TradFi’s massive push into crypto

Bitcoin and the rest of the crypto market continued to drop over the last week, following the Federal Reserve’s third consecutive monthly 75 basis point interest rate hike. Although the hike was expected, it was Fed Chair Jerome Powell’s continued hawkish comments that were most damaging to risk assets.

At the time of writing, bitcoin is trading at around US$19,088. Ethereum underperformed bitcoin once again, down -8.67% vs bitcoin’s -4.88%.

Bitcoin’s market cap declined to US$365.8B, with the total crypto market down to US$939.3B. Bitcoin’s market dominance sits at 38.94%.

Price High Low Change from previous week
BTC (in US$) $19,088 $19,674 $18,290 -4.88%
ETH (in US$) $1,330 $1,388 $1,229 -8.67%

Source: CoinMarketCap. As at 25 September 2022. Past performance is not indicative of future performance. Performance is shown in US dollars and does not take into account any USD/AUD currency movements.

Source: Glassnode. Past performance is not indicative of future performance.

Crypto news we’re watching

Nasdaq announces crypto custody service

The second largest stock exchange, Nasdaq Inc., announces it is entering the crypto space by launching ‘Nasdaq Digital Assets’. The new business will offer institutional-grade custody solutions, as demand for digital assets from institutional investors continues to increase. According to a press release, the solution will combine “the best attributes of hot and cold crypto wallets with a high degree of accessibility and scalability without compromising security”.

The new head of Nasdaq Digital Assets, Ira Auerbach, said: “We believe this next wave of the revolution is going to be driven by mass institutional adoption … I can think of no better place to bring that trust and brand to the market than Nasdaq.”

 

Nomura launches crypto venture capital arm

 

Japanese-based financial giant Nomura announced the launch of a crypto-focused firm called Laser Digital Holdings. The company was incorporated in Switzerland indicating the target market is global and not just in Japan. The new company will look to offer a range of services and product lines to institutional clients in the the crypto space. The first product will be Laser Venture Capital which will invest in DeFi, centralised finance (CeFi), Web3, and blockchain infrastructure companies.

 

Nomura CEO, Kentaro Okuda, said in a statement: “Staying at the forefront of digital innovation is a key priority for Nomura. This is why, alongside our efforts to diversify our business, we announced earlier this year that Nomura would be setting up a new subsidiary focused on digital assets.”2

Societe Generale responds to increased demand

The third-largest French bank by market cap, Societe Generale, is introducing crypto-related services. The services will cater for asset managers developing crypto funds. Using a framework that is in-line with European regulations, the services will allow asset managers to offer crypto in a “simple and adapted” way, the bank said. With plans for a slew of crypto funds starting with bitcoin and ethereum, French asset manager Arquant Capital SAS has reportedly adopted the service.3

On-chain metrics

Bitcoin (BTC): Price drawdown from ATH

The above metric looks at the percent drawdown of the BTC price from the previous all-time high. Although every cycle is different, monitoring this metric can give a sense of how severe the current drawdown is on a historical basis.

Looking at data from on-chain analytics company Glassnode, at a price of US $18,945, the drawdown from the previous high in November is -72.44%. This is not the worst drawdown in the asset’s history on a percentage basis, but is the worst from a dollar perspective, and ranks in the Top 5 largest percentage drawdowns in BTC’s history.

Source: Glassnode. Past performance is not indicative of future performance.

Bitcoin (BTC): Market Value to Realised Value Ratio (MVRV)

This metric looks at the the ratio between market cap and realised cap. It can give an indication of when the traded price is below a ‘fair value’. According to the creators of this metric, David Puell and Murad Muhmudov, MVRV is calculated by simply dividing market value by realised value on a daily basis. Historically, two thresholds emerge: 3.7, which has denoted overvaluation, and 1, which has denoted undervaluation.

According to Glassnode, at the time of writing, the MVRV value had fallen into oversold territory as BTC’s price has sunk below the realised price. The ratio sits below 1 once again, potentially indicating an opportunity to purchase at historically undervalued levels.

Source: Glassnode. Past performance is not indicative of future performance.

Altcoin news

In altcoin news, Ripple (XRP) pushed higher making a new 4-month high. In the last 7 days, XRP returned 31% while the majority of the crypto market declined. Pushing the price higher appears to be speculation that a potential lawsuit win versus the US Securities and Exchange Commission (SEC) is on the horizon. The legal battle between the two is approaching two years, and involves allegations by the SEC that Ripple had committed securities fraud. It was made public last week that Ripple and the SEC had filed motions for a summary judgement with the court. The judge will decide whether the case goes to trial or not, and potentially make a ruling using the evidence available. 

Investing in crypto assets or companies servicing crypto-asset markets should be considered very high risk. Exposure to crypto assets involves substantially higher risk when compared to traditional investments due to their speculative nature and the very high volatility of crypto-asset markets.

Investing in crypto assets or crypto-focused companies is not suitable for all investors and should only be considered by investors who (i) fully understand their features and risks or after consulting a professional financial adviser, and (ii) who have a very high tolerance for risk and the capacity to absorb a rapid loss of some or all of their investment.

Any investment in crypto assets or crypto- focused companies should only be considered as a very small component of an investor’s overall portfolio.


1. https://www.bloomberg.com/news/articles/2022-09-20/nasdaq-makes-first-big-crypto-push-to-lure-institutional-clients?sref=6EQWk76O

2. https://news.bitcoin.com/japanese-banking-heavyweight-nomura-to-launch-crypto-focused-venture-capital-arm/

3. https://www.coindesk.com/business/2022/09/21/societe-generale-introduces-services-for-asset-managers-developing-crypto-funds/


Off the Chain is published every Tuesday. It provides the latest news on bitcoin and the rest of the crypto market, along with analysis and insights into the world of crypto.It provides general information only and is not a recommendation to invest in any crypto asset, crypto-focused company or investment product.

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