Author: Faith Yakubu

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Despite the release of hotter-than-expected inflation data and doubts surrounding potential Federal Reserve rate cuts, the Bitcoin price unexpectedly surged on Wednesday, showcasing resilience amidst market turbulence.

The US Consumer Price Index (CPI) reported a 0.4% increase in March, surpassing the anticipated 0.3% rise, with core CPI metrics also exceeding forecasts. Consequently, US bond yields and the US dollar experienced significant gains as traders reevaluated their expectations regarding the Federal Reserve’s rate cut.

The US 10-year yield reached its highest level since November, rising nearly 20 basis points, while the US Dollar Index (DXY) surged 1% to over 105, hitting its peak since November 2023. These movements led to a decline in US stock prices, with the S&P 500 down approximately 1% for the day, reaching its lowest level in nearly four weeks.

Traditionally, lower stock prices alongside strength in yields and the US dollar tend to signal weakness for crypto prices due to their positive correlation with stocks and negative correlation with yields and the USD. However, Bitcoin’s bounce back to $69,000 surprised some traders, indicating that the cryptocurrency market may not be as closely linked to traditional financial markets as previously thought.

Traders Reevaluate Expectations for Fed Rate Cuts

Expectations for Federal Reserve easing have partly driven Bitcoin’s recent price appreciation. However, following the latest data, there has been a reduction in bets on Fed rate cuts. US interest rate futures markets are now pricing only a 15% chance of a rate cut in June, down from 57% one month ago.

This adjustment follows a series of stronger-than-expected US economic data releases, including Wednesday’s hot CPI report, which have prompted policymakers to hesitate in expressing support for near-term rate cuts.

Factors Influencing Bitcoin’s Resilience

Despite market uncertainties, several factors may have contributed to Bitcoin’s resilience on Wednesday. One possible factor is the diminishing impact of large-scale selling of Grayscale Bitcoin Trust (GBTC) shares by bankrupt crypto estates, as suggested by Grayscale CEO Michael Sonnenshein.

Another factor could be the upcoming Bitcoin halving, scheduled to occur next Saturday. The halving is expected to reduce long-term sell pressure from miners and could be a bullish factor for Bitcoin’s price.

However, the short-term market impact of the halving remains uncertain, with past occurrences sometimes resulting in sharp corrections in the market. Nevertheless, the long-term outlook for Bitcoin remains positive, driven by factors such as the rising US deficit, potential ETF flows, and the anticipation of a Bitcoin ETF approval.

In conclusion, while short-term price movements are difficult to predict, the long-term outlook for Bitcoin remains bullish. Despite potential market fluctuations, Bitcoin’s resilience amidst changing economic conditions suggests a favorable environment for future price growth.

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David Pan, the founder of Ace Exchange in Taiwan, along with six other individuals, has been indicted by a Taiwanese court on April 8 on charges related to money laundering and cryptocurrency fraud involving digital assets valued at NT$340 million New Taiwan dollars ($10.7 million).

The court ordered the confiscation of the defendant’s property and other assets worth $110,000.

Pan is accused of defrauding at least 162 individuals by offering a fraudulent product through over-the-counter (OTC) exchanges and fake investment platforms. He allegedly created an offshore trading platform that included a cryptocurrency wallet service named “Alfred Wallet,” which was used to deceive victims into depositing their funds. Once the funds were deposited, investors lost access to them, realizing they had been scammed only when attempting to withdraw their cryptocurrencies or locked out of their wallets after depositing them.

In response to the indictment, Ace Exchange released a statement distancing itself from Pan and clarifying that the wallet service involved in the case was not a product of Ace but was developed by a third-party team hired by Pan. The exchange assured users that its operations were unaffected, emphasizing the security of user assets and the smooth functioning of deposit and withdrawal services.

Pan, a former executive, had not been involved in the daily operations of Ace Exchange since 2022, according to the exchange.

Taiwan has seen a surge in cryptocurrency fraud and money laundering cases. Another incident involved a collaborator named Lin, accused of orchestrating a cryptocurrency fraud scheme with Pan. Authorities seized cash and cryptocurrencies during a raid on Lin’s residence, leading to the delisting of certain trading pairs on Ace Exchange.

In a separate case, Yuting Zhang, the COO of Bitgin exchange, was arrested for alleged involvement in a money laundering network, while another individual named Chuang was arrested for fraud and money laundering using Bitcoin ATMs imported into Taiwan without proper reporting to the Financial Supervisory Commission (FSC).

The impact of such incidents, coupled with events like FTX’s collapse, has affected Taiwanese investors, leading to a push for regulations to protect crypto investors in the country. Taiwan’s Financial Supervisory Commission (FSC) has announced plans to introduce new digital asset regulations in September 2024.

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Short sellers targeting MicroStrategy (NASDAQ:MSTR) have faced significant losses, totaling $1.92 billion since March, as per data from S3 Partners. This underscores the impact of a rally that has propelled the stock’s performance beyond that of bitcoin.

The approval of several spot bitcoin exchange-traded funds (ETFs) by the Securities and Exchange Commission (SEC) in January has brought the once-nascent asset class closer to mainstream adoption.

Traders betting against crypto exchange Coinbase (NASDAQ:COIN) and bitcoin miner CleanSpark (NASDAQ:CLSK) have also suffered losses, with figures amounting to $593.50 million and $106.40 million, respectively, according to the data.

MicroStrategy held nearly 190,000 bitcoins on its balance sheet as of the end of 2023 and has expressed intentions to further increase its exposure to the cryptocurrency. The company recently sold convertible debt twice within a week to raise funds for purchasing more Bitcoin.

Analysts at BTIG noted in an April report that the premium for MicroStrategy is driven by investors seeking exposure to bitcoin who may not have direct access to the cryptocurrency or ETFs. The company’s ability to raise capital for expanding its bitcoin holdings is viewed positively by shareholders, the brokerage added.

Despite the recent optimism surrounding certain crypto-related stocks, short interest in nine of the most closely monitored companies in the crypto space remains high, standing at 16.73% of the total outstanding shares, which is more than three times the average in the United States.

The SEC’s discomfort with crypto persists, and its approval of spot bitcoin ETFs may not necessarily indicate a willingness to embrace similar products, such as spot ethereum ETFs, Reuters has reported.

Alan Konevsky, chief legal and corporate affairs officer at online investment platform tZERO, remarked that the decision on spot bitcoin ETFs does not signal a change in philosophy at the Commission and may not lead to further favorable decisions.

Short sellers engage in selling borrowed shares with the expectation of buying them back at a lower price later, thereby profiting from the price difference.

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Amid the crypto frenzy, a tokenized hedge fund named Ethena has captured attention by offering a 37% yield through its USDe token, attracting billions of dollars in tokens and generating widespread market buzz. However, alongside the excitement, skepticism looms regarding the sustainability of such high yields.

Ethena’s USDe token, labeled as a synthetic dollar, achieves its impressive yield through a crypto version of the basis trade, exploiting price differences between spot and futures markets. This strategy, known as a cash-and-carry trade in crypto, has proven highly profitable recently amid surging token prices and soaring funding rates, which are the interest paid by bullish traders to maintain futures positions.

While high yields are enticing, they often come with elevated risks, as seen in the crypto-market turmoil of 2022 when inflated rates on the TerraUSD token proved unsustainable. Although Ethena’s design differs from Terra’s, investors remain cautious about potential risks in an asset class notorious for unexpected downturns.

Ethena operates as a tokenized hedge fund, managing a complex trading strategy across multiple crypto exchanges. The worst-case scenario, according to Robert Leshner, a partner at fintech venture fund Robot Ventures, is underperformance relative to implied funding rates across exchanges.

Here’s how Ethena works: Traders generate USDe tokens by depositing stETH and other accepted tokens into an automated system. Ethena Labs, the entity behind USDe, then opens short positions via Ether futures and perpetual swaps across various exchanges, including Binance. These short positions allow holders of sUSDe, a derivative of USDe, to benefit from high funding rates, which have exceeded 100% annualized in the current bull market.

Ethena’s rapid growth since its inception last year has been remarkable, with over $2 billion worth of cryptocurrencies deposited into the project, according to DefiLlama. This surge is fueled by the demand for high yields following the fallout of lenders like Genesis and BlockFi in 2022.

Despite its success, Ethena faces inherent risks, including funding risk if rates turn negative, exchange risk in the post-FTX crypto market, custodial risk relying on third-party partners, and collateral risk due to its reliance on stETH. However, the team behind Ethena remains optimistic, emphasizing that most risks are either unlikely or manageable.

While some experts remain cautious about potential downsides, Ethena’s team asserts its commitment to transparency and risk mitigation. As the crypto market continues to evolve, Ethena’s performance will be closely monitored to assess its resilience amidst changing market conditions.

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Gunzilla Games has revealed a groundbreaking integration with OpenSea, enabling players to trade in-game assets on the NFT marketplace. This integration will debut with Gunzilla’s upcoming video game, “Off the Grid.”

In a statement, Gunzilla Games announced that OpenSea will incorporate the gaming developer’s GUNZ blockchain, which operates on a custom Avalanche subnet. This integration aims to establish a compliant and transparent NFT marketplace for trading in-game items. Players and OpenSea users will have the opportunity to trade in-game NFT items for any game built on the GUNZ blockchain, utilizing the GUN token as the exclusive method of payment.

OpenSea CEO Devin Finzer expressed enthusiasm for partnering with Gunzilla Games, praising their commitment to exceptional gameplay and advanced in-game economies that prioritize player experience.

“Off the Grid,” Gunzilla Games’ battle royale title, will be the first game to leverage this integration. Set for release on PC, PlayStation, and Xbox consoles later this year, “Off the Grid” could become the first video game on both Sony’s PlayStation and Microsoft’s Xbox to enable players to own and trade digital assets as NFTs.

This announcement aligns with recent patent filings by Sony Interactive Entertainment, indicating interest in NFTs for transferring assets across games and console generations.

Gunzilla Games co-founder and CEO Vlad Korolov emphasized the significance of this partnership, stating that the launch of “Off the Grid” will offer a preview of the future of gaming economies.

In response to inquiries regarding regional restrictions on trading “Off the Grid” NFTs, Gunzilla Games stated that in-game assets held by players in regions where the game debuts will be tradable on OpenSea. The company plans to issue separate announcements about the specific rollout of GUNZ across different regions.

Last month, Gunzilla Games announced a $30 million funding round co-led by CoinFund and Avalanche’s Blizzard Fund, with ambitions to develop the first blockchain-based AAA video game targeted at mainstream gamers.

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Pre-halving volatility continued to dominate the crypto market on Tuesday as prices reversed course from Monday’s spike, leading to Bitcoin (BTC) plunging below $69,000 while altcoins faced significant declines.

Stocks also trended lower for most of the trading day, with investors waiting on the sidelines ahead of tomorrow’s Consumer Price Index (CPI) report, which is expected to provide insights into the potential trajectory of U.S. interest rates. Currently, the market anticipates a 57% chance of a rate cut in June and a 74% likelihood of a cut in July.

Despite this, a rally into the close managed to lift the S&P and Nasdaq out of negative territory, while the Dow finished flat.

Data from TradingView indicates that Bitcoin has been on a downtrend since reaching its peak at $72,800 on Monday, experiencing a 6.82% decline to reach a low of $68,200 on Tuesday afternoon. However, dip buyers subsequently pushed it back above $69,000, and at the time of writing, BTC trades at $69,030, marking a 3.75% decline over the past 24 hours.

Market analyst Bloodgood commented on the current macro environment, describing it as oscillating between hope for a perfect soft landing and fears of inflation, with sentiment appearing to lean towards the bearish side recently.

He highlighted the significance of tomorrow’s CPI release and cautioned about potential surprises regarding inflation, advising caution, especially for those with leveraged positions.

Regarding Bitcoin, Bloodgood noted a lot of indecision lately but expressed confidence in the bulls’ control due to the upward drift and higher lows being printed. However, he emphasized the challenge at the current All-Time-High, slightly above $73,700.

Bloodgood also touched on the unusual aspects of this bull market cycle, including the attention garnered by memecoins and the ongoing rise of gold. He urged traders to focus on the current chart rather than relying on fractal patterns or previous cycles to predict future movements.

In conclusion, Bloodgood suggested that capital might rotate towards technically impressive projects later in the cycle, despite the current dominance of memecoins.

According to Michaël van de Poppe, founder of MN Trading, Bitcoin is likely to trade sideways and consolidate in the near term until sometime after the halving.

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After Bitcoin soared to its March all-time high above $73,000, profit-taking by long-term holders has started to decrease, as per a recent report from Glassnode.

While Bitcoin’s March all-time high prompted significant profit-taking by long-term holders, this activity has begun to taper off, the Glassnode Insights report noted on Tuesday.

Typically, profit-taking, especially by long-term holders, intensifies around all-time high breaks but has been cooling down in recent weeks, according to the report.

The balance of assets between long-term Bitcoin holders and new demand indicates that the current market is entering the early stages of a euphoria or price discovery phase. However, historical analysis suggests that such phases are prone to price corrections, with drawdowns exceeding 10% being common, and many surpassing 25%.

Since Bitcoin’s all-time high in March, there have been only two significant corrections of around 10% or more, the report highlighted.

The upcoming Bitcoin halving is currently a major driver of market speculation. Sunny Lu, Founder of VeChain, emphasized how regulatory developments would impact Bitcoin’s trajectory post-halving.

Comparing the current cycle to the previous one, Lu highlighted the impact of regulation on pivotal price moments. Regulatory actions have been instrumental in driving significant price movements since the last halving in May 2020.

Lu pointed out that the approval of spot Bitcoin ETFs in March of this year triggered the latest price peak, following previous peaks after the Coinbase IPO in April 2021 and the approval of Bitcoin futures ETFs in November of the same year.

He emphasized a shift in focus from solely considering supply dynamics to broader macroeconomic factors in understanding the halving’s impact. The evolving narrative now encompasses not only the halving’s mathematical effect on supply but also macro forces influencing prices.

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Worldcoin, the digital identity and cryptocurrency project led by OpenAI CEO Sam Altman, is introducing new features to bolster personal data protection and enhance age verification processes.

On April 9, Worldcoin unveiled two updates: the option to unverify World IDs through permanent iris code deletion and the introduction of in-person age verification checks.

World ID holders now can unverify their World ID, which acts as a digital passport verifying an individual’s humanity using “orbs,” devices that scan users’ eyeballs to confirm their authenticity.

Unverification of the World ID involves the permanent deletion of the user’s iris code, a numerical representation of their unique iris texture, ensuring that individuals can only verify one World ID.

Upon deletion request, the user’s World ID becomes invalid. To prevent fraud, a six-month “cool-off” period is mandated, ensuring individuals cannot immediately re-verify their humanness.

After the cool-off period, users’ iris codes are permanently deleted and rendered unrecoverable.

The development of Worldcoin’s unverify option involved collaboration with third-party privacy and security experts, including the Bavarian State Office for Data Protection Supervision (BayLDA), serving as Worldcoin’s lead supervisory authority in the European Union.

The second update introduces in-person age verification checks to ensure the platform’s accessibility exclusively to individuals aged 18 years and above.

This update incorporates on-site age verification checks at all orb locations prior to World ID verification. Third-party personnel will conduct the verification before granting entry to the venue.

Worldcoin spokesperson stated, “Worldcoin has always required that individuals be a minimum of 18 years old to obtain a World ID,” emphasizing that users have been prompted to confirm their age in the app, aligning with the practices of widely used applications.

Altman launched Worldcoin in July 2023 intending to establish a “global financial and identity network based on proof of personhood.”

While receiving mixed reactions from the community, Worldcoin has faced scrutiny over concerns regarding centralization, privacy, and security. Governments, including the European Union and Kenya, have expressed skepticism and initiated investigations into Worldcoin’s operations due to privacy concerns.

Despite challenges, Worldcoin maintains its commitment to operating lawfully in all available locations and ensures compliance with relevant laws.

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With the Bitcoin halving approaching, traders are closely monitoring market dynamics, particularly professional traders, to gauge sentiment. Historically, the anticipation surrounding halving events has typically led to bullish sentiment in the months following rather than on the exact halving date. This is due to the delayed impact of reduced mining output on the market.

Bitcoin miners tend to accumulate rather than liquidate holdings daily, especially anticipating a bullish market, bolstered by Bitcoin’s 59% appreciation year-to-date in 2024. This expectation of market appreciation further tightens supply, potentially driving prices higher.

However, analysts caution against simplistic post-halving price surge expectations, noting Bitcoin’s price trajectory is influenced by various factors, including economic trends, investor risk appetite, monetary policies, and correlations with the stock market. Relying solely on historical halving patterns may be overly optimistic.

Neutral-to-bullish call options dominate the June 28 expiry, with professional traders turning to options strategies to leverage positions with minimal upfront deposits, avoiding direct liquidation risk found in futures markets.

Open interest for options expiring on June 28 at Deribit has reached $4.5 billion, showcasing a significant call-to-put options imbalance, with bullish positions outweighing bearish ones threefold. However, this perspective warrants deeper analysis, considering the cryptocurrency community’s tendency towards optimism.

While there are call options targeting as high as $140,000 and $200,000 for the June 28 expiry, some appear overly ambitious. Realistic call options open interest is around $2.72 billion, excluding bets on prices exceeding $90,000. Conversely, put options placed before Bitcoin’s surge over $50,000 have diminished the likelihood of profitability, with open interest in puts at $57,000 or higher at a scant $250 million.

Bitcoin’s unexpected performance surge, attributed to factors like the approval of a spot exchange-traded fund in the U.S., reduced inflation to 3%, and absence of a predicted global economic recession by June 28, caught bears off guard. Consequently, bearish scenarios tied to the Bitcoin halving seem increasingly unlikely.

Speculations about a “death spiral” due to reduced block rewards and decreased miner participation have been consistently debunked. Bitcoin’s network adjusts its difficulty every 2016 block, ensuring stability amid fluctuating hash rate levels.

In a hypothetical scenario where Bitcoin’s price drops to $47,000 by June 28, a 32% decrease from current levels, put options open interest would be $422 million, while calling options up to $46,000 account for a $670 million exposure, highlighting a market inclination towards neutral-to-bullish strategies for the Bitcoin halving, at least by the June 28 expiry.

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Cryptocurrency ETFs are grappling with a 5.99% decrease in value as both Bitcoin and Ethereum suffer losses, exacerbated by the SEC’s postponement of spot ETF approvals, which further impacts ETFs like EFUT and AETH.

The cryptocurrency market experienced a challenging week, particularly affecting crypto Exchange-Traded Funds. Reflecting setbacks in major cryptocurrencies, the overall theme of cryptocurrency investments witnessed a decline of 5.99%. Bitcoin dipped by 2.25%, falling below the $70k mark, while Ethereum faced a steeper drop of 6.5%.

SEC and Spot ETF Challenges

The recent action by the U.S. Securities and Exchange Commission (SEC) triggered profit-taking. The SEC initiated a three-week comment period regarding proposals for spot Ether ETFs, effectively delaying any potential approval until at least May. This delay tempered investor optimism, especially among those expecting swift approvals for spot ETFs, which directly represent cryptocurrency investments rather than derivatives.

Impact on Crypto ETF Performance

Specific crypto ETFs felt the repercussions of these developments. The Ether Tracker Euro ETC (ETHEREUM XBTE) and the 21Shares Ethereum Staking ETP (AETH) experienced declines of 7.96% and 7.63%, respectively. These declines underscore the heightened sensitivity of crypto ETFs to regulatory decisions and market sentiment as investors navigate the uncertain landscape of cryptocurrency regulations and their implications for spot ETFs.

The SEC’s decision to postpone spot ETF approvals has cast doubt on the future of Ether ETFs, momentarily halting the momentum that had been building in anticipation of broader institutional acceptance. While these ETFs provide a regulated avenue for investors to access cryptocurrencies, the road ahead appears murky with regulatory uncertainties, affecting both investor confidence and ETF performance.

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