CoinLoan Weekly: Calming down, crypto hedge fund and ETF plans, resilient BTC
Bitcoin took an abrupt dive from $16,500 to under $16,000 on Monday, November 14, and rebounded to just shy of $17,000. Following a dip, it soared higher the next day, reaching $17,044.68. Subsequently, the price held above $16,500 until losing its grip on Monday, November 21 — BTC initially slid below $16,250 and ended up below $16,000.
Tuesday's 7-day high was triggered by the October PPI figures, which also invigorated stocks. The Crypto Fear and Greed Index stayed on the previous level as extreme fear persisted in the wake of the FTX wipeout. So far, just four of the eleven Novembers since 2010 have brought BTC monthly declines. For this period to end in the green, the coin must rise above $20,485.
As of this writing, BTC is changing hands at $15,682.45, with a 24-hour slip of -5.7% and a 7-day loss of -4.0%.
ETH see-sawed on Monday, November 14, and jumped on the PPI data the next day, reaching a 7-day high of $1,277.08. On Wednesday, November 16, it slid to $1,200. ETH held slightly above this level through Friday and Saturday, but as Sunday's fall deepened on Monday, November 21, it sank below $1,100.
On Sunday, November 20, a hacker holding the FTX Accounts Drainer wallet reportedly sold over 50,000 ETH, primarily for Bitcoin, through Ren's gateway. The dumping took a toll on the price, drawing it down to the $1,000 mark. The identity of the hacker, who now holds over 200,700 ETH, is unknown, but some users speculate he could be a former FTX executive.
As of now, ETH is worth $1,086.59, with a 24-hour loss of -7.8% and a 7-day decline of -11.2%.
Unlike BTC and ETH, XRP finished in the green. From around $0.34, it soared to $0.394712 on Tuesday, November 15, dipped and resumed trading above $0.38. The price held firmly above this level on Friday and Saturday until Sunday's plunge. Monday, November 21, finished with a rebound to over $0.35.
On Monday, November 21, whales shoveled almost 338 million XRP worth $117.7 million, per the Whale Alert blockchain tracker. A transfer of a comparable size also occurred on November 19. Meanwhile, Ripple CEO Garling has expressed interest in buying remnants of the failed FTX empire, including its parts serving business customers and stakes in other entities.
As of now, XRP is trading at $0.351616, with a 24-hour fall of -6.6% and a 7-day rise of +2.9%.
Unfazed by market turmoil, Man Group and Valkyrie commit to crypto
The biggest publicly traded hedge fund manager is going ahead with its plan to delve deeper into crypto. According to a Bloomberg report, despite the repercussions of the FTX debacle, Man Group plc could launch a dedicated crypto fund in early 2023.
At present, the crypto exposure of this London-based firm is limited to trading cryptocurrency futures through Man AHL, its proprietary quant trading platform. CEO Luke Ellis announced plans to scale up the involvement earlier this year. Previously, he had mentioned that price volatility made digital assets an attractive trading instrument despite "no inherent worth."
- As per anonymous sources cited in the report, Man Group's crypto strategy has been in the works for months.
- Portfolio manager Andre Rzym reportedly leads the endeavor.
- Following a counterparty risk assessment, the dedicated fund will be approved for investors only.
- AHL, the company's computer-led trading unit, could have the fund up and running by the end of 2022.
Meanwhile, Valkyrie Investments, one of the first BTC ETF issuers, does not "plan on pivoting," according to Chief Investment Officer Steven McClurg. "Blockchain is a technology that's here to stay, and crypto is a currency that's here to stay," explained the executive.
Aside from the crypto winter and FTX's meltdown, the Nashville-based firm has been grappling with other setbacks. First, the value of its Valkyrie Bitcoin Strategy ETF (BTF) is down by around 75% year-over-year, which is worse than the losses in the S&P 500 and the Nasdaq.
Secondly, the firm has laid off roughly a third of its staff in recent months. Finally, in October 2022, it quietly admitted losing $5 million of an $11.2 million fundraising round as the biggest investor — CSA Evolution VC Fund — had backed out. Valkyrie managed to replace a portion of this funding allocation.
McClurg does not believe the plunge will last, as institutional investors and broker-dealers are still interested. However, Valkyrie has postponed aggressive capital-raising campaigns, foreseeing "a pause in investments in the sector over the next few quarters until the FTX situation blows over," according to the CEO. "The market is down in general, be it tech or bonds. But you don’t see asset managers just throwing their hands up and walking away," he added.
Bitcoin avoids heavy losses amid the FTX contagion
Last week, as the FTX fallout was unfolding, the freefall for BTC and ETH ceased. Along with stocks, they surged on Tuesday, spurred by a new PPI (Producer Price Index) report from the US Labor Department. By the beginning of the weekend, the leading coins had only slipped by 1% and 4%, respectively.
The October figures indicated an annual rise of 8% in US wholesale prices, below 8.5% in September and 8.7% in August. With the second PPI report showing signs of subsiding inflation, the Fed could be more likely to relax its fiscal policies.
Beyond BTC and ETH, several members of the top 20 shed 5-10% last week, including Cardano (ADA), Polygon (MATIC), and Dogecoin (DOGE). FTX's downfall affected Solana (SOL) the most, as the exchange was among its earliest backers. Aside from a 17% plunge to $13.31, the fallout involved layoffs at Metaplex, a Solana NFT protocol.
Keys to BTC's strength
According to Stéphane Ouellette, CEO of FRNT Financial, several factors may have contributed to BTC's resilience:
- A strong community of investors, including the so-called "Bitcoin maximalists." Their almost religious commitment to BTC could explain why the price hardly budged on Wednesday after Genesis Global Capital, one of the biggest crypto lenders, suspended withdrawals and new loans.
- The market may have priced in more issues, considering the earlier string of bankruptcies (Celsius Network, Voyager Digital, and others) following the TerraUSD debacle. It caused the BTC price to halve while investors rushed to pay back their debts. If significant leverage had not left the market, the latest downturn might have been more profound.
Proponents of BTC can also find solace in its historical performance — the coin has always resumed growth after each fall. According to Bloomberg's estimates, since 2018, it has shed 20% in one week six times, with each subsequent month pushing it up by 9% on average.
Still, an index of expected volatility in BTC has soared, while the BTC futures curve is partly in backwardation — the spot price exceeds the futures price. This mismatch could bolster bets on declines: traders have an opportunity to profit by selling short and buying at the lower futures price.