Trading With Macroeconomy: Weekly Market Review from TokenInsight

Affected by the macro market turbulence, the volatility of mainstream cryptos has risen, but they are still in the low volatility range.

The rebound in market risk appetite has pushed up the prices of commodities and crypto assets, but whether the market will pick up still needs to wait for the end of July to determine.

Market Confidence Recovered With More Potential Volatility

Earlier this week, due to the panic caused by the rebound of the epidemic, the stock market and bulk commodities all fell sharply, affecting the crypto market. News related to the regulation of stablecoins further lowered the market's expectations for the crypto market. On Tuesday, the price of BTC fell below $30,000 for the first time, and the market was bearish. The put/call ratio of ETH options once reached 1.7.

But beginning on Wednesday, the B Word online summit strongly supported the market bulls, and the crypto market institutions rebounded. The prices of cryptos has recovered and the volatility has begun to rise. As of Friday, the historical volatility of Bitcoin has rebounded to the 60 moving average, while the historical volatility of Ethereum has rebounded to above the 80 moving average, which is conducive to the operation of volatility-related strategies.

Market confidence has also recovered. The recent skewness of the mainstream cryptos has risen significantly, indicating that optimism has begun to be included in the pricing. The negative basis rate of the next week and the front-month futures has been wiped out, and the recent bitcoin futures even have a small positive premium.

However, since a series of economic indicators and data will be announced at the end of the month, and next week will be the monthly settlement period for derivatives, market volatility may further increase, and it is necessary to pay attention to the risk of price fluctuations in the short term.

Macroeconomic Factors Dominate the Crypto Market Temporarily

This week, the impact of macroeconomic factors on the market is higher than that of supervision, but the long-term layout and plan of the supervisory agency still cannot be ignored.

U.S. government agencies and regulators have begun to develop a regulatory framework for stablecoins and DeFi, and are trying to push individual investors away from the crypto asset trading market.

• On July 19, the US Federal Bureau of Investigation (FBI) issued a serious warning against crypto assets such as Bitcoin and told individuals not to participate in it. The FBI stated that cybercriminals targeted cryptocurrency users, exchanges and third-party payment platforms in the crypto industry, causing massive economic losses to victims.
• On July 20th, US Treasury Secretary Yellen convened US regulators to discuss stablecoin rules. At the meeting, participants discussed the rapid growth of stablecoins, the potential use of stablecoins as a means of payment, and potential risks to end users, financial systems, and national security. The U.S. Financial Markets Working Group also listened to an introduction from the Department of the Treasury on the preparation of the stablecoin report. The report discussed the potential benefits and risks of stablecoins, the current regulatory framework in the United States, and suggestions for resolving regulatory gaps. The working group is expected to issue recommendations in the coming months.
• On July 21, SEC Chairman Gensler stated that even on a decentralized platform, cryptocurrencies priced in securities must comply with securities regulations.

European regulators have proposed a ban on anonymous cryptocurrency transactions, but the short-term impact is not significant.

• As part of the plan to combat money laundering and terrorist financing, the European Union proposes to ban anonymous cryptocurrency transactions. The plan announced on July 20 includes a number of proposals to strengthen financial transaction supervision, including the creation of a new EU institution with about 250 people to supervise high-risk financial institutions, and a ban on cash transactions exceeding 10,000 euros. The European Union said it would ban anonymous crypto asset wallets.
• The European Commission stated that it should impose the same regulations on cryptocurrencies as regular bank wire transfers. The plan must be approved by the European Parliament and the European Council, and the process may be lengthy. The EU stated that the goal is to start operating a new anti-money laundering agency in 2024.

Although the crypto market suffered a series of blows in Q2, since the Q3, market confidence has shown signs of recovery.

• CNBC reported that despite the setbacks of cryptocurrencies, blockchain companies received a total of $4.4B in financing in the second quarter.
• Global X Bitcoin Trust stated that in order to achieve its investment goals, the trust will hold Bitcoin.
• This week, the cryptocurrency exchange FTX announced a financing of $900M, one of the largest financings this quarter, and its valuation has reached $18B.

Although the crypto market is showing signs of recovery, as the Fed’s interest rate resolution and other important economic information will be announced next week, the volatility of the macro market will increase significantly. The volatility at the beginning of this week proves the increasingly close correlation between the crypto market and the macro economy, which requires continuous attention to the macro market situation.

Trading in response to macro expectations will dominate the crypto market this week and next week. It is expected that the volatility of the crypto market will increase with macro fluctuations, but the increase is limited and will remain at a low-to-medium level in the short term.