnant, lagging behind the market expansion of Bitcoin and Ethereum. Moreover, the total staked ETH continued to rise, reaching an all-time high of 27.62 million ETH at the end of July. This divergence in performance may indicate that investors have become increasingly risk-averse for altcoins and are shifting their investments towards more established cryptocurrencies, such as Bitcoin and Ethereum.

2.4 The month of July saw a downturn in the trading volume of cryptocurrency exchanges, which could be interpreted as a symptom of a broader decrease in market dynamism and investor engagement

Source: LTP Research, 2023. Data retrieved from Tokeninsight, as of August 1, 2023. 

For informational purposes only and should not be considered investment advice or a recommendation to buy, sell, or hold any particular security or cryptocurrency.

In the month of July, the trading volume of prominent cryptocurrency exchanges experienced a decline compared to the previous month. This downward trend can be attributed to the absence of high-impact news events in July, following a period of increased market activity in June.

However, it is worth noting that during the 13th and 14th of July, major cryptocurrency exchanges, including decentralized exchanges, observed a significant surge in trading volume. This upswing was largely driven by the highly anticipated verdict in the legal dispute between Ripple and the Securities and Exchange Commission (SEC), which injected a sense of optimism into the markets.

The second half of July, devoid of significant news drivers, saw a return to below-average trading volume levels.

2.5 The relative volume of major cryptocurrencies in July decreased, falling below a 90-day average benchmark

Source: LTP Research, 2023. Data retrieved from Binance, as of August 1, 2023. 

For informational purposes only and should not be considered investment advice or a recommendation to buy, sell, or hold any particular security or cryptocurrency.

Following the initial excitement surrounding institutional adoption news, the relative volume of Bitcoin, Ethereum, Litecoin, and Bitcoin Cash decreased, falling below a 90-day average benchmark. This suggests that the market may have entered a period of consolidation, with investors taking profits and awaiting further developments before making new investment decisions.

2.6 The 30-day Rolling Volatility of Major Cryptocurrencies, Measured on an Annualized Basis, Decreased in July

Source: LTP Research, 2023. Data retrieved from Binance, as of August 1, 2023. 

For informational purposes only and should not be considered investment advice or a recommendation to buy, sell, or hold any particular security or cryptocurrency.

The 30-day rolling volatility of major cryptocurrencies, measured on an annualized basis, decreased in July. Specifically, the volatility of Bitcoin, Ethereum, Litecoin, and Bitcoin Cash all declined. This decrease in volatility suggests that the market may have entered a period of consolidation, with investors taking profits and awaiting further catalysts before making new investment decisions. Additionally, Bitcoin's value dropped below its Q2 level, further indicative of a potential market slowdown.

2.7 Trading Traffic Analysis by 15-Minute Interval

Source: LTP Research, 2023. Data retrieved from Binance, as of August 1, 2023. 

For informational purposes only and should not be considered investment advice ora recommendation to buy, sell, or hold any particular security or cryptocurrency.

July saw a decrease in trading activity compared to June, with a 15-minute interval aggregate trading volume of 94523 BTC, down from 146845 BTC in June. The aggregate number of trades per 15-minute interval also declined, from 1341937 in June to 819965 in July. Additionally, the average displacement per 15-minute interval decreased from $84 to $60, indicating lower volatility.

The most active trading hours were observed in two periods: between 13:30 - 15:30 (UTC) during the London Close and New York opening, and 18:15 - 19:15 (UTC) during the middle of the NY trading session.

2.8 Bitcoin Volume Profile Indicates Significant Trading Activity at $28,000, Supporting a Fair Value Assessment

Source: LTP Research, 2023. Data retrieved from Binance, as of August 1, 2023. 

For informational purposes only and should not be considered investment advice or a recommendation to buy, sell, or hold any particular security or cryptocurrency.

The volume profile of Bitcoin provides valuable insights into the distribution and range of trading volume, offering a unique perspective on the its price movements. The Volume Point of Control (VPOC), represented by the dotted red line, indicates the price level at which the highest volume of trades occurred during a specific period. A closer examination of the volume profile reveals two notable areas of interest for Bitcoin's price movements: the $28,000 level from mid-March to mid-June, and the current area centered around $30,250. The VPOC in Q2 2023 at $28,000 is particularly significant, as it represents the price point with the highest trading volume between March and July which serves as a benchmark for assessing Bitcoin's fair value. This suggests that a significant number of market participants are comfortable transacting at this price level, potentially indicating a fair value zone for Bitcoin.

2.9 Trading Volume on BTCTUSD Outpaces BTCUSDT, BTCTUSD Maintains Premium Over BTCUSDT

Source: LTP Research, 2023. Data retrieved from Binance, as of August 1, 2023. For informational purposes only and should not be considered investment advice or a recommendation to buy, sell, or hold any particular security or cryptocurrency.

The price of Bitcoin (BTC) on the BTCTUSD pair continued to trade at a premium over the BTCUSDT pair during July. Furthermore, the trading volume of BTCTUSD increased significantly, from approximately double that of BTCUSDT to triple, towards the end of July. Notably, the trading volume of BTCTUSD exceeded that of BTCUSDT by a factor of 5 at its peak. Since Binance launched a zero fee promotion for BTCTUSD pair in March,  traders have migrated from trading BTCUSDT pair to BTCTUSD pair, enhancing the liquidity conditions of the latter.

2.10 Trading Volume on ETHTUSD was significantly smaller than ETHUSDT, despite trading at a premium against ETHUSDT

Source: LTP Research, 2023. Data retrieved from Binance, as of August 1, 2023. For informational purposes only and should not be considered investment advice or a recommendation to buy, sell, or hold any particular security or cryptocurrency.

The price of Ethereum (ETH) on the ETHTUSD pair continued to trade at a premium over the ETHUSDT pair. However, the trading volume of ETHTUSD represented a significantly lower percentage of the total trading volume of ETHUSDT, at less than 5%, as there's no zero fee promotion for ETHTUSD pair. This contrasts notably with the trading volume of BTCTUSD against BTCUSDT, which exhibited a much higher level of activity.

2.11 Bitcoin Continues Maintaining Tight Correlation with Ethereum

Source: LTP Research, 2023. Data retrieved from Binance, as of August 1, 2023. For informational purposes only and should not be considered investment advice or a recommendation to buy, sell, or hold any particular security or cryptocurrency.

This correlation, quantified by a Pearson correlation coefficient of 0.9, underscores the consistent parallel movements of these prominent cryptocurrencies on a daily basis. Nevertheless, it is noteworthy that a temporary deviation in the correlation emerged in early July, primarily attributable to Ethereum's failure to replicate Bitcoin's returns. This divergence can be attributed to the prevailing bullish market catalysts, which predominantly favored Bitcoin over Ethereum.

2.12 Prior to Halving, Litecoin Experienced Increased Volatility but Reverted to Align with Bitcoin's Price Action

Source: LTP Research, 2023. Data retrieved from Binance, as of August 1, 2023. 

For informational purposes only and should not be considered investment advice or a recommendation to buy, sell, or hold any particular security or cryptocurrency.

Throughout the months of June and July, Litecoin demonstrated a marked escalation in volatility as it approached its halving event in early August. Notably, despite experiencing heightened fluctuations, Litecoin eventually realigned its price dynamics with that of Bitcoin, primarily influenced by the gravitational pull of Bitcoin in the cryptocurrency market. During our analysis, we observed a noteworthy pattern wherein, when the 1-day correlation between Litecoin and Bitcoin dropped below 0.4, Litecoin tended to revert back to its mean value. The mean correlation, centered around 0.7, indicated a tendency for Litecoin's price action to align with that of Bitcoin. This observation further highlights the influence of Bitcoin's market dynamics on Litecoin and its role in driving the convergence of their price movements.

2.13  Ripple vs SEC's Complex Verdict: Market Sentiment Boosted as Majority of Cryptocurrencies Gain Momentum

Source: LTP Research, 2023. Data retrieved from Binance, as of August 1, 2023. 

For informational purposes only and should not be considered investment advice or a recommendation to buy, sell, or hold any particular security or cryptocurrency.

On July 13, 2023, the United States Southern District Court of New York rendered a ruling in the case involving Ripple's sales of XRP, in which the court determined that Ripple's Institutional Sales of XRP qualified as the unregistered offer and sale of investment contracts, thereby violating the Securities Act. However, the court also found that Ripple's Programmatic Sales of XRP (selling via exchanges) did not constitute a violation. This mixed verdict for Ripple sparked a significant increase in XRP's price, with a 102% surge in a single day. Additionally, Coinbase, a popular cryptocurrency exchange, relisted XRP on their platform. It is important to note, however, that the legal battle between Ripple and the SEC is ongoing, and the SEC may choose to appeal the decision.

It's interesting to note that $XLM, $SOL and $LINK saw increased volatility while the majority of L1s remained stagnant.

2.14 Trending Layer 2s Performance (July)

Source: LTP Research, 2023. Data retrieved from Binance, as of August 1, 2023. 

For informational purposes only and should not be considered investment advice or a recommendation to buy, sell, or hold any particular security or cryptocurrency.

L2s also experienced increased volatility following the release of the Ripple vs SEC verdict.

2.15 Trending GameFi/Metaverse Tokens Performance (July)

Source: LTP Research, 2023. Data retrieved from Binance, as of August 1, 2023. 

For informational purposes only and should not be considered investment advice or a recommendation to buy, sell, or hold any particular security or cryptocurrency.

The GameFi/ Metaverse sector remained stagnant.

2.16 Trending DeFi Tokens Performance (July)

Source: LTP Research, 2023. Data retrieved from Binance, as of August 1, 2023. 

For informational purposes only and should not be considered investment advice or a recommendation to buy, sell, or hold any particular security or cryptocurrency.

Among the cryptocurrencies associated with Decentralized Finance (DeFi), $MKR demonstrated notable performance, outpacing its peers.

2.17 Trending CEX Tokens and Memecoins Performance (July)

Source: LTP Research, 2023. Data retrieved from Tokeninsight, as of August 1, 2023. 

For informational purposes only and should not be considered investment advice or a recommendation to buy, sell, or hold any particular security or cryptocurrency.

The value of CEX tokens remained largely unchanged, while $DOGE and $SHIBA experienced a surge in value due to unconfirmed reports of X (previously known as Twitter) incorporating cryptocurrencies into its payment system.

2.18  August Historically Sees Increased Volatility in Bitcoin

Source: LTP Research, 2023. Data retrieved from Glassnode and yfinance, as of August 2, 2023. 

For informational purposes only and should not be considered investment advice or a recommendation to buy, sell, or hold any particular security or cryptocurrency.

The month of July tends to exhibit consolidation trends in the S&P 500, Nasdaq, Gold, and Bitcoin markets. As we enter August, the seasonal patterns of the S&P 500, Nasdaq, and Gold tend to be positive. However, Bitcoin has historically experienced heightened volatility during August, leading to a downward trajectory.

News Highlights

Coinbase Will Be Surveillance Partner for Fidelity, Other Bitcoin ETFs, Refiled Applications Say

Court Orders Kraken to Turn Over History Transaction and Account Information to IRS

Litecoin blasts past $100 amid surging hash rate, upcoming 'halving'

BlackRock CEO Larry Fink sees bitcoin as 'digitizing gold'

Binance senior execs quit over CEO's response to investigations: Fortune

FBI searched former Kraken CEO's home: The New York Times

Gemini sues Digital Currency Group, Barry Silbert over alleged fraud

Multichain was exploited for more than $120M in assets

Circle, Tether freezes over $65M in assets transferred from Multichain

Ripple, Crypto Industry Score Partial Win in SEC Court Fight Over XRP

Former SEC Chair Says Bitcoin ETF Could Be Approved—If These Conditions Are Met

Europe’s first spot Bitcoin ETF eyes 2023 debut after year-long delay

First spot bitcoin ETF application filed under new Australian regulations

Cboe reaches surveillance agreement with Coinbase for spot bitcoin ETFs

Binance Labs invests $10 million in cross-chain DeFi lender Radiant Capital

SEC sues Celsius Network, Alex Mashinsky

Worldcoin's Mainnet, WLD Token Goes Live

Dogecoin Bumps 10% on X Payments Speculation, DOGE Futures Traders Lose $10M

Binance lists new stablecoin FDUSD with zero trading fees

Ripple runs CBDC pilot with Pacific island nation of Palau

Optimism Tokens Worth $36M to Be Unlocked on Sunday; OP Slides 3.5%

August Volatility

Appendix

Fig A. Fed Balance Sheet, U.S. Treasury General Account (TGA), Reverse Repurchase Agreements (RRP) and Euro Central Banks Total Assets

Source: LTP Research, 2023. Data retrieved from Fred, as of August 1, 2023. 

For informational purposes only and should not be considered investment advice or a recommendation to buy, sell, or hold any particular security or cryptocurrency.

Fig B. Liquidation Heatmap

Source: Hyblock Capital., as of August 1, 2023.

For informational purposes only and should not be considered investment advice or a recommendation to buy, sell, or hold any particular security or cryptocurrency.

Source: LTP Research, 2023, Data retrieved from Binance, as of August 1, 2023.

For informational purposes only and should not be considered investment advice or a recommendation to buy, sell, or hold any particular security or cryptocurrency.

Disclaimers

The information, opinions, estimates, and projections contained in this cryptocurrency market commentary (collectively "Information") are provided by LIQUIDITY TECHNOLOGIES INC. (the "Company"). This Information is for informational purposes only and is not intended to serve as investment advice or any form of endorsement or recommendation. The company has taken reasonable measures to ensure the accuracy and validity of the Information provided but makes no warranty as to its accuracy or completeness. The opinions expressed reflect the judgment of the authors at the date of publication and are subject to change without notice.The Information should not be construed as an offer or solicitation to buy or sell or trade in any cryptocurrency, security, or financial instrument. It does not account for individual investment objectives or the financial situation of any readers. Cryptocurrencies are volatile and complex products and are subject to significant risks including the risk of sudden and substantial price movements.Investments in cryptocurrencies are not protected by any statutory compensation arrangements in the event of the firm's failure. The value of cryptocurrencies may be affected by changes in currency exchange rates, regulatory interventions, or other political and economic developments.Investors should be aware that the value of their investments can fall as well as rise, and they may not receive back the original amount they invested. If you are in any doubt about the contents of this document, you should seek independent professional advice.

Any historical information contained in this Information is based on our own analysis and is provided for illustrative purposes only. Past performance is not indicative of future results, which may vary.In no event shall the company, nor its directors, employees, agents, partners, suppliers or affiliates, be accountable or liable for any indirect, incidental, special, consequential or punitive damages, including without limitation, loss of profits, data, use, goodwill, or other intangible losses, resulting from the use of this Information. The company  reserves the right to change, modify, add, or remove portions of this Information for any reason at any time without notice.

July FOMC

On 26th Jul, 2023, the Fed raised the interest rate by 25bps. Despite inflation showing signs of moderation and dropping to 3% (YOY) in June, Chairman Jerome Powell stated that the process of getting inflation back down to 2 percent has a long way to go. 

On the other hand, the Fed continues to reduce its holdings of Treasury securities and agency debt , and agency mortgage-backed securities. After the announcement,  CME FedWatch Tool reflects that an additional rate hike is expected in the Sep FOMC.

Major Cryptos Relative Volume and Volatility

The trading volume of major cryptocurrencies dropped below their 30-day averages on June 26th. There was a noticeable decrease in trading activity and price movements, with levels remaining below the average. 

Over the past week, the annualized volatility of Bitcoin, Ethereum, and Bitcoin Cash has been on a downward trend. Bitcoin's volatility has come to a quarterly low, as it has been contained in consolidation throughout July. However, Litecoin has seen an increase in volatility, which can be attributed to its upcoming halving event in early August. This anticipated supply reduction has likely contributed to increased price fluctuations for Litecoin.

Bitcoin vs Litcoin Price Action

In recent months, Litecoin has exhibited heightened volatility, particularly since May, due to the anticipation of its halving event in early August. While Bitcoin has remained in a prolonged consolidation phase throughout July, Litecoin's price fluctuations have been influenced by Bitcoin's price movements. Interestingly, we can see that Litcoin's price has significantly decoupled from that of Bitcoin, which tends to revert and maintain a stable correlation coefficient around 0.8. As a result, Litecoin's price deviation has been pulled back in line with Bitcoin's price action.

Bitcoin Volume by Price (Volume Profile)

The volume profile of Bitcoin provides valuable insights into the distribution and range of its trading volume. The Volume Point of Control (VPOC), represented by the prominent red line, signifies the price level at which the highest volume of trades occurred during a specific period.

In particular, the profile highlights two noteworthy areas of interest for Bitcoin's price movements: the $27,000-$28,000 range from mid-March to mid-June, and the current area of interest centered around $30,250.

Furthermore, the VPOC in Q2 2023 at $28,000 is a significant indication of Bitcoin's fair value, as this price point amassed the most volume of trades between March and July. If Bitcoin's price were to return to the Q2 2023 VPOC at $28,000, we can expect to see increased trading activities and volume as the market reevaluates Bitcoin's fair value at this level. The VPOC represents the price point with the highest trading volume, indicating that a significant number of market participants are comfortable transacting at that price.

As such, in the upcoming phase of price discovery, $28,000 is expected to serve as a crucial checkpoint for Bitcoin's valuation. If the price exceeds this level, it signals the market's willingness to discover an increasing fair value for Bitcoin. Conversely, if the price drops below and fails to hold this level, it suggests the market's willingness to discover discounted fair value. Therefore, investors and traders should closely monitor the price movements around this critical level to gauge Bitcoin's future direction.

Disclaimers

The information, opinions, estimates, and projections contained in this cryptocurrency market commentary (collectively "Information") are provided by LIQUIDITY TECHNOLOGIES INC. (the "Company"). This Information is for informational purposes only and is not intended to serve as investment advice or any form of endorsement or recommendation. The company has taken reasonable measures to ensure the accuracy and validity of the Information provided but makes no warranty as to its accuracy or completeness. The opinions expressed reflect the judgment of the authors at the date of publication and are subject to change without notice.The Information should not be construed as an offer or solicitation to buy or sell or trade in any cryptocurrency, security, or financial instrument. It does not account for individual investment objectives or the financial situation of any readers. Cryptocurrencies are volatile and complex products and are subject to significant risks including the risk of sudden and substantial price movements.Investments in cryptocurrencies are not protected by any statutory compensation arrangements in the event of the firm's failure. The value of cryptocurrencies may be affected by changes in currency exchange rates, regulatory interventions, or other political and economic developments.Investors should be aware that the value of their investments can fall as well as rise, and they may not receive back the original amount they invested. If you are in any doubt about the contents of this document, you should seek independent professional advice. Any historical information contained in this Information is based on our own analysis and is provided for illustrative purposes only. Past performance is not indicative of future results, which may vary.In no event shall the company, nor its directors, employees, agents, partners, suppliers or affiliates, be accountable or liable for any indirect, incidental, special, consequential or punitive damages, including without limitation, loss of profits, data, use, goodwill, or other intangible losses, resulting from the use of this Information. The company  reserves the right to change, modify, add, or remove portions of this Information for any reason at any time without notice.

Bullish developments are hovering around cryptocurrencies as U.S. inflation dropped to its lowest level since 2023, and $XRP jumped 100% after winning the SEC lawsuit.

"U.S. CPI (YOY) dropped to 3%, traders are anticipating the last rate hike in July"

On July 12, 2023, the U.S. Consumer Price Index (CPI) (YOY) was released, showing a reading of 3.0%, down from the previous reading of 4%. This drop was attributed to aggressive rate hikes, which have helped to bring inflation closer to the Federal Reserve's target of 2%.

Following the release of this data, the Dollar Index experienced a rapid decline. Additionally, the Fed Funds Future, which reflects market expectations for future interest rate changes, indicates that investors and traders are currently betting on a final rate hike in July of 2023.

Looking ahead, the Federal Open Market Committee (FOMC) is scheduled to meet on July 26, 2023, where Fed Chair Jerome Powell is expected to provide more insights into the Fed's plan for the remainder of the year.

CPI (YOY), Fed Funds Rate, PPR Award Rate and Short-Dated Treasury Securities Yields

"SEC vs Ripple's Lawsuit came to a mixed verdict - Institutional Sales violated Securities while Programmatic Sales (selling via exchanges) did not, $XRP jumped 100% immediately"

On July 13, 2023, . The court found that Ripple's Institutional Sales of XRP constituted the unregistered offer and sale of investment contracts in violation of the Securities Act, but its Programmatic Sales of XRP (selling via exchanges) did not. As a result, the court's ruling was a mixed verdict for Ripple.

In response to this news, XRP's price surged by 102% in a single day, as the news generated much hype in the crypto community. Coinbase also relisted $XRP on the exchange. Despite the bullish reaction in the market, it is important to note that the SEC could still appeal the decision, and the legal battle between Ripple and the SEC is not yet over.

It is noteworthy that $SOL also experienced a surge of more than 50% following the news of Ripple's lawsuit outcome. Investors are interpreting this as a positive sign that $SOL may not be classified as a security, similar to the ruling made for Ripple's Programmatic Sales.

Trending L2s Performance (July)

 In addition to the positive news surrounding Ripple, there are several other bullish developments in the cryptocurrency world. For example, , providing investors with more exposure to the cryptocurrency market. Additionally, , indicating growing interest in the asset class among investors.

Furthermore, , which could help to further legitimize and mainstream cryptocurrency investments.

These developments suggest that the cryptocurrency market is gaining wider acceptance and recognition among traditional financial institutions and regulators, which could potentially lead to further growth and adoption of cryptocurrencies in the future. However, as with any investment, it is important to carefully evaluate the risks and potential rewards before making any decisions.

Disclaimers

The information, opinions, estimates, and projections contained in this cryptocurrency market commentary (collectively "Information") are provided by LIQUIDITY TECHNOLOGIES INC. (the "Company"). This Information is for informational purposes only and is not intended to serve as investment advice or any form of endorsement or recommendation. The company has taken reasonable measures to ensure the accuracy and validity of the Information provided but makes no warranty as to its accuracy or completeness. The opinions expressed reflect the judgment of the authors at the date of publication and are subject to change without notice.The Information should not be construed as an offer or solicitation to buy or sell or trade in any cryptocurrency, security, or financial instrument. It does not account for individual investment objectives or the financial situation of any readers. Cryptocurrencies are volatile and complex products and are subject to significant risks including the risk of sudden and substantial price movements.Investments in cryptocurrencies are not protected by any statutory compensation arrangements in the event of the firm's failure. The value of cryptocurrencies may be affected by changes in currency exchange rates, regulatory interventions, or other political and economic developments.Investors should be aware that the value of their investments can fall as well as rise, and they may not receive back the original amount they invested. If you are in any doubt about the contents of this document, you should seek independent professional advice. Any historical information contained in this Information is based on our own analysis and is provided for illustrative purposes only. Past performance is not indicative of future results, which may vary.In no event shall the company, nor its directors, employees, agents, partners, suppliers or affiliates, be accountable or liable for any indirect, incidental, special, consequential or punitive damages, including without limitation, loss of profits, data, use, goodwill, or other intangible losses, resulting from the use of this Information. The company  reserves the right to change, modify, add, or remove portions of this Information for any reason at any time without notice.

June 2023, Part 1 by LTP Research

Summary of June 2023

Macro

In June, the Federal Reserve paused its interest rate hikes for the first time this year and continued reducing its holdings of Treasury securities. However, most of the committee members expected more rate hikes by the end of 2023, delivering a hawkish pause. On the other hand, the European Central Bank (ECB) raised interest rates by 25 basis points.

The US Treasury began funding the Treasury General Account (TGA) after a debt ceiling deal was reached in May. The TGA refill was mostly funded by short-term Treasury securities, and money held in Fed's Reverse Repo Program (RRP) contributed to most of the demand, alleviating the expected liquidity drain from the commercial sector (see Appendix A). 

Crypto

In June, several significant events impacted the digital asset industry in addition to the FOMC and ECB interest rate decisions. On June 6th and 7th, the SEC sued Binance.US and Coinbase for unregistered securities offerings, and later on Robinhood delisted multiple cryptocurrencies in response to the lawsuit, triggering sell-offs.

A week later, multiple traditional finance institutions, including Blackrock, WisdomTree, Invesco, Bitwise, Valkyrie Funds, and Fidelity, submitted a Bitcoin Spot ETF application to the SEC, injecting bullish sentiment into crypto markets. On June 20th, Crypto Exchange EDX Markets backed by Fidelity, Schwab, and Citadel launched, enabling traders to trade Bitcoin ($BTC), Ethereum ($ETH), Litcoin ($LTC), and Bitcoin Cash ($BCH) on the platform.

These events injected a great deal of volatility into cryptocurrencies, causing $BTC to reach a yearly high above $30,000, The aggregate trading volume among popular exchanges significantly increased in June compared to May. $BCH was the top gainer in June, with a staggering 170% increase in price. $LTC also outperformed towards the end of June as its halving approaches in early Aug.

Although $BTC reached a yearly high, it's worth noting that $ETH did not follow suit and continued to trade below $2,000. This is likely due to concern about whether the SEC will deem $ETH as a security, after listing 68 altcoins as securities so far.

Summary of June 2023

Macro

In June, the Federal Reserve paused its interest rate hikes for the first time this year and continued reducing its holdings of Treasury securities. However, most of the committee members expected more rate hikes by the end of 2023, delivering a hawkish pause. On the other hand, the European Central Bank (ECB) raised interest rates by 25 basis points.

The US Treasury began funding the Treasury General Account (TGA) after a debt ceiling deal was reached in May. The TGA refill was mostly funded by short-term Treasury securities, and money held in Fed's Reverse Repo Program (RRP) contributed to most of the demand, alleviating the expected liquidity drain from the commercial sector (see Appendix A). 

Crypto

In June, several significant events impacted the digital asset industry in addition to the FOMC and ECB interest rate decisions. On June 6th and 7th, the SEC sued Binance.US and Coinbase for unregistered securities offerings, and later on Robinhood delisted multiple cryptocurrencies in response to the lawsuit, triggering sell-offs.

A week later, multiple traditional finance institutions, including Blackrock, WisdomTree, Invesco, Bitwise, Valkyrie Funds, and Fidelity, submitted a Bitcoin Spot ETF application to the SEC, injecting bullish sentiment into crypto markets. On June 20th, Crypto Exchange EDX Markets backed by Fidelity, Schwab, and Citadel launched, enabling traders to trade Bitcoin ($BTC), Ethereum ($ETH), Litcoin ($LTC), and Bitcoin Cash ($BCH) on the platform.

These events injected a great deal of volatility into cryptocurrencies, causing $BTC to reach a yearly high above $30,000, The aggregate trading volume among popular exchanges significantly increased in June compared to May. $BCH was the top gainer in June, with a staggering 170% increase in price. $LTC also outperformed towards the end of June as its halving approaches in early Aug.

Although $BTC reached a yearly high, it's worth noting that $ETH did not follow suit and continued to trade below $2,000. This is likely due to concern about whether the SEC will deem $ETH as a security, after listing 68 altcoins as securities so far.

1.  Macro Economic Outlook

Quantitative Tightening

The Federal Reserve's Quantitative Tightening program is ongoing, the Committee will continue reducing its holdings of Treasury securities and agency debt and agency mortgage-backed securities. Reference: 

Inflation and Interest Rates

The CPI (year-over-year) fell to 4% in May. However, the CORE CPI (month-over-month) was stubborn and remained at 0.4% for three consecutive months.

In the June FOMC meeting, the Fed paused for the first time in 2023. However, during the FOMC press conference, Jerome Powell stated that most of the committee members expected more rate hikes at the end of the year, delivering a hawkish pause. The DXY surged and $BTC plummeted as soon as the statement was made.

Inflation in European countries remained elevated, with the CPI (year-over-year) dropping to 6.1% in May. In June, the European Central Bank raised rates by 25 basis points.

Treasury General Account (TGA) Refill and Liquidity Drain

After the debt ceiling deal was reached in late May, the U.S. Treasury proceeded to fund the TGA in June. The composition of securities offerings was mostly short-term dated Treasury securities, and the majority of the demand came from money held in the Reverse Repo Program (RRP), alleviating the expected liquidity drain from the commercial sector (see Appendix A). 

2.  Cryptocurrency Market Commentary

2.1 Bitcoin Outperformed Gold and CFTC Commercial Traders Switched To Net Longs

In June, commercial traders on the CME trading platform for Bitcoin futures closed their short positions and shifted to net long positions  towards the end of the month. This shift in sentiment could be  attributed to several bullish catalysts, including news about Bitcoin adoption by traditional finance, which was reported in mid-June.

Interestingly, Bitcoin's price action has recently deviated from that of gold with gold's price action remaining sluggish. Additionally, the US Dollar Index has been in a general downtrend, which has also contributed to the rise in Bitcoin's value relative to the dollar.

2.2 Bitcoin Defended 200-Week Moving Average and Continued The Uptrend

In June, Bitcoin's price defended and showed strong support at the 200-Week Moving Average and Short-term Holder Cost Basis, resulting in a continued uptrend. This was largely due to bullish news within the industry.

Meanwhile, the circulating supply of the top 4 stablecoins continued to decline.

As of June 30, the market capitalization of Bitcoin stands at $592 billion, while the Total Value Locked (TVL) in DeFi on the Ethereum network is at $26 billion.

The Stablecoin Supply Ratio Oscillator is currently within the medium range, which does not suggest an overbought or oversold condition.

 2.3 CEX Spot and Derivatives Trading Volume

The trading volume in June surpassed that of May, as the month was marked with several high-impact news and events. Notably, on June 16th, the Curve Finance Spot Volume saw a significant surge due to the fear of USDT de-peg. This prompted traders to exchange the stablecoin for other cryptocurrencies, leading to a higher-than-normal transaction volume.

Moreover, the total trading volume on both centralized and decentralized exchanges spiked during the week following the filing of Spot Bitcoin ETF by Blackrock and other traditional finance institutions, and the launch of EDX Markets. These developments injected optimism and hype in crypto markets, which contributed to the surge in trading activities.

 2.4 Bitcoin Trading Traffic (UTC)

During June, the busiest trading period for Bitcoin fell within 13:30 to 18:00 (UTC), which corresponds to the close of the London Trading Session and the opening of the New York Trading Session. This period also exhibited a significant increase in price displacement, with the highest average displacement of $143.6 during 16:30 to 16:45 (UTC). This represents a window for traders to capture volatility and price movements.

In the Asia Trading Session, the most active trading period occurred between 00:15 to 01:15 (UTC).

 2.5 Bitcoin Price Action Review (Price Drivers in June)

High-profile news events in June had a significant impact on the $BTC price. 

The SEC suing Binance.U.S. caused sell-offs and liquidated more than $60M in long positions. 

Robinhood delisting certain cryptocurrencies and Powell's announcement of additional rate hikes also triggered sell-offs. 

However, Blackrock and several traditional finance institutions filing for Bitcoin Spot ETFs injected optimism and caused Bitcoin to rally, with rumours about Fidelity's filing on 23rd June resulting in a 2023 all-time high of $31,432.

The major price displacement of Bitcoin tends to occur towards the end of the London Trading Session and the opening of the New York Trading Session, when high impact news are released and  traders from all around the world are most active in the market. 

As of June 30, the total open interest in the market stands at approximately $18 billion. Additionally, the aggregate funding rate remains positive, indicating that the market sentiment is bullish.

 2.6 Bitcoin Cash ($BCH) Top Gainer in June

On June 20th, EDX Markets, a crypto exchange backed by Citadel Securities, Fidelity Digital Assets, and Charles Schwab Corp., announced the launch of trading for Bitcoin ($BTC), Bitcoin Cash ($BCH), Ethereum ($ETH), and Litecoin ($LTC).

The launch of trading on the exchange led to an astonishing 200% price increase for Bitcoin Cash ($BCH) in just one week as $BCH gained more social interest and hype. 

Additionally, it is worth noting that Litecoin's ($LTC) halving is expected to occur on August 2nd, which may have an impact on its price in the coming weeks.

However, Ethereum ($ETH) underperformed admist the SEC listing more altcoins as securities. Whether the SEC will deem $ETH as a security or not remains a point of concern for $ETH investors.

 2.7 Trending Layer One and Layer Two Tokens Performance

Interestingly, in June, only Bitcoin ($BTC), Bitcoin Cash ($BCH), Litcoin ($LTC), Ethereum ($ETH) and Tron ($TRX) recorded positive price increases, while most altcoins recorded negative. This can be attributed to the SEC's lawsuit against Binance.U.S. and Coinbase for unregistered securities offerings, and listing more altcoins as securities, which created uncertainty and fear in the altcoins market.

As a result, investors moved away from altcoins and sought refuge in more established non-securities cryptocurrencies like Bitcoin and Bitcoin Cash.

Disclaimers

The information, opinions, estimates, and projections contained in this cryptocurrency market commentary (collectively "Information") are provided by LIQUIDITY TECHNOLOGIES INC. (the "Company"). This Information is for informational purposes only and is not intended to serve as investment advice or any form of endorsement or recommendation. The company has taken reasonable measures to ensure the accuracy and validity of the Information provided but makes no warranty as to its accuracy or completeness. The opinions expressed reflect the judgment of the authors at the date of publication and are subject to change without notice.The Information should not be construed as an offer or solicitation to buy or sell or trade in any cryptocurrency, security, or financial instrument. It does not account for individual investment objectives or the financial situation of any readers. Cryptocurrencies are volatile and complex products and are subject to significant risks including the risk of sudden and substantial price movements.Investments in cryptocurrencies are not protected by any statutory compensation arrangements in the event of the firm's failure. The value of cryptocurrencies may be affected by changes in currency exchange rates, regulatory interventions, or other political and economic developments.Investors should be aware that the value of their investments can fall as well as rise, and they may not receive back the original amount they invested. If you are in any doubt about the contents of this document, you should seek independent professional advice. Any historical information contained in this Information is based on our own analysis and is provided for illustrative purposes only. Past performance is not indicative of future results, which may vary.In no event shall the company, nor its directors, employees, agents, partners, suppliers or affiliates, be accountable or liable for any indirect, incidental, special, consequential or punitive damages, including without limitation, loss of profits, data, use, goodwill, or other intangible losses, resulting from the use of this Information. The company  reserves the right to change, modify, add, or remove portions of this Information for any reason at any time without notice.

Disclaimers

BTCUSDT (Spot), BTCTUSD (Spot), Cash/Crypto Margined, Perpetual Futures Open Interest, TUSD Circulating Supply, BTCUSDT-BTCTUSD Premium/Discount, Long/Short Liquidations

1.  Last week was a highly bullish week for Bitcoin, as the leading cryptocurrency reached its highest trading level of the year so far, hitting $31,432 on Binance Spot on 23rd June. This surge in price was propelled by the recent filing of the Bitcoin Spot ETF by Blackrock, as Bitcoin entered an upward trajectory with a remarkable increase of over 20%.

2.  This bullish sentiment was amplified even further on 20th and 22nd June when WisdomTree, Invesco and Valkyrie also followed suit by submitting filings for their own Bitcoin Spot ETFs. The multiple filings from traditional institutions indicate a strong and growing interest in Bitcoin adoption.

3.  Adding to the positive outlook, on 21st June, Federal Reserve Chairman Jerome Powell testified before lawmakers, stating that "crypto appears to have staying power as an asset class." This statement provided an additional boost to the already bullish sentiment surrounding Bitcoin and cryptocurrencies.

4.  Last Wednesday marked the biggest bullish day for Bitcoin in recent times, with a staggering price increase of over 5.8%. Price action from last week indicated that Bitcoin was highly active during the trading sessions between London and New York, as evidenced by the above chart. In fact, on both 21st and 23rd June, the price experienced a significant pump during the period where the London session overlapped with the New York trading session.

5.  In addition to the factors mentioned previously, it is interesting to note that Bitcoin's recent bullishness coincided with the minting of $1 billion worth of TrueUSD (TUSD) Stablecoin by Binance on 16th June.( source:https://tronscan.org/#/address/TGuWCuGCrnpVr7aHkB7xAkBMT5Ybce2RwX/transfers) Notably, BTC-TUSD has been trading at a premium compared to BTC-USDT since crossing the $30,000 threshold. Furthermore, Binance has also announced the launch of the TUSD Zero Maker Fee Promotion, scheduled to take effect on 30th June 00:00:00 (UTC).

Disclaimer:

The information, opinions, estimates, and projections contained in this cryptocurrency market commentary (collectively "Information") are provided by LIQUIDITY TECHNOLOGIES INC. (the "Company"). This Information is for informational purposes only and is not intended to serve as investment advice or any form of endorsement or recommendation. The company has taken reasonable measures to ensure the accuracy and validity of the Information provided but makes no warranty as to its accuracy or completeness. The opinions expressed reflect the judgment of the authors at the date of publication and are subject to change without notice.The Information should not be construed as an offer or solicitation to buy or sell or trade in any cryptocurrency, security, or financial instrument. It does not account for individual investment objectives or the financial situation of any readers. Cryptocurrencies are volatile and complex products and are subject to significant risks including the risk of sudden and substantial price movements.Investments in cryptocurrencies are not protected by any statutory compensation arrangements in the event of the firm's failure. The value of cryptocurrencies may be affected by changes in currency exchange rates, regulatory interventions, or other political and economic developments.Investors should be aware that the value of their investments can fall as well as rise, and they may not receive back the original amount they invested. If you are in any doubt about the contents of this document, you should seek independent professional advice.Any historical information contained in this Information is based on our own analysis and is provided for illustrative purposes only. Past performance is not indicative of future results, which may vary.In no event shall the company, nor its directors, employees, agents, partners, suppliers or affiliates, be accountable or liable for any indirect, incidental, special, consequential or punitive damages, including without limitation, loss of profits, data, use, goodwill, or other intangible losses, resulting from the use of this Information. The company  reserves the right to change, modify, add, or remove portions of this Information for any reason at any time without notice.

「What Happened Last Week?」

Last week was a week of volatility due to FOMC and ECB Interest Rate Decisions. 

The following table is a summary of the important economic events:

A summary of the important economic events

Summary: 

The latest CPI data suggests that inflation has moderated, with CPI (YOY) dropping to 4% in May. The Federal Reserve decided to maintain the target range for the federal funds rate at 5 to 5-1/4 percent and continue the process of significantly reducing its securities holdings. The Fed deemed it prudent to hold the target range steady to allow for the assessment of additional information and its implications for monetary policy. During Chair Powell's press conference on Thursday, he noted that nearly all Committee participants expect that it will be appropriate to raise interest rates somewhat further by the end of the year. 

As soon as Powell made this statement, $BTC plummeted as additional rate hikes were being priced in, which liquidated approximately $20M worth of $BTC longs. 

On Friday, ECB raised 25bps. The U.S. Dollar Index plummeted consequently, $BTC reacted and managed to recover from the sell-off since FOMC and closed the weekly candle in the green. Funding Rate remained positive overall.

Industry News of last week:

On June 15, 2023, Coindesk reported that iShares, a subsidiary of BlackRock, had filed paperwork for a spot Bitcoin ETF. The iShares Bitcoin ETF would allow investors to gain exposure to Bitcoin without having to directly hold the cryptocurrency themselves. It remains to be seen if the SEC will approve the iShares Bitcoin ETF, but if it does, it could further legitimize Bitcoin as an asset class and potentially open the door for other cryptocurrency ETFs in the future.

On June 17, 2023, a temporary agreement has been reached between the US Securities and Exchange Commission (SEC), Binance, and its US affiliate, Binance.US, which requires Binance.US to take steps to ensure that only local employees can access customer funds while the SEC lawsuit is ongoing. The agreement was signed off by a federal judge in the District Court for the District of Columbia. The proposed temporary agreement came in response to an SEC motion to freeze all of Binance.US's assets while it pursues the exchange on securities-related charges. The SEC had expressed concerns that funds could be moved offshore or records destroyed if it was not granted a temporary restraining order (TRO).

More news highlight:

New York bans CoinEx exchange, seizes $1.7M in crypto assets

Crypto Prime Broker FPG Loses Up to $20M in Cyber Attack

Bank of China's BOCI issues first tokenized security in Hong Kong on Ethereum

Shiba Inu Testnet Blockchain 'Puppynet' Crosses 20M Transactions

Disclaimer:

The information, opinions, estimates, and projections contained in this cryptocurrency market commentary (collectively "Information") are provided by LIQUIDITY TECHNOLOGIES INC. (the "Company"). This Information is for informational purposes only and is not intended to serve as investment advice or any form of endorsement or recommendation. The company has taken reasonable measures to ensure the accuracy and validity of the Information provided but makes no warranty as to its accuracy or completeness. The opinions expressed reflect the judgment of the authors at the date of publication and are subject to change without notice.The Information should not be construed as an offer or solicitation to buy or sell or trade in any cryptocurrency, security, or financial instrument. It does not account for individual investment objectives or the financial situation of any readers. Cryptocurrencies are volatile and complex products and are subject to significant risks including the risk of sudden and substantial price movements.Investments in cryptocurrencies are not protected by any statutory compensation arrangements in the event of the firm's failure. The value of cryptocurrencies may be affected by changes in currency exchange rates, regulatory interventions, or other political and economic developments.Investors should be aware that the value of their investments can fall as well as rise, and they may not receive back the original amount they invested. If you are in any doubt about the contents of this document, you should seek independent professional advice.Any historical information contained in this Information is based on our own analysis and is provided for illustrative purposes only. Past performance is not indicative of future results, which may vary.In no event shall the company, nor its directors, employees, agents, partners, suppliers or affiliates, be accountable or liable for any indirect, incidental, special, consequential or punitive damages, including without limitation, loss of profits, data, use, goodwill, or other intangible losses, resulting from the use of this Information. The company  reserves the right to change, modify, add, or remove portions of this Information for any reason at any time without notice.