As market waits for clear path, token-specific actions assume significance

Mornin’ Switchers!

Here’s your weekly dose of market news and updates. So open your minds and get ready to gobble it up. But first, remember, a pinch of your own research is as essential as salt in your food.

Your weekly market roundup

Crypto trades slightly lower as risk-on assets falter in the broader market

Last week, macro uncertainties started weighing in on the “new” year rally across asset classes. As a result, markets witnessed a healthy correction. The bond markets are waking up to the risk of another Fed rate hike. The yield curve between 2- and 10-year treasuries was inverted further, causing it to visit extreme levels that hadn’t been seen since the early 1980s.

An inverted yield curve shows that long-term interest rates are less than short-term interest rates. It indicates the onset of an economic slowdown.

*last updated 10:00 am, 27 Feb 2023

With S&P 500 and Nasdaq falling by close to 3% on a week-on-week basis, Bitcoin (BTC) and Ether (ETH) mirrored the sentiments of the broader market. Overall, the crypto market cap dropped slightly, taking it below $1.1 trillion.

The short-term “decoupling” between BTC and S&P 500 is interesting to note. Because the dominant narrative last year was that BTC is trading in sync with high-growth tech stocks. The correlation between BTC and S&P 500, which had shot above 0.8, is now down to ~0.3. That means BTC is back to behaving like a unique asset class that can help diversify portfolios.

The other key emerging story is the rise in “Chinese” coin or token prices. These are cryptos with a heavy Chinese presence among their developers. Filecoin (FIL, up by 32%), VeChain (VET, up by 21%), and Neo (NEO, up by 60%) are the main month-on-month gainers in this list. A recent Bloomberg report stating that Hong Kong will become the gateway for Chinese crypto access further fuelled the price rise.

Tezos’ XTZ token, too, saw a sharp price jump of over 20% last week as Google Cloud announced its decision to become a validator on the network.

Hot off the press: Market developments in the news

News is one of the major drivers of the crypto ecosystem. Catch up on all the developments in the space with our quick takes on the latest developments.

Coinbase launches Layer-2 blockchain

Coinbase, the American company that operates the well-known exchange of the same name, is jumping into the Layer-2 game with the launch of Base, an Ethereum-based platform. Base is built on Optimism blockchain and will offer a secure, low-cost way to build dApps. The testnet went live on 23 February. According to Jesse Pollack, Coinbase’s senior director of engineering, there are no plans to issue a token as yet. (Source: Coindesk)

Tezos teams up with Google Cloud

In a bid to accelerate the development of Web 3.0 applications, Tezos Foundation is teaming up with Google Cloud. The cloud division of the search engine major has agreed to serve as a Tezos “baker” (meaning network validator), allowing corporate customers to support blockchain development on Tezos. The move is expected to drive institutions into the blockchain and Web 3.0 space. (Source: Coindesk)

Spotify testing token-enabled music playlist

Music streaming platform Spotify is testing a new service called “token-enabled playlists” at the moment. The new service will allow NFT holders to connect their crypto wallets and listen to community-curated music. The service is currently available to Fluf, Moonbirds, Kingship, and Overlord token holders. The curated playlists will be actively updated throughout the three-month testing period. The pilot is currently only available to Android users in the US, UK, Germany, Australia, and New Zealand. (Source: Coindesk)

Date confirmed for Ethereum’s Shanghai upgrade on Sepolia testnet

Ethereum developers have officially confirmed the date for the Shanghai-Capella Ethereum upgrade on the Sepolia testnet. It is scheduled for 28 February 2023. This will be the second public testnet on which the upgrade will be deployed. The first testnet to deploy the upgrade was Zhejiang.

Following the Sepolia deployment, Ethereum developers will explore the possibilities of the upgrade on the mainnet. The mainnet upgrade will enable validators on the network to withdraw their tokens—something they can’t do yet. (Source: TheBlock)

FATF agrees to an action plan for implementing global crypto norms

The Financial Action Task Force (FATF) has agreed to develop a roadmap to ensure the “timely implementation” of its global crypto standards. The news came to light via a plenary meeting report of FATF, a financial crimes watchdog comprising 206 members, including the UN.

Meanwhile, on a related note, the International Monetary Fund (IMF) and the Financial Stability Board (FSB) are also preparing a technical paper to push for a coordinated global approach for the regulation of crypto assets. The Indian G20 Presidency earlier proposed the adoption of such an approach. The paper will be presented for discussion at the G20 Finance Ministers and Central Bank Governors meeting in October this year. (Source: Coindesk, The Hindu)

On-chain activity

Now let’s try to look to the future with some on-chain activity data analysis, shall we?

Is profit booking on the horizon in the crypto market?

For the first time in 2023, Bitcoin and Ethereum traders took to selling at a loss last week, indicating that the strength has bottomed out.

More BTC being held than sitting in exchanges

On-chain data from Glassnode shows that there is over 2.2 million BTC currently sitting on exchanges. That’s a lot but it’s lesser than the 2.6 million BTC supply being held by users for 10+ years. And, since 2020, the supply of BTC to exchanges has been steadily decreasing. The holding pattern despite the recent negative events indicates that investor confidence in BTC has not wavered.

Chart of the week: MATIC

Weak sentiments in the crypto market, combined with news of Polygon layoffs and nodes going offline, led to a MATIC sell-off last week. The coin dropped by more than 13% in the week.

However, after testing for support at the ₹110 level, MATIC did bounce back a little, indicating buyer presence around this level.

MATIC is likely to attempt to move toward the ₹125 level this week if the selling pressure doesn’t persist.

The Relative Strength Index (RSI) is close to the neutral zone, and the 50-EMA line is rising as well. MATIC is, therefore, likely to find strong support at this level. We can expect MATIC to rise further if it breaks above ₹120 during the day. As always, DYOR.

If you are new to charts, read our beginner’s guide to TradingView charts.

Coin of the week: SOL

After spending most of November and December last year in freefall, thanks to its association with FTX, SOL is rising like a phoenix from the ashes. After making a low of ₹9.9, SOL has gained more than 120% year-to-date. Some positive developments last week that contributed to the price jump are:

• Helium, the chain dedicated to the Internet of Things (IoT), announced a complete migration to Solana on March 27.

• Solana emerged as the second-largest blockchain network by sales volume in January. It sold about 85 million NFTs, up by 23% from the previous month.

That makes it our coin of the week. What’s yours?

Thanks for sticking around!

See you later, folks.

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