Macro Market Update August 15th, 2022

Last Week Recap

• U.S. Consumer prices rose 8.5% in July, less than expected, as inflation pressures peaked and eased a bit
• Coinbase posted a billion-dollar loss in the second quarter and a revenue miss
• Ethereum 2.0 Merge on track in middle Sept as Goerli test merge successfully finalized
  • Crypto community divided over Ethereum hard fork
• Tornado Cash Sanctioned by U.S. OFAC (The Office of Foreign Assets Control)
  • Netherlands arrests suspected developer of Tornado Cash
• BlackRock to offer crypto investment vehicle to U.S. institutional clients, partnering with Coinbase
• MakerDAO founder proposes converting $3.5B USDC reserve to Ethereum
  • Vitalik Buterin calling it "a risky and terrible idea”
• Huobi CEO Li Lin in Talks to Sell $1 Billion Stake in Crypto Exchange
• Acala Network aUSD Depegs by 99% as Hacker Issues Over 1 Billion Tokens

ETH Merge Monitoring Dashboard

• Protocols/Communities/Companies support ETH hard fork
  • BitMEX: to offer leverage trading for potential Ethereum POW fork
  • OKX: to evaluate and support the airdrop and withdrawal of forked tokens
  • Binance: “will support The Merge,” In case of new forked tokens, Binance will evaluate the support for distribution and withdrawal of the forked tokens.
  • Poloniex: has enabled the trading of potential ETH forks, ETHS (ETH2) and ETHW (ETH1), and listed TRON-based ETHS and ETHW.
  • APENET: the APENFT Marketplace will support all NFT trading on the ETHPoW chain, allowing APENET to facilitate the ETH 2.0 merging.
  • Huobi: confirmed that it would support Ethereum forked assets on its platform as long as they meet the exchange security requirements
  • Gate: Will Support ETH Potential Hard Fork and List ETHS and "Candy" Token ETHW
  • MEXC: Supports Ethereum (ETH) 2.0 Upgrade & Lists Potential Hard Fork Tokens
• Protocols/Communities/Companies object to ETH hard fork
  • Circle: Circle plans to only support the Ethereum PoS chain after Merge
  • Tether: USDT supports ETH PoS transition
  • Debank: All Products Do Not Support Ethereum Forks
  • Chainlink: Will Not Support Ethereum Forks After the Merge
  • Digital Currency Group: does not intend to back any Ethereum hard fork
  • ETC Coorperative: Urges ETHPoW To Drop Ethereum Fork (ETHW) Plan
  • Aave Community: Only Support Post-Merge Ethereum PoS

Legacy Markets

VIX has subsided in the wake of cooler inflation data, slipping below 20, which hasn’t been seen since mid-April. Over the past two months, the index has declined by 42.9% after the index peaked at 35.05 back on June 13th, risk appetite growing in the equity market, S&P 500, and the Nasdaq flying higher.

Open Interest & Funding Rates

BTCUSDT OI went down before the CPI report and recovered to the previous level after CPI. However, compared with previous months, OI is still very high as investors tend to use more derivatives to bet the price action around ETH merge.

BTC Weekly View

BTC touched $25k for the first time since mid-June and pushed bravely closer to $25k for the third time in four days before retreating nearer $24k. Once the base is built above $25,000, we could see BTC moving quickly toward the $29,000-$30,000 range, the level back in May.

ETH Weekly View

ETH has been lately rising faster than Bitcoin and touched $2,000 for a second consecutive day on Saturday before moving lower. Ether's surge has come as the anticipated Merge is on track, plus more demand for ETH from investors for a potential ETHPoW token airdrop.

ETH/BTC

ETH/BTC will likely continue the strength as they both benefit from cooler CPI on the macro end, but ETH’s merge play becomes more dominant and can push ETH/BTC higher.

TOTAL2 - USD Market Strength

TOTAL2 has maintained a steady upside move and tried to recover to the pre-May crash level. The narratives have grown in the TOTAL 2 market, such as the hefty growth of NFTs on AVAX, boosting DeFi market share in L2 like Optimism and Arbitrium, Spike on SHIB, etc. If ETH can maintain the momentum towards merging, we could also see further upside on TOTAL2.

TOTAL2BTC - BTC Market Strength

It’s interesting to see that the TOTAL2BTC ratio has already passed the May 2022 level and is on track to touch the early 2022 level. As new ecosystems and narratives quickly build on different chains, and BTC is more tied to slowly updated macro data and monetary policies, this ratio likely move higher.

SH*TPERP/ALTPERP

As BTC and ETH posted a high return after cooler CPI, the rotation is also going on to SH*T and ALT coins. Although the SH*TPERP/ALTPERP ratio has been relatively stable since July, it is likely to increase as investors' risk appetite gradually picks up if BTC, ETH, and large altcoins can hold their ground towards merging.

Summary

• ETH price is likely to consolidate after the cooler CPI and Goerli test, new momentum will come once investors gain more information about merging and therefore position themselves.
• Altcoin and smallcap tokens continue gaining strength.
• Tornado Cash sanctions likely have more ripple effects and create volatility as some crypto communities trying to move away from centralized stables.

DISCLAIMERThe information in this report is for information purposes only and is not to be construed as investment or financial advice. All information contained herein is not a solicitation or recommendation to buy or sell digital assets or other financial products.